• Jim Rickards wrote a gem of a piece in yesterday’s Daily Reckoning.
• Jim thinks the US is the sucker at the geopolitical poker table.
• This mimics an article I wrote the last time Jim wrote about this subject. I reference it heavily.

Happy Hump Day!

It’s glorious here in Northern Italy.

While drinking my morning cappuccino, I read Jim Rickards’s piece in yesterday’s Daily Reckoning.

It echoes a theme he wrote about in February 2022. I remember it vividly because I piggybacked that article for the Rude.

Since he’s writing about the same theme in a timely way, I will piggyback him again.

The theme is this: how on earth did the United States wind up in this pickle?

So Who’s the Fool in This Deadly Game?

Jim brought up a great metaphor, encapsulating the situation from first principles.

Warren Buffett is famed for saying it succinctly, so here it is:

From Jim’s piece:

Here’s the easiest way to understand what’s happening using a poker game as a metaphor: The U.S., China, and Russia are the only superpowers in the world. There are many other important powers, and I’m not suggesting that they don’t count, but only the U.S., China, and Russia qualify as superpowers.

Now imagine a three-handed poker game that involves those three. There’s an old saying in poker: If you’re at the table and you don’t know who the sucker is… you’re the sucker.

In any three-sided contest, it makes sense for two of the parties to work together to crush the third. Once the third player is wiped out (loses all his chips), the two survivors can turn on each other. That’s just power dynamics. The U.S. understood this dynamic implicitly since the end of World War II.

The EU? Nope.

The UK? Not even close.

Nor is India. Just three players, though they matter in their own ways.

Russia-Ukraine War Update

From Jim’s piece yesterday:

Over 200,000 dead Ukrainian soldiers speak as if from the grave about how badly Ukraine is losing. They’ve lost much of their best personnel and are sending fresh troops to the front lines with only rudimentary training. Many of them don’t last more than a couple of days.

On the other hand, Russia is in the process of mobilizing 400,000 new troops. That’s in addition to perhaps 400,000 now in Ukraine, and 300,000 or more in reserve.

Ukraine is also low on ammunition, while Russia has dramatically been increasing ammo production. Russia also maintains sizable leads in every major category of equipment from aircraft, to tanks, to artillery.

Not what you hear in the US mainstream media, is it?

It’s a different story on the ground.

Ending One Communist Regime and Empowering Another

I’ve written before about how Henry Kissinger gave away the game to the Chinese.

In his remarkable book The Hundred Year Marathon, Michael Pillsbury details how Henry Kissinger gave away America’s technological advantage to China in exchange for China not siding with the Soviets.

And while I don’t think what Kissinger did was worth it, I’ve got to admit the immediate goal was accomplished.

Only 20 years or so after Nixon went to China, the Soviet Union collapsed.

That’s because America and China made the Soviet Union the patsy at the table.

Of course, the Soviets knew what was happening and tried to get America to stop it, but their efforts were fruitless.

And while that outcome looked good on the surface for 30 years, now we’ve got Russia and China turning the tables on America.

America’s position isn’t looking so good right now.

So Jim’s point is that American policy overall is incorrect and misguided.

Back in the 1990s

The oligarchs took over the companies when Russia tried to start with capitalism.

“It’s a good place to end, but not a good place to start.”

The State Department minions who now have senior positions have never forgiven Putin for disrupting their terraforming plans.

Let’s get one thing straight: Vladimir Putin is not a nice man. He’s not someone I’d want to go into business with. He’s an ex-spy chief who plays for keeps.

But just because we don’t like someone, doesn’t mean we don’t have to deal with them.

And since those diplomats failed in the 90s, Putin has accomplished some things for Russia.

With the oligarchs, he gave them an ultimatum: keep the money, but stay out of politics.

Putin built bridges to the Orthodox church.

He’s also made Russia less dependent on, and almost entirely independent of, the USD system, which nullified the sanctions.

Russia is by no means perfect. It’s still kleptocratic, and its judiciary isn’t strong enough.

But it’s functional, something it wasn’t when the Soviet Union fell.

Not History, But Security

In America, students stopped learning history and geography in high school.

There’s a flat plain between Moscow and the rest of Europe.

From Northern France, you can march straight to Russia without encountering a hill.

It’s like Kansas.

Ukraine is smack in the east end of it.

And it’s not like we don’t have historical examples of Russia’s enemies trying it on.

Napoleon got there and froze to death, losing 90% of his troops.

Hitler did the same. He couldn’t hold his supply lines. Millions of lives were lost.

The only thing that saved Russia was the harsh winter.

So, in Russia’s mind, it must create buffer zones.

Russia lost the Baltics to NATO. Russia thinks it can’t afford to lose Ukraine.

Now, does that mean Ukraine should be under Russian rule?

Of course not.

Just like I don’t think Canada should be under American rule.

Or vice versa.

But that doesn’t mean we don’t have to deal with the situation.

We’re the Sucker!

Jim concludes:

The rise of Putin after 1999 enraged both neoconservatives and progressives in the U.S. who wanted Russia to be a Western puppet. Putin was a nationalist and pro-religious figure who returned Russia to a more traditional conservative state.

Then Russia became a left-wing punching bag because it was a convenient way to rationalize Hillary Clinton’s dismal campaign (2016) and to tar Donald Trump. Finally, the Russo-Ukraine War, provoked by the U.S. after 2014, became an excuse to exclude Russia from the international system entirely.

At the same time, the potential for huge profits in China was irresistible for U.S. businesses despite China’s atrocious record on human rights. In time, the U.S. was disabused of the notion that China would be “just like us” given enough time. China turned out to be a vicious Communist dictatorship and an even worse enemy than the former Soviet Union.

Where are we now? China and Russia are close allies, and the U.S. is the odd man out.

We’re the sucker.

This shows that the people in charge in DC don’t know what they’re doing. The situation never should’ve come to this.

We leave goat herders in Afghanistan $85 billion in equipment when we cut and run from them. Why Americans think a war would be different against Russia and China is beyond me.

Wrap Up

Like Jim says, “We’re the sucker.” And it never should’ve gotten to this point.

America, in large part due to the current administration, has lost so much soft power. And that doesn’t begin to explain its hard power decline.

The USG needs to step back and see the situation for what it is.

If not, there’s a greater chance of a misstep later.

Until tomorrow.