Recently, the global gold market has been dominated by the situation in Crimea and the latest Federal Open Market Committee. After trading above the $1,390-an-ounce level for the first time since September 2013, gold’s upward momentum was thwarted by the outcome of the latest FMOC meeting.
Up until a few weeks ago, Crimea was probably unknown to most people around the world. So why, so suddenly, has this region had such an impact on global equities, currency and financial markets? And, the events unfolding there could possibly change the complexion of Europe, if not the rest of the world.
The answer is simply because the action of one country (Russia) does not suit the aspirations of many Western countries, the United States in particular. And, as a consequence, this region has become the centre of a political standoff between Russia and most of its Western counterparts.
For months, main stream media has focused on the Ukrainian revolution, which ignited in November after the recently ousted government suspended the signing of a free-trade agreement with the European Union. Instead of forging ties with Europe, Ukrainian President Viktor Yanukovych opted to seek closer economic integration with Russia.
After months of protests, Yanukovych, was chased out of Ukraine, and a pro-European government was established in Kiev. A few short weeks later, Russia responded by invading Crimea, under the guise of protecting ethnic Russians. However, it is important to understand that there is a long standing history between Russia and Crimea.
Although Crimea was part of Ukraine, it had its own government, laws, and constitution.
Throughout its history, the country has been a target of invaders, including the Greeks, Huns, Byzantines, Ottoman Turks, Mongols, Venetians, and—most recently—the Russians.
Crimea was administratively part of Russia for 200 years and has been part of Ukraine for only 60 years having been given away by Soviet leader Nikita Khrushchev as a gift to Ukraine in 1954. Some 60% of the population are Russian-speakers, with Ukrainian-speakers and Tatars making up the rest.
While Crimea remained part of Ukraine, psychologically Russians did not accept that. And, it is interesting how history often repeats itself. During the Crimean War the Russians manoeuvred their fleet to prevent the British and French navies from entering Sevastopol Harbour. Russian ships blocked the exit to the harbour at the same spot last week to prevent Ukraine’s tiny fleet from making a getaway.
The Crimean War was also where Florence Nightingale gained renown for the heroic care of the nursing sisters that she led and for her advocacy for Britain’s wounded.
Now that Russia has annexed Crimea, leaders of the Western countries are condemning the actions of the Kremlin. It is quite ironic given the recent history of U.S. involvement everywhere. It is far more reasonable to accept the actions of Russia which is right next door, than it is for the U.S. government to be involved in places such as Libya, Iraq, Afghanistan, Pakistan, Syria, and Somalia, just to name a few. And Russia is not bombing and destroying cities in Crimea like what was done in Iraq and Libya. The Russian government called for a referendum that resulted in an overwhelming majority of the population wanting Crimea to return to Russia.
The questions on the ballot paper were: “Are you in favour of the Autonomous Republic of Crimea reuniting with Russia as a constituent part of the Russian Federation?” And: “Are you in favour of restoring the Constitution of the Republic of Crimea of 1992 and of Crimea’s status as part of Ukraine?” The middle way of greater autonomy within Ukraine is not an option.
According to Wikipedia A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendmentor a law. Besides initiative and recall election the referendum is one of the three pillars of direct democracy.
Direct democracy (also known as pure democracy is a form of democracy in which people decide (e.g. vote on, form consensus on, etc.) policy initiatives directly, as opposed to a representative democracy in which people vote for representatives who then decide policy initiatives.
It also seems hypocritical that Western powers have dismissed the ballot as unconstitutional and part of an attempt by Moscow to gain spurious legal cover for the annexation of Crimea, when they accepted the results of similar referendums held in the Falklands, which the UK won back from Argentinian occupiers following a brief war in 1982, and the referendum in South Sudan.
A referendum on political status was held in the Falkland Islands on 10–11 March 2013. The Falkland Islanders were asked whether or not they supported the continuation of their status as an Overseas Territory of the United Kingdom.
On a turnout of 92%, an overwhelming 99.8% voted to remain a British territory, with only three votes against
The British Prime Minister, David Cameron, expressed his delight after the Falkland Islands voted overwhelmingly to remain part of Britain. All but three who cast a vote said they wished the Falklands to remain part of the UK's overseas territory. David Cameron said that Argentina and the rest of the world should heed the wishes of the islanders. The prime minister said Argentina should take "careful note" of the referendum result and that Britain would always be there to defend the Falkland Islanders. Here is the link to his news statement on UK television:
On 9 July 2011 South Sudan became the newest country in the world. The birth of the Republic of South Sudan was the culmination of a six-year peace process and a new chapter in a region that has seen little peace in the last 50 years. The United States backed the peace treaty that put the referendum in motion. And, the President of the United States Barack Obama said the result of the vote was “inspiring" as voters decided "their own future [and marked] another step forward in Africa's long journey toward justice and democracy". He also said that the United States would recognise South Sudan's independence when formalised.
Meanwhile, a referendum on whether Scotland should be an independent country will take place on Thursday 18 September 2014. Following an agreement between the Scottish Government and the United Kingdom government, the Scottish Independence Referendum Bill, setting out the arrangements for this referendum, was put forward on 21 March 2013, passed by the Scottish Parliament on 14 November 2013 and received Royal Assent on 17 December 2013. The question to be asked in the referendum will be "Should Scotland be an independent country?" as recommended by the Electoral Commission.
British Prime Minister David Cameron said that his Government supported the holding of the referendum and would “respect and defend” the result.
It seems to me that the Crimean peninsula is far more important to the Russians than the Falkland Islands are to Britain.
Looking at the situation developing in the Ukraine I can’t help wonder why it is that leaders of the USA, UK and EU have rejected the results of the referendum in Crimea yet, they were completely accepting of the referendums in the Falklands and Sudan. Obviously, nothing is as clear as it appears. And, what I also found fascinating was the speed at which the EU suddenly signed an association agreement with Ukraine in Brussels.
EU President Herman Van Rompuy and other EU leaders signed the agreement with Ukraine's Prime Minister Arseniy Yatsenyuk on the sidelines of an EU summit in Brussels. The two sides signed three of the seven chapters of the agreement.
"This deal covers the most existential and most important issues, mainly security and defence cooperation," Yatsenyukd said. "This deal will establish a joint decision-making body, which is to facilitate the process of real reforms in my country. And this deal meets the aspirations of millions of Ukrainians that want to be a part of the European Union."
European Commission President Jose Manuel Barroso described the bloc's intent as the first day of the EU summit concluded in the early hours of the morning on March 21.
"We are already going to sign with the prime minister of Ukraine the political provision of the association agreement and seal the strong political partnership that brings Ukraine and the European Union closer together," Barroso said.
"This is the democratic choice that Ukraine has made. It is our firm intention to sign the remaining parts of the agreement in due course. Europe is committed to Ukraine for the long term," he added.
The signing ceremony came as Russian President Vladimir Putin formally signed the annexation of Crimea, having secured backing in both chambers of the Russian legislature.
The trade portion of the EU accord, which is the bulk of the treaty, is to be signed after May.
Barroso spoke immediately after the EU leaders agreed to slap an asset freeze and travel ban on 12 more Russians and Ukrainians over Moscow's annexation of Crimea.
Meanwhile, the United States extended its sanctions against Moscow earlier on March 20, adding dozens of influential Russians, including a number of individuals within what the U.S. Treasury described as Russian President Vladimir Putin's "inner circle."
It soon became apparent to me that the main issue at stake here is the supply of natural gas. A number of key gas pipelines from Russia to Western Europe run through Ukraine. Around 58% of gas consumed in Ukraine is imported from Russia and some 66% of gas imported to the EU from Russia transits the Ukraine. Now, things are getting a lot clearer to me. In pure economic terms, a shift to Russia would likely change the dynamics of how Western Europe is powered. So, if Russia had control over the Ukraine, Europe’s supply of gas would become even more dependent on Russia.
Meanwhile, the Federal Reserve monetary policy meeting on Tuesday and Wednesday will give investors some clues of what the Fed thinks regarding the economic outlook. So far most economists are still expecting the Fed to stay on track with reducing its quantitative easing program.
Meanwhile, the FOMC's March meeting turned out to be more hawkish than expected and the Fed unveiled more stimulus tapering, pledged continuing low interest rates, and cut its 2014 GDP forecast.
Besides announcing a further reduction of monthly asset purchase by USD10 billion policymakers have brought forward the tightening cycle and upgraded the labour market outlook. The Fed also modified its forward guidance, removing the thresholds of 6.5% unemployment rate and 2.5% inflation rate. The central bank, however, stressed that 'the change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements'.
The situation in Crimea shows how small events can escalate into a major crisis, and how the majority of politicians have seemingly become nothing more than legalised racketeers and duplicitous philanderers who serve themselves instead of serving their citizens. I have no doubt in my mind that some government official somewhere stands to lose or make substantial amounts of money from the on-going turmoil in Ukraine. These types of people are not capable of creating wealth but are only able to use their positions of power to divert funds or steal tax payer’s money in order to enrich themselves.
And, as I have stated countless times, the best protection against corrupt governments, geopolitical tensions, and expansionary monetary policies of central banks is gold and silver.