Whether it’s Bailey Bros Savings & Loan or Silicon Valley Bank, the fastest way to trigger a bank run is when the word gets out you are illiquid.
The duration gap is a financial and accounting term used to measure their risk due to changes in the interest rate. This is one of the mismatches that can occur and are known as asset–liability mismatches.
Another way to define Duration Gap is the difference in the price sensitivity of interest-yielding assets and the price sensitivity of liabilities (of the organization) to a change in market interest rates (yields).
Risk management 101.
You can get a gap a lot of ways — your credit losses can rise (the GFC scenario), your unrealized losses can rise from interest rate hikes (the current banking sector scenario).
The Lehman death scenario – funding long-term liabilities with short-term assets.
The duration gap measures how well matched are the timings of cash inflows (from assets) and cash outflows (from liabilities).
When the duration of assets is larger than the duration of liabilities, the duration gap is positive. In this situation, if interest rates rise, assets will lose more value than liabilities, thus reducing the value of the firm’s equity. If interest rates fall, assets will gain more value than liabilities, thus increasing the value of the firm’s equity.
Conversely, when the duration of assets is less than the duration of liabilities, the duration gap is negative. If interest rates rise, liabilities will lose more value than assets, thus increasing the value of the firm’s equity. If interest rates decline, liabilities will gain more value than assets, thus decreasing the value of the firm’s equity.
By duration matching, that is creating a zero duration gap, the firm becomes immunized against interest rate risk. Duration has a double-facet view. It can be beneficial or harmful depending on where interest rates are headed.
Some of the limitations of duration gap management include the following:
the difficulty in finding assets and liabilities of the same duration
some assets and liabilities may have patterns of cash flows that are not well defined
customer prepayments may distort the expected cash flows in duration
customer defaults may distort the expected cash flows in duration
convexity can cause problems.
Let’s try an example.
When the duration gap is zero, the firm is immunized only if the size of the liabilities equals the size of the assets. In this example with a two-year loan of one million and a one-year asset of two millions, the firm is still exposed to rollover risk after one year when the remaining year of the two-year loan has to be financed.
Got it now?
So, what’s going on?
A lot of stuff like this as Lew Ranieri just posted (Lew of the South Ozone Park, Queens Ranieri’s — not to be confused with the Greenwich Ranieri’s).
And as Lew observes, that’s NOT the first floor.
And this
Lines were seen outside a First Republic Bank branch in California, with worried customers wanting to withdraw funds after the sudden collapse of Silicon Valley Bank. SVB Group on Friday became the largest bank to fail since the 2008 financial crisis https://t.co/YQyF6dE5vipic.twitter.com/f8robxtwrw
And Signature Bank just announced they’re closed by state authority.
Here’s the pre-crash story — a lot of uninsured depositors appropriate to a business backed with high-end individuals.
Deposits are a smaller fraction of the portfolio
With a growing fraction of long-dated assets.
The dough had to go somewhere — so they went to long-dated securities like government paper — and then insanely held them to maturity as the Fed started raising interest rates.
Like climbing out on a limb while Jay Powell spins up a chain saw to cut the branch.
Here’s the effect of Jay’s cutting — AOCI starts piling up unrealized losses.
As Jay cut, the blood flowed all through 2022 while NOBODY did anything.
SVB was posting long-dated assets to back short term loans as the value of those assets plunged.
Duh!
Here’s SVB in the context of others from The_Real_Fly’s tweet
How did we get here? Let’s go to the tape.
Got it?
SVB was getting a slug of cash from Federal stimulus deposits over the last few years.
But, now the Congressional paydays are done and that cash is disappearing along with VC money — just like George Bailey when “Mr. Potter stole the drunk’s dough”
Normally, you would have a Chief Risk Officer with quant skills sufficient to anticipate these dynamics, and capable of advising how best to head them off.
Well, SVB’s last CRO left a year ago as the rats were starting to jump, leaving risk management in the hands of this thing — someone who could give you her pronouns before she could spell convexity:
I once had to work for a couple of unskilled “here are my pronouns” people at a company that went insanely woke. Fortunately, I worked for them for just for a short time.
Too long a story how it happened but it began with a class-act president leaving, replace by a wokester, my boss retiring, and well, you get the picture.
I saw the handwriting on the wall early but hung around to see what would happen. It was a surreal experience.
“Go ask Alice – when she’s 10-feet tall.”
Anyway, let’s go to the 2 minute “elevator pitch version” of what has happened and is currently happening, graciously provided by my trusted Mexican risk advisory
SVB was full frontal woke, managing their portfolio on ESG, watching their unrealized losses pile up on their Treasuries as Powell drove interest rates back into the historic normal band.
As Jay hiked, SVB saw their deposits plunge as the Federal welfare wagon slowed.
And they did nothing.
Let’s recall the Clown Car exec team asleep at the switch — or sitting in DEI conferences 24×7:
Chief Risk Officer: Kim Olsen (led credit ratings in 2007 at Deutsche)
Chief Legal Officer: Michael Zuckert (General Counsel at Citibank in 2008)
Over the last 2 weeks, management sold nearly $5 million in stock.
Here’s Greg “Fearless Leader” Becker speaking at the “you’re fired/thanks for the memories” call (note the Gleneagles logo on his jacket – a primo golf resort in Scotland)
Silicon Valley Bank’s CEO, Greg Becker, reportedly sent this to employees after the collapse of the bank.
"My unfair ask is can you guys just hang around, try to support each other, try to support our clients… which may be a slightly better outcome than where we are now." pic.twitter.com/3mcVTOZtim
How about the ratings agencies? Where were they? Any “early warning”?
Nope – investment grade all the way up to the moment the FDIC stepped in, halted the bleed, and delivered the merciful kill-shot.
Let’s put this all in context by reviewing the week just ended:
$200 billion collapse of Silicon Valley Bank in 24 hours
Crypto market lost over $100 billion
Bank stocks lost $100 billion in value
Mortgage demand hit 30 year low
Fed said 2 million people will lose jobs
Who’s now at risk of a haircut or worse. Well, everyone with SVB balances over $250K are uninsured.
That includes:
Circle: $3.3 billion
Bill․com: $670 million
Roku: $487 million
BlockFi: $227 million
Roblox: $150 million
Sunrun: $80 million
Ginkgo Bio: $74 million
iRhythm: $55 million
Rocket Lab: $38 million
Sangamo Thera: $34 million
Lending Club: $21 million
Huuuge Inc: $24 million
Payoneer: $20 million
Ambarella: $17 million
Protagonist Thera: $13 million
Oncorus: $10 million
Eiger Bio: $8 million
Repare Thera: $7 million
Anybody you know?
And these are the only companies REPORTING exposure so far – ~$4 billion.
Yet SVB has $170 billion in uninsured deposits.
50% of all VC-backed startups in the U.S. have exposure to SVB.
97% or so of the deposits uninsured.
But there is a bright side — chatter has it Harry and Meghan had a lot of dough in cash in SVB along with Oprah.
We can dream, can’t we?
Clearly, the shareholders are wiped out. A lot of vendors stiffed. And, with haircuts all around, depositors will scramble to deal with their payments issues, take their haircuts, and move on.
So how does the US banking sector look this Sunday afternoon?
But, as our Mexican risk advisory said, “don’t panic” — Auntie Janet says there will be no bailout – just a “Special Monetary Operation” in the form of an SPV that looks like a bailout, smells like a bailout, and quacks like a bailout.
After all, a lot of California money on the table – that’s a lot of Progressive political power with substantial “value at risk”.
Here’s Auntie:
BREAKING: Janet Yellen Says No Bail Out for SVB But Has Concerns About Contagion to Other Banks
“We’re not going to do that [bail out] again…let me just say that we want to make sure that the troubles that exist at one bank don’t create contagion to others” pic.twitter.com/6aZUlBu5KG
Translation — my “Special Monetary Operation” is a bailout.
For one thing, Jennifer Newsom has some “dough at risk”.
So Gavin says: “Mi problemo es tu problemo.”
After all, in the People’s Republic of California with $568 billion in debt, recall that 1% of the population pays most of the taxes. And a lot of that tax dough is — or was — parked in SVB.
Meanwhile, in the real world, notes the Treasury dumping since the Biden Regime unlawfully seized power.
Not expecting the bank runs will do much to head this all off. And with China brokering peace between Iran and Saudi Arabia, any surprise China is no buying oil in Chinese yuan?
And the contagion risk is rising — HTM and AOCI are bleeding as interest rates rise, even as that portion of bank balance sheets gets bigger.
52 regional banks lost >10% market value last week with a combined market cap of $369 billion.
FDIC says the US banks are sitting on ovr $620 billion in unrealized losses.
As Winston Zeddemore famously said: “That’s a big Twinkie.”
Now, in fairness, some people did call this.
FLASHBACK: If you put the wrong person in office you’ll see a STOCK MARKET CRASH that could look like 1929…
First came the bankrun about a month ago triggered by guidance that losses would continue.
A couple weeks later came the next drop after chatter hit the street that regulators were digging into what Axel Lehmann (Board Chair) knew about the run and when he knew it.
So it’s like on schedule that CS stock craters 7% to a record low, following some bad press, courtesy of Reuters and Bloomberg.
For those scoring this game, recall CS has a book per share of ~15.25 and tanking fast.
Lords knows what’s in that pile of toxic waste charmingly labelled “held to maturity.”
So, no surprise, Reuters reports CS is frantically buying deposits at any price – offering 6.5-7% annual rate on new three-month deposits of $5 million+ for one-year deposits.
That’s a Big Twinkie – 100 to 200 bps above JPM, UBS and Citi.
Hilariously, new deposits cost CS more — per Reuters higher than Credit Suisse’s lending rates in Asia.
Do they plan to make it up in volume? Old joke, just kidding
Per Bloomberg, dozens of CS “scalp hunters” have bailed out since September “and are likely to take at least a quarter of the funds they manage to their new employers, rising to as much as 60% in some cases, according to people familiar with the hires.”
Russia Tells UN That Ukraine Crisis Is A “War With The West For Survival”
BY TYLER DURDEN
FRIDAY, FEB 24, 2023 – 06:55 AM
In two days of United Nations special sessions this week related to Ukraine as well as the Nord Stream pipeline sabotage, Russia mounted a robust defense, arguing that it sees its ongoing military action in Ukraine is a matter of “survival”.
Russia’s Permanent Representative to the UN Vasily Nebenzya voiced the stark perspective on Wednesday, casting the war as one against the collective West. “As for our country, we see all of this as a war with the West for survival, for the future of our country, for our children, for our identity,” he said.
He stated that “Ukraine is nothing but a bargaining chip in this plot” – part of a broader plan which was long in implementation, going back to 2014.
The Russian diplomat’s words followed a surprise admission by NATO Secretary General Jens Stoltenberg, who in a Feb.14 press conference in Brussels described that “the war didn’t start in February last year. The war started in 2014.”
The day prior to Nebenzya’s remarks, the UN Security Council had convened at the urging of permanent member Russia to consider fresh allegations surrounding the Nord Stream sabotage. Nebenzia during that session called for establishing an independent investigation.
He specifically invoked Pulitzer Prize winning journalist Seymour Hersh’s bombshell report which said the pipelines were bombed as part of an elaborate covert CIA operation involving the US Navy and help from the Norwegians:
“This journalist is telling the truth,” Nebenzia said at the meeting. “This is more than just a smoking gun that detectives love in Hollywood blockbusters. It’s abasic principle of justice; everything is in your hands, and we can resolve this today.”
Crucially, China immediately backed the call. “As the most authoritative and representative international organization, the UN can play an active role in conducting an international investigation and ensuring the security of transboundary infrastructure,” the Chinese ambassador told the Security Council.
But US Ambassador John Kelley slammed what he called Moscow’s attempts to obfuscate and deflect blame from its aggression in Ukraine, saying that “today’s meeting is a blatant attempt to distract” from the forthcoming emergency meeting of the General Assembly. The US at that upcoming meeting is expected to rally in favor of a scathing UN condemnation of Moscow to mark one-year since Moscow’s Feb.24 invasion.
“That is what our focus should be on,” Kelly said. “Russia desperately wants to change the subject.”
But also addressing the council as outside experts were American economist Jeffrey Sachs and Ray McGovern, a former CIA analyst and author Ray McGovern. They made compelling cases during their presentations, saying that the Hersh report is accurate also on account of recent statements from US officials. Those presentations before the UN body be viewed below:
Initial translation – will update when the Tass publishes the official transcript
“I am speaking at a difficult, milestone time for the country, at a time of cardinal irreversible changes in the world.
Putin: Since 2014, Donbass has been fighting for the right to live on its own land, to speak its native language under constant shelling. He believed and expected that Russia would come to the rescue
.Putin: The Western rulers’ claim of peace, as we can see, was a hoax. The West increasingly encouraged the Ukrainian regime to carry out terrorist actions in the Donbass. The United States deployed its bases near the borders with Russia. They prepared Ukraine, enslaved by them, for a big war. They admit it openly.
We defend not only our positions. In the modern world there should be no division into “civilized” countries and all the rest. We were ready for a constructive dialogue with the West. But in response they received a hypocritical reaction – the expansion of NATO, missile defense systems, the deployment of military contingents. Neither side has hundreds of military bases around the world like the US does. The whole planet is covered.
In December 2021, we sent the West a security guarantee agreement, but all positions were refused. The incoming information said that by February everything was ready for another punitive action in the Donbass, against which Kyiv threw artillery, planes, and tanks.
They started the war, and we use force to stop it.
The next target after the Donbass was an attack on the Crimea and Sevastopol. They are now talking about it openly. We protect our home, and the goal of the West is unlimited power. The West spends $150 billion on the war, and $60 billion on supporting poor countries.
Endless accusations against Russia were heard at the Munich Conference. The feeling that this was done so that everyone would forget what the West has been doing in recent decades. And they plunged entire regions into chaos, released gin and bottles. Because trillions of dollars are at stake under the guise of democracy.
In the 1930s, the West opened the way for the Nazis to power in Germany. In our time, they made Anti-Russia out of Ukraine. The project is not new. It goes back to the 19th century. It was cultivated in Austria-Hungary, Poland in order to tear the historical regions away from our country. Nothing new. Everyone repeats. The West accelerated this project by supporting the anti-state anti-constitutional coup in 2014 in Kyiv. Russophobia was planted with ideologies.
The Armed Forces of Ukraine use Nazi symbols, do not hide whose heirs they are. The West doesn’t give a damn who to bet on in the fight against Russia. The main thing is to fight against us. So, you can use at least terrorists, at least neo-nazis, at least a bald trait. And in the 1930s and now the idea is the same: to kindle a hotbed of war in the East.
The people of Ukraine have become a hostage of the occupational pro-Western regime, which has been plundering its state for decades. Nobody cares about people. They are prepared for slaughter, turned into consumables. Sad, scary to talk about it, but true. The responsibility for the escalation lies with the West and the Kiev regime, for which its own people are a stranger.
The more long-range systems fall back on Ukraine, the further we will be forced to push the threat away from our borders.
The elites of the West want to turn a local conflict into a global confrontation. It is about the existence of our country. But they understand that it is impossible to defeat Russia on the battlefield. Hence the information attacks, lies, distortion of historical facts, attacks on the Russian Orthodox Church, culture.
I would like to tell the West – look at the main books of world religions. It says that the family is the union of a man and a woman. But even these sacred values are questioned. The British Church is considering the idea of a gender-neutral God. Forgive me Lord, they don’t know what they’re doing. The elites of the West are going crazy, leading people to disaster. And we will protect our children from degradation and degeneration.
The West is trying to undermine our society. But traitors will be held accountable. We will not arrange a witch hunt for those who have abandoned their homeland. Let them live with it. The main thing is that the citizens of Russia gave them a moral assessment. We are proud that the Russians understood our actions in Donbas and supported us. This is a manifestation of patriotism, a feeling that is historically inherent in our people.
I want to thank our people for their courage and determination. Thank the fighters, volunteers, patriots. I would like to apologize for not being able to name everyone during the speech. When I was preparing the performance, I wrote a long list of heroic units, then took them out, because it was impossible to name them all. I was afraid not to name someone.
Low bow to the families of those who defend Donbass, doctors, builders, rural workers, teachers, cultural figures, volunteers, journalists. Especially those who work on the front lines. I thank the military priests, civil servants and entrepreneurs who fulfill their professional civil and human duty.
Special words of gratitude to the residents of the DPR, LPR, Kherson and Zaporozhye regions. You yourself made your choice in conditions when there were military actions nearby. But you decided to be with Russia, with your Motherland.
Special words of gratitude to the residents of the DPR, LPR, Kherson and Zaporozhye regions. You yourself made your choice in conditions when there were military actions nearby. But you decided to be with Russia, with your Motherland.
We will implement infrastructure projects in new regions of Russia. Build roads, as they did in the Crimea, which now has a land connection with Russia. We will do everything so that the long-awaited peace returns to our land, the safety of people is ensured. For this, for their ancestors, for the future of children and grandchildren, for the reunification of peoples, fighters, our heroes, fight. I ask you to honor the memory of the soldiers who gave their lives for this, the civilians who died at the hands of neo-Nazis and punishers…
I understand how hard it is for the families of the fallen soldiers. Our duty is to support them. Help them raise their children, give them education and a profession. The family of each member of the NWO should be surrounded by care and honor. Their needs must be addressed immediately.
Every fighter should have the opportunity to visit family.
The programs for the development of the armed forces should be based on real combat experience. He is priceless. Officers and sergeants who have shown themselves to be competent commanders will be sent to military educational institutions as a priority. and should be in demand both in the army and in civilian life. The Motherland will appreciate their contribution to the defense of the Fatherland.
We will strengthen guarantees for labor collectives. I propose launching a special program to create preferential rental housing for defense industry workers. The rental rate will be lower than the market rate, as part of the payment will be taken over by the government. We will start building such housing, primarily in defense cities.
The West has also deployed an economic front against us. But the organizers of the sanctions are punishing themselves. Provoke rising prices, closure of enterprises, energy crisis. And they say that the Russians are to blame. They tried to break ties with Russian companies, disconnect them from financial communication channels, disconnect them from the markets. This is the theft of our foreign exchange reserves. Attempts to collapse the ruble and provoke destructive inflation. Their goal is to make our citizens suffer. Such humanists.
In March, a program to support the economy for 1 trillion rubles was adopted. We were predicted an economic downturn of up to 10%. But GDP fell by 2.2%. Despite the fact that in February-March they predicted a collapse for us. Russian business has rebuilt logistics, changed partners to reliable ones. Settlements in rubles doubled and amounted to a third of all. and with the currencies of friendly countries – more than half. We will continue to form a stable, secure system of settlements independent of the Western system and currencies.
Defense is a priority. But we are not going to destroy the country’s economy. Thus, the basic sectors of the economy increased their performance. The delivery of housing has exceeded 100 million square meters. Agriculture showed a two-fold growth, for which we bow to them.
We have every opportunity to make a breakthrough in other areas as well. We have achieved a reduction in unemployment. Before the pandemic, we had 4.7% unemployment, and now it is 3.7%.
You have reached a new level of economic development – the production of goods with high added value. This year, a solid demand for domestic producers is forecast. Our companies are ready to occupy the niches vacated after the withdrawal of Western companies.
I draw your attention to the fact that the meaning of our work is not to adapt to current conditions, but to bring the economy to new frontiers. Now everything is changing very quickly. This is a time of opportunity.
We will build new logistics links. Build roads to the East, develop a dig. We will pay special attention to the international North-South corridor. This will open up opportunities for cooperation with India, Iran, the countries of Southeast Asia. Our plans include building up the capabilities of the Trans-Siberian Railway, the Northern Sea Route. The infrastructure of the regions will receive a powerful impetus. In 2024, at least 85% of regional roads will be brought to a standard condition. We will continue the free gasification program and expand it to social facilities. For citizens, such a program will operate on an ongoing basis.
We have been investing trillions of rubles in housing and communal services for 10 years.
We will expand the preferential industrial mortgage program. In industrial clusters, the tax burden has been reduced. They receive long-term orders and subsidies.
I ask the government to lend a shoulder to business, provide support measures, including tax incentives.
Starting this year, companies can reduce income tax payments if they purchase domestic IT products. I propose extending the exemption for the purchase of domestic high-tech products.
There will be new sources of investment financing. Banks work stably and steadily. Last year, the volume of loans to the industrial sector grew by 14%. This is more than in 2021 without any SVO. Development is underway. The banking sector worked with a profit of 203 billion rubles. This is also an indicator of Russia’s financial stability. Inflation for the quarter will approach the target of 4%, while in some EU countries up to 17%.
Loans for the real sector should become more accessible. Long-term savings are sources of financing loans. I ask the government to launch a state program to attract savings and guarantee the safety of citizens’ finances.
Separate solutions are needed for high-tech business. For them, we will provide for the placement of shares on the domestic market. The most important element of economic sovereignty is private business. He knows how to adapt to changing conditions.
It is necessary to revise the norms of criminal legislation regarding economic crimes. We need to move towards decriminalization. We need government measures to deoffshorize. Business must operate in Russian jurisdiction – this is a basic principle.
After the collapse of the USSR, its planned system in conditions of chaos, the country created a market economy. Western countries serve as an example. It would seem to just copy. But something happened – our national economy became oriented towards the West. as a source of raw materials. The reasons are also clear – the new emerging Russian business was aimed at making a profit. Fast and easy. Therefore, more complex sectors of the economy developed poorly. It took years, massive changes and investments to break the trend. And there is a result.
Technologies and equipment were bought in the West. And instead of buying domestic, the money was spent on estates, yachts, foreign real estate. Especially at first. And where there is wealth, there are children, their education, their life and future. Recent events have shown that a safe haven abroad is an illusion. The West robbed, took away even legally earned money.
None of the ordinary citizens of the country felt sorry for those who lost their capital in foreign banks, who lost their yachts and palaces. And in conversations in the kitchen, they probably remembered both the privatization of the 1990s and the ostentatious luxury of the new elites.
The West has provoked conflicts, used means of economic deterrence all these years. And big business is responsible for the strategic enterprises of thousands of teams. This means that when the leaders and owners of such a business are dependent on the West, it is a danger to the country. Such a situation cannot be tolerated.
Everyone has their own choice. You can stay in your arrested castle with arrested accounts. But you have to understand that they are second class there. But there is another choice: to be with your Motherland, to work for compatriots. Open new businesses, change the life around you. We have many such real entrepreneurs-fighters. Behind them is the future of domestic business. The sources of well-being and the future should be only here, in Russia. Then we will create a solid economy.
The capital earned here must remain here. It is pointless to run and humiliate yourself before the West, begging for your money. Do not try for the past, try to sue something. We need to change our lives and work. Especially since you are strong people, I am addressing business representatives. Launch new projects, earn money and invest in Russia. Help schools and universities, science and healthcare, culture and sports. So multiply capitals, and earn the gratitude of people. And the state will support you. Let’s take this as a guide to business.
This civilization was passed down to us by our ancestors. And we must save and pass on. We will develop relations with friends, but first of all we will rely on our own potential, traditions and values. Our people have always been distinguished by generosity and mercy. Russia knows how to be friends. Always came to the rescue. For example, in the case of earthquakes in Syria and Turkey. The people are the source of power. Rights are inviolable and guaranteed by the Constitution. Despite the threats, we will not retreat from them.
Presidential elections in 2023 and 2024 will be held strictly in accordance with the law.
I would like to quote Stolypin: “In the matter of defending Russia, we must all unite, coordinate efforts, duties and rights to maintain one historical supreme right – the right of Russia to be strong.”
Among the volunteers there are deputies, representatives of authorities of all levels and all parties. Public associations help with the collection of goods in the NWO. Once again, kudos to you all.
The education system and culture are important to reinforce our values. The Presidential Grants Fund and other tools will support all forms of creative research. It is necessary to awaken the best human qualities in society. The development of the cultural sphere will become one of the priorities for restoring peaceful life in the Donbass.
We must improve the quality of education in schools and universities so that young people can learn more about the history of Russia. We have a young bright generation that is ready to participate in the development of the country. For such active people, the competitions “Leaders of Russia”, “Leaders of Revival” open the doors. The winners and finalists of the competitions volunteered to help establish a peaceful life. Act professionally and courageously.
Those who were born and raised in the Donbass, who fought for it, should become the backbone of the development of the territory. Russia is counting on you.
We need to give scientists more freedom to be creative. Fundamental science should work for the following areas: transport, energy, housing and communal services, medicine, agriculture, industry.
In December, I met with young scientists. Their problem is housing. I instruct the government to determine the reserves for expanding the relevant program. The prestige of secondary education has grown. The demand for college graduates has grown tremendously. We must significantly expand the project of professionalism, within the framework of which educational clusters are being created together with enterprises. The goal is to train 1 million specialists for the electronics, robotics, nuclear and other industries in 5 years. Key to the sovereignty and competitiveness of Russia.
There are changes in higher education. I propose to return to the country’s traditional basic training of specialists in higher education. The term of study can be from 4 to 6 years within the same specialty and the university may have different programs depending on the profession, industry and market demand. If the profession requires additional training, then a person can pursue education in the magistracy and postgraduate studies. Postgraduate studies will be separated into a separate structure of education. The transition to the new system should be smooth.
Those students who are studying now can continue their education in existing programs. I ask the ONF to take control of all changes in higher education.
Spending on supporting families in Russia has increased significantly in recent years. It is the fastest growing section of the budget. Since February 1, mother’s capital has been indexed by 11.9%. Residents of new regions also have the right to this. I propose to provide maternity capital to Donbass families whose children have been born since 2007, when the program began to operate in Russia. We also extended the program to residents of Crimea and Sevastopol.
The minimum wage last year was raised twice by 20%. We will continue to raise it, at a rate higher than inflation. From January 1 next year, I offer an additional increase of 10%. The minimum wage will increase by 18.5% and will amount to more than 19 thousand rubles.
Since last year, families with 2 or more children have been exempted from taxes when selling a home and buying a larger one. I propose to increase the size of the social tax deduction for the education of children. It is necessary to raise not only the amount of the deduction, but also to increase the demand for it so that it is provided proactively – quickly and remotely.
Funds for national projects, which are reserved for 2024, the regions will be able to receive now through interest-free budget loans, and in April next year they will be automatically repaid. We do not need storming and the pursuit of volumes. There must be a high return. This is especially true for the modernization of primary health care.
We launched a school renovation program. 3500 schools will be updated in a year. Most of them are in rural areas. Starting in 2025, federal funds for the repair of schools and kindergartens will be allocated on a regular basis to prevent situations when buildings are in an emergency. This year we will introduce 400 new schools.
We are additionally allocating 250 billion rubles for the development of transport, utilities and other infrastructure. I instruct the government to allocate an additional 50 billion rubles. They will be used to upgrade the transport system in the regions. I ask you to pay special attention to small towns and rural areas.
We have extended the Clean Air program. We will continue the landfill elimination program. We will continue the improvement of Lake Baikal, the Volga, and expand it to the Volga, Neva and other rivers. A draft law on the development of tourism in specially protected natural areas has been prepared. It determines what can be built and what cannot. I ask the State Duma to expedite consideration of the bill.
In early February, NATO demanded a return to the implementation of the strategic offensive nuclear arms treaty, including inspections of our facilities. This is a theater of the absurd. The West is directly involved in the attempts of the Kyiv regime to strike at our strategic aviation. And now they also want to inspect our defense facilities. This sounds like bullshit. The West does not allow us to conduct the same inspections. NATO’s goal is to defeat Russia and at the same time they want to visit our facilities? Do they want to poke their nose at our new ground-based centers?
NATO actually made an application to become a party to the Strategic Nuclear Arms Treaty. This question is long overdue. After all, NATO consists of the nuclear countries of the United States, France, Great Britain. They develop, improve and are directed against us.
The US has withdrawn from the ABM treaty. Our relationship has deteriorated. And this is the merit of the United States, which began to revise the results of the Second World War, to build a world where there is only one owner – the United States. Planned a series of wars around the world to break the architecture of world relations. After the collapse of the USSR, they are striving to fix their dominance.
It is unacceptable that the United States is rebuilding the world order exclusively for itself. And now ultimatums are being put forward through NATO: “Follow our demands, and we will do what we want.” This is either the height of hypocrisy and cynicism, or stupidity. Don’t call them idiots.
Russia suspends participation in the strategic offensive arms treaty. It doesn’t exit, it stops. But to return the discussion, we must understand what NATO is counting on.
The expiration date of nuclear weapons in the United States. And individuals in Washington are working on new types of nuclear weapons. We must be prepared to test new types of weapons if the US does. Not the first. No one should be under the illusion that global nuclear parity can be destroyed.
Cohesion manifested itself from the first days of the NWO. Hundreds of thousands of volunteers came to the military registration and enlistment offices to fight for truth and justice. They fight shoulder to shoulder. All of them are for the Victory, for comrades-in-arms, for the Motherland
A small, globe-trotting balloon declared “missing in action” by an Illinois-based hobbyist club on Feb. 15 has emerged as a candidate to explain one of the three mystery objects shot down by four heat-seeking missiles launched by U.S. Air Force fighters since Feb. 10.
The club—the Northern Illinois Bottlecap Balloon Brigade (NIBBB)—is not pointing fingers yet.
But the circumstantial evidence is at least intriguing. The club’s silver-coated, party-style, “pico balloon” reported its last position on Feb. 10 at 38,910 ft. off the west coast of Alaska, and a popular forecasting tool—the HYSPLIT model provided by the National Oceanic and Atmospheric Administration (NOAA)—projected the cylindrically shaped object would be floating high over the central part of the Yukon Territory on Feb. 11. That is the same day a Lockheed Martin F-22 shot down an unidentified object of a similar description and altitude in the same general area.
There are suspicions among other prominent members of the small, pico-ballooning enthusiasts’ community, which combines ham radio and high-altitude ballooning into a single, relatively affordable hobby.
“I tried contacting our military and the FBI—and just got the runaround—to try to enlighten them on what a lot of these things probably are. And they’re going to look not too intelligent to be shooting them down,” says Ron Meadows, the founder of Scientific Balloon Solutions (SBS), a Silicon Valley company that makes purpose-built pico balloons for hobbyists, educators and scientists.
The descriptions of all three unidentified objects shot down Feb. 10-12 match the shapes, altitudes and payloads of the small pico balloons, which can usually be purchased for $12-180 each, depending on the type.
“I’m guessing probably they were pico balloons,” said Tom Medlin, a retired FedEx engineer and co-host of the Amateur Radio Roundtable show. Medlin has three pico balloons in flight in the Northern and Southern hemispheres.
Aviation Week contacted a host of government agencies, including the FBI, North American Aerospace Defense Command (NORAD), the National Security Council (NSC) and the Office of the Secretary of Defense for comment about the possibility of pico balloons. The NSC did not respond to repeated requests. The FBI and OSD did not acknowledge that harmless pico balloons are being considered as possible identities for the mystery objects shot down by the Air Force.
“I have no update for you from NORAD on these objects,” a NORAD spokesman says.
On Feb. 15, NSC spokesman John Kirby told reporters all three objects “could just be balloons tied to some commercial or benign purpose,” but he did not mention the possibility of pico balloons.
Launching high-altitude, circumnavigational pico balloons has emerged only within the past decade. Meadows and his son Lee discovered it was possible to calculate the amount of helium gas necessary to make a common latex balloon neutrally buoyant at altitudes above 43,000 ft. The balloons carry an 11-gram tracker on a tether, along with HF and VHF/UHF antennas to update their positions to ham radio receivers around the world. At any given moment, several dozen such balloons are aloft, with some circling the globe several times before they malfunction or fail for other reasons. The launch teams seldom recover their balloons.
The balloons can come in several forms. Some enthusiasts still use common, Mylar party balloons, with a set of published calculations to determine the amount of gas to inject. But the round-shaped Mylar balloons often are unable to ascend higher than 20,000-30,000 ft., so some pico balloonists have upgraded to different materials.
Medlin says he uses a foil balloon sold by Japanese company Yokohama for $12. The material has proven to be resilient for long periods at high altitude, he says, even if the manufacturer never intended the balloon to be used for that purpose. An alternative is Meadows’ SBS, which makes a series of balloons designed specially for circumnavigational flights.
The pico-ballooning community is nervous about the negative attention by some members of Congress and the White House, who have called the objects shot down at altitudes of 20,000-40,000 ft. dangerous to civil aviation.
“We did assess that their altitudes were considerably lower than the Chinese high-altitude balloon and did pose a threat to civilian commercial air traffic,” Kirby says. “And while we have no specific reason to suspect that they were conducting surveillance of any kind, we couldn’t rule that out.”
In fact, the pico balloons weigh less than 6 lb. and therefore are exempt from most FAA airspace restrictions, Meadows and Medlin said. Three countries—North Korea, Yemen and the UK—restrict transmissions from balloons in their airspace, so the community has integrated geofencing software into the tracking devices. The balloons still overfly the countries, but do not transmit their positions over their airspace.
The community is also nervous that their balloons could be shot down next. Medlin says one of his balloons—call sign W5KUB-112—is projected by HYSPLIT to enter U.S. airspace on Feb. 17. It already circumnavigated the globe several times, but its trajectory last carried the object over China before it will enter either Mexican or U.S. airspace.
“I hope,” Medlin said, “that in the next few days when that happens we’re not real trigger-happy and start shooting down everything.”
What Is a Pico Balloon?
Pico balloons are typically about 3 ft. in diameter on the ground before they are launched. As they ascend to altitudes of 20,000-50,000 ft., the super-pressure balloon envelope expands by about 2-3 times in size and achieves neutral buoyancy, allowing them to float at a roughly consistent altitude. Wind currents then push them through the atmosphere, with some balloons capable of circling the world several times before they pop or fall.
The balloon owners keep track of them through HF and VHF/UHF radio links. A small GPS tracking device is attached to the balloon by a tether. The balloon broadcasts its position using the WSPR protocol on HF and the ASPR standard for line-of-sight on VHF/UHF. Most pico balloons lack the lifting power to carry batteries, so the tracking coordinates usually are broadcast in daylight hours, with tiny attached solar arrays sending power to the transmitter.
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So, what does it cost to take-down one of Northern Illinois Bottlecap Balloon Brigade (NIBBB) balloons?
Citing intelligence community reports, Joe Biden said the three things shot down during the last week or so were “most likely balloons.” So how much did it cost to destroy these objects that may only be $12-180 each? As a case study, I considered the Pentagon’s operation over Lake Huron on February 12. According to my analysis of government documents, flight tracking data, and media reports, I estimate that it cost $1,953,127 to shoot down what was “most likely” a balloon. Methodology section is below, and feedback is welcome on this preliminary (and very conservative) estimate.
^Alt text for screen readers: Biden spent $2 million to shoot down a balloon: A cost estimate for the Pentagon’s operation over Lake Huron. This table has four columns: the component used in the Lake Huron operation, the activity it performed, the cost per unit or hour, and the total cost. I’ll go down the chart row by row: AIM-9X, 2 missiles fired, $442,798 per unit, $885,597 total cost. There are two rows for the F-16 showing these data: 7 flight hours, $26,927 per flight hour, $188,489 total cost. KC-135, 7 flight hours, $27,801 per hour, $194,607 total. E-3, 7.5 hours, $66,126 per hour, $495,945 total. All told, $1,953,127 in total. Data via DOD Comptroller, Government Accountability Office, flight trackers, media reports.
Methodology
To calculate the unit cost of the AIM-9x missiles, I looked at the Air Force’s FY2022 procurement figures from the DOD Comptroller and divided the total purchase value by the quantity of missiles purchased. I referred to the Government Accountability Office for the cost per flying hour for each aircraft. To get the number and type of missiles and aircraft involved in the operation, I relied on mediareports and statements from DOD officials. To calculate flight times, I used mediareports to ascertain the takeoff and landing times for the F-16s, but I analyzed flight tracking data to get the takeoff and landing times for the support aircraft, the KC-135 and E-3.
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And, of course, with all the Progressive saber-rattling coming out of the Zhou Regime, once again, we reprise our song of the week.
There’s been an increasing realization and acknowledgement from all sides, that the current conflict has shaken the foundations of a lot of doctrinal military theory, and the very understandings of how strategy and tactics are employed in a modern ISR-dense (C4ISR) and observation/integration/network-centric-dominated battlefield.
This war may very well be the first truly 4GW and 5GW conflict. For those not familiar with the concept of generational warfare, you can get up to speed here: https://en.wikipedia.org/wiki/Generations_of_warfare
An evolution is taking place in real time before our very eyes, with both sides working furiously to adapt, breaking new ground along the way, oftentimes with deadly miscalculation.
One common theme around which a lot of discussion has revolved recently has been the idea that maneuvering large groupings of mechanized forces has become nearly obsolete. This has garnered growing attention in light of Russia’s looming ‘major offensive’ escalation, which will, as most presume, bring vast amounts of new forces and armored groupings into theater.
In Ukraine, we’ve seen from both sides the absolute risk and folly in sending a sizable armored column to assault, particularly over open ground. The preponderance of highly accurate modern guided munitions and ubiquitous fire-correcting drones, as well as x-ray-like full-spectrum battlefield-perception abilities in every conceivable band—from radar to IR to signal emissions detection (phone, wifi, starlink, radio, radar, etc)—turns the modern theater of war into something resembling a real-time-strategy video game, in the tradition of C&C: Red Alert.
The battlefield is strewn with modern precision munitions of every variety, which have ironically reverted maneuver warfare back to a locked-in, positional WW1 style framework. Everything from self-sensing mines like PTKM-1R to smart-cluster-munitions like the RBK-500 carrying Motiv-3M SPBE’s dropped from artillery systems which explode above armored vehicles and auto-target their soft roofs—have all been implemented thus far in the conflict (on both sides, in the case of AFU: via German PhZ-2000 firing smart munitions, and German M270’s firing AT-2’s, and another). Artillery shells on both sides—Krasnopol and Excalibur variety—accurately guided by drones and satellites and endless electronic systems of every possible extraction.
There are two ways of examining this, the microcosmic tactical-view scale, which deals with the unit tactics, and the operational macro sense. We’ll delve a bit into both. In the operational one, the advent and proliferation of longer range precision systems likewise greatly inhibit the ability of a maneuver force to prosecute an offensive in that supply lines (dumps, HQ’s, etc.) are all within easy reach of HIMARS and Smerch style guided precision munitions.
Some, like Strelkov, have recently rhapsodized on the notion that Russia is ‘completely unable to move forward’ in any significant operational sense, and is locked into a stalemate, because as soon as its forces create a push, the supply/logistics nodes feeding that advance are immediately targeted by things like HIMARs, loitering drones, GPS-guided artillery, etc., which grinds the offensive to a halt for lack of supplies.
Many have used this reasoning to rationalize Russia’s purported ‘failures’ in places like the Kherson front, though that is patent fallacy—as the pullback in Kherson had everything to do with the imminent threat of catastrophic river flooding from the potential destruction of the Nova Khakovka dam, not Russian forces’ inability to cope. In fact, several high profile AFU accounts have penned long, ‘scholarly’ twitter threads espousing just how well Russia adapted to the HIMARs threat on its rear depots in the Kherson region by distributing ammo concentrations. But of course, it’s easier to adapt when you’re only set on defending—but the topic of this discussion is one of attack: maneuvering forces pushing an advance in the signal heavy, ‘naked’ modern environment.
The totality of the NATO and ‘Five Eyes’ infrastructure is being utilized 24/7 as a sort of vast rear-end cloud-service and mega-processing/computational-cycle capacity for Ukraine’s frontline forces. Hundreds of satellites, including dozens of imaging ones with 5cm/pixel resolution, skim every inch and quarter of Russian territory, searching for actionable hidden targets. The data is then processed and collated by thousands of fulltime NATO/Five Eyes analysts working in distribution centers all over the world, then fed directly to the Ukrainian crews by way of Starlink and other datalinks, which Ukraine can then sub-distribute via their innovative ‘Nettle’ integrated system to feed those targets to a variety of sector artillery and other systems.
We’ve got a glimpse of this months ago when documents were leaked which demonstrated the exact work-flow by which this NATO/Five Eyes superstructure identifies and transmits the positions of every imaginable Russian unit, down to the barest granularity. It showed papers typed up by the army of analysts poring over the satellite cluster footage, which have endless lists of high-value Russian targets, catalogued, categorized, etc., with their exact coordinates and associated reference photos.
And of course this is not to even mention the fleet of AWACs that collect radar data around the clock from the Polish and Romanian airspace, RQ-4 Global Hawks, with their SAR radars that photograph Crimea daily from the Black Sea, the OTH shortwave radars likely doing early warning detection on Russia’s airforce flights from thousands of kilometers away, and more. In fact, it’s even been suggested that U.S. forces use seismic sensor data to track large Russian force movements. The Soviets themselves capably used this tactic against the Mujahideen in Afghanistan.
We saw in Kherson and many other places, anytime the AFU launched a wide offensive with large, visible mechanized column pushes, they were instantly spotted, tracked, and decimated from long range. But recently in Ugledar, it appeared that Russian Marines fared no better under similar circumstances.
Their mechanized columns too could not cross that dreaded no-man’s land of frozen farm fields before getting ID’d. Granted, it appeared that mines played the biggest role in that, as some intrepid readers have pointed out. However, I must counter with the point that the only reason they even hit the mines to begin with, is because they were under orders to do a mad dash across the fields, from cover to the next position in the dachas section of lower Ugledar, for the very reason that lingering and taking their time negotiating the minefields would have exposed them to enemy ISR and immediate risks from the air in the form of drone-corrected strikes, etc. If it weren’t for that ubiquitous observational threat, they could have leisurely crept along with a mine-trawl, or called up a slow-working UR-77 mine clearer.
To tangentially expand on, briefly, how one is theoretically supposed to deal with such threats, and why it doesn’t quite work as well in practice as in theory, first let’s examine how, to counter artillery, we know you need your own drone-ISR systems, and preferably augmented by counter-battery radars which can place the vector and distance of the enemy shot for you to retaliate.
But as seen in this Patrick Lancaster video, a Russian soldier gave a frank answer in describing the complexity, difficulty, and irregularity of dealing with these issues. He states that they used Russia’s most powerful ‘Zoopark’ counterbattery radar, but the system is SO ironically powerful that it becomes an immediate target for anti-radiation sources that can home in on it like an IR missile to a burning flame.
So then they moved the system farther behind the lines, but the AFU’s artillery discipline is such that they still manage to scoot-n-shoot their guns away from danger by the time one can use the system to locate them and respond. Now, to be clear: this is not a blanket characterization of how ALL such scenarios/systems work. We have an abundance of evidence of the same Russian Zooparks (and others) working fantastically to obliterate AFU’s positions with counter-battery fire. But it’s just an illustration of the difficulty and unpredictability of these things. If you get a really good enemy crew, with strong discipline, they can negate such systems.
This to a large extent explains the type of perplexing, small-unit warfare we’ve been witnessing up to this point. Wagner themselves described their most successful tactics in Bakhmut: it consists of small groups of men, 8 or so max, operating independently, storming forward to intentionally close in within 50-150 meters of the AFU positions, so as to prevent the enemy’s rear artillery from firing, for fear that they will hit their own men. They call it, “riding the shoulders of the enemy”. But the key detail is a religious devotion to staying separated in small, isolated fire teams.
This partly explains Russia’s decision to lean on smaller, detached BTG’s in this conflict. And why in so many seemingly bewildering videos, we see such small assault groups or lone tanks operating so often on the frontlines. In today’s highly network-centric, integrated, signal and observational-overload battlefield, it’s simply near-suicide to clump up together into large groups.
II.
So the big question is: how can Russia actually push forward, break through enemy lines, and successfully conquer territory en masse under such conditions? Is Strelkov right, and Russia is doomed to incremental positional hacky sack?
It’s a very broad topic, as there are many facets to covering the feasible ‘solutions’ to this dire dilemma. Let’s delve into the ones already being used effectively, and those likely to be used in the coming escalations.
1. Atmospherics And Smoke Screens
Firstly, to get the simplest tactics out of the way, let us mention a few chief limitations of all these whiz-bang omnipresent ISR systems. The first of which is environmental/atmospheric conditions. In short: drones and satellites really hate clouds, and even with the advent of ‘remote sensing’ and SAR satellites, they can’t really penetrate cloud-layers as well as the MIC salesmen would claim—at least not at the granularity of seeing individual units and combat groupings.
Fact is, when there’s heavy cloud cover and/or fog, drones can become utterly useless, and same goes for satellites. If one were really up to the task, one could use serious weather modification capabilities like cloud-seeding, to create a perma-overcast conditions to blind one’s enemy. Unfortunately, it would blind you as well.
Several times recently, there’s been reports of Russian offensives (in both Kremennaya and Ugledar) grinding to a halt because there was severe cloud cover that greatly diminished their CAS and negated their air superiority. But, conversely, there were other times they considered it an advantage in some fronts, and pushed in specifically when there was cloud cover and the AFU’s drones were blinded.
The less-drastic compromise can be using a variety of smoke-generating systems to conceal your movements, of which Russia itself not only has many, but has even used a lesser version in the very theater we discussed above, when the Marines pumped smoke from their BMP-3’s to advance.
Of course, this is just a small-scale, temporary measure against more localized ISR, but it was worth mentioning to get it out of the way.
2. Satellites and Kesslerization?
The most effectively practical method to defeat the most potent form of Ukraine’s observational abilities would be simply to shoot down the satellites. Russia has threatened to do so already several months ago.
However, the U.S. replied that it would react in kind. Although, Russia was specifically naming the group of commercial satellites like Maxar, rather than U.S. military satellites. Today, Russia even repeated the threat after NATO announced a new program to radically boost space recon cooperation into a new fleet of highly centralized and coordinated military/civilian satellite constellations aimed at total domination of the C4ISR domain.
But could/would Russia actually shoot down the satellites? We know they can if they wanted to: they demonstrated it last year as a show of force, and if you watch to the end of the linked video, the U.S. generals were quite worried about the fact.
Some have asked: why doesn’t Russia jam/blind these satellites with the vaunted and newfangled Murmansk and Zhitel (among others) systems that they brag so much about? The problem is, those systems jam signals like radars, GPS, etc. But the chief types of satellites that are the true thorn in Russia’s side are the electro-optical, i.e. “photo” satellites. How can you jam a telescope-like satellite with a powerful zoom camera that is taking pictures of your facilities and troop movements? You can’t “jam” a camera lens.
The only possible countermeasure for those is blinding them with a laser. And there’s long been a string of reports that claim everything from Russia having already blinded U.S. satellites, to Russia threatening to do so and testing it, to Russia currently building the capabilities to do so.
While it’s true that Putin triumphantly announced Russia’s new ‘Peresvet’ laser last year, most lasers of this sort—including the U.S. navy tested ones—have a fairly short range of only a few kilometers at most. Satellites, of course, travel hundreds or even thousands of kilometers up. However some reports claimed that the Peresvet can blind satellites at 1500km range.
And reports from earlier last year claimed that Russia even fielded a new type of laser called ‘Zadira’, which is allegedly even more powerful than the Peresvet, and are already using and/or testing it in Ukraine.
And the Soviets had a laser called Terra-3 which was said to have glitched out the Challenger space shuttle. Per wiki:
Shuttle attack rumor
Terra-3 is the topic of a widespread claim that the IR laser was used to target the Space Shuttle Challenger during its 6th orbital mission on 10 October 1984 (STS-41-G). According to reports by Steven Zaloga, the Shuttle was briefly illuminated and caused “malfunctions on the space shuttle and distress to the crew,” causing the United States to file a diplomatic protest about the incident.[6] This claim appears to have started with former Soviet officials, notably Boris Kononenko.[7] The crew members and “knowledgeable members of the US intelligence community” have denied that the shuttle was illuminated by the Terra-3.[8]
So can Russia’s lasers really blind satellites? No one knows for certain, though likely they can. However, the most advanced U.S. Keyhole opto-electrical satellites most likely have counter-measures against this, i.e. simple remote-controlled panels that close over the lens to prevent the sensor from getting fried. The laser at that range likely does not have the power to outright burn up the entire satellite, but rather fry the delicate imaging CMOS sensor behind the lens.
Also, it is likely far more difficult to do this than it appears. Firstly, to do any damage, most laser weapon systems have to keep the laser trained onto the target for a certain period of time. In short range tests, 5-10 seconds usually ‘burned’ the target up. However to damage a sensor 300-500km away (the orbit of most Keyhole satellites), the laser would likely have to accurately ‘track’ the satellite across the entire sky. But satellites move extremely fast, and the laser would have to basically thread a needle by keeping the beam on the sensor as the satellite flies across the sky. This would take much greater abilities of digital tracking, automation, fire-control systems than most people think.
Sure, commercial and prosumer telescopes have abilities to track stars across the slowly moving sky, and presumably a similar tech can be employed but it’s worth mentioning how technical and difficult this is.
Secondly: between the U.S. and “partners”, they have many such imaging satellites, yet Russia probably has a very low amount of these prototype laser systems. It would be very difficult to blind all the satellites in a timely manner. With that said, we don’t know for certain—Russia could have more of them than we think—and it could always blind one or two as a warning, forcing the shutdown of the rest.
The most trusty and dependable method in the end is the good ol’ Nudol Missile.
The intrepid readers will say, the U.S. claims they would ‘respond’ if Russia took out their satellite(s). But, there’s one very interesting angle to this scenario that few have foreseen.
Sure, the U.S. can retaliate and take out Russia’s satellites after Russia takes out all the U.S. ones. But guess who that leaves as the sole dominant space-hegemon and satellite power in the world?
That’s right. This guy—who will become not only the happiest, but the most dominant player in space with a sudden massive and historical strategic advantage over the American adversary. Russia and the U.S. would both be sent back to the stone age, satellite-wise, but China would now enjoy virtual, de facto space hegemony. Do you think U.S. cares to risk such an unthinkable option? Not very likely.
In short, the U.S. goading Russia into a satellite war is like a guy with a Bugatti threatening to ram someone’s ‘92 Toyota Tercel in a roadrage incident. They have far more to lose. That’s not to disparage Russia’s space capabilities, but rather to highlight that U.S. will be the really big loser in this case. The Toyota guy can get a new bumper for $125 while the other guy will have $100k+ in damages.
So it’s for this reason that I believe U.S. really doesn’t want Russia to up the ante and give Russia reason to start taking out satellites.
3. Asymmetrical, Hybrid Warfare, And Light Assault
The next way to minimize the dominance of an enemy’s modern 4GW/5GW capabilities is by using a lot of asymmetrical warfare tactics. By simple point of necessity alone, the AFU has already been doing this. Russia has too, but Ukraine has pushed the envelope further and faster in some areas, in terms of asymmetrically circumventing the signal dominance of the battlefield.
Things like 3D printing drone bomblets, maskirovka of every variety (feints, dummy props like scarecrows and blowup tanks to fool recon), unconventional/hybrid force usage—the eschewing of large, slow armor groupings and instead utilization of insurgent-style ‘ISIS technicals’ to trade safety for space and time.
The Kharkov assault was a somewhat successful example of this (I say somewhat because, while objectives were achieved, they took heavy losses—which exposes the downside). The AFU chose a balls-to-the-wall, safety-last strategy which banked on surprising and overloading recon OODA loops by crossing large swaths of territory very quickly on fast moving, light vehicles, and creating mass panic, overreaction, and disorientation on the receiving side.
Of course, this doesn’t work everywhere. In Kharkov it relied on heavy forested areas where cover could conceal the movements. Not to mention the 5:1 or 8:1 (according to some sources) numerical advantage over what was effectively an Allied volunteer garrison; but it’s an example in one place and time.
Russia, too, used the ‘light assault’ with hybrid warfare (activation of partisans in conjunction with Kherson assault, etc.) fairly effectively early on, but with the same downsides, as there were much more casualties than usual. And going forward, this is not the strongest strategy of choice.
4. Stretching Your Enemy To The Breaking Point
Here’s where we start getting to the real meat and potatoes of what Russia will likely employ. A related strategy they can use operationally on a much grander scale, and which I believe we could likely see very soon in the coming offensive, is the intentional stretching of the front to the breaking point, exploiting the AFU’s weaknesses of manpower and troop quality. But most importantly, apropos the current topic, it would put a huge logistical strain on that back-end NATO C4ISR server-farm.
If Russia opens multiple new broad fronts, it exponentially increases the raw man-hours, processing power, etc., needed to keep track of everything and relay it to the AFU. Those aforementioned, vast churning computational-cycles of NATO’s backend would be strained to the limit to keep track of such broad distributions of forces and possibilities. Further, it would stretch and diffuse the key Ukrainian guided systems, like HIMARs, which they have relatively few of, thus further nullifying the ISR edge, as NATO’s target data is useless if the systems they’re sending the targets to aren’t effectively positioned, or are diluted all over the country.
For clarity, imagine that most of the war takes place on one near front. The AFU can concentrate all their precision systems like HIMARs, M270’s, etc., there, and use them in concentrated fire on a relatively smaller area, where NATO surveillance can also much more effectively and efficiently keep track of Russian rear areas, C3, supply, logistics, etc.
But spread over multiple broad fronts, Ukraine would have no choice but to dilute its most powerful precision units, spreading them hundreds/thousands kilometers apart. With that said, the risky extreme of this, as we discussed in Part 2, would be Russia utilizing fronts which are TOO broad and far apart, thereby passing a point of diminishing returns in benefits. But this only really applies to the distant extremes, like a front in west Ukraine, Volyn province. Though now, there’s been some slight indications—albeit it could be the usual maskirovka feints—that Russia could still choose that dreaded first vector from my Part 2 report. Not only have Russian drones been spotted mysteriously buzzing the Zhytomir region (west of Kiev) of Ukraine for the first time since the start of the SMO, but there’s been ‘strange activity’ in far west Belarus, with reports witnessing ‘Wagner troops’ (or troops that “looked like Wagner) in Baranovichi, Belarus, near the Polish/Ukrainian/Belarus border. This has compelled Ukraine to station 20,000 troops there in preparation for a possible Russian assault from that vector, as per the reputable Ukrainian ‘Resident’ channel:
Ukrainian TG-channel “Resident” shares an insider: The General Staff is concentrating 20,000 troops of the Armed Forces of Ukraine in Zhytomyr to repel a possible Russian strike from Belarus.
Zhytomyr would be in line with the ‘Macgregor Axis’ of our previous Part 2 forecasts. Such an axis could very well accomplish what we mentioned above—the stretching and straining of Ukrainian/NATO intel/recon capabilities, which would give large Russian forces more headroom in advancing under these digital-dominated conditions. In short, it splits enemy resources in these domains, puts greater strain on satellite (and other SIGINT, ELINT, etc.) resources, requiring satellites to orbit in wider, unpredictable, less coordinated orbits, which degrades and increases NATO’s own reaction times and OODA loops.
5. EW Bruteforce
It’s also possible to brute-force and overpower your enemy’s electronic infrastructure with the large-scale deployment of powerful EW systems. But one issue most overlook, is that powerful jammers also jam your own devices.
Specifically in the sphere of drone warfare. If you have one of these standard battlefields we see so often, wide, expansive fields with a no man’s land in the middle, drones from both sides hovering above and correcting artillery fire—and you position a powerful Krasukha system behind your artillery and start flooding the skies above that field with jamming signal, you’ll FUBAR your own drones as well as the enemies.
This has already been mentioned several times in interviews with Russian soldiers, where they bemoan the annoyance of not being able to use their anti-drone guns or EW systems in some circumstances as it interferes with their own drones as well.
Now, if you had your own natively-made drones with custom secret bands that your military engineers designed to be specifically immune to the jamming bands, it could be a different story. But unfortunately, that’s the problem with both sides relying on the same Chinese DJI products, rather than constructing indigenous devices.
With that said, the actual effect that Russian EW is having on this war is greatly underestimated and understated. Because of Russia’s supreme OPSEC, and the vast amounts of drone footage we see, most assume that Russian tech is sitting it out, or is ‘underwhelming’. But in fact, if you pay attention to the reports and interviews as fastidiously as I do, you’d see that Ukrainian forces constantly complain about the sheer EW dominance prevailing against them. Hell, our last report was about this very fact. And there have been many reports of entire frontlines blacked out by Russian EW:
But there is even much more beyond that. A large portion, and dare I say majority, of AFU drone-related videos we see are against DPR/LPR or volunteer forces. Against actual Russian brigades, their drones are almost completely nullified, barring the one point of weakness when Russian units are advancing and happen to over-extend past their EW coverage.
6. Refining The Reconnaissance-Strike-Complex
The other more straightforward and logical method is ironically the most systematic and difficult: one way to defeat the enemy in modern conditions is to simply be much better trained, more efficient, and in general have a tighter, stricter, faster and more accurate armed forces.
Specifically, this is in reference to things like the aforementioned OODA loop, which is encompassed in the famous Russian conceptual doctrine of the Reconnaissance Strike Complex (RSC) and Reconnaissance Fire Complex (RFC). In essence, these doctrines have to do with refining the process and ‘workflow’ of integrating and streamlining the various systems and trainable procedures involved in acquiring a target and effectively relaying the data to gun crews in short time. Russia has said to have gotten its RSC capabilities down to as little as 10 seconds, up to 2-3 minutes for some systems.
Thus, the more one can systemically enforce a high standard in all your formations, and the tighter they can operate, lowering reaction times in these types of decision loops, the more you can outpace an enemy’s own loops and thus negate a large part of their multi-domain 5GW / C4ISR capabilities.
That may sound like a techno-babble-word-salad, but to simplify it: if NATO has all these powerful satellite recon and ELINT capabilities, they can be partly negated if Russia’s better training allows them to make decisions faster on acquiring-targeting-engaging a target. If NATO warns the AFU, for instance, that a large Russian force (or contingent of aircraft) is moving in on a particular sector, this spoiled ‘element of surprise’ can be partly negated if Russia’s RSC / OODA loops are so well-honed that they out-perform the AFU’s own capabilities to relay needed info at the tactical level, even in spite of the Ukrainian force’s general knowledge of the Russian advance. In essence, if you KNOW an enemy is across the field from you because someone with a satellite tells you, but that enemy’s recon-to-strike loops are much faster than yours, then it will matter little, as he will still beat you to the punch.
But as mentioned at the start, this is the most difficult option by far, because it relies on a ‘no shortcuts’, hard-work and elbow grease mentality of simply refining the entirety of your armed forces to an extremely high capability level, rather than relying on ‘gimmicks’ like surprise attacks or maskirovka to muddy the enemy’s battlefield perception.
But doing so also requires a parallel effort in modernizing your forces such that the technological backbones and infrastructure can effectively support the increased load of these standards. One way Russia has done this in recent years, is by steadily introducing ‘network-centric’ systems to digitally integrate their battlefields in such a way where the interoperability of systems and units can allow them to disperse targeting data in a timely and streamlined fashion. Russia has begun to use systems like the Strelets-M (Sagittarius-M) and Andromeda-D battlefield management systems (part of the Ratnik program) which, in layman’s terms, gives soldiers a console with a digital map, allowing them to input enemy positions with the touch of a finger, and instantly send those positions to a variety of fire units to engage the enemy.
Like U.S.’s Link-16 system, this allows a Russian ground soldier to even pass targeting data up to a frontline bomber like Su-34, if it’s equipped with a corresponding system. Only several weeks ago, we got one of our first glimpses of a Russian artillery unit officer using such a console: https://www.bitchute.com/video/WII88BHXBghz/
The system has already been successfully fielded in Syria, where Russian soldiers fed targeting data to Su-24M bombers, with a reported “100% accuracy”.
So ultimately, the question is—does Russia have the advantage here, which can nullify NATO’s abilities? We have heard some reports (mostly from militarily adjacent figures, like DPR soldiers, filtered through doomers like Strelkov) and complaints about some serious deficiencies in Russia’s OODA loops when it comes to artillery target relay.
One such complaint described how an AFU unit was fording a river, and they relayed the target data to Russian artillery somewhere in the rear. But the decision-making process had to go through so many chains of command and authorizations that by the time the shells started flying, the AFU units were long gone.
But it’s always easy to hand-select small incidents that happen to agree with one’s narrative. There may be some localized issues with certain units as there are with any large fighting force. But there is no evidence to suggest that the problem is endemic to all combat units. The fact is, you do not kill your near-peer opponent at unprecedented 10:1 ratios, giving them hundreds of thousands of casualties, if your decision strike chains are that unserviceable.
The truth is, the West’s militaries are not artillery forces. Ukraine has been praised as combining the best of the West’s capabilities, including their most modern, advanced, and capable systems (PhZ2000’s, Krabs, Archers, Danas, Caesars, M109’s, M777’s, Zuzana’s, etc.) and smart-munitions, with the superior Soviet artillery doctrines to create an alchemized force of unprecedented combat potential. And by ‘unprecedented’, I mean literally better than the American military. Don’t take my word for it, read this famous twitter thread from ex-DoD expert Trent Telenko who exults in the AFU’s unrivaled and revolutionary networking/integration synthesis which makes their artillery force far superior even to that of the U.S. army. Here’s an excerpt:
“It is a true distributed software environment that reduced request for fire to trigger pull from 20 minutes to 30 seconds. By comparison, the US Army did that call to trigger pull in 5 minutes in WW2, 15 minutes in Vietnam and one hour currently. No, that isn’t a typo. The increased US Army time ‘from call to trigger pull’ has to do with trying to prevent friendly fire plus the inclusion of JAG officers in Division artillery fire control centers doing rules of engagement/collateral damage vetting of calls for fire. In 2006, when US Army Special Forces task force hunting high value targets was given direct access to an MLRS battery with GMLRS rockets – without a JAG officer poisoned chain of command – got it back down to Vietnam 15-minute levels in Iraq, thanks to the Blue Force Tracker. This didn’t last long with the Obama Administration thanks to Taliban high value targets using their own kids as human shields followed by cellphone photos of dead kids. Then everything went back to the JAG officer game & the Special Forces started buying loitering drones.”
So, what’s the point? That this unrivaled capability in the hands of a Ukrainian force that not only has the single greatest, most modern artillery howitzers, the most accurate, and best-ranged munitions, but also the most powerful combined force of all NATO/Five-Eyes’ ISR and satellite recon—THIS historical force of nature, is getting its clock cleaned by Russian artillery forces. Sure, the AFU masterfully get in their punches too here and there. But as a totality, Russian artillery forces, utilizing Russia’s own revolutionary Reconnaissance-Fire-Complex capabilities are roundly wiping the floor with the Ukrainians in the artillery war.
Sure, the naysayers will say it’s because Russia has much more ammo to expend—but hey if those newfangled Western systems and whizbang GIS Art capabilities were so great, shouldn’t the accuracy and time-to-kill capabilities overmatch the Russian ammo advantage?
In short, Russian RCS/RFC has proved its mettle by devastating the AFU army so badly, they literally ordered a whole second army.
7. Economies Of Scale
Thus far, in many ways Russia has employed the method of atomization and ambiguity to most success, simply owing to necessity. They already had an inordinately small force which had no choice but to operate like a ‘ghost’, appearing many places at once, and utilizing Sun Tzu strictures to seem much larger and more omni-present than it really was.
This, in turn, worked in their favor to some extents, because having an already small force pretty much precluded them from ‘clumping up’ in a way that would benefit the ISR-heavy NATO snoopers.
But now, with the expected force of 300-500k (or more) new mobiks joining the fray, there’ll be no choice but to move around large, juicy formations which present ‘target-rich environments’ for that NATO all seeing eye. And this is where the method of distribution can work. By extending the forces to vastly broad new frontlines, they can put a major strain on NATO’s capabilities.
Also, there’s something to be said for the concept of ‘economies of scale’. That is, there’s a certain benefit gained from scaling up one’s forces, where certain redundancies and parallelizations of systems begin to work in tandem in such a way as to become ‘more than the sum of their parts’, conferring additional benefits.
An example is this: up to now, Russia’s airpower has been characterized by many as ‘anemic’, which most don’t realize was due to the small number of forces Russia has actually committed to the conflict thus far. This has reciprocal effects on the function of the entirety of the frontline forces in a given theater. Think of a battle as a sort of eco-system—you’ve seen the famous videos where wolves are introduced into a wildlife preserve, causing a chain reaction of events; whereby the wolf eats the deer which eat the grass, which saps the water from the stream, stifling the breeding of fish. So by introducing a wolf, a miraculous, compounded and seemingly paradoxical chain of events occur, eventually leading to the revitalization of the river and fish habitat.
Russia’s coming escalation includes an increase in troop numbers of all branches, including the airforce. We’ve seen the reports how 400 jets and 300 helicopters are now allegedly stationed outside Ukraine, ready for action.
Similarly, by the force of scale—by increasing the air support to a given frontline, Russia will precipitate a chain reaction in the eco-system. There’ll be more ‘wild weasels’ for SEAD missions, AFU AD systems will be consequently far more pressured and less active, which in turn will compound the active participation of even MORE airpower, in the manner of frontline bombers and attack choppers—now able to more freely operate. This domino effect will cause an increase in the effectiveness of assault units advancing at the enemy, which will keep them from being “static” and stuck in stalemate-y, positional and attritional battles—which will therefore negate a lot of NATO ISR reliant on static targets whose coordinates they can feed to artillery systems. In short, it will avalanche into a more fluid battlefield which hampers and strains ISR systems, particularly satellite recon.
Similarly, the ‘economy of scale’ concept pertains to the increase of Russian AD systems in each sector. As discussed briefly in Part 2, a more ‘densely’ integrated and layered AD system can have compounding effects due to how all the various disparate parts mutually overlay each other like neurons making multiplicative connections to each other.
This will further compound Russia’s ability to intercept strikes at the ‘rear lines’, which is precisely what the biggest (and only) strength of NATO’s ISR capabilities has been. One must understand, due to Russia’s very lean use of force to now, it meant the drastic under-powering and under-utilization of AD systems. But with the coming troop increase, many more missile brigades will be brought in, and will have an additive effect, like standing waves or cymatics systems, where overlapping frequencies become much stronger together.
Many people sat goggly-eyed months ago, watching the perplexing display of the Antonovsky bridge being hammered by HIMARs, often without even the barest Russian effort to intercept the missiles. Most don’t realize that Russia’s small force usage was the culprit. Stretched so thin, even the missile brigades operated anemically, such that hardly a single Pantsir unit could be found to cover the bridge, at least up until the end, when more were moved in.
So, as per the opening question: this is how Russia can advance a large army in spite of NATO’s ISR overmatch. By drastically increasing the troop numbers, which correspondingly increases the AD brigades, Russian AD will generate compounding efficacy by the expanded, overlapping layered integration, which will in turn hamper the AFU’s attacks on rear lines and ammo depots, and thus allow Russian forces to keep supply lines intact and more consistently advance.
Of course, NATO will try to nullify this by up-scaling the delivery of precision systems to Ukraine, to match force for force and attempt to overwhelm those AD systems. To wit, their newest package aimed to send another 18 HIMARs systems (on top of the ~20 Ukraine already has); but it’s unclear if/when they will get those as there appeared some indications it won’t actually come any time soon.
8. Classic Soviet Doctrine Still King
The last operational-scale strategy we’ll mention, which works in nullifying the reach and overwatch of NATO’s ISR systems is to some extent what Russia has already been successfully doing.
In short: engaging in a long range artillery war—though ‘artillery’ is an oversimplification, and is meant to represent all long range systems from shell to tube artillery, to ground and air-launched missiles, etc.
Now this may sound contradictory, as previously we mentioned that movement and maneuver warfare on a broad-front scale can negate many aspects of the modern hybridization and digitalization of the battlefield. But, lacking the ability to open broad fronts, the alternative is posturing your forces in such a way that the critical rear areas are all out of reach of the enemy’s longest range systems, in this case HIMARs. And then simply using the vast ‘artillery’ overmatch to grind the enemy down via a slow, attritional war.
This method relies on having a certain quantitative and qualitative superiority in long-range fires, which Russia does have. Not only does Russia have way more long-range units in general, but obviously much more ammo for them, AND far greater range.
Often, West supporters claim Ukraine’s Western artillery is ‘superior in range’ to that of Russian and legacy-Soviet systems. It’s true only to the extent that some of the most modern Western systems supplied, like M777, Caesar, etc., can shoot advanced RAP and base-bleed ammo giving a range edge of about 30-40km to typical artillery munitions which may peak around 25km. And while Russia does employ many older systems, from the 2S1 Gvozdikas, 2S4 Akatsiya’s, the standard 2S19 Msta-S, and various towed howitzers like D-20 and 30, which all have lower ranges, Russia also employs a raft of other systems that equal or outrange the Western ones. For instance 2A65’s Msta-B, 2S7M Malkas, 2S5 Giatsint-S, 2S19-M2 upgraded Msta-s, and a host of tube artillery from Bm-21 Grads, Bm-27 Uragans, Bm-30 Smerch’s etc.
The point being that, with the extended range superiority, it allows Russian systems to be further back behind the contact line, which means the critical supply arteries feeding these systems can likewise be placed even further back and still retain the regularity of resupply. If your 2S7M Malka, for instance, can fire over 50km, that means it can be 50km behind the frontline. And its primary ammo dump can be another 20-30km behind it. That means the ammo is now 70-80km from the frontline. A HIMARs has a max reach of 90km, however it can’t fire from right on the contact line, it has to be at least 10-20km behind the line to be safe from various shorter range frontline systems, like loitering drones. So, moving back 10-20km, the HIMARs is now upwards of 90-100km from that critical ammo supply feeding the Malka, which is now out of reach.
This is just one example of how having that qualitative range superiority can nullify ISR. NATO’s satellites will spot and transmit the coordinates of that ammo dump, but the AFU can’t do anything about it because its systems can’t reach it. Meanwhile Ukraine’s critical frontline/battalion ammo dumps might have to be only 50-60km from the contact line, and Russia’s systems can hit them. If the AFU moves them much farther back, then suddenly the gap between their operating frontline units and the essential munitions feeding them becomes too large and inefficient, critically slowing their resupply and eroding their combat effectiveness.
Thus, by forcing Ukraine into this attritional long-range fires war, Russia is nullifying the West’s recon capabilities, but only so long as it maintains that qualitative edge in the range of their systems. If Ukraine, for instance, were to begin getting supplied en masse with much longer range systems, like the much-hyped GLSDB’s, then it could theoretically begin to nullify that advantage, and NATO’s ISR overmatch would suddenly again be able to dictate an operational initiative.
Some might argue, such a tactic wouldn’t work against the U.S. Russia is lucky that Ukraine doesn’t have many more long range systems. But if Russia fought the U.S., both sides would immediately Kesslerize each other’s satellites, instantly nullifying all “guided munitions” which require satellite-GPS to function. And guess which country will function better in a classic war scenario?
III.
A last important thing to consider, apropos of the original question, of how well can Russia function in the coming offensive, against the vast overreach of NATO’s All-Seeing-Eye: is who will be leading the operation? Recently, as we all know, Russia appointed Valery Gerasimov to the post of Supreme Commander of the entire war, signaling a portentous shift in the gravity with which the Kremlin now regards the conflict.
This mirthless and taciturn man has been the subject of a lot of speculation in the West, where he at times strikes a sort of mythical figure. Though this is partly owing to his quiet and enigmatic demeanor—shying from the limelight unlike so many American generals enamored with goosestepping and pandering in front of the flashing lights, flapping their gums on CNN for corporate baksheesh.
No, Gerasimov is invariably seen sitting and listening, in quiet observation of those around him. In many old reels of Chechen War footage from the 90’s, one can likewise catch glimpses of him lurking over the shoulders of his more loquacious superiors, alertly appraising their every spoken word.
We discussed here the various doctrines and strategies of fighting in a modern hybrid, next generational war scenario. Gerasimov is the man who practically ‘wrote the book’ on this topic. His famed ‘Gerasimov Doctrine’ has long been held as a sort of apotheosis of Russia’s understanding of the evolution and philosophy of modern war-fighting.
Though there’s much controversy surrounding the actual content of the doctrine itself, and though nothing inside of it is particularly ‘revolutionary’ in thought—it is simply an attempt to understand and distill modern 5GW warfare through the lens of America’s usage of it to foment crises like the Arab Spring—it nevertheless exists as proof that at least the Russian forces are now in the capable hands of someone who intimately understands the intricacies and nuance of fighting such a complex modern war.
Gerasimov’s Views on Future Warfare
The doctrine calls for a 4:1 ratio of non-military to military action.Gerasimov emphasizes “the importance of controlling the information space and the real-time coordination of all aspects of a campaign, in addition to the use of targeted strikes deep in enemy territory and the destruction of critical civilian as well as military infrastructure.” Also he proposes to cloak regular military units in “the disguise of peacekeeper or crisis-management forces.”[1]
Interestingly, the ‘Doctrine’ came about at a time (2013) when Russia was just preparing to engage in its first truly ‘hybrid war’ scenarios in both Syria and Ukraine. And thus it outlined sets of parameters for maximizing effectiveness in these asymmetric and ‘irregular’ style conflicts—how to best leverage small forces with a variety of clandestine actions, from cyberspace, political, partisan, indirect/irregular/paramilitary forces, asymmetric techniques, etc.
However, lesser known is the fact that in 2019, as the Ukrainian crisis was slow-marching toward its inevitable powder-keg moment, Gerasimov, clearly reading the tea leaves, was said to have updated a sort of informal v2.0 of his ‘Doctrine’, which once more re-emphasized the importance of preparing for a more classical, direct military confrontation of bruteforce armies.
In this new address, he stressed the particular importance of preparing ‘precision weaponry’ well in advance of conflict, noting that to attemptmanufacturing such weapons only once conflict has already broken out, is a failed strategy that would never work. Simple as this concept may seem, it seems Russia has taken it to heart and prepared well, per his guidelines. NATO, on the other hand, have failed to take heed.
Gerasimov is therefore a man who knows how to read which way the wind is blowing, the patterns and trends of modern warfare, and the nuances of the current crisis. It’s only fitting, then, that the coming, climactic phase will be led by him—a commander who’s become synonymous with leveraging these asymmetrical and irregular tactics to victory. And so, we can remain hopeful that Russia will exercise the finer points presented here, and many others, in the coming days.
Ultimately, we can expect to see Russia utilize both the broad-front tactic to stretch and stress the West’s capabilities, and in select theaters, where the front remains more fixed, Russia will continue utilizing its own Recon-Fire-Complex and RSC from long range to throttle and nullify the West’s ISR capabilities.
Stocks & Bonds Puke After Fed’s Mester Drops ‘Hawk Bomb’
BY TYLER DURDEN
THURSDAY, FEB 16, 2023 – 09:10 AM
After hot PPI, Cleveland Fed President Loretta Mester rubbed salt in the wounds of the market this morning when said she saw a compelling case for rolling out another 50 basis point hike earlier this month and the US central bank has to be prepared to move interest rates higher if inflation remains stubbornly high.
“At this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time,” Mester said Thursday in remarks prepared for an event organized by the Global Interdependence Center and the University of South Florida Sarasota-Manatee.
“Indeed, at our meeting two weeks ago, setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50 basis-point increase, which would have brought the top of the target range to 5%.”
Additionally, as Bloomberg reports, Mester said inflation risks remain tilted to the upside because of the war between Russia and Ukraine, which adds more uncertainty for food and energy prices. China’s reopening could also increase demand for commodities, she said.
Mester, one of the more hawkish Fed policymakers, said those upside risks support the case for “overshooting” on policy.
“Over-tightening also has costs, but if inflation begins to move down faster than anticipated, we can react appropriately,” Mester said.
As a reminder, Mester’s opinion matters since if Austan Goolsbee is appointed as Vice Chair (replacing Lael Brainard who is leaving to work at The White House), then Mester will become a ‘temporary’ voter until Goolsbee’s replacement is chosen. This means The Fed ‘voters’ lose an uber-dove (Brainard) and get an uber-hawk (Mester) in the short-term.
The reaction was not a positive one as stocks tanked…
Treasury yields rose on her comments…
Of course, the STIRs market had already started to price a more aggressive (for longer) Fed…
And the odds of 3 more 25bps hikes continue to rise…
Econophysics2020 
