Ukraine War & Pandemic Caused More Inflation Than Gov. Spending – Wilkerson

Paul Jay

Hi. Welcome to theAnalysis.news. I’m Paul Jay. In just a few seconds, I’ll be back with Larry Wilkerson, and we’re going to talk about the results of the U.S. midterm elections. Please don’t forget there’s a donate button. We’re heading towards the end of the year when a lot of people are thinking about donating. We are a 501(c)(3) in the United States. We’re not in Canada or other places, but I hope you donate anyway. The best way to donate is to come to the website. If you’re not already watching on the website at theAnalysis.news, click the donate button, and off you go. Also, please subscribe to the email list. Be back in just a few seconds with Larry Wilkerson.

On Tuesday, the midterm elections were almost over. The so-called ‘red wave’ didn’t happen, as everyone has commented on, and the Democratic Party got a reprieve from total disaster. Although it looks like they will lose control of the House, they’re not the only ones that got a reprieve. I guess you can say all of us got a reprieve because at least the far-right Christian nationalists, fascists, and batshit crazy forces didn’t take total control of Congress, and they lost some important governorships and just didn’t do as well as expected. Although they still control many state legislatures and governors, and, as I say, will probably wind up in control of the House.

I say a reprieve because if economists are correct and many are predicting, including many senior figures on Wall Street are predicting, we are heading into a recession. If the current economic policies are not changed, and we do head into a recession, then look out for the presidential elections and, of course, congressional, again, the House elections and such in 2024. If they take place in the midst of a recession, then, of course, the economy will be the only story. Unless, of course, we’re in the midst of some kind of nuclear war, but then it won’t matter.

All of that said, I have a little more to say about all this, but before I do, I’d like to introduce our guest, Col. Larry Wilkerson. Lawrence Wilkerson was the Chief of Staff to Secretary of State Colin Powell. He’s a regular on theAnalysis.news, and so I don’t think he needs a heck of a lot more of an introduction. Thanks very much, Larry, for joining us again.

Lawrence Wilkerson

Good to be with you.

Paul Jay

The American people who voted expressed more rationality than was expected.

Lawrence Wilkerson

I think that’s clearly the case. 

Paul Jay

I’d say it’s a temporary reprieve, but what do you make of why there wasn’t the traditional swing to the party not in power, not in the White House?

Lawrence Wilkerson

The three people that I’ve read today while I was watching, listening to the National Symphony Orchestra play [Claude] Debussy, [Richard] Wagner, and others, looking at my phone surreptitiously, they said abortion was the biggest issue, parsing it state-by-state. They said abortion was the biggest issue, therefore, the Democrats made an error. They should have pushed that issue, pushed that issue, pushed that issue right up to the last minute. Now, of course, that might have backfired had they pushed it so hard, but that was in most states where they’ve done some reasonable polling– why did you vote this way afterward? It’s abortion, and women were the big turnout factor, as you might imagine. That was the number one.

The other issue is parsed out over the states, whatever the state happened to be, whether it was Wisconsin, Michigan, or Pennsylvania. Pennsylvania, one political scientist said, “well when you have a nut running, the other guy has a pretty good chance.” I assume he was talking about the governor’s race. There were different issues across the country regarding the second, but abortion was the top one. That’s what they all said anyway in their reports.

Paul Jay

I thought the fact that over and over again in the media, without almost any pushback, the odd one, but almost none, the fact that the economy was equated as a strength for the Republican Party and that inflation as an issue somehow favored the Republicans. I thought the fact that the Democrats, except for a few exceptions and a few media pundits, mostly didn’t push back on that. They kind of accepted the fact that the economy was a strength for the Republicans, so they had to fight on the issue of democracy and abortion.

I looked at a very interesting study for the Democrats; as much as I can’t stand the corporate Democrats, for them to acknowledge and accept in a way that the bailout packages were fundamentally responsible for inflation, which is what was said over and over again by Republicans. I saw Chris Christie on the Stephanopoulos show Sunday morning. Donna Brazile was opposite him, and he said, “well, we’re going to win because of inflation in the economy, and everybody blames the inflation on the Democrats, and they deserve to be blamed,” and she doesn’t push back on that.

Sarah Isgur

“Inflation has raised the minimum wage because now you have to pay $20 to the grocery store.”

Donna Brazile

“What drives inflation? It’s not just who is in Washington, DC. This inflation is being driven by huge demand at a time we had two years of economic lockdown.” [crosstalk 00:05:59]

Chris Christie

“I’ll take Larry Summer’s word for it, okay. Larry Summers, Clinton’s Treasury Secretary, told the Biden administration two years ago, “you go ahead with the spending you’re talking about, and you are going to create enormous inflation.” It’s exactly what happened. We can try to blame it on a whole bunch of other things, but when you put $5 trillion that you printed into the economy, after all the money that we put in during COVID, that’s why you have inflation. The fact is that it’s got to stop at some point, and the Democrats don’t want to talk about that because their constituencies are all about ‘pay me more’.”

“In the end, Sarah’s right that they ceded that this round to Republicans because they knew that Joe Biden couldn’t articulate the argument as to why he was better.”

Paul Jay

There was an interesting study done by the San Francisco Federal Reserve. In fact, two studies where they analyzed the big bailout packages during the Biden administration, stimulus packages that put a lot of money in people’s pockets. The maximum inflationary power of those subsidies maybe adds 3% to inflation. Now, this is at a time when this all began, when inflation was practically zero anyway. The actual stimulus packages might have given a 3% inflation rate which is actually not so terrible. It means that– it’s relatively healthy to have inflation down around three, maybe 2%. The 8%, and maybe more inflation, comes from the Russian invasion of Ukraine, the increased energy prices, supply chain problems, semiconductor problems, and on and on with the global supply chain. The vast majority of the increased inflation had absolutely nothing to do with government spending.

Then number two, because of the effect of those government stimulus plans that put money in people’s pockets, it is pretty much gone because that stimulus money is not flowing anymore. The current inflation rate has next to nothing to do with government spending. It might have a minor piece, but very minor.

Lawrence Wilkerson

Well, but why would you doubt for a moment that the media– the Republicans read the media better than the Democrats– wasn’t going to support the idea of inflation being Biden’s fault? They’re not going to point out what really is causing the problem, and that is the damn war in Ukraine and those things associated with it, and Covid, as you pointed out. I dare say the war in Ukraine, the supply side problems it’s created, and the chain problems it’s created in everything from fertilizer to food is causing more of this than anybody else wants to say, including the government, because they’d never do anything in reporting inflation except ambiguity and lies. They pull things out and say, “oh, this is food, and this is gas,” and they pull another thing out and say, “oh, this is houses.” It’s crazy. If you looked at the whole inflation business, you’d probably find that Ukraine is the number one cause. The war in Ukraine.

Paul Jay

I agree with that to a large extent, but let me add another point. This report from the San Francisco Fed said not only was inflation at a maximum of maybe 3% because of government spending, but if there hadn’t been that government spending, if there hadn’t been the stimulus, it says there would have been deep recession which would have been far more difficult to deal with than a temporary 3% of inflation.

Lawrence Wilkerson

Probably true.

Paul Jay

Now, the other big piece of inflation, which I agree with you. The war in Ukraine is a major part and the Russian invasion and such, but also the rising tension with China, the threat, and the fear amongst the corporate elites– and it’s a legitimate fear, although it’s to a large extent stoked by the American government– that China may not be a reliable producer for American products anymore. They fear that about the global supply chain. All of this adds up to the fundamental fear they have, which is the thing that terrifies corporate America, including corporate America that backs the Democratic Party. The American working class, for the first time in decades, actually has some leverage. There are a lot of jobs not filled out there. Wages are actually going up some. There’s some rising militancy in the American working class. Nothing scares American corporate elites more than the American workers actually starting to wake up. Maybe there’s even some reflection of that in these elections.

I think the Democratic Party, corporate leadership, at least, didn’t really want to unpack how benign the government spending was because corporate America now wants austerity, they want high-interest rates, and they want to beat back any feeling amongst American workers that they actually have some strength and might unionize, and might go on strike which many are doing.

Lawrence Wilkerson

I think the media really astonishes me with this war in Ukraine in how they played it to the maximum extent possible on our side, on the west side, and so forth. I think the money that’s being spent on that and the money that’s being spent in anticipation of [Volodymyr] Zelenskyy not giving up, the money that’s being spent on NATO, in general, is money that’s going down a toilet. Pretty soon, that’s going to have an even more dramatic effect on our financial situation, our economic situation, and the world’s economic situation than other things because it’s doing things that are not healthy for the future of Europe’s economy or our economy.

Take Germany, for example, where there is a real discussion going on about its manufacturing leaving Germany because of the situation facing them in terms of energy. Nord Stream didn’t do any good to that. Nord Stream probably made a lot of corporate leaders in Germany decide that their energy future was so tenuous that they are going to relocate. I’m told they’re out there scouting right now. They’re probably not going to move to China, but they might move some aspects of their manufacturing to China. Most people don’t realize that Germany is one of the few manufacturing countries left in the world. It’s actually, 20% to 21% of its economy is manufacturing, whereas France is about 7%, and the U.S. is about 9%. We just aren’t manufacturing countries anymore in the West.

Now, a 9% portion of the U.S. GDP devoted to manufacturing is bigger than most other countries in the world manufacturing because we’re so gigantic in terms of our base. It does indicate how much our GDP and how much our production has turned into– I hesitate to use the word production– moving money around. Whether it’s the bank of International Settlements or it’s the New York Fed, which works with the BIS, or it’s some of these other crazy things that we do today with money that really fuels the coffers of the .001%, not just in the U.S. but in the world, but in the U.S. first. That’s the thing where our hegemony really matters. That’s what we do.

When you take a country like Germany, which still is a good, solid manufacturing country, and you start doing this sort of thing to it, then you’re disrupting the whole pattern of postwar Europe. I don’t think that’s good. I really don’t. I’m all for both Germany and Japan being treated not as World War Two pariahs but as first-class, decent democratic states today. There is an impetus to give them problems that I would not rather give them, like Japan having to decide whether it’s going to go nuclear or not in the face of this incredibly stupid, maniacal re-emphasis of nuclear weapons. That would be, I think, very dangerous if Japan went full-up nuclear.

On the other hand, if we drove Germany into some kind of isolation in Europe and made her feel like she had to fall back on her own recognizance all the time, and she started doing things that weren’t necessarily healthy for the rest of Europe. We don’t have to consult history too closely to figure out that this is the sort of thing that happens. It’s not anything in the character of the Japanese or the character of the Germans. It’s what their geography and the rest of the world force them into because of their geography and because of the rest of the world’s attitude towards that country and even connivance in making that country what it shouldn’t be.

A great case in point is when Helmut Kohl said, “do you really want, after we unified Germany, it to be a member of NATO, or do you want it to be neutral” Everybody said, “of course, we want it to be a member of NATO. We want it to be the most powerful European member of NATO.” Okay, think about that for a minute. Just think about history, think about geography, think about Moscow, and think about that for a minute before you so– I mean, this is a German saying that. Yet we went ahead and did what we did, and then we amplified the problem tenfold, 100-fold, by saying, “bye, Germany. We’re going to go that way. We’re going to go past you. We’re going to go to Poland. We’re going to go to Hungary. We’re going to go to Finland, Norway, and other countries, finally.”

We’ve made NATO such an untenable organization now that I’m more worried about our attempt to reestablish our ultimate hegemony over Europe through NATO than I am about the economic situation, and that takes a lot to make me worry more about that than the economy.

Paul Jay

They’re very tied together because, as I said, the war in Ukraine is what drove– go back. I don’t want to say the war in Ukraine because it sounds like it’s some abstraction. The Russian invasion, the illegal Russian and brutal invasion of Ukraine, without doubt, provoked, but still, it was Russia’s choice to do it; that said, it drove energy prices up, which is the biggest factor that drove inflation up.

Up until now, I think domestic politics in Russia and domestic politics in the United States were driving this policy more than anybody’s security concerns. Of course, Ukraine had legitimate security concerns. They just got invaded.

Now that the midterms are over, are we seeing a little hair of rationality in the Biden administration on Ukraine and even on China? I read a report yesterday that under American pressure, Zelenskyy withdrew his statement that he would refuse to negotiate with Russia until Putin was gone. Well, that’s something.

Lawrence Wilkerson

That is something big.

Paul Jay

I saw that Biden’s going to meet with Xi [Jinping] in the next few weeks. That’s something. It sounds like there’s going to be maybe a rational conversation between the U.S. and China. I’m wondering if there’s some domestic political pressure off Biden now that he can–

Lawrence Wilkerson

I hope so.

Paul Jay

— be so one-sided.

Lawrence Wilkerson

I said that a couple of weeks ago. I said, “I want to see what Biden does, win or lose, in the midterms, what he does when the political pressure is off him, and he can show some ankle on Ukraine. Will he then turn to diplomacy?” I know Joe Biden knows diplomacy is the only answer to this conflict. I also know that he knew I’m 40% in the polls and sinking further, and the midterms are coming up, and we’re going to get blasted if I suddenly say, “I’m going to Geneva and sit down with Putin.” That would have been– the media would have just ripped him apart, almost the way they ripped [George] Marshall apart when he came home from China and lost China. We do those sorts of things. So it was inevitable. I know Biden knew that. I’m hoping, as you said, on both counts, China and Ukraine, Moscow, he sees an opportunity to do some things afterward. Not that he was mightily empowered by the midterms, but he certainly wasn’t disemboweled.

It might have been more emphatic, though, if he were disempowered significantly. If they really lost badly, then he would have thought, “well, I can go out and at least have a foreign policy triumph. Or I can do something that defies the media and the people and turn it into a positive,” like [Richard] Nixon did when he went to China, for example. Got nothing to lose, in other words. Well, you can say now he’s got a little more to lose, but I think it’s still time, and I think he’ll realize that. I hope he puts [Antony] Blinken in a straitjacket because Blinken has shown me that he doesn’t know how to be a diplomat. He has no clue about what it takes to be a diplomat.

Paul Jay

My most optimistic hope– and what’s the word– optimistic hope, low expectation is that Biden will realize that if they want to win in 2024, they have to stop a deep recession from setting in and do everything they can. If the Republicans control the House, they’re not going to be able to pass, probably any more stimulus unless somehow he can do something by executive order.

His one way of doing this is to get a deal in Ukraine, let energy prices get back to where they were, and give up any notion of bringing down Putin’s government. Again, be careful what you wish for because from what I know of Russian domestic politics, which is very little, but from what I’m told from people who do, you’re as likely to get someone more militarist, more fascistic than Putin. There’s no reason to think if Putin falls, you’re going to get some pro-Western figure in there. Not that being pro-Western is so great, either. That said, be careful what you wish for if this is the fall of Putin. If they can get energy prices back down to pre-war levels, I would think that would go a long way to at least making this recession minor and maybe no recession at all. Maybe this election gives Biden the wherewithal to do that because nothing is going to help him more in the elections than getting energy prices down.

Lawrence Wilkerson

I think you’re right, and I think it’s going to be a harder row than maybe you think to hoe because I think the Saudis, OPEC plus, and OPEC itself are going to be really pegged on that price per barrel that they’ve been pretty much fixed at. As a number of people have pointed out lately, not trying to defend the Saudis but trying to show the rationale, it’s a very logical rationale for why they’re at where they are right now and don’t want to go too much lower, nor go too terribly or much higher. It’s the old ballgame of don’t want to incentivize too fast renewable energy sources, and we have to have what we’re getting at the bottom of our price range in order to fulfill MBS’s plan. They can’t go below that for more than a month or so, or their plan just gets tubed. The Saudis are very logical about this. It has nothing to do, I don’t think, with their angst over [inaudible 00:22:18] and our emphasis on it or the Yemen war or whatever. That’s not the way the Saudis deal. They’re purely pragmatic. Even MBS is made to be pragmatic by the plans he has for the future, which are going to cost a certain amount of money, which in real life, he is heavily indebted for already. I don’t just mean monetary debt. If he doesn’t keep that range, then it’s curtains for him, I would estimate, and a lot of people like me who are more expert than I estimate the same thing.

Trying to get that price down anywhere below that bottom figure the Saudis are looking at in their scale is probably going to be difficult because I suspect that if Putin’s still around or whatever Russian leader is still around, they’ll agree with that, and they’ll stay at that. That’s all about geopolitical developments between Moscow and Riyadh, and Beijing and Riyadh, and to a certain extent–

Paul Jay

 China’s interest is to get energy prices down, too. They don’t–

Lawrence Wilkerson

Yeah, but not as long as they’re getting it at a cut-rate price from Russia. That’s kind of what they’re doing in order to not say too much adverse about Ukraine.

Paul Jay

Well, I agree with you. I’m no expert on oil prices either, but oil prices were down significantly lower than they are now prior to–

Lawrence Wilkerson

I don’t know what the bottom is now. The bottom was about–

Paul Jay

I was just going to say if you are heading into a– sorry, go ahead.

Lawrence Wilkerson

No, the bottom of the range was about $55 to $56 a barrel, but that was when we were doing the exercises in Beijing at the end of the first decade of this century. I don’t know what it is now. I suspect it’s probably around $88-$89 or somewhere in that neighborhood. He was saying the other day that it’s $125-$130. I don’t think it’s that high. That might be the top part that doesn’t incentivize faster development of alternative energy and therefore leaves them with trillions of dollars of stranded assets because it will be in the ground, and they haven’t got money out of it when we transition.

Paul Jay

Well, are you seeing some of the signs that maybe Biden is more open now–

Lawrence Wilkerson

Yes.

Paul Jay

–to push the Ukrainians to negotiate a deal?

Lawrence Wilkerson

I think it’s just inevitable from the politics of it. It’s hard because the media has made such a cause celeb of this war. They’ve made it such a white Christian nationalist, blah, blah, blah. This is the war. This is the war we want to be in. This is World War II revisited. They will probably fall off of that rapidly after the winter, but right now, that’s what it is. He’s still got to fight that.

What’s the media going to say? What’s going to be the headline above the New York Times, Washington Post, when he decides to do diplomacy? Is it going to be favorable? Is it going to be neutral? Is it going to be favorable? Are they going to be encouraging? What are they going to write, and what’s the editorial page of the Wall Street Journal going to write? That’s a republican–

Paul Jay

My feeling is there is a mood-building for negotiations.

Lawrence Wilkerson

I hope so. I hope so.

Paul Jay

Zelensky– I can’t imagine how they’re not going to have to give up on Crimea because if they push that–

Lawrence Wilkerson

Well, he said today, or I read today, I think, in the New York Times, a quote of him where he said, “we took…” what’s the city they just got back? It just went out of my head. Kherson? “If we did that, we can take Crimea back.” Oh, okay.

Paul Jay

That Russians cannot live with that.

Lawrence Wilkerson

No, I don’t think so.

Paul Jay

The thing about this– and I want to keep saying this because a lot of these geopolitical conversations don’t talk about this– the issue is tens of thousands of people are dying. I heard today [Mark] Milley thinks 100,000 Russian soldiers have died. They think more than 100,000 Ukrainian soldiers have died. Tens of thousands and thousands, I don’t know what the number is now, of Ukrainian civilians have died. This has to stop for those reasons and this distraction of having to defend every inch of Ukrainian sovereignty–

Lawrence Wilkerson

Well, it’s always the people who don’t have to stand there with a bayonet and man the foxhole or the tank or the artillery piece who are saying that. It’s rarely the personnel on the frontline unless the personnel on the front lines are propagandists.

Paul Jay

Thanks very much for joining me, Larry.

Lawrence Wilkerson

Thanks for having me, Paul.

Paul Jay

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