Jack Rasmus

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by Dr. Jack Rasmus

This week, February 24, 2024 marks the beginning of the third year of the war in Ukraine. Hundreds, if not thousands, of assessments of the first two years of the war will be published, heard, or viewed.

As the war now enters its third year, Russia recently announced victory in a major regional battle for the strategic city of Avdeyevka in the Donetsk region of east Ukraine. Avdeyevka was the lynchpin for Ukrainian defenses throughout the region which, by some indications, are beginning to fracture.

After similar Russian strategic victories in the strategic cities of Bakhmut in 2023, and Mariupol in 2022, Russia lacked sufficient numerical forces to capitalize on those victories and launch new offensives to further expand its area of control. However, after the taking of Avdeyevka it appears that now may be changing. This time Russia is pressing westward and taking more villages and towns formerly in Ukrainian control. Moreover, rumors of an ever bigger Russian offensive coming soon are being reported by reliable sources.

Some of those sources report more than 110,000 new, additional Russian forces have been positioning in the north Kharkhov-Kupiansk area directly bordering Russia. A new Russian front and offensive may soon emerge in that region. If so, it would make Russia’s recent Avdeyevka victory—where 40,000 Russian troops were employed— appear as mere dress rehearsal. Others have identified another 60,000 Russian troops are also amassing in the far south Zaporozhiye region.

In short, the bigger picture that emerges is that Russian forces have now significantly increased in number all along the Ukraine front. While its initial invasion in February-March 2022 involved only 190,000, spread across roughly 1500 miles of front from Kiev to Crimea, the Russian Ministry of Defense admits it has more than 600,000 troops now deployed along a front in East Ukraine half that long. This number is also more or less confirmed by the Ukrainians as well. In contrast, while Ukraine had a total force of more than 500,000 in 2022, and likely significantly more by the summer of 2023, it now has by various accounts no more than 350,000 available combat troops.

In 2023 Ukraine launched a general offensive starting in early June. It called a halt to the offensive by early fall 2023 after suffering massive losses in killed and wounded. Estimates vary from 100-300,000 Ukrainian forces killed and wounded depending on sources.

Most independent sources put Ukraine’s losses around 200,000 during the summer 2023 offensive and including all of 2023. The magnitude of the losses have resulted in Ukraine recently announcing plans to draft another 500,000 in 2024 to replenish its ranks. Initially this 2024 mobilization was to include women and students. However, a public outcry has now forced the Ukraine government to reconsider and change the composition of that planned draft, the results of which have yet to be finalized yet. In the meantime reports and smartphone videos abound showing ‘recruitment teams’ composed of Ukrainian police and other para-military forces kidnapping military age Ukrainian men off the streets who are then sent to quick military training and then to military units on the front in east Ukraine.

In contrast to Ukraine’s difficulties replenishing its military forces, in the fall of 2023 Russia announced it was already training 420,000 new troops in 2023, available for combat by the winter 2024 and after. This mobilization of manpower was composed, according to the Russian Ministry of Defense, completely of volunteers, not draftees. Russia said Russian citizens were volunteering to join the Russian army at a rate of 1500 per day. It’s likely some of the 420,000 may have already been committed to the recent strategic battle of Avedeyevka, as part of Russia’s 40,000 troops there who took that city in mid-February 2024.

Some of the 420,000 recruited and trained in 2023 are also certainly among the 110,000 Russia has amassed in the north Kharkhov-Kupiansk front, as well as among the 60,000 Russia has additionally assembled at its southern Zaporozhiye front.

All this preceding reference to the relative force numbers engaged at the outset of the conflict, then lost over two years, and now being mobilized in the third year is with a purpose.

The Principles of War

Wars are seldom won when both sides are roughly evenly matched in numbers of troops, weapons and equipment. According to the Principles of War a decided military advantage lies with the side that is able to concentrate superior forces and commit that relatively superior force at the opponent’s weakest point.

Concentration of Force is probably the first principle of war, although there are clearly others—not least of which include: element of Surprise, Mobility, Maneuver, sufficient Reserves, which side has Internal lines of Communication and Supply, quality of Intelligence, Morale, Deception, etc. However, all these other principles mostly serve in various ways to enhance the principle of Concentration of Force.

The principle of Surprise may allow a smaller attacking force to catch a larger off guard, create confusion and disarray, disperse its forces, and disrupt its ability to respond. Mobility is about moving forces to a point to quickly create a concentration; Mobility and Maneuver enables the concentration temporarily of superior forces along an opponent’s various weak points. Having sufficient Reserves is a principle of particular importance the longer the conflict; Reserves restore a concentration when depleted; Intelligence discovers weakness of an opponent along a line of conflict; Deception convinces an opponent to incorrectly deploy its forces, etc.

The point here is not a lesson in basic military tactics or strategy. It is to provide a basis for explaining why the Ukraine war over the past two years has appeared to swing back and forth in its outcome.

When conflict initially erupted in February 2022 there were significant Russian gains and advances in spring of 2022; thereafter Ukrainian gains later that late summer-fall 2022; followed by Ukraine’s defeat in its summer 2023 offensive by Russia’s superior defense; now, in 2024 once again, Russia is advancing at multiple locations across the Donbas front and appears may soon launch even broader offensives elsewhere.

The Principles of War are universal and apply in every conflict, whether during the world wars of the 20th century, US wars of Empire in the 21st, civil wars, regional wars, and even guerilla insurgencies—in the latter case one side may be outnumbered but is able nonetheless to concentrate its forces at a single point to gain a relative force advantage temporarily and thereby defeat a larger opponent.

These and other basic principles of war have been observed and written about for centuries. Julius Caesar wrote of them in his War Commentaries and in his reflections on the Roman civil war. So did Napoleon’s general and military theorist, Bertrand de Jomini, during the Napoleonic wars. Britain’s Liddell Hart during the world wars of the 20th century. And in guerrilla warfare both Mao and Vietnam’s general Giap.

Perhaps best known to the general public, however, are summations of the Principles of War by the Prussian general von Clausewitz. Clausewitz wrote about applying the Principles of War both tactically as well as strategically. The latter includes how the Principles are impacted by economic power, political maneuvering by elites, and psychological factors.

The infamous phrase, ‘war is the extension of politics by other means’ is generally attributed to him. Although others have reversed that phrase to say no, in contrast, ‘politics is an extension of war’ (Henry Kissinger).

So how have the Principles of War appeared to influence the current Ukraine war? How have the two sides–NATO/Ukraine on the one hand and Russia on the other— applied (or misapplied) the principles to date, such that the seesaw outcomes between the two sides is the result? Which side has Clausewitz’s Ghost haunted the most?

Russia’s Initial Special Military Operation (SMO): 1st Offensive Spring 2022

For the past two years western media and the Biden administration has tried to create the message that Russia’s Special Military Operation (SMO) launched in February 2022 was about capturing the capital of Ukraine, Kiev. As the message goes, Russia was then defeated in some mystical battle of Kiev and retreated from Kiev that spring. Ukraine’s army then drove the Russians all the way back to the eastern Donbas region of the breakaway ‘provinces’ (called Oblasts) of Lughansk and Donetsk.

However, evidence that has appeared over the past year, and in recent months in particular, reveals this was not true. There was no battle of Kiev. And Russian forces withdrew from around Kiev and were not defeated in some assumed major combat event.

This actual alternative reality was revealed by public statements of participants of both sides in the secret negotiations held in Istanbul, Turkey in March-April 2022 where the representatives of Ukraine and Russia apparently reached a tentative peace deal and compromise at that time. The key elements of that tentative deal were that Ukraine would not join NATO and the eastern ‘states’ of Lughansk and Donetsk would remain in Ukraine, albeit with a degree of autonomy.

In the middle of the Istanbul negotiations Russia was asked by leaders of France and Germany (Macron and Sholtz) to show good faith in the negotiations by withdrawing its troops around Kiev. It did. While the withdrawal was underway, and the Istanbul tentative peace deal was being considered by Ukraine’s president Zelensky, it is now confirmed that British Prime Minister, Boris Johnson, flew overnight to Kiev and convinced Zelensky to reject the tentative deal and continue the war. Johnson reportedly promised Zelensky all the military arms, money and NATO support necessary to defeat Russia militarily.

Johnson and NATO’s military strategy was based on NATO’s inaccurate intelligence assessment at the time that the Russian military was weak and disorganized; that its economy could not survive the sanctions being imposed by the US and NATO; and that Putin’s political position was tenuous and regime change likely as Russia losses mounted and its economy crashed. That intelligence and that NATO strategy proved completely erroneous as the historical record has since shown. But Russia’s own intelligence assessment when it launched its initial SMO in February 2022 may not have been any more accurate than NATO’s. In terms of Principles of War, the principle of Intelligence was misapplied by both sides.

It is now known that the initial objective of Russia’s SMO was political, not military. As the tentative Istanbul deal in March-April, shortly after the invasion revealed, the goal was a military show of force by Russia in order to convince Ukraine to come to the negotiations table in Istanbul. In that regard, Russia’s SMO was successful. It brought Ukraine to the negotiations table in Istanbul.

However, Russian intelligence politically underestimated the influence of NATO in the Zelensky government and the ability of NATO (Johnson) to convince Zelensky to continue the war. Russia’s political objective was thus trumped by NATO’s political influence to convince Zelensky to continue the military conflict.

Politics thus drove Russia’s initial SMO while NATO political counter-measures by Boris Johnson led to a continuation of military conflict. Clausewitz’s famous dictum ‘war is an extension of politics’ was confirmed by Zelensky’s decision to continue fighting. But so apparently was Kissinger’s reverse dictum: ‘politics is an extension of war’ was confirmed as Russia succeeded in bringing Ukraine to the negotiations table.

There was no way that Russia’s initial SMO intended to take Kiev by military action—let alone conquering all of Ukraine as western media . The SMO force was composed of only around 190,000 Russian troops. That’s about four divisions, spread along a 1500 mile front from Kiev to Crimea. That wasn’t even a sufficient Concentration of Force to even take Kiev let alone all of Ukraine. The initial phase SMO was therefore ultimately and fundamentally a political not a military strategy. Its objectives were ultimately political, not military. If the SMO first phase failed in its political objective, it was due to poor application of the principle of Intelligence.

Putin’s intelligence advisors reportedly assured him Ukraine would come to the table and compromise if a military show of force were undertaken. That intelligence assessment underestimated US/NATO ability to ensure the war’s continuation, however. Not surprising, after Ukraine rejected the Istanbul compromise and opted for more war, Putin reported sacked a hundred of Russia’s intelligence operatives.

Putin himself was also deceived during the Istanbul negotiations by the request of France’s Macron and Germany’s Sholtz to show good faith by withdrawing Russian forces from around Kiev. Putin admitted he fell for that NATO use of the Principle of Deception in his public interviews later in 2024.

NATO failed in its Intelligence as well. NATO grossly underestimated the political, economic and military strength and durability of Russia. But NATO’s intelligence failure was more long term consequential, while Russia’s was more short term tactical.

It wasn’t the first time Putin fell for NATO deception. He recently also admitted he trusted France and Germany’s assurances in 2015 when they, in the persons of then German Chancellor, Merkel, and France President, Holland, assured him Germany and France would enforce the Minsk agreement of 2015. That agreement called for a halt in hostilities between Ukraine and the Donbas breakaway provinces, Lughansk and Donetsk. But Ukraine’s Kiev government did not halt its attacks on the Donbas for the next eight years, continually shelling Donbas from 2015 to 2022, in the process killing 14,000 of Donbas Ukraine citizens.

Of course the grandest deception was US and EU assurances in 1991 when the USSR collapsed that NATO would not ‘move east’. Starting in 1999 it did so. So in its effort to reach some strategic security arrangement with NATO, Russia has repeatedly been duped.

Given the events of 1991, 2015 at Minsk, and now March 2022 in Istanbul, it’s not likely Putin will ever trust any verbal assurances by Germany and France—or the UK or US—ever again. As the well-known American saying goes: ‘fool me once, shame on you; fool me twice, shame on me’.

It is thus highly unlikely Putin and Russia will fall for any tentative agreements in the Ukraine war. In 2024 any resolution of the conflict will be determined by military force. Kissinger’s reverse statement ‘politics is the extension of military action’ (not military action the extension of politics) seems more likely the application in 2024 and beyond.

Ukraine’s 1st Offensive: Summer-Fall 2022

If Concentration of Force, Intelligence and Deception were the key Principles of War at play in the initial phase of the Ukraine War in spring 2022, by late summer 2022 Concentration of Force and the element of Surprise were the dominant forces.

In the summer of 2022 Ukraine quickly followed up on Russia’s withdrawal from Kiev and northern Ukraine and launched an offensive of its own. It used the four months from February 2022 to build its manpower and arm itself with western weapons (or older Soviet weapons that East Europe was giving it). By summer it had 500,000 troops available, to Russia’s still limited 190,000 most of which were no longer located in the north but were committed to the taking of the strategic city of Mariupol in the south. That left the northern Kharkhov region sparsely defended and overly extended. With the planning and strategy assistance of NATO officers, including US generals in Kiev, that summer 2022 Ukraine overwhelmed Russian forces in Kharkhov province in the north and drove them back to Lughansk. It was a clear tactical defeat for Russia.

Russia consolidated its forces in Lughansk by mobilizing an emergency force of 300,000 from its reservists in Russia. That regrouping also included pulling some forces back across the Dnipr river in the southern province of Kherson. That too was a withdrawal not a defeat, notwithstanding the spin by western and Ukraine government media.

Thus by early 2023 Ukraine’s initial advantage in numerical forces committed to its 1st offensive in Kharkhov was neutralized by Russia’s call up of 300,000 reservists. As 2022 came to a close both sides were about numerically equal with around 400,000 troops.

Ukraine’s Defeated 2nd Offensive: Summer 2023

A new military phase in the conflict was about to begin in 2023. Russia went over to the defensive while Ukraine planned on yet another, larger 2nd offensive for some time in the spring or early summer 2023. And here Ukraine made a major strategic mistake which may in hindsight indicate a turning point in the war long term: Ukraine waited nine months to launch a second offensive in June 2023. While it delayed, Russia built massive defenses in depth all along the now shorter 800 mile front. Those defenses were especially deep in Zaporozhiye where Russia expected Ukraine’s next offensive to concentrate. It was not difficult to assume that location was where Ukraine would concentrate its forces. Zelensky and his government repeatedly said publicly that’s where the offensive would come. So much for the Principle of Surprise which Ukraine used to its advantage in its prior summer 2022 offensive in the north.

Clausewitz and every general before and after knows that defensive forces have a numerical advantage over offensive when it comes to Concentration of Force. Typically and on average an offensive force needs to be at least three times as large as a defensive one in order to prevail. In attacking a major urban area, the ratio needs to be perhaps as much as five to one. (Another reason why Russia in February-March could not have planned to take Kiev with only around 40,000 in that area).

Russia’s massive defense, called the Surovikin line, were at least three lines deep. Extensive fields of mines, anti-tank gun emplacements, artillery or all kinds were positioned on the high points, along with drones, thousands of tanks and around 400,000 Russian troops most of which were concentrated in the Zaporozhiye line. Ukraine in turn failed to concentrate sufficient force in that region as part of its offensive, keeping large forces deployed elsewhere. US military advisors at the time reportedly criticized Ukraine’s failure to concentrate sufficient forces in its major point of offensive in Zaporozhiye. The outcome of Ukraine’s 2023 offensive was predictable. The Principle of relative Concentration of Force determined Ukraine’s failed offensive. Defensive warfare–which Russia has always been good at–prevailed—as the Nazis in world war II discovered in battles for Moscow in 1941, Stalingrad in 1942, and then Kursk in summer 1943.

Ukraine’s summer 2023 offensive proved a military disaster and a huge tactical defeat. Reports of Ukrainian losses ranged from 90,000 killed or wounded in the summer offensive alone and 250 to 300,000 through the first two years of the war. The western source Mediazone estimates Russia’s total losses in killed and wounded for the first two years of the war at 37,000.

Ukraine’s 2nd offensive gains for that expenditure of manpower during were measured in mere hundreds of meters in a handful of locations. Many tens of thousands more of its troops were also lost trying to hold the strategic city of Bakhmut in central Donetsk in spring 2023. These losses were sorely felt when a couple of months later the main 2nd offensive was launched. Ukraine’s summer offensive needed a force of perhaps one million to prevail over Russia’s dug in 400,000. It barely had a ratio of 1.5 to 1, if that. Clausewitz’s primary Principle of War was thus fundamentally violated, with predictable results.

Ukraine’s 2nd offensive was decimated by Russia’s 1st Defensive. Actually ‘decimated’–a word taken from the old Roman word for 1/10 of losses–was an underestimation. Ukraine may have lost one third and certainly one-fourth. Clausewitz must have looked down and just shook his head.

As Ukraine’s 2nd offensive cracked its teeth on the rock of the Surovikin line, Russia was already preparing for 2024. Once Ukraine’s 2023 offensive was halted by fall 2023 Russia announced it had been training 420,000 new troops. These forces be available to join the front in 2024.

In contrast, by year end 2023 Zelensky announced Ukraine needed to recruit (draft) and mobilize another 500,000 in 2024 to replenish forces lost in 2023. At first that draft plan included students and women but Ukrainian public protests forced him to back off that plan. To date, the final plan has not yet been defined in final form; nor recruitment begun. Reportedly the new plan will employ means to force the estimated 6 million Ukrainian men who emigrated to Europe when the war began to return. In the interim teams of Ukrainian police and paramilitaries have been forcibly kidnapping military aged Ukrainian men off the streets and sending them to the military.

So the picture as of February 2024 entering the third year of war is Russia with 600,000 men in arms on the front at start of 2024, as confirmed by Russia’s Ministry of Defense, with possible more of the 420,000 enlisted and trained in 2023 also coming on line. Assuming some rotation, Russia’s total deployment in Ukraine should reach around 800,000 this year. Meanwhile, Ukraine’s forces are estimated at 350,000 which includes 100,000 of reserves of its best units.

Russia’s 2nd Offensive: Spring 2024?

Russia forces are amassing across multiple fronts. There are the 60,000 located reportedly in south Zaporozhiye province who may be planning to take the rest of that province still occupied by Ukraine. And an estimated 110,000 more amassed in the north reportedly preparing to retake Kharkhov province as well. One or both of those regional offensives are expected to begin sometime this spring. In the meantime, Ukrainian forces are steadily being driven back from their recent defeat in Avdeyevka—the third major strategic city taken by Russia (the first Mariupol and second Bakhmut)–as 40,000 Russian forces push a third front west from Avdeyevka. This time the Concentration of Force advantage lies decisively with the Russians.

Internal Lines of Supply and Communication are also key principles of war. Here as Russia’s anticipated second offensive begins, Russia has another strategic advantage. It has virtually all internal lines of supply. In contrast, Ukraine has to depend on lines reaching back into Europe and across the Atlantic. And Ukraine’s lines appear to be drying up for two reasons.

First, Europe has run out of the old USSR weapons it had been given Ukraine. Now it is dipping into its store of more modern US provided weapons like cruise missiles and F-16s. More troublesome, both the USA and Europe appear unable to provide Ukraine with necessary military ammunition, most notably 155mm artillery shells. EU at best produces only 4-5,000 a month. (During the summer offensive Ukraine was using 6,000 a day!) US production of 155mm is barely more sufficient. It began the war producing 14,000 a month. Now it’s 28,000 a month. Still not enough. After one more year US claims it will produce 50,000 a month. But Zelensky says he needs 1m shells a year now.

The US has had to arrange ammunition for Ukraine from South Korea and reportedly now from Japan. Russia on the other hand produces 1m shells a year. That’s nearly 100,000 a month plus the additional shells it’s getting from No. Korea. This ammunition problem is replicated across other ammunition production to varying degrees.

At the same time, opposition appears to be growing within the US military to provide Ukraine with more modern US weapons thereby depleting US stocks. For example, only a small number of Abrams tanks have been provided Ukraine to date. F-16s will be drawn from Europe’s stock but of older versions of the aircraft. The US has provided so far only 7 Patriot anti-missile defense units but 5 have already been destroyed. Patriot systems cost billions and take a long time to produce. It’s not likely the US military will want to sacrifice too many more in 2024 quickly.

Then there’s the matter of US funding for Ukraine which continues to struggle through Congress with little light at the end of that tunnel. Ukraine’s totally dependent, in other words, on sources other than its own production and those supply lines are susceptible to political winds changing in the west. Even Ukraine’s early advantage in battlefield intelligence via surveillance is fading. It initially had total use of Elon Musk’s Starlink satellite system but Russia has reportedly found a way to tap into that on the battlefield as well now.

In short, Ukraine’s disadvantage in critical weapons is growing. So too is its disadvantage in air superiority on the front. It’s main successes have been sinking several Russian ships with west provided drones and long range missiles. But that has not had any appreciable impact on the progress of the ground war. Nor have any of the western media’s many NATO ‘game changing’ weapons throughout the war.

Shifting Strategies in the Ukraine War

Ukraine may have lost the war as far back as its failed summer-fall 2023 offensive. Since then it has not been able to recoup its losses in men or material, as Russia’s advantages in both grows steadily. Ukraine is totally dependent on US/NATO funding, both for weapons and for keeping its economy afloat. Half of Ukraine’s budget has been provided by the west. And that funding is getting harder to provide, as events in Congress have shown recently with the failure of the Biden administration to convince it to pass his requested $61B further aid to Ukraine. For its part, Europe has passed legislation to provide Ukraine with another $54 billion, but that’s in the form of loans distributed over several years.

But no amount of funding by the west can substitute for Ukraine’s simply running out of men (and women) in arms as war depletes its available sources of military manpower. Whether Ukraine can restore a Concentration of Force to neutralize Russia’s is highly doubtful.

At the outset of the conflict, US and NATO strategy was to arm Ukraine to the teeth with weaponry to fight the war, impose sanctions on Russia they thought would undermine its economy and ability to produce military arms, reduce its ability to sell oil globally with which to fund its military and even its civilian economy, and bet that the losses in the war and economic crises would result in political instability in Russia and Putin’s overthrow. But none of the above had, or will, happen. If anything, the war has strengthened Putin’s position in which polls show a 80% pubic favorable impression. His re-election this spring is all but ensured.

In contrast, Zelensky’s government is rift with discontent and rumors of coups. He has replaced most senior military generals and many government officials. His ability to continue martial law runs out in a couple months after which elections are likely and, if held, most independent accounts predict he’ll lose re-election by wide margins.

In this increasing bleak scenario for NATO and the Biden administration, the US and NATO strategy is now shifting as well. The US new strategy is not formally finalized but appears to be moving toward the following elements: Ukraine militarily must shift to a defensive strategy with a new line somewhere east of the Dnipr river in the Donbas-Zporozhiye area and Kharkhov in the north. It must rebuild its military forces in 2024. The US/NATO will provide it new advanced weaponry needed (F-16s, ATACMS long range missiles, long range drones, etc.) to hold the Russians back from bigger gains. After the US elections in November 2024, Ukraine can then launch yet another, 3rd offensive in 2025 after it has rebuilt its forces. In the meantime, Ukraine (and NATO) should ‘play for time’ behind the scenes, as it had in 2015.

However, not all in Washington DC accept this future change in US strategy. Some neocons want again to ‘double down’, either sending NATO troops to west Ukraine to release more Ukraine forces to the front; to allow Ukraine to use US provided long range weapons (F-16s, ATACMS missiles, drones) to attack deep inside Russia; to seize and distribute Russia’s $300B assets in western banks frozen at the start of the war and use them to fund Ukraine; and even to consider using tactical nuclear weapons should Russia ever cross the Dnipr river or try to take Kiev.

For its part, Russia’s SMO has changed as well. While Russia is open for discussions with the west (some early contacts reportedly going on in secret), military action will determine the outcome of the war. No more western verbal ‘assurances’. At minimum, Ukraine must clearly reject joining NATO. It must remove fascist influences in its military and government—i.e. de-nazify. It must henceforth be neutral and no longer a strategic threat to Russia. NATO must agree to a longer term security arrangement with Russia. But there may be more.

Signals from Putin and other high ranking Russian officials in recent months also suggest that, should Ukraine continue the war, or the west escalate further, then Russia considers all the Russian speaking provinces must become part of Russia just as the four eastern ones already have. That means the area of Kharkov, all the provinces east of the Dnipr river and the southern provinces of Mykolaiv and Odessa as well. Perhaps even Kiev. Russia will likely not talk to Zelensky either, but only with NATO. In other words, continued military action will determine the eventual outcome of the war.

As the respective positions indicate, all sides are still quite far apart. Negotiations or a deal is not on any table or about to be. That means all sides are still betting on a military solution.

But as Clausewitz’s Principles of War have already shown, which side has the greater Concentration of Forces, both tactically and strategically, has the ultimate advantage. In addition, the equation of war is influenced as well by which side runs out of Reserves first; which has the stronger Internal Lines; which can deceive the other better as to how and where it will attack next; which forces have the better training and morale; which economy can out produce the other; which has the more and better weapons. And, not least, which leaders are more capable and can remain in office to provide continuity of effective leadership. In 2024 it appears Russia either has, or is gaining, advantage in all the above.

(For an audio discussion of these same topics, listen to the podcast of my Friday, February 23, 2024 Alternative Visions radio show at: https://alternativevisions.podbean.com/e/alternative-visions-ukraine-war-and-the-ghost-of-clausewitz/ )

Dr. Jack Rasmus

February 25, 2024

Since Tucker Carlson’s Interview with Putin, pro-UK and Ukraine sources have issued rebuttals saying it was Russia Foreign Minister, Lavrov, that broke off negotiations in Istanbul not UK’s Boris Johnson who arrived in Kiev a day later. Following my posting of the Carlson-Putin interview (see below) in which Putin said it was Johnson and that Russia and Ukraine negotiators had a tentative peace deal, only to be signed off by Zelensky, pro-Johnson propagandists took issue with my posting reporting Putin’s position. The pro-Ukrainian trolls say the proof of their view is that China state TV reporters supported it.

I rarely allow third parties to post on this blog but in this case I am. What follows is a third party’s analysis of the debate ‘did Lavrov or Zelensky reject the tentative peace deal’. Check out the following analysis, time lines and the references. Decide for yourself. Who’s wrong: Putin or the pro-Ukraine trolls.

ANOTHER VIEW OF WHO REJECTED THE ISTANBUL DEAL

“Between March 14-17, a fifth round of peace talks took place via video conference. This produced the best outcome so far. On March 15, Ukrainian President Zelensky reported ‘real progress’; next day Lavrov spoke of ‘some hope for reaching a compromise’. The Financial Times of March 16 signalled a 15-point draft deal by which Kyiv gave up its NATO ambitions in return for security guarantees outside NATO. In an interview with ABC news , Ukrainian negotiator Podolyak said Russia’s demands and position have “softened significantly” and :therefore, we have much confidence that we will have a cease-fire in the coming days”.

By this time, a certain amount of peace momentum had replaced war momentum. There was no breakthrough at the sixth round of negotiations on March 21. However, according to BBC news and Vedomosti ( Russian newspaper) President Zelensky requested a face-to-face meeting with Putin. Lavrov rejected this and said, “ It should happen once the two sides are closer to agreeing on key issues”.

The seventh round of talks on March 29 saw the renewal of face-to-face negotiations in Istanbul. European Pravda reported that this had so far been the ‘most effective round of Ukraine-Russian negotiations’. The discussion centred on a draft treaty, the gist of which was permanent Ukrainian neutrality and non-nuclear status, in return for which Ukraine would have security guarantees similar to Article 5 of the NATO military alliance from China, Russia, UK, France, Belarus and others. Ukraine would also start a 15-year consultation period on the status of Crimea, though reserving the right to reconquer Luhansk and Donetsk (Ukrainian Pravda). For its part, Russia would “drastically reduce” military activity near Kyiv to ‘create the necessary conditions for further negotiations”. Ukraine’s successful counter-offensive had started a week before the Istanbul peace talks. The Russian offer to ‘withdraw’ on March 29 was thus far from voluntary.
This draft was the one Putin waved on television on June 17, 2023. He called it a “not bad result”.

What happened then?

Kyiv official says ex-UK PM Johnson derailed 2022 talks with Russia – (https://www.dailysabah.com/world/europe/kyiv-official-says-ex-uk-pm-johnson-derailed-2022-talks-with-russia_) Davyd Arakhamiia, a top advisor to Ukrainian leader Volodymyr Zelenskyy and the leader of the Servant of the People faction, said the Russian delegation at the 2022 negotiations in Istanbul had promised Kyiv peace in return for neutrality. “The war could have ended in the spring of 2022 if Ukraine had agreed to neutrality,” Arakhamia, who led the Ukrainian delegation, told Ukrainian TV channel 1+1 on Friday.

“Russia’s goal was to put pressure on us so that we would be neutral. This was the main thing for them: They were ready to end the war if we accepted neutrality, like Finland once did. And for us to make a commitment that we will not join NATO. This is the main thing,” he added.

In reply to why Ukraine did not agree to the proposal, Arakhamia said: “Firstly, it was necessary to change the Constitution, and secondly, there was no trust in the Russians that they will do this.”

“Further, after we returned from Istanbul, Boris Johnson visited Kyiv and said that we should not sign anything with the Russians and ‘let’s just fight.'”

Common Dreams Jake Johnson reports it as follows:
Boris Johnson Pressured Zelenskyy to Ditch Peace Talks With Russia: Ukrainian Paper

“The British government has become an obstacle to peace in Ukraine,” said the Stop the War Coalition. “The conflict there is developing into a proxy war between Russia and NATO and it is the Ukrainian people who will suffer the consequences.”

The Ukrainian news outlet Ukrayinska Pravda reported Thursday that British Prime Minister Boris Johnson used his surprise visit to Kyiv last month to pressure President Volodymyr Zelenskyy to cut off peace negotiations with Russia, even after the two sides appeared to have made tenuous progress toward a settlement to end the war.

Citing unnamed sources from Zelenskyy’s “inner circle” and advisory team, Pravdareported that “Johnson brought two simple messages to Kyiv”:

“The first is that Putin is a war criminal; he should be pressured, not negotiated with. And the second is that even if Ukraine is ready to sign some agreements on guarantees with Putin, they are not. We can sign [an agreement] with you [Ukraine], but not with him. Anyway, he will screw everyone over,” is how one of Zelenskyy’s close associates summed up the essence of Johnson’s visit…

Johnson’s position was that the collective West, which back in February had suggested Zelenskyy should surrender and flee, now felt that Putin was not really as powerful as they had previously imagined.

Moreover, there is a chance to “press” him. And the West wants to use it.

In public remarks during his trip, Johnson vowed that the U.K.–in line with the U.S., Germany, and other western powers–would continue ramping up its “military and economic support and convening a global alliance to bring this tragedy to an end, and ensure Ukraine survives and thrives as a free and sovereign nation.”

“I made clear today that the United Kingdom stands unwaveringly with them in this ongoing fight,” the right-wing British leader said, “and we are in it for the long run.”

Dr. Wilmer Leon
February 12, 2024

by Dr. Jack Rasmus, copyright 2024

For months the mainstream media and Washington Pols have been pushing the metaphor that the US economy is a plane on its final approach to a ‘soft landing’. Soft landing is defined as inflation steadily coming down to the Federal Reserve’s goal of a 2% price level AND does so without provoking a recession.

However, as revealed by the inflation statistics in the US Labor Department’s latest Consumer Price Index (CPI), the ‘soft landing’ plane is clearly stuck circling the airport!

The government’s just released January 2024 Consumer Price Index report shows not only that prices are stuck at a level (i.e., ‘circling’?) where they’ve been since last summer 2023, but January’s CPI report shows signs of prices even beginning to rise once again.

Moreover, if one lifts some of the questionable assumptions and methodologies used to estimate inflation in the CPI, inflation may be even higher than officially reported. Perpetually circling for months, the soft landing plane may even be running out of gas.

The CPI is one of several government price indices. The other two are the Personal Consumption Expenditures (PCE) index and the GDP Deflator Index. These latter are produced by the Commerce Department. The PCE typically estimates inflation only two thirds to three-fourths the price level provided by the CPI, using different assumptions and methodologies than the CPI.

Having said that, let’s look at the January CPI report (after which Part 2 of this article will show why even the CPI undershoots inflation and why the PCE and GDP Deflator undershoot even more).

January 2024 Consumer Price Index

The CPI slices and dices inflation in many ways. Its aggregate number is called the All Items CPI-U. It’s the summary of price changes for all the goods and services estimated by the CPI. All means around 450 or so of the most often purchased by households. There are literally millions of goods and services in the US economy but households’ budgets are almost totally spent on the CPI’s 450 or so ‘basket of goods and services’ that are mostly purchased by households.

The All Items category is then broken down into what’s called ‘Headline’ inflation and ‘Core’ inflation. Since food and energy (i.e., gasoline, natural gas, electricity, fuel oil, groceries, food at home, food away from home, etc.) are goods that tend to fluctuate a lot, subtracting food and energy from All Items results in what’s called ‘Core’ inflation. Add back in food and energy goods and that’s ‘Headline’ inflation.

Another important breakdown of ‘All Items’ is Goods vs. Services inflation. The Goods sector of the economy is roughly 20% of GDP (Construction—residential and commercial—is about 8% of GDP and Manufactured goods about 12%). All the rest (80%) of the US economy is Services. So Services contributes a bigger part of the overall CPI and inflation.

So what does the latest January 2024 CPI report show us for ‘All Items’, ‘Headline’, ‘Core’ and the important sub-categories of Goods vs. Services inflation?

The most important takeaway from the January CPI is the ‘All Items’ rate of inflation last month is at the same level that it was seven months ago in June 2023—that is, inflation continued to rise at the same 3% annual rate of change in January 2023 that it was in June 2023!

To continue the ‘soft landing’ metaphor, what that means is the Inflation plane had entered its ‘downward leg’ from January 2022 to January 2023, slowing from a 7.5% annual rate increase at the start of 2022 to 6.4% a year later in January 2023. It then slowed further the following six months from January 2023 to June 2023, from the 6.4% to 3%.

Thereafter, since last June 2023, it has plateaued at a 5,000 foot level above the US economy airport, where it’s been circling ever since.

Peeling the onion of the ‘All Items’ aggregate indicator, and considering just ‘Core’ inflation—i.e. ‘All Items’ minus energy and food prices—It’s a similar picture: Core inflation has also been stuck, at around 3.9%-4% since October 2023.

Slicing ‘All Items’ yet another way, into Goods vs. Services inflation what the latest January CPI stats further reveal is that since October 2023 Services inflation has also been stuck, in this case in roughly the 5% range.

In other words, except for gasoline and some food prices, the CPI has not slowed in the last seven months. The plane has not landed but just keeps circling!

And it may be running out of gas as well. The latest CPI stats, on a month to month change basis, suggest the rate of inflation may now have started to rise again last month. Unadjusted for seasonality (i.e. the actual price changes), January’s CPI stats show a month to month rising trend for the CPI as follows:

• October 2023: 0.0%
• November 2023: -0.2%
• December 2023: -.0.1%
• January 2024: +0.5%

Within the January numbers were some worrisome trends: Services inflation nearly doubled in January compared to December (0.7% vs 0.4%); food prices did double (0.4% vs 0.2%) with grocery prices rising the fastest in the entire previous twelve months. Meanwhile shelter costs rose from 0.4% to 0.6% for January with its biggest component, Rent, rising the fastest in nine months. And other services like hospital and airlines, the prices of which had slowed in 2023, surged again in January.

Forces pointing to higher gasoline and energy Goods inflation in the coming months are appearing as well. The business media in US and abroad report that global crude oil supply problems are mounting—at a time when typically in the spring oil refineries also shut down for maintenance and consumers begin to drive more.

The Goods vs. Services Inflation Conundrum

To sum up thus far: if CPI reports for the past seven months show Services prices are stuck at 5%, Core prices at around 4%, and All Items stuck at 3%. Those numbers suggests Goods prices—gasoline and some food prices—have indeed come down. The January CPI report shows that Goods prices have been either flat or slightly negative over the past twelve months.

But Services inflation remains stuck at around 5% for months now. The main culprits in continuing Services inflation have been Rent services which have consistently been responsible more than half of all the CPI services price increases for several months; Day Care services; Sporting and Entertainment events prices; Auto Repairs; and Auto Insurance services which have risen by 20.6% over the past year. In addition, hospital services costs are now surging anew and rising at the fastest rate since 2015.

So why have Goods (especially gas and food) inflation significantly abated over the past year while the Services price level has barely done so?

There are several explanations. Here’s a couple:

Fed Interest Rates Are Increasingly Inefficient

Federal Reserve interest rate hikes since 2022 have clearly had an effect on Goods inflation—i.e., on energy and food and some other commodities. But so may have other economic forces.

The US economy has slowed due to rate hikes. But so has the global economy slowed. Which has had more impact on dampening demand for oil, commodities and thus US energy related goods prices in general? US rate hikes or slowing global economy? And what about food/grocery prices? Prices for milk and eggs surged in 2021-22 but have since come down. However, processed foods like bakery goods and other processed items like juice and beverages have not. They’re still rising at more than 20% annual rate? The difference likely lies in the fact that milk and eggs are produced locally and are not monopolistic; processed foods are monopolistic and dominated by a handful of companies. That strongly suggests corporate price gouging is going on in the processed foods sector of food prices. Recent media and government are now also talking about ‘shrinkflation’ (a hidden price hike by lowering content) which suggests evidence of processed food corporations’ price gouging as well.

2021-22: Supply Driven Inflation

The big problem in Goods inflation that emerged initially back in 2021 was domestic US and global ‘supply chains’. As this writer discussed back then (see my ‘The Anatomy of Inflation’ Counterpunch article of June 23, 2022), what drove inflation to its 9.1% peak were mostly Supply side forces—i.e. supply chains exacerbated by price gouging by monopolistic US corporations jacking up prices as the US economy reopened in the summer of 2021 from the Covid shutdowns. That’s a topic to which mainstream economists and politicians have paid too little attention of late.

Productivity also collapsed in 2021-22 falling to the worse levels since 1947, which in turn raised business unit labor costs that many companies simply passed on to consumers in higher prices. Like supply chains and price gouging, that too was basically a supply matter.

Inflation at the time in 2021-22, in other words, was thus largely supply—not demand—driven.

The Covid shutdown of 2020-21 was a major shock to much of the US economy, especially supply. Workers laid off did not immediately return. Some businesses like railroad companies found it convenient and profitable not to brink all their workers back but to run on more profitable skeleton crews. Other businesses did not immediately or fully ramp up production once the economy began to reopen in the summer of 2021. They at first waited to see if the reopening could be sustained. But once the economy began to successfully reopen by late summer 2021 many services businesses tried to recoup lost revenue by rapidly raising prices (A typical example was the Airlines companies and Hotels which clearly price-gouged consumers with record prices for travel in 2021-22.

The Covid shutdowns restructured labor, product and financial markets in ways still not fully understood by economists or policy makers. Fiscal and monetary stimulus measures in particular did not work very well or efficiently (a topic for another article). A given amount of monetary and fiscal stimulus simply did not produce an expected magnitude of real economic recovery.

A dramatic fact of the past two years US economic recovery has been its tepid growth rate. In 2020-21 the Federal Reserve pumped $5 trillion into the US banking system and directly to investors via its QE program. Congress provided an additional $4 trillion in government spending and tax cuts. That’s $9 trillion in combined stimulus! About twice that provided in 2008-10 What has resulted, in the first two years 2022-23 after the economy reopened in 2021 was a growth rate in GDP terms of a mere 2.1% in 2022 and unimpressive 2.5% in 2023.

In short, a mountain of $9T fiscal-monetary stimulus resulted in a molehill GDP recovery!

Overlaid on the supply problems that emerged in 2021 and which lingered into 2022 was global commodity prices surging in 2022-23 as a consequence of the Ukraine war and US Russian (and China to lesser extent) sanctions policies and the Ukraine War.

All these factors contributed to the primarily supply side driven inflation of 2021-22. Those supply forces were only partially abated by the demand depressing policies of the Federal Reserve after it began raising rates.

And now since mid-2023 Fed rate hikes have stopped. And with it so too has Services inflation decline. Fed rate hikes to 5.5% appear to have little effect on Services inflation. So how high might interest rates have to go to have an effect? A little history as follows might give some idea.

Volcker’s 1980-82 Solution vs. Powell’s 2022-23

Despite US inflation’s largely supply side character, in 2022 US politicians and the Federal Reserve decided the strategy to address supply side inflation would be to depress consumer demand in the US economy. The Federal Reserve set out to attack consumer demand to dampen inflation. Its main tool was raising interest rates and the Fed commenced in 2022 to raise rates at the rapidest pace in decades. The idea was to create enough unemployment that would reduce wage incomes and thus consumption spending to bring down demand and theoretically prices in turn. In other words: even if the main drivers were Supply side (which the Fed can do nothing about) the strategy was to make households pay the price to abate inflation by depressing household wage incomes and consumption demand. So the Fed raised interest rates to 5.5% over the course of 2022-2023.

After all, the same rate hike strategy to compress demand worked under Reagan in 1981-83 when Paul Volcker was Fed chair. 10%+ annual CPI inflation at the time was lowered via Fed rate hikes that attacked the Goods sector, raised unemployment, and subsequently depressed wage incomes and consumption. It was a demand side approach to price reduction—employed to address a Supply side inflation problem back then as well. Nevertheless it worked. Prices came down, but only after the Fed raised rate to more than 15%! A deep recession in 1982-83 followed the Fed rate hikes of 1980-81. But that was then. The US economy has changed dramatically since. It doesn’t work that way anymore. Indeed, monetary policy hardly works at all.

As in 1980-82, Powell’s Fed rate hikes in 2022-23 have succeeded in dampening goods prices but have NOT succeeded this time around in bringing down services prices very much, as the CPI data for the past seven months clearly shows. Goods inflation has indeed come down, but services prices remain stuck at levels of last summer 2023 now for months and may be rising once again. So why is it that four decades later monetary policy (rate hikes) has not succeeded as it did in 1980-82 in reducing the price level very much?

In his December 2022 press conference following the Fed’s commencing to raise rates, Fed Chairman Jerome Powell indicated the Fed’s strategy in 2023 would be to continue raising rates. He specifically cited his main goal of bringing Services prices down, adding for that more unemployment was needed in Services in order to lower Services consumption. That was the Fed’s inflation strategy for 2023. But that strategy—and lower Services prices—didn’t happen.

Contradictions of Fed Monetary Policy

Halfway into 2023 Powell stopped raising rates. But why? Why didn’t he continue raising rates and stopped halfway through 2023? There are several possible answers, but as this writer has argued before, perhaps the main reason was the crisis that emerged concurrently in the US regional banking system in March 2023. Raising interest rates even higher would have exacerbated that regional banking crisis. So Powell raised rates for the last time in May-June 2023 after the Regional Bank Crisis erupted that March 2023.

By doing so the Fed decided to trade off reducing Services and Core inflation further in 2023 in order to prevent further exacerbating regional bank instability. Powell apparently has placed his bet on assuming the already 5.5% interest rate level will prove sufficient over time to eventually, if albeit slowly, bring down Services prices. Thus far it hasn’t. Services sector unemployment and Services consumption has not abated. Powell has lost his bet. Services prices are ‘stuck’ at 5% and Core at around 4% now.

What this scenario suggests is that the US and global economy has changed in fundamental ways since the early 1980s. The US is a much more Services centric economy today compared to forty years ago. Services don’t respond as efficiently to rate hikes. Nor does the economy in general, it appears. To put that in economists’ parlance: Services inflation has become ‘interest rate inelastic’.

That lack of real economy response to interest rates (i.e. the inelasticity) may be due in part to the US economy becoming more ‘financialized’ today compared to 1981-83. What that means is Fed periodic liquidity (aka money) injections into the economy get redirected from going into real investment and flow relatively more into financial asset markets instead of the real economy. That makes Fed rate policy ‘inefficient’—i.e. more monetary injection is required to get an equivalent stimulus ‘bang for the buck’.

The converse is also true: Fed rate hikes have less effect on dampening inflation and slowing the real economy because it has become more financialized. Rate hikes simply don’t retract as much liquidity (money) from the economy as they used to. And even if they did it wouldn’t matter. Businesses (and consumers) today, forty years later, have access to alternative sources of funds besides bank lending, in the US and worldwide. Or perhaps businesses and investors cut back on investing in the real economy first, before they consider reducing their investing in financial markets. After all, didn’t financial markets and profits boom during Covid while opportunities for investing in the real economy collapsed?

The preceding paragraph suggests globalization may also be resulting in less effective Federal Reserve interest rate policy when it comes to rate hikes dampening inflation. Here financialization and globalization of the 21^st century capitalist economy overlap.

Multinational corporations in particular aren’t limited by Fed interest rate hikes or levels when they need money capital to invest. They can go anywhere in the world for lower rates. That’s presuming they even bother to borrow from banks at all any more. Multinationals raise far more money by issuing corporate bond debt of their own. And they loaded up on bond issuance in the years of near zero Fed rates from 2009-2018 and then during 2020-21 when the Fed injected $5T more of virtually free money into the banks and directly to investors via QE. Corporations just issued mountains of bond debt prior to Covid that they didn’t even need and then just hoarded the cash throughout the pandemic. Or else redistributed the virtually free Fed money to their stockholders in buybacks and dividends and hoarded their own cash earnings. Once the Fed started raising rates in 2022 those rate hikes were irrelevant for many big businesses. They were flush with unspent cash from issuing bonds or new stock.

A good example was Apple Corporation. Sitting on a $252 billion cash hoard, given the Fed’s zero rates in 2020 Apple nonetheless issued multi-billions in its corporate bonds. It then mostly distributed that money to its shareholders in stock buybacks while continuing to hoard its $252B cash pile. Only the smallest businesses are impacted any more by Fed rate hikes, or rate cuts for that matter.

Some Conclusions

In conclusion, in terms of inflation, what all this means is Fed chair Powell will have to raise rates much higher than 5.5% if he wants to reduce Services and Core inflation significantly further. Maybe not as high as Paul Volcker’s 15% in 1981. But higher than the current 5.5% for sure.

However Powell won’t do either so long as Services inflation levels remain stuck at current levels. He’s decided he can live with that level of Services inflation, while betting perhaps rates kept at current levels may yet reduce inflation further over the longer run.

Powell won’t risk higher rates that will certainly exacerbate a regional bank crisis again, which by the way continues to deteriorate slowly and which now faces the threat of commercial property defaults coming in 2025-26, to which already unstable regional banks remain highly exposed.

He also won’t raise rates because the US economy is teetering on the brink of recession already. The US construction sector has fallen one-third and appears stuck at that level while the manufacturing sector has been contracting for the last nine months, according to the Purchasing Managers’ Index (PMI). A deeper recession in 2024 would certainly not help the politicians. And regardless what apologists for the Fed say, Fed policies are politically a-tuned in election years.

So expect CPI and inflation to remain at levels largely similar to what they have for the past half year. Goods inflation will likely stay low (subject to uncertain oil prices). Companies that can, will continue to price gouge. Rents and home prices, Insurance services, processed food items, select services will remain at current levels or even drift up further. So consequently will the CPI, fluctuating perhaps marginally around its January levels month to month.

However, as will be explained in a Part 2 sequel to this article, even reported CPI is a low- balled estimate of the price level, due to the many questionable assumptions and methodologies that go into its estimation of inflation.

So if the US economy plane does decide eventually to descend, its landing may be anything but ‘soft’.

Jack Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, 2020. He publishes at Predicting the Global Economic Crisis

By Dr. Jack Rasmus
February 9, 2024

The following are my ‘takeaways’ from listening closely to the Tucker Carlson-Putin Interview of this past week. A number of revelations came out of the interview (e.g. repeated role of France, Germany, UK and CIA scuttling a resolution to the conflict) as well as Putin’s deep commitment to continue until Ukraine is no longer a threat to Russia. One comes away from listening to the interview that Putin feels he has been ‘had’ by the US/EU so often he no longer trusts its politicians and doesn’t believe US presidents have the power to decide; he, and Russians in general, have a deep belief that Russia and Ukraine (and Belarus) are ‘one people’ who have been divided by invaders in the past but always re-united again; and that he’s ready to negotiate but Zelensky and US/NATO have ruled it out and would have to initiate it. Finally, US sanctions have failed, the world is changing fast, and many countries have developed to the point they no longer do whatever the US wants and are demanding more independence.

(Note: For another more detailed audio commentary on the Interview, listen to my Friday, February 9, Alternative Visions radio show at:

https://alternativevisions.podbean.com/e/alternative-visions-carlson-putin-interview/

Here’s my “X” (twitter) posts on main points of the Carlson-Putin interview:

1. Putin says he’s ready to negotiate but Zelensky has outlawed discussions and US/NATO doesn’t want to. Zelensky is “head of Ukraine state. He could cancel his decree” and negotiate. Russia’s ready but will not ask for negotiations. Russia’s minimal demands: No NATO. Neutral Ukraine. Nazis out of Ukraine government & military

2. Russia & Ukraine had a signed deal in Istanbul in April ’22 to end war. As part of deal Donbass remained in Ukraine but with some autonomy. Russia asked to withdraw troops from Kiev as sign of good faith during negotiations in Instanbul and did. Zelensky reneged on deal after Boris Johnson flew in and told him to, promising him all the money and weapons he needed.

3. Putin gave long historical introduction on history of Russia & Ukraine since 862. He explained attempts (in 1200s, 1650s, 1918-21, 1941-44) by invaders to split Ukraine from Russia that all eventually failed. (Suggesting current NATO effort would too). A major repeated Putin theme as Ukraine & Russia have always been one people

4. Western Ukraine (Lvov region) before WW2 was Poland-Hungarian-Romanian, but given to Ukraine by Stalin after WW2 after Poland was given eastern Germany. Putin implied the West could have western Ukraine back (as Putin suggested in prior speeches). West Ukraine is not part of historic Russian homeland which is Russia-Ukraine-Belarus.

5. Russia wanted to join Europe after 1991 but was repeatedly rejected by West. Putin described face to face meetings with Clinton & Bush Jr. where they agreed re. Russia joining NATO (Clinton) and stopping US intervention in Chechnya (Bush) but both Clinton and Bush then reversed after conferring with advisors. Putin’s impression US presidents can’t make a deal and are often overturned by other powers in Washington. China’s Xi has same impression, per Putin.

6. After meeting with Bush, Putin gave him proof CIA was involved in Chechnya war. Bush replied “Well, I’m going to kick their ass”. Bush never got back to Putin after. In 2008 US/NATO in Bucharest NATO meeting declared Ukraine & Georgia would soon join NATO. Russia’s 2008 War with Georgia followed

7. Re. 2014 coup, Putin said “CIA did its job” but it was unnecessary. It “could have been done all legally”. Ukraine president at the time (Yanukovich) was warned by US/EU at the time of the coup not to use police or army against demonstrators in Maidan. He didn’t. Yanukovich agreed to a 3rd re-election not provided by Ukraine’s constitution but hey went ahead with coup anyway. US representatives bragged they spent $5B on the coup. Putin would not mention names (Victoria Nuland). Regarding 2015 Minsk agreement: Putin said Ukraine refused to implement it. EU leaders (Germany’s Merkel & France’s Holland) admitted in 2022 Minsk agreement in 2015was ‘just to buy time’ to rearm Ukraine. In Putin’s words: “They simply led us by the nose”

8. When asked by Carlson if current talk in the west that if Russia wins in Ukraine it means it will invade Europe, Putin replied ‘only if they attack Russia first’. US mercenaries are already fighting in Ukraine. And when Carlson mentioned US Sen. Shumer’s statement that the US might have to fight in Ukraine, Putin sarcastically said: “Does the US have nothing better to do than fight in Ukraine”. If US did commit troops to Ukraine, it would push world to “brink of humanity”.

9. When asked by Carlson who blew up Nordstream pipeline, Putin: “CIA has no alibi” and “look at those interested and have capability of doing it” and “beneficiaries are American institutions”. When Carlson asked for more evidence US did it, Putin replied Russia has the evidence but no purpose to reveal it now. Germany has shut down 2 other pipelines that can still be opened & Russia will gladly resume sending gas (naming names might obviously jeopardize that he implied). Germany goes along with US because “German leaders are driven by interests of collaborative west rather than German interests”.

10. Putin: Biden’s Russian sanctions are “a grave mistake”. By weaponizing the US $, the US is undermining its global economic influence. Putin: The dollar is the cornerstone of US of US power. “Do you even realize what’s going on or not? You are cutting yourself off”. He added, before 2022, “80% Russia trade was in $” and only 3% in Yuan. Now 30% is in Yuan, 30% in Rubles and only 13% in $US.

11. Sanctions failed. Russia now 5th largest economy in ‘purchasing power parity’ measure. China 1st. Russia-China trade now >$240B. BRICS economies are now as large in GDP as US/G7. Sanction “tools US uses don’t work”

12. World is changing very fast. US can’t stop it but is reacting aggressively & militarily to the change. Threats from genetics, AI technologies, ‘brain chip’, etc. Much like gunpowder in prior era. There’s “no stopping Elon Musk” (i.e. technological change)

13. Carlson asked if Russia will negotiate. Putin: “They’re options if there’s a will”. Those in power must realize Russia can’t be defeated. West “stopped negotiations”.. “Let them correct their mistake”..”I know they want it; let them think how to do it.” Ukraine is now a satellite of the USA, which spends $72B a year on it

14. Putin: what’s happening “to an extent is a civil war”. Ukraine and Russia will be reunited again. “No one can separate the Russian soul” (once again returning to theme at start of interview that historically) Russia, Ukraine, Belarus are one people

15. Among the various reporting ‘bombshells’ revealed by Carlson’s interview was Putin’s clarification it wasn’t Ukraine negotiators at Istanbul that requested Russia pull back from Kiev in ’22 as show of good faith..it was Macron (France) and Sholtz (Germany) request. And so much for the western media myth of Ukraine’s great military ‘victory’ driving the Russians out of Kiev in April ’22

There’s lots of spin and talk coming out of Washington that the condition of the US economy is quite ‘good’ and, consequently, workers are doing great with wages rising, prices falling, and jobs expanding. Beltline politicos therefore just can’t understand why all the public polling shows Americans don’t agree. It’s not so great out there. In the following interview with the california internet podcast ‘This Is Revolution’ I peel off the scab of cherry picked statistics to reveal, per other govt stats, that the reality re. Jobs, wages, inflation, US economic growth (GDP) is not as rosy as the politicians and their mainstream media say.

TO WATCH GO TO:

https://www.youtube.com/live/lPkkTTXG0kQ?si=023_7AIy7vQ9RdgQ

Listen to my two short radio interviews of this past week on topics of tentative $118B border bill, US deficits, social program spending austerity, public v. Washington politicians’ perceptions of the US economy, politicians’ cherry picking of US statistics jobs and wages, the reality of ‘Bidenomics’, Fed rate hikes, real US GDP and real inflation.

1. Critical Hour Radio show, February 5, 2024 (Border bill, jobs numbers, Bidenomics)

https://drive.google.com/file/d/1VUVXugk0Pccu0sp5qTR-pEcWfz9DjlZb/view

2. Critical Hour Radio show, January 30, 2024 (Fed holds interest rates, US inflation, tech layoffs)

https://drive.google.com/file/d/16CClhQHt6LXGrosIq3gaRGkU0aM5uYSa/view

Listen to my Jan. 26, 2024 Alternative Visions radio show for an breakdown of the US economy and GDP for 2023 in detail.

Go to: https://alternativevisions.podbean.com/e/alternative-visions-2023-us-gdp-analysis-in-depth/

SHOW ANNOUNCEMENT

Today’s show is dedicated to dissecting the just released US first report on 2023 GDP by the Commerce Dept. Dr. Rasmus breaks down the various contributing elements to US GDP (Consumption, Business Investment, Government Spending, and Net Exports) to identify where the changes in GDP in 2023 were strongest and weakest. Explained as well is how the methodology for estimating inflation (GDP deflator price index) serves to low ball price changes and in turn boost the real GDP number of 2.5% for 2023. The methodology behind the GDP deflator is explained, and compared to the CPI (Consumer Price Index) with its higher estimate of inflation. Rasmus explains how changes to definition of GDP a decade ago also artificially boosted real GDP. Consumer spending held up in 2023 due to record credit card spending, drawdowns of savings and a surge in auto buying. Meanwhile, serious negative trends in business spending on equipment and housing construction continued in 2023 offset by a surprise jump in business spending on structures like factories; imports slowed faster than exports, and a sharp increase in 2023 in government spending on defense and state and local government all contributed (along with the low inflation adjustment) to the somewhat unexpected 2.5% GDP rise in 2023. Dr. Rasmus concludes, however, that the weaknesses within GDP do not ensure a ‘soft landing’ in 2024, which forecasts are saying will grow only 1-1.25% with recession in the first half of the year.

Today, February 2, 2024 the US Labor Dept released its monthly jobs report for January. One of the Department’s two surveys showed +353,000 jobs created in January. But a second report shows a drop in total employment in January of -1,070,000 full time and part time jobs (and an additional -400,000 jobs if one includes unincorporated independent contractors jobs. So, like the Bible, one can find whatever one wants in the government job stats.

So why the discrepancies between the two surveys in the monthly jobs report?

JOBS

One reason is that the two surveys have big differences in their methodologies (and underlying assumptions).

The Current Establishment Survey (which is not really a survey), or CES, is a compilation of reports provided by around 400,000 large businesses to the labor department. Even so, apparently those large corporations have been reducing their participation in the reporting. So maybe half that send in their reports on their hiring, layoffs, etc. to the government.

The second survey, the Current Population Survey, or CPS, is a true survey conducted by the labor department monthly. It actually surveys but mostly smaller businesses. It has a different methodology than the CES and different assumptions.

If one uses the CES it appears (and the Biden administration claims) 3.1m jobs were ‘created’ in all of 2023. But the CPS survey shows only 820,000 (again, counting full time, part time, and unincorporated independent contract workers).

Part of the problem may be that the CES doesn’t count NET job creation just new jobs while the CPS looks at the total level of employment from period (Jan) to period (Jan). The latter makes more sense. Doesn’t one want to determine what the net gain in jobs was over the year? Jobs gained minus jobs lost? And isn’t a survey that considers the millions of smaller companies perhaps more accurate than a partial census with declining participation by bigger corporations? There’s a bifurcated US economy out there. Big businesses may be doing ok; but smaller businesses generally aren’t.

Then there’s the matter of the unemployment rate monthly reporting. Here we keep getting a monthly unemployment rate of 3.7% (for the last three months). But that 3.7% is what is called the U-3 unemployment rate. That rate, unfortunately, is for full time workers only! The US civilian labor force is about 167 million. Maybe 40-50m of that total labor force is part time workers, temps, gig workers (grossly underestimate btw), independent contractors (who are actually workers not small businesses), etc.

And if one looks at the CPS survey again, there’s a statistic called the U-6 unemployment rate. That’s at 8%, not 3.7%, in the January jobs report.

The U-3 concludes only 6m workers are unemployed; the U-6 estimates almost 14m are unemployed.

The mainstream US media likes to hype and report the 353,000 January and 3.1m 2023 jobs, and the 3.7% unemployment rate and 6.1m jobless. You’ll see that published virtually everywhere. But elsewhere in the same government stats there’s the -1,070,000 January and 820,000 2023 jobs and the 8% unemployment rate and the 14m jobless.

It all comes down to what population you’re dealing with, what kind of survey you’re using (or not) and what are the scores of underlying assumptions (typically not noted in the reports) that are being employed in the methodologies chosen.

For example, when estimating U-3 jobs the government takes the raw data on jobs in monthly big business report (CES) then adds a separate set of raw jobs data from what it considers net new businesses created. These two datasets are merged (with certain assumptions about how many jobs on average are associated with a new business when it is created). It combines the two datasets, does a number of operations & manipulations on the raw data, including (but not limited to) seasonality adjustments, and comes up with the 353,000 reported, for example. But that 353,000 is a statistic, a manipulation and transformation of the actual raw data on jobs. Statistics are estimations of the actual data, not the actual number of jobs created in January. But this approach integrating new business formation job creation with the monthly large businesses reporting on jobs has certain real problems:

First of all, it is impossible to estimate net new business development. Why? There’s data on when a new business has formed. It must report formation to its respective state. But businesses rarely report anything when they go out of business. They simply go away. So the government plugs in a number based on historical trends for the number of businesses failing each month, subtracts that from the number newly started, and that’s the new business formation jobs total it then adds to the big businesses reports to the labor department. In other word, the ‘net’ is half made up, a plugged in number! Worse still, the ‘net’ supposedly jobs number is lagged at least six months from the current big business raw jobs number reported. So one’s estimating jobs ‘created’ six months ago and mixing it with current jobs reported.

Not only is this mixing apples and oranges but oranges and potatoes since the latter is not really a fruit.

WAGES & SALARIES

There are similar issues when the government says wages have risen 4.5% over the past year: that 4.5% is for full time workers only. Moreover, it includes ‘wages’ (salaries) of the highly paid occupations, including managers and even CEOs salaries. The fact is these occupations at the top end of the ‘wage structure’ get wage raises much higher than 4.5%. So the 4.5% average is skewed to the top end. And that means workers at the median are likely getting less than 4.5%. Those below median even lower, unless they were at minimum wage and living in one of the States that raised minimum wages recently. If not, and living in the two dozen or so stuck with the federal minimum wage of $7.25 for nine+ years now, they got 0% raise.

In other words, reporting 4.5% is an average and that distorts reality.

There’s also the problem of what is the real take home pay wage and salary. The 4.5% is reported as adjusted for inflation. But what if the adjustment is, once again, only for full time workers, which is the case for the oft-reported 4.5%. Even more important, what if the inflation adjustment is ‘low-balled’? The CPI price index latest results showed inflation of 4% for ‘all items’. That would suggest an average real wage gain of 0.5% last year. But has it been 4%. (Or the even lower 3.4% for the other price index, the PCE)? There are a whole set of other issues associated with the under-estimation of inflation–and thus overestimation of the 4.5% wage gain. That would require a separate article to fully consider and explain. To make it brief, this writer believes the corrected CPI is at least 6%, not 4%. If so, the real wage gain of 4.5% is actually a real wage decline of at least -2% last year.

When one looks at the overall growth of the economy year to year, or quarter to quarter, as measured by the Gross Domestic Product, GDP, another entire set of issues also arise. The official preliminary first GDP report released a week ago indicated GDP in 2023 rose by 2.5%.

GDP vs. GDI

Without considering all the issues why GDP is also over estimated even at 2.5% (another article perhaps), here’s just one: GDP measures the total market value of all the goods and services produced and sold in a given year (or quarter). That total production results in a corresponding total income generated.

After all, if a product or service is sold (the definition), then it produces a revenue which gets distributed among various sources of income: profits, wages, etc. The gross income created from the gross production should be more or less equivalent. But the gross income for 2023 (called Gross Domestic Income, or GDI) was only 1.5% while the Gross Domestic Product, or GDP, was 2.5%! So where did the other 1% go? Either GDI is underestimated or GDP is overestimated, or both. Whatever, the media likes only to report GDP but it seems what ends up in people’s pockets (GDI) is more important.

The preceding is just an overview of some of the real issues behind US statistics on jobs, unemployment, wages or even the economy’s growth in general that get glossed over or even ignored by the media and especially politicians. There’s a lot of ‘cherry picking’ of the statistics going on.

Perhaps that’s why in part the media, pundits and politicians keep scratching their heads recently, lamenting on why the American public doesn’t get it that ‘the economy’s doing really good’.

Maybe, just maybe, John Q. Public is experiencing a different set of statistics (and raw data facts) about the condition of the US economy.

The US political system is badly split we are told. No doubt. But maybe the economic reality the US public deals with on a daily basis differs so much from the selective statistics reported by the media there’s a split in perceptions of the actual US economy as well?

Dr. Jack Rasmus
February 2, 2024

Watch my January 21, 2024 YouTube presentation to the Niebyl-Proctor Library audience in Oakland, CA. (Q&A discussion afterward included) on the real conditions and prospects for American workers, their unions, and the US economy. What’s the real data and stats on job creation, inflation, wages and economic growth of the US economy vs. the spin called Bidenomics.

GO TO: https://youtu.be/OL3rvge8Q84