Tag: economics

Free Trade is Economic Heroin

In all the many defenses of Free Trade going back to David Ricardo and his fatally-flawed concept of Comparative Advantage, and in all of the critiques going back to the 18th century mercantilists, one of the issues that no one either side of the economic issue ever seems to discuss is the inherent fragility of free trade and the way in which that fragility is imposed upon the economies of nations foolish enough to adopt a free trade policy.

I’ve already laid out, in statistically-significant detail, the proof of the total incompatibility of free trade with nationhood, in my Efficiency of Labor Mobility critique of free trade. But the scale and scope of that argument, combined with its requirement to have a basic grasp of neo-Keynesian economic theory, has proven to be well beyond the average individual and the average free trade economist alike. Lest you think I exaggerate, the total inability of the author of an introductory textbook on Austrian Economics to understand the critique, let alone formulate a response to it, really has to be read in order to be believed.

But the European Union’s successful attempt to force the Hungarian government to approve its economic aid package for Ukraine demonstrates another fundamental problem with free trade that even the average heroin addict is able to comprehend. It goes well beyond the obvious problem that many have previously observed with the regards to the way in which free trade can result in needing to buy weapons and raw materials from a trading partner with whom one is at war.

Several EU heads of state directly told Hungarian Prime Minister Viktor Orban that they would crash the Hungarian economy if he blocked a €50 billion ($54 billion) economic aid package for Ukraine, his adviser, Balazs Orban, has revealed.

EU leaders signed off on the mammoth four-year aid package earlier this month, after the Hungarian leader lifted his veto in exchange for some minor concessions from the bloc’s 26 other member states. These concessions included an annual debate on its implementation and a promise to review its impact on the EU budget after two years.

Before the package was approved, the Financial Times reported that the European Council had drawn up a plan to cut funding to Budapest and tank the Hungarian economy if Budapest maintained its veto. According to the Financial Times, the EU planned on pulling funding from Hungary, thereby hampering its ability to subsidize foreign direct investment and eventually crashing the value of the Hungarian forint.

EU leaders threatened to ‘politically rape’ us – Hungary, RUSSIA TODAY, 10 February 2024

In other words, since the Hungarian government foolishly permitted itself to become dependent upon the transfer of free money created ex nihilo by German banks, it now no longer has the ability to establish its own policies in the interest of the citizens of Hungary. Hungary might as well be a heroin addict attempting to defy the wishes of his heroin dealer.

This illustrates both the anti-democratic nature of free trade and usefully explains why Clown World is so hell-bent on imposing free trade policies everywhere from Azerbaijan to Zambia. Once Clown World can get a nation hooked on its destructive economic drug, it can literally dictate that nation’s policy. Only going clean, like Russia was inadvertently forced to do by the sanctions regime enforced by the West, can free an economy from the external chains and intrinsic fragility imposed by free trade.

Free trade is economic heroin for a nation. It might make things feel good for a while, but it’s very bad for your health and will eventually kill you if you don’t get off of it.

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Communism > Clown World

One of the most startling realizations of the 21st century has been the inescapable conclusion that communism, despite all of its atheism, murderous tendencies, economic shortcomings, and various other evils, is still much, much better for a nation than Clown World’s neoliberalism.

A map recently published by German poll aggregator Wahlkreisprognose shows that in the former East Germany Alternative für Deutschland (AfD) has a clear lead in almost the entire former German Democratic Republic while the western part is overwhelmingly dominated by the conservative CDU and its Bavarian sister party CSU.

In other words, the country is sharply divided along what was once formerly West Germany and East Germany (GDR).

In the map, the Institute has colored Germany’s Bundestag constituencies according to party preference. The black color represents the center-right Christian Democratic Union (CDU), the blue color the Alternative for Germany (AfD), the red color the Social Democratic Party of Germany (SPD), and the green color the Greens. The fainter the color, the smaller the lead of the party in the constituency, and the darker the color, the more dominant the party is.

The CDU dominates in western Germany outside the big cities, and the AfD in eastern Germany outside Berlin. The CDU and AfD are perfectly aligned with the former border between the former German Democratic Republic and the former West Germany.

This is not an argument for communism, but rather a condemnation of Clown World. North Korea is still Korean. China is still China. But the USA is no longer American, Great Britain is no longer British, the European nations are invaded and occupied by foreigners, and even the proud nations of Japan and South Korea are under direct assault.

Clown World delenda est.

By the way, the econoclowns lied about the “economic need for immigration” too. Immigration doesn’t help the economy at all. It is observably worse for an economy than losing a war and being nuked.

Mass immigration may cost Germany up to €19.2 trillion, and has already cost the country €5.8 trillion, according to a top German academic on public finances, Prof. Bernd Raffelhüschen, of the University of Albert Ludwig University of Freiburg. Often referred to as the “pension pope,” Prof. Raffelhüschen’s study blows a hole in the narrative promoted by pro-migration parties and business leaders, who claim that mass immigration will save Germany’s public finances and the job market.

Several top Dutch professors recently released a study detailing how migrants have cost the Netherlands a minimum of €400 billion since 1995, and the Netherlands has accepted far fewer migrants than Germany. In Norway, researchers found that only half of migrants are employed despite the state spending €6.6 billion on workforce integration projects over the course of 10 years.

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Trump’s Trade War 2.0

Contra economists from both the Democratic and Republican parties, a trade war in 2025 would be a very, very good thing for the US economy:

Former US President Donald Trump has told advisers he wants to impose a 60% tariff on all imports from China if he wins this year’s election, the Washington Post reported on Saturday, citing three unnamed people familiar with the plan. The measure would trigger major disruptions to the US and to economies around the world, which would far exceed the impact of the trade wars initiated by Trump during his first presidential term, economists from both the Democratic and Republican parties told the newspaper.

During his current presidential campaign, Trump has pledged to revoke China’s status as a “most favored nation” for trade. The designation is applied to almost all nations that do business with the US, and the White House can introduce any tariffs on imported goods from countries that do not have it. According to the GOP front-runner, tariffs on foreign goods raise vital revenue for the US budget, and current import levies are among the world’s lowest.

China ranks third in the list of US trading partners, behind Mexico and Canada. In November, Beijing accounted for 11.7% of total US foreign trade.

As I pointed out six years ago on Chinese state television, a trade war is very much to the advantage of the United States economy. The net effect of the Western sanctions regime on the Russian economy only serves to underline my original point: a trade war is, by definition, always beneficial to the trading party that has a negative trade balance. And the USA has a massive trade deficit vis-a-vis China. Unlike a naval war in the Pacific, an air war in the Middle East, or worse, a ground war in Europe, this is one war that the USA literally cannot lose.

The reason the Russian economy didn’t suffer from the trade war the West imposed upon it despite having a trade surplus is because the West is now actually the smaller of the two global markets by a significant margin, both in terms of population and purchasing power parity. What Russia lost in Western trade, it more than gained in trade with the BRICSIA countries. And from the defense manufacturers to fast food chains, Russia’s industries benefited massively from the protection from Western imports that was inadvertently provided by the sanctions regime.

As recent history has demonstrated, the Clown World economists are totally wrong, even by their own Samuelsonian metrics.

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The Art of Never Learning

Belgium completely fails to learn from the Ukrainian example of what happens when one crosses a Russian red line:

Belgium will transfer €611 million (58.3 billion rubles) to Ukraine from income received from interest on frozen Russian assets. The information was confirmed by the head of the Belgian Ministry of Defense, Ludivine Dedonder (pictured), Belga News Agency reports. The total amount of frozen Russian assets in the EU is about €180 billion (17 trillion rubles), most of them are located in Belgium, the agency clarified.

No doubt the EU will try to hide behind the fact that they aren’t seizing the frozen capital, only the interest on the capital. This will not fool the Russians, and it’s safe to anticipate some sort of tit-for-tat will soon take place, if not escalation.

The Russians have to find this childish tomfoolery more than a little tedious by now.

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The End of Sports Illustrated

You would have thought that a business that relied upon sports, plus an occasional splash of beautiful women in bikinis, would be bullet-proof. And you’d be wrong:

Much of the staff of Sports Illustrated, and possibly all remaining writers and editors, received layoff notices Friday, which essentially could spell the end of a publication that for decades was the gold standard of sports journalism.

The union of the staff tweeted Friday that it would continue to fight for the publication of the magazine but that its future is now in the hands of the magazine’s owner, Authentic Brands Group.

ABG has owned the magazine since 2019 and sold the publishing rights to a company called the Arena Group. The Arena Group missed a recent payment for those publishing rights, prompting ABG to pull the publishing license and putting the future of Sports Illustrated in jeopardy.

“As a result of this license revocation, we will be laying off staff that work on the SI brand,” the note to staff read, adding that some employees would be terminated immediately, while others would work through the end of a 90-day notice period.

Sports Illustrated lays off most of its staff, threatening iconic brand’s future, WASHINGTON POST, 19 January 2024

Those sounds you hear in the distance are Fox executives celebrating their prescient purchase of Outkick the Coverage.

This is why we will never sell off any of our core projects. As we’ve seen with Football Outsiders and now Sports Illustrated, there is no faster way to ensure a debt-related implosion short of taking the entire payroll to Vegas and betting it on black.

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The Decline is Observable

It’s rapidly becoming readily apparent to everyone, not just me, Wang Hunin, Simplicius, and Andrei Martyanov, that the decline of the imperial United States is both a) inevitable and b) observable.

The best indicator of real GDP per capita is energy usage per capita, because everything about a comfortable modern lifestyle takes a lot of energy, energy comes into everything people do and consume. This was rising exponentially to 1972, when the rise suddenly halted. It then started fall, slowly. And suddenly it has now started to fall rather more quickly and dramatically. It looks like three trend regimes: Exponential growth starting in the seventeenth century, then stagnation and slow decline starting in 1972, and now it looks like the beginning of dramatic collapse, looks like the beginning of a sharp break in the trend of slow and gentle decline.

This reflects a regime ever more hostile to the men who made it great, to the faith that made it great, the culture that made it great, and race that made it great.

Notice that no matter what metric is used, 1972-1973 keeps appearing as the high water mark for the USA. That’s not an accident. 1972 was, from an economic, industrial, and demographic perspective, the moment of Peak America.

Everything since then has been nothing but decline disguised by the collapse of the Soviet Union.

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China Sanctions USA

It’s going to be interesting to see how the corpocracy changes its tune once it starts losing its access to the world’s largest market, as yesterday, the Chinese Foreign Ministry announced sanctions on five US defense companies:

Q: The US recently announced new arms sales to Taiwan and sanctioned Chinese businesses and individuals under various pretexts. China said it would take countermeasures. Could you tell us specifically what those measures are?

A: The US arms sales to China’s Taiwan region in blatant violation of the one-China principle and the stipulations of the three China-US joint communiqués, particularly the August 17 joint communiqué of 1982, and the illegal unilateral sanctions the US has imposed on Chinese companies and individuals under various false pretexts seriously harm China’s sovereignty and security interests, undermine the peace and stability across the Taiwan Strait, and violate the legitimate and lawful rights and interests of Chinese companies and individuals. China strongly deplores and firmly opposes this and has made solemn démarches to the US. 

In response to these gravely wrong actions taken by the US and in accordance with China’s Anti-Foreign Sanctions Law, China has decided to sanction five US defense industry companies, namely BAE Systems Land and Armament, Alliant Techsystems Operation, AeroVironment, ViaSat and Data Link Solutions. The countermeasures consist of freezing the properties of those companies in China, including their movable and immovable property, and prohibiting organizations and individuals in China from transactions and cooperation with them.

I would like to stress that the Chinese government remains unwavering in our resolve to safeguard national sovereignty, security and territorial integrity and protect the lawful rights and interests of Chinese companies and citizens. We urge the United States to abide by the one-China principle and the three China-US joint communiqués, observe international law and the basic norms governing international relations, stop arming Taiwan, and stop targeting China with illegal unilateral sanctions. Otherwise there will be strong and resolute response from China.

This is clearly just a warning shot across the bow of the US corpocracy. Because if the Chinese really want to increase the pressure on the US government, they will sanction Apple, Disney, and other entertainment companies. The amount of lobbyists descending upon Washington DC in response would make D-Day look like a small commando raid.

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Sykes-Picot is Dead

The Sykes–Picot Agreement, officially known as the Asia Minor Agreement, was a secret agreement between the governments of the United Kingdom and France, with the assent of Russia, defining their proposed spheres of influence and control in the Middle East should the Triple Entente succeed in defeating the Ottoman Empire during World War I. The negotiation of the treaty occurred between November 1915 and March 1916. The agreement was concluded on 16 May 1916. The agreement effectively divided the Arab provinces of the Ottoman Empire outside the Arabian peninsula into areas of future British and French control or influence.

Pepe Escobar describes the geo-strategic significance of the Yemeni-imposed restrictions on Red Sea traffic and how they have proven vastly more effective than the G7 sanctions on Russia:

In chess, there always comes a time when a simple pawn is able to upset the whole chessboard, usually via a move in the back rank whose effect simply cannot be calculated.

Yes, a pawn can impose a seismic checkmate. That’s where we are, geopolitically, right now.

The cascading effects of a single move on the chessboard – Yemen’s Ansarallah stunning and carefully targeted blockade of the Red Sea – reach way beyond global shipping, supply chains, and The War of Economic Corridors. Not to mention the reduction of the much lauded US Navy force projection to irrelevancy.

Yemen’s resistance movement, Ansarallah, has made it very clear that any Israel-affiliated or Israel-destined vessel will be intercepted. While the west bristles at this, and imagines itself a target, the rest of the world fully understands that all other shipping is free to pass. Russian tankers – as well as Chinese, Iranian, and Global South ships – continue to move undisturbed across the Bab al-Mandeb (narrowest point: 33 km) and the Red Sea.

Only the Hegemon is disturbed by this challenge to its ‘rules-based order.’ It is outraged that western vessels delivering energy or goods to law-breaking Israel can be impeded, and that the supply chain has been severed and plunged into deep crisis. The pinpointed target is the Israeli economy, which is already bleeding heavily. A single Yemeni move proves to be more efficient than a torrent of imperial sanctions.

It is the tantalizing possibility of this single move turning into a paradigm shift – with no return – that is adding to the Hegemon’s apoplexy. Especially because imperial humiliation is deeply embedded in the paradigm shift.

Russian President Vladimir Putin, on the record, is now sending an unmistakeable message: Forget the Suez Canal. The way to go is the Northern Sea Route – which the Chinese, in the framework of the Russia-China strategic partnership, call the Arctic Silk Road.

For the dumbfounded Europeans, the Russians have detailed three options: First, sail 15,000 miles around the Cap of Good Hope. Second, use Russia’s cheaper and faster Northern Sea Route. Third, send the cargo via Russian Railways.

Rosatom, which oversees the Northern Sea Route, has emphasized that non-ice-class ships are now able to sail throughout summer and autumn, and year-round navigation will soon be possible with the help of a fleet of nuclear icebreakers.

All that as direct consequences of the single Yemeni move. What next? Yemen entering BRICS+ at the summit in Kazan in late 2024, under the Russian presidency?

The US-led Armada put together for Operation Genocide Protection, which collapsed even before birth, may have been set up to “warn Iran,” apart from giving Ansarallah a scare. Just as the Houthis, Tehran is hardly intimidated because, as West Asia analyst ace Alastair Crooke succinctly put it: “Sykes-Picot is dead.”

This is a quantum shift on the chessboard. It means West Asian powers will frame the new regional architecture from now on, not US Navy “projection.”

That carries an ineffable corollary: those eleven US aircraft carrier task forces, for all practical purposes, are essentially worthless.

How Yemen changed everything, PEPE ESCOBAR, 28 December 2023

I find this move by the Yemenis, presumably made in coordination with China, Russia, and several of the Arab nations, to be utterly fascinating, and more importantly, indicative of how far ahead of Clown World the BRICS strategists appear to be thinking. While I was certain that the impotence of the US Navy was a) going to be demonstrated before 2030 and b) that demonstration would have a significant effect on the way in which the nations regarded Clown World going forward, I assumed that it would be necessary for someone to sink a carrier or three in order to demonstrate that impotence.

But this is a much more elegant approach, as the observable reluctance of the US Navy to risk any direct engagement with what is, on the international scale, a sixth-rate power, demonstrates that impotence even more clearly than the loss of an entire carrier task force in the South China Sea could. After all, only Russia possesses the striking power of the Chinese military, but most of the nations in the world have resources that exceed that of Yemen; even the military capabilities of Croatia and The Democratic Republic of the Congo are rated ahead of Yemen in the 2023 Global Firepower rankings.

It’s one thing for Russia to prove that the Empire can’t push it around, it’s another thing for the nation ranked 74th in the world to do so.

If it is not yet clear to everyone that the US empire is in rapid decline, we can be confident that it is entirely apparent to everyone whose opinion matters.

UPDATE: Meanwhile, the US government continues to demonstrate that it has not yet learned anything from the consequences of its recent attempts to poke the bear.

The United States has called for working groups from the Group of Seven (G7) countries to explore ways to confiscate hundreds of billions of dollars in frozen Russian assets, the Financial Times reported this week. The United States, backed by the UK, Japan and Canada, has proposed setting up preparatory work for expropriating over $300 billion in Russian foreign exchange reserves that were immobilized by Western nations after the start of the Ukraine conflict.

The EU, where most of the assets are blocked, is more wary of a direct confiscation, fearing possible retaliation from Moscow if the money is taken. Currently, €210 billion ($230 billion) of Russia’s reserves are held in the bloc’s financial institutions, with €191 billion in Belgium, €19 billion in France, and €7.8 billion in non-member Switzerland.

Stealing Russian assets is not the greatest plan in the world when Russia is going to be in a position to simply march some of its 1.5 million mobilized troops into some of those nations and take whatever it wants from whomever it wants within the next two years. Notice that the G7 countries which are within marching distance don’t appear to be quite as enthusiastic about offering Moscow yet another casus belli.

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Libertarians and Clown World

Argentina fails to reach escape velocity thanks to its new, self-styled-libertarian president:

Argentina has formally rejected an invitation to become a member of the BRICS group of nations, several news media outlets reported on Friday, citing an official letter they have seen which has been sent to the leaders of Russia, China, India, Brazil and South Africa. While President Javier Milei had previously voiced his opposition to joining the alliance before being elected, the move represents a complete U-turn from the policy of his predecessor, Alberto Fernandez.

Fernandez had accepted the invitation to join the five-nation group in August, holding that such a move would offer the Latin American nation a “new scenario” for its development. Milei, who won the presidency in November, said at that time that he would not “push for deals with communists because they don’t respect the basic parameters of free trade, freedom, and democracy.”

The South American nation is currently struggling with its worst economic crisis in decades. Inflation has surged 160% over the past year alone. The severely devalued peso forced the country to refinance its $44-billion debt to the IMF. Milei’s government is also facing massive

The last paragraph is the dead giveaway. When they say “free trade, freedom, and democracy” what they really mean is “debt, debt, and more debt”. Because the only real “freedom” provided by Clown World is the freedom to borrow as much money as one’s potential creditors will allow.

This is a hard thing for most libertarians to accept. But there is no tenet of libertarianism that isn’t generally in line with Clown World’s professed ideals, beginning with free trade and the free movement of peoples. It’s as hopelessly utopian and untenable as communism in the end.

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