Review of the year 2014


Many of us started the year 2014 with the hope that finally the economy will recover. The stocks have been surging during the last months of 2013 and although many were expecting a correction there was hope and enthusiasm in the markets, even Europe was preparing to “face some inflation” (today in 2015 it sounds pretty much like a joke). Very few expected to see instead all the mess we have seen. Here there is a short summary of what happened:

  • Ebola. The ebola virus started spreading-out in West Africa, but as long as just few African villages were being wiped-out by this virus nobody really cared in the western society. However, when the virus reached big African cities and few cases were reported in the west, we had few weeks of Ebola-panic and the media seemed not to be able to talk about anything else but it will disappear again from the news towards the end of 2014.
  • The regime-change in Ukraine. February was also the month in which the CIA-sponsored regime change in Ukraine occurred. Basically, it was just an exchange of oligarchs (towards more western-friendly ones) but it came at the cost of a civil war (although many still don’t want to call it as such). This was just another move in the political chess-board between Russia and the United States, but a very important one because in few weeks it wiped-out 20 years of progress in the relation between Russia and the west, projecting us back 20 years, back to the cold war. In the beginning many dismissed this as paranoia but later on, things would only get worse, confirming this theory. Anyway, Ukraine was seen as a key region for Russia because most of its gas delivery to Europe transmit through Ukraine, and also because this is a vital trading partner. With this move, the west wanted to inflict a vital political blow to the Russians forcing them into submission. However, as it happened with the war in Iraq, the bombing of Libya, the attempt to change regime in Syria and the war in Afghanistan, things did not go as planned. Russia’s first move was to annex Crimea, this caught the west by surprise even if it was the most probable move Russia would have done. We have to consider that Russia already had military bases in Crimea (therefore the Ukraine government would not dare killing civilians there) and by holding a referendum it could easily get Crimea back in a democratic way because majority of the population in Crimea is Russian anyway. But Russia did some miscalculations too. In fact, probably it did not expect the eastern regions of Ukraine to rise up and demand independence from a west-controlled Ukraine. The new government in Kiev did not take this lightly and in an excess of optimism regarding their military power tried to crush people in eastern Ukraine labelling them as terrorists (most of them are civilians) and officially starting a civil war in which armed private battalions (the government in Kiev does not have enough money to pay for regular troops, thereby allows oligarchs to have or sponsor private battalions) are allowed to kill, rape and take whatever they wish (so far 4700 people were killed and over 10000 injured according to UN estimates) with the western media closing an eye because too busy with the demonization of Putin. The fact that Ukraine was being used to score political points became more evident when the US urged Europe to sanction Russia. Understandably European countries were at first reluctant to inflict meaningful sanctions against Russia as it is one of the major importer of European goods. However, the tragic crash of the MH17 flight was the trigger that spurred Europe into shooting itself in the foot and apply sanctions against Russia.

  • The economic ripercussions of sanctions. For years we heard and waited for the economic recovery and even central banks prophesized that 2014 would be the year of the recovery. However, the economy has been weak throughout the 2014 and probably became even more fragile. To expose this weakness were the effects to the economic sanctions against Russia. European leader assumed wrongly that the weakening of Russian economy would have no spill-over to the western economies. This is just another proof that Europe is governed by a bunch of idiots. What happened was a decrease in demand of European goods by Russia and its diversification towards Asia, in particular China. The relations between China and Russia strengthened resulting with some massive energy deals between those 2 countries decreasing the strategical importance of Europe as a market for Russian energy. In the meantime, the slowdown in Europe becomes more pronounced and inflation looks even more like a mirage.

Victoria Nuland explained quite clearly what’s the opinion the US government has of Europe.

  • The end of QE from the FED and the Oil crash. 2014 was also the year in which the FED decided to end its massive QE stimulus. FED officials were able to avoid a market crash (however, sooner or later the bubble will pop) but also helped by the fact that FED’s balance sheet is still expanding despite the end of stimulus. This, so far is still keeping the American economy afloat. Despite all the troubles in Europe, the American economy seems in better shape, probably helped by the job-creation coming from the shale boom. Nevertheless, another consequence of the end of stimulus is a lower support by the speculative buyers to oil prices. This, in parallel with high supply and a weak demand will cause the oil prices to crash towards the end of 2014. So we can say the FED did not crash the markets (yet) but allowed oil to crash. Some say (and even Obama admitted) that some of this was also an artificial reduction in oil prices aimed at weakening the Russian economy that relies so much in oil exports. In fact, the US may have coordinated with the Saudis to talk down oil and to maintain high supply in order to allow oil prices to go down. Actually the fall of oil prices really hurted the Russian economy, much more than the sanctions. However, this move will have unintended consequences. In fact, oil extracted by fracking in the US is expensive and it needs high oil prices to be viable. Currently with prices below 70$ many US oil companies are operating at a loss. It’s still cheap for them to borrow money but this won’t last long and their financing costs will spike up in 2015. Anyway, this move succeeded in giving Putin a massive headache, the Ruble as a result crashed and Russia is forced to revise its expenses because of a tighter budget. But a question arises, with the Russians in trouble who is left to buy European goods?
  • The rise of the Islamic state. A universal fact of existence is that most of the people you meet in this life are fundamentally and functionally ignorant. Not necessarily stupid, but certainly ignorant. Ignorance comes not from a lack of intelligence, but from a denial of knowledge and truth. That is to say, ignorance takes hold when people decide to act as though they know and understand a thing, even if they do not. Indeed, ignorance was the main cause of the insurgency of the Islamic state also known as ISIS. Years of imposed “democracy” over oil-rich Muslim countries prepared the ground for ISIS, the US and the Saudis even trained and used them in the past to fight their enemies. By denying knowledge and truth to its own people, the US government was able to maintain the Middle East in a state of chaos without losing the popularity of its electorate. An example was the bombing of Libya or the murder of Saddam Hussein, it’s just amazing how they got away with it and all they had to do was to maintain Americans and western people ignorant of the facts keeping them under a curtain of lies with the complicity of western media. However, the void left by the destroyed regimes in the Middle East allowed ISIS to strengthen. Its members are fighting to create their own state. They even have a budget with taxes and other revenues (mostly from selling captured oil from Syria and Iraq). Their aim is to conquer most of Syria and part of Iraq, they have been around for a while but now are making the news because are not under US or Saudis control anymore. To fight ISIS while keeping his promise that there won’t be American boots on the ground, Obama decided to go ahead and train and provide weapons to small rebel groups in the Middle East that supposedly would do the “dirty job” and fight ISIS. However, as it happened in the past, those weapons and newly trained men found their way towards ISIS itself, making it even stronger. The only option left was to start bombing ISIS bases. This came at a huge cost, in fact on average 28 civilians (mostly women and children) are killed for every terrorist taken down by bombing, not exactly an efficient and human way to fight terrorism. Moreover, by indiscriminate bombing by the US, the local population is choosing between 2 evils and siding and aiding the terrorists. But the main difference between ISIS and the previous forms of terrorism consists in the fact that ISIS recruits people through social network and it’s very effective in launching messages especially to the west. Unfortunately, their brutality is also unprecedented and their favourite way to attract attention is through beheading western journalists all recorded and posted online. Fear is winning this battle so far and I hope this madness will stop, we need leaders with some common sense, that do their homework instead of spending their time playing golf and taking decisions on things they know nothing about.
  • The dollar run. After years of losses the dollar in the 2014 saw a record-breaking run up. Mainly this move was due to the fact that the FED ended QE but also because of speculation that soon the FED will raise rates because of the improving economy. Although, in my opinion the US economy is still very fragile, when compared with the economies of other major countries I understand why investors are parking their money in the US for the time being. With the central banks of Japan, Europe and Australia trying to destroy their currency there is simply nowhere else to go.
  • The positive notes. Although the 2014 was full of horrible news I just wanted to end this post with some good news. It sounds a bit like a joke but Germany finally won the world cup in Brazil. And remaining in the American continent, finally there was the resumption of normal relations between the US and Cuba.


Overall, it’s been a though year and probably we will see some bloodshed and more pain also in 2015, but I hope our leaders will gain some common sense and try not to repeat the same mistakes that have been done in the past. All this pain and bloodshed can be avoided.


Filed in: Blog, Economy, Featured Tags: , , , , , , , , , , , , , , , , ,

You might like:

See EU: Thoughts on Brexit See EU: Thoughts on Brexit
Will new stimulus keep China afloat? Will new stimulus keep China afloat?
Will Lower Gas Prices Bring Economic Recovery? Will Lower Gas Prices Bring Economic Recovery?
Is the Eurozone doomed to fail? Is the Eurozone doomed to fail?

Leave a Reply

Submit Comment
© 2018 How to trade for a living. All rights reserved. XHTML / CSS Valid.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions..