Weekly Forecasts 2/2025

Glimmers of hope with 'bogeymen' lurking in the background

Forecasts

1. The long road to peace in Ukraine vs. Peak Escalation (with warnings).

2. Is the U.S. economy about to (re-)accelerate?

3. Implications of the relentless upward-march of U.S yields.

The long road to peace in Ukraine

Most fortunately, we (the world) were able to avoid the Peak Escalation during the last months of 2024. In August 2024, we warned that:

Like Tuomas noted in his recent piece, we have entered what is likely to be the most precarious era the world has seen for quite some time. Alas, we warn on the possibility of cataclysmic events, a peak escalation, in the coming months aimed at pushing the world into a global conflict.

This did not come to be, which is excellent news. However, the flip-side is that the early hopes of a peace in Ukraine with the leadership of President Trump have been dashed. His nominee for special envoy to Ukraine and Russia, Lieutenant General Keith Kellogg (ret.) is now hoping that a lasting solution to Ukraine can be found with 100 days from the inauguration of Donald J. Trump on January 20. The first preliminary proposal, or ‘probing’, of the coming Trump administration failed, because it included a “moratoria” for the NATO membership of Ukraine. Trump himself has stated that he hopes for a resolution in six months, a quite notable change from the phrase “peace in 24 hours” floated during his campaign.

These statements reflect the complexity of the situation in and around Ukraine, on which we and especially Tuomas, have been warning about for some time. Essentially, peace requires relinquishing parts of the ‘American hegemony’. That is, peace in Ukraine requires admitting a (partial) defeat for the U.S. and NATO. The last time the U.S. was forced to such “humiliation” was in April 1975, when the Presidential Palace in Saigon fell, ending the Vietnam War.

We are suspecting that creation of such a situation has been and continues to be the play of the NATO Deep State and the military-industrial complex. Over the course of the years they, with the help of two Democratic Presidents in the U.S., have driven the conflict in Ukraine into a de facto perpetual war. This has been done through three policy lines:

1. Breaking of all promises/hints made to Kremlin on peace/truce.

2. Push for ever-deepening escalation.

3. War-propaganda used to guide the mindset of the general populace and politicians alike towards continuation of the war (“Slava Ukraini”).

We emphasize that there is no question about the defining role of Russia in the conflict. It was Russia who started all-out military operation, while her motives/triggers behind this can be discussed. We currently see the ‘Special Military Operation’ (SMO) to have served two purposed. First, it was aimed at clearing the threat posed by Armed Forces of Ukraine (AFU) to the run-away regions of “Donetsk People’s Republic” and of the “Luhansk People’s Republic”, who declared independence in a Russian-supported coup in May 2014. Secondly, the SMO was a likely effort to force then newly appointed Ukrainian President Volodymyr Zelenskyi to the negotiation table, which was successful. However, the peace negotiations, led by Turkey, were reportedly torpedoed by the U.K. and U.S. administrations, partly due to the security guarantees the deal would have required from the West.

On August 3, Tuomas wrote:

In Ukraine, we seem to approaching an actual push for a ceasefire possible leading to a peace hinted by statements of both Volodymyr Zelenskyi and President Putin. This is a welcome sign, but we need to remain skeptic. This is because losing in Ukraine would be serious defeat for NATO. Essentially, the options for the West are: Peace in Russia’s terms or drastic escalation possibly through a ‘false flag’ attack.

Just three days later, the AFU launched an attack to the Kursk region, invading parts of Russian mainland. This was the last act of breaking of trust of Kremlin, which started from the Minsk agreements, signed in September 2014 and February 2015. Officially they were aimed at ending the conflict in Ukraine, but the (partial and short) truces they provided were just used to buy time to arm Ukraine against Russia, or at least this is how Kremlin views it. We consider that this line of “betrayal” by the West has been a deliberate policy choice, as explained by our Peak Escalation hypothesis. It’s also paramount to understand that often times in geopolitics, what has actually happened does not matter so much, as how the parties view the developments. It’s rather clear now that Kremlin feels betrayed, especially after the Kursk invasion. When there’s no trust between the war-going factions, truce and peace are very difficult to find.

Since August, our base-line scenario (working hypothesis) has been the Peak Escalation. Peak Escalation simply indicates that there’s a push, most likely, by the NATO Deep State, the military industrial complex and the group-over-groups (etc.), hypothesized by Tuomas, to lead to world into a perpetual war. Most unfortunately, our hypothesis has hold true. We cannot pretend that we would o know all the motives behind the Peak Escalation this at this point, but money (vast profits created by wars to many) definitely plays a role.

We seem to have ‘dodged’ the worst possible scenarios of Peak Escalation during the past six months, partly because Kreml has not allowed itself to be provoked to over-react and partly because, for reasons unknown, NATO has not gone all the way with the escalation (e.g., there has not been a ‘false flag’ attack). Yet, we consider that the aims of Peak Escalation have not changed, while methods used to push it may have. There may be just a change in strategy.

This is why we issue two warnings:

1. There will be attempts to post-pone, or completely derail the peace process in Ukraine during H1 2025.

2. If this (peace in Ukraine) comes to be, as we suspect it eventually will, another front with Russia will be opened somewhere in the axis of Poland/Belarus, Baltics or the Nordics, shortly after.

If (when) peace in Ukraine starts to look likely, we can expect some sudden setbacks with the treaty, combined with increasing of tensions in the vicinity of the Russian western border. Estimated timeline: peace in Ukraine by summer/early fall, increasing tensions by late 2025 with another conflict commencing in early 2026.

If peace comes without another conflict flaring up, it implies that we would have entered the Optimistic scenario (for 2025) and the world would see a definite turn towards better times. Unfortunately, at current time, the we do not consider the likelihood of this to be very high.

Is the U.S. economy up for an acceleration?

Tuomas has argued since mid-May 2024 that, in actuality, the U.S. economy is in recession, masked as an expansion only by the gargantuan fiscal stimulus. He based his argument on the still on-going credit recession. The upcoming presidency of Donald J. Trump has increased optimism, but will it be enough to turn the U.S. economy around? Let’s take a look at the business and fiscal side of the U.S. economy.