One could actually say he hasn't gone insane and is acting in a very calculated way. He knew that no one would intervene militarily on Ukraine's behalf and knew that his military was strong enough to attempt to install a puppet regime. The West would never have agreed to his core demands, we knew it and he knew it. He coldly did the one thing he felt would be the most efficient solution to his problems w/r/t Ukraine.
Even an old crow like Biden knew that Putin could not be convinced. For the last few months, Biden was fairly confident even when the press was crying that diplomacy was the only solution that he believed that Putin would invade Ukraine:
Biden predicts Russia will invade Ukraine, warns Putin | AP News. He said that on January 19th, more than a full month before the start of the invasion. Macron was trying to negotiate until what, three days ago? This in and of itself proves your bolded statement incorrect also, people really did think Putin would invade long before this. Analysts were saying it even before Biden:
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