Tag: economics

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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The Great Taking

A short book warns of the sinister, but desperate plan that underlies all of Clown World’s various projects, from the World Economic Forum and the Covid vaxxes to Global Warming, the invasion of Gaza, and Operation Prosperity Guardian.

The Great Taking puts forth a warning that a virtually unknown entity called “The Depository Trust & Clearing Corporation” (DTCC) is effectively the “owner” of all the publicly traded companies in the world, and in fact all debt-based assets of any kind:

“It is about the taking of collateral (all of it), the end game of the current globally synchronous debt accumulation super cycle. This scheme is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass.

Included are all financial assets and bank deposits, all stocks and bonds; and hence, all underlying property of all public corporations, including all inventories, plant and equipment; land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will likewise be taken, as will the assets of privately owned businesses which have been financed with debt.”

Over the course of the book, the author describes a 50-year process by which ownership of shares in public companies, and all debt collateral has been “dematerialized”.

In the olden days, you invested in a company – they gave you physical share certificates – and you were now part owner of the company. This is still how many value investors including me think of stock ownership.

We’re not invested in all of these companies in The Bitcoin Capitalist Portfolio simply because we’re trying to time the oscillations in the price movements. We think of ourselves as partial owners of these businesses.

Michael Saylor, Brian Armstrong, Mike Novogratz, Frank Holmes, Jamie Leverton et al, aren’t just celebrity CEOs in this space (Bitcoin)… they’re our partners. Granted, we’re the minority partners, silent ones, betting the jockeys and just along for the ride; but we don’t think of these positions as just stock charts and price gyrations – we think of them as businesses in which we are part owners.

At least I do.

According to The Great Taking, author David Rogers Webb, this is not true. We don’t own small pieces of these companies, we own claims on those pieces, because – over the course of decades, through the exigencies of ever-increasing trading volumes, combined with the machinations behind the scenes of diabolical manipulators – stock ownership has been supplanted by “security entitlements”.

Webb posits that when the debt super-cycle culminates in its ultimate blow up; the trap will be sprung, and actual ownership over all these companies and assets will be subsumed by the clearing houses. An infinitesimal cadre of elites will effectively own everything, and the masses of the world will be reduced to serfdom.

It’s not actually that difficult to postulate; I always considered it a patently obvious risk. This is precisely why I have always warned everyone to stay COMPLETELY out of debt. You can look it up. It’s been obvious since 2002 that there is far more debt, and claims of ownership to that debt, than there is of physical collateral for the debt, and that’s before we even take into account any of the conspiracy theories that HUMAN BEINGS or their lifetime economic potential are somehow being utilized as collateral for state currency debt.

As long ago as 2008, it was already estimated that there were $100 of debt claims on every actual $1 of collateral value. That figure is almost certainly higher today.

The global credit economy rests entirely upon the idea that the foundation of debts upon which it rests will never be called in. As Paul Samuelson wrote in what is quite literally the system’s textbook, Economics: An Introductory Analysis, “what difference does it make if Paul owes Peter or Peter owes Paul?”

Well, it makes a tremendous difference if everyone on the planet owes one person, or one small group of people, particularly if the ultimate holder of all debt in the world is an evil, sociopathic devil worshiper with an endless hatred of the human race.

Now, it’s not quite as bad as most of these dire economic conspiracy theorists make things out to be, because as we have been learning since 2015, the Lords of Debt are discovering the limits of money power, as are the nationalist resistance. There is a very good reason that first Iran, then China, and then Russia, all of whom were locked out of the Clown World economy, have gone from seeking to participate in the system to actively waging war against it.

The book’s author appears to have noticed the same thing:

“The “control system” has entered collapse. Their power has been based on deception. Their two great powers of deception, money and media, have been extremely energy-efficient means of control. But these powers are now in rampant collapse. This is why they have moved urgently to institute physical control measures. However, physical control is difficult, dangerous and energy-intensive. And so, they are risking all. They are risking being seen. Is this not a sign of desperation?“

I suspect that reason for the rise of BRICS and The Great Bifurcation of the global economy is that important and influential individuals in the relevant nations did the math and realized that debt is, at best, a good way to lose everything you own, and at worst, a form of legal slavery. Debt can take down even the largest, oldest companies literally overnight; imagine what it can do to entire nations that find themselves awash in it and vulnerable to physical foreclosures.

Anyhow, read the book, and then focus on what you can do to ensure that when the credit system crashes, either naturally of its own weight or as a result of economic warfare, you do not find yourself stripped of everything you need to survive. And don’t forget that money in the bank is not savings, but rather, debt that the bank owes to you, and which will not be repaid in the event of a bank failure.

It’s true that a lot of economic pessimists, including me, have missed out on tremendous opportunities over the last forty years. However, it is very healthy to live modestly and below one’s potential means, and the probabilities that the Clown World system is coming to an end have never been higher.

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They Know They Lost, Right?

It’s no wonder that NATO has been demolished in Ukraine with military leadership of this intellectual calibre and historical knowledge:

The Ukrainian government needs to look at what Germany did in WWII to stand a chance against Russia, according to Ben Hodges, former commander of US Army forces stationed in Europe. Hodges, who retired as a lieutenant-general in 2017, has long been an outspoken supporter of Ukraine. In an interview with the Australian YouTuber Perun, published over the weekend, he repeatedly cited examples from the Second World War to argue that Kiev can defeat Moscow on the battlefield. “They are gonna have to increase production of ammunition and weapons in Ukraine,” Hodges said. “Some of these things are already happening, but it is possible when you are at war to increase production, even with Russian missiles raining down on your cities.” “I mean, think about what Germany did in 1944. Aircraft production for the Luftwaffe peaked in 1944. That’s after more than two years of steady bombing by the Royal Air Force and the US Army Air Corps bombing the hell out of German cities. But yet German aircraft production increased. So I think Ukraine can do that with some improving efficiency. Some Western companies are already there helping,” he concluded.

On the one hand, he’s right. Germany did increase its aircraft production in 1944. And so did Japan, which not only increased its shipping tonnage produced in 1944, but even managed to build more aircraft in 1945 than it did in 1942.

  • 1942: 8,900
  • 1943: 16,700
  • 1944: 28,200
  • 1945: 11,100

On the other hand—–and I would argue this is the more salient point—–both Germany and Japan were not only defeated militarily, but were defeated so comprehensively that they were forced to surrender unconditionally and are still under military occupation nearly 80 years after their respective surrenders.

Forget the Kiev regime. Forget Ukraine. And forget NATO. Anyone who knows anything about military history recognizes that both of them are already finished, they simply haven’t stopped quivering yet. The USA is now facing global military defeat on every single front, even as it is prostrate before the biggest invasion in all of human history.

At this point there appears to be nothing that can stop the All Nations Alliance from defeating Clown World. And for those who would cite the US and Israeli nuclear arsenals as a possible emergency measure, I repeat: there is nothing. I didn’t understand it when I first read the book as a child, but in retrospect, Jeff Sutton was telling us what the programming was back in 1968.

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Paperbacks Unlimited

Just to put it on the record, here is where I think Amazon is headed over the next three years, and the effect its actions will have on the publishing industry over the next decade. I could well be wrong. I very much hope that I will be wrong, but as it stands, please note that I wasn’t pessimistic enough about the long-term effects of Kindle Unlimited when it was introduced in 2014.

2024: Audible Unlimited. Like Kindle Unlimited, but for audio. Authors get paid by the listened hour from a collective pot that is funded by Amazon’s additional $7.99 charge on top of the $11.99 paid by KU subscribers.

2025: Paperbacks Unlimited. Subscribers can pay $19.99 per month and receive any three KDP paperbacks of their choice. Authors are paid $0.99 per paperback shipped. A hardcover option will follow the next year, which will be available at a lower price point, but the subscriber will only receive one book per month, with the ability to pay more to get two or three. Hardcover compensation pays authors $2 per book shipped. It’s essentially the old book club model, writ very, very large.

The introduction of Virtua Voice makes the former viable. The purchase of print-on-demand facilities in the USA and the UK make the latter viable. And most of the bestselling KAP Unlimited authors will either be a) AI-assisted independents cranking out a new series book every month or b) fake authors created by Amazon.

If you’re an author or a publisher, you had better prepare accordingly. Because these programs are coming, and they will have the same effect on audiobook and print sales as KU has had on ebook revenues. I estimate that KAP Unlimited will have the potential to shrink total US consumer books sales from $17.4 billion to under $5 billion by 2035.

UPDATE: Apparently Audible Unlimited already exists, in the form of Audible Plus. What has changed is the ability of Amazon to inexpensively convert all of its KDP ebooks to Audible Plus audiobooks using Virtua Voice.

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Gunning for the Dollar

Russia is openly advocating for other nations to follow the lead of itself and China in abandoning the dollar standard for international trade:

Russian Finance Minister Anton Siluanov said in a statement, that it is very important for all the BRICS member states that they develop sustainable financial relations and settlements within the organization. He made the statement while speaking on Monday at the Russia-China Financial Dialog in Beijing, where he was conducting meetings with Lan Foan, his Chinese counterpart.

The BRICS alliance of developing nations, made up currently of Brazil, Russia, India, China, and South Africa, has been hashing out ways for member countries to make payments in local currencies. The bloc wants to accelerate its growth by reducing its reliance on the US dollar and the euro.

Siluanov said, “We need to further develop financial cooperation within the BRICS countries. Here we see opportunities … to develop a payments system that would be independent of the infrastructure, which does not always fully fulfill the goals of individual countries. Therefore, the sustainable development of financial relations and settlements on the BRICS platform is important for us, and we believe that it is necessary to work out such issues, and today we will consider a number of them.”

We have the rare historical privilege to witness the decline and fall of an empire. While we tend to think of such things as being sudden and catastrophic events, they actually tend to take place over such an extended period of time that most of the empire’s inhabitants don’t even realize anything is changing until well after the changes have taken place and they have become accustomed to the consequences.

The events of Gibbon’s Decline and Fall of the Roman Empire take place over century. The decline of the US empire is only measured in decades at this point, but even at this accelerated rate, it is taking place too slowly for the average individual to comprehend, even if he is sufficiently acute to notice some of the changes.

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Taxing Imaginary Money

Now, money is largely an illusion anyhow, so it’s not actually the stretch it might appear to be as the US Supreme Court contemplates giving the IRS the ability to tax theoretical gains that don’t actually exist yet.

If the Supreme Court rules in favor of the government, and allows it to redefine income to include any unrealized appreciation in any asset, then it will grant the Federal Government a new power to nationalize the entire asset stock of the nation. In hyperinflation, the only refuge people have is the ability to hold real assets and never sell them. But if the Federal Government can claim unrealized inflationary gains as being taxable income, then almost all Americans will be forced to sell their assets just to pay their tax liabilities. But with all assets up for sale at once, the most likely buyer will be the Federal Government itself, which will pay in near worthless paper. In one decision, the Supreme Court would have rendered the Constitution meaningless, effectively illuminated private property rights, and provided the Federal Government with the legal mechanism to pull off a communist revolution without having to fire a single shot.

This would be absolutely and utterly absurd, as well as rendering all taxation perfectly subjective, but then, so much of Clown World is that one can’t simply assume that the US Supreme Court will not find some emanation or penumbra that permits it to invent a new federal power.

I mean, why not simply allow people to book theoretical profits while they’re at it? Sure, you might have held on to the stock too long, but if we simply imagine that you had sold it when it was at its peak, then you’d have made a lot more money, which, if properly recognized, will permit you to stimulate the economy with your imputed profits.

Everybody wins!

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Stumbling Toward 2033

Simplicius explains his perspective on the decline and fall of Clown World:

The general gist though of what’s happening now is that the world is hurtling toward a nexus point, a sort of singularity moment, because the entire 20th century’s worth of hyper-financialized “capitalism” has reached a near-breaking point.

The type of system in the West relies on parasitism and labor theft to keep its own luxurious standards afloat, as well as mediate the endless debt expansion and ever-ballooning inflation. They needed globalism to do this, as globalism allowed a new form of parasitizing the rest of the world by smudging out economic borders between countries and creating a predatory pipeline enabling the “too big to fail” corporations and banks in the West to keep themselves afloat by increasingly robbing the rest of the world via offshoring and other globalist techniques.

The problem is, that too has come to its end, as most developing nations like China have reached a level where it’s no longer profitable to use them for slave labor, and infact they’re in turn becoming so powerful that they threaten to form new economic blocs that could entirely usurp the Western money cabal’s rule of the globe.

One of the ways the West has been kept afloat is via the anchor of the U.S. dollar, which was made possible by secret coercive deals with all vassals to prop it up by way of purchasing U.S. government treasuries and bonds—in short, financing all U.S. debt.

But now that too has reached its limit as China and other traditional purchasers are no longer buying, and are in fact dumping, the treasuries. This is leading to a point of no return, where the entire Western financial system has no way out, no further quick “saves” like before.

In the past, they used several emergency stopgap measures to buy themselves a few more years of time. The financial crash of 2008 was the first crack heralding the end of the system. They pumped trillions upon trillions to keep the system afloat, but by the 2020s it was obvious time was running out and final collapse was again close. So they panicked and rolled out the Covid hoax to save the system one final time. Under cover of the Covid falseflag, they managed to sneak another few massive trillions into the system to get a last few precious years.

But now they’ve run out of options. Only the final tried and true method could save them: instigate some type of global war/conflict, which is mostly why they provoked the Ukrainian conflict at the time they did, after years of it being frozen.

As you said, things are now moving at breakneck speeds and the power elite are hanging by a thread, as they’re being assailed and losing on almost every front: from social media, where they’ve failed to stop the onslaught of ‘truth’ destroying most of their fake “Fact-Checking” fronts and Ministry of Truth attempts (Nina Jankowicz, etc.); to the global geopolitical flashpoints where they’re besieged, from Ukraine to the MidEast; to the Covid and “Climate Change” hoaxes, which are taking a beating in the public forum; the ‘paradigms’ are crashing all around.

Now I believe hyperinflation has truly begun in the U.S. Forget Biden’s cooked numbers, everyone who’s paying attention can see the prices for everything are skyrocketing YoY.

So where is it all leading? I believe the turmoil is only just beginning. Sure, there’s potential for a major culmination to happen by election time, or 2025, but I personally think it will drag out a bit longer both in U.S. and Europe as well.

Large new movements are growing in Europe, we’ve seen the wave of conservative and ‘right wing’ candidates sweeping many countries. The citizens are up in arms and angrier than ever, with major protests getting steadily more violent in France, Netherlands, Ireland, Italy, and everywhere in between. Insanely totalitarian new laws are being rolled out everywhere, from the new proposed clampdowns in Ireland, to the crazy anti-free-speech laws in Germany and the EU at large with their DSA.

There’s still far more “room for growth” in terms of the degradation and disaffectation in society. I believe this trajectory will continue for another few years, with A.I. developments adding the final ‘unpredictable’ black swan momentum which could veer everything into untold and unforeseen directions.

That’s why I don’t see a final collapse or major historic ‘events’ happening until closer toward 2030, but it’s very possible it can happen sooner.

What I find fascinating is the way in which what was deemed impossible and borderline insane when I first pointed out the observable trajectory back in 2004 gradually became conceivable in the late 2010s and is now increasingly becoming seen to be inevitable in the early 2020s. That doesn’t mean I was correct, of course, as even the seemingly inevitable is only a probability, but it is rather fascinating to see the way public opinion has shifted so massively over the last two decades.

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The Global Economy is Dead

And the Great Bifurcation is now in place. Russia and China are no longer using the US dollar for trade between their countries:

Western currencies have been almost completely phased out in Russia-China trade, as nearly all payments between the countries are now carried out in rubles and yuan, Russian First Deputy Prime Minister Andrey Belousov announced on Monday.

Since the introduction of Western sanctions on Moscow, Russia and China have accelerated the use of their own currencies in trade. According to Belousov, 95% of all transactions between Russia and China are now carried out in one of the countries’ national currencies, and given the rapid expansion of mutual trade and cooperation, this percentage is likely to grow.

Speaking at a meeting of the Russia-China intergovernmental commission in Beijing, the deputy prime minister said bilateral trade between the two countries will exceed the target of $200 billion this year, and may reach $300 billion by 2030.

World War III largely remains unfought, and yet its economic victors are already apparent. For decades, the USA has bombed, staged coups, invaded, and occupied in order to defend the primacy of the US dollar. In less than two years, inspired by what has to be the dumbest, least well-considered economic siege in recorded history, the USA has lost its ability to exert currency influence over the biggest economy on the planet and the foremost military power on Earth.

It’s only a matter of time now before all the BRICS countries stop using the dollar for trade outside the Western bloc. The ramifications of this are massive, and may well serve to mark the precise moment that the USA ceased to be a global power and became a regional one again.

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The Inflation is Real

Karl Denninger observes that the government’s CPI numbers simply do not reflect the reality at the grocery store:

When I go to the grocery store the register tape — and my Quicken — says I’m spending a lot more money there. Not a couple of percent over the last 12 months, an obscene increase. Shelf prices are one thing, but actual paid prices are truth — and those involve discounts, coupons, BOGOs and similar. I, like most people, buy pretty much the same things to eat. Spending over the last 12 months is in fact up more than 30%, not 2%.

Car insurance is claimed to be up about 20% — and it is. That’s real, and everyone with a car has had to pay it. But the government also claims that health insurance has been down in price by roughly 30%. That’s nonsense, and we all know it, but there it is.

There are some who think the answer is “higher wages!” But its not; you can’t keep up any more than you can with a “roaring” stock market.

The simple reality is that you cannot have Congress emit eight percent, more or less, of the economy in newly emitted credit and not have prices go up by about 8% unless there is somewhere that absorbs it which you do not have to cover. For roughly two decades there was — the increase in global trade, most of which is settled in dollars, buffers that by temporarily capturing the money while goods are in transit.

Note however that a permanent change in trade doesn’t result in this remaining captured; it is the change in level of global trade that does that, and only while the change is taking place. We’ve offshored basically everything we can offshore at this point and thus the available increase has dwindled to essentially zero.

The problem is that during that 20 year period of time we “trained” Congress (and both political parties) that they can run 30% deficits and not have it show up as 8% inflation on a permanent basis. That’s flat-out false.

This in turn means that either we’re going to absorb about 8% inflation (no matter what the government claims), spending must come down by about 30% at the federal level and that is only to stabilize prices, not return them lower, or taxes must go up by about 40% which of course is another expense in the household and reduces disposable income. The latter is politically impossible.

How does this resolve?

Revolution and civil war cometh, if Peter Turchin’s cliodynamics are to be believed. A perfect storm is approaching for the United States, as all four structural drivers of societal instability are not only present, but appear to be at, or at least near, record historical levels.

Focus on what is important, focus on what is going to last. It’s not an accident that Castalia has shifted from ephemeral ebooks to leather books that are capable of lasting for centuries and have been assembling machinery for everything from sewing machines to leather bindings.

It’s going to be difficult. But our community is not only going to survive, it is going to thrive. Because unlike most, we have been repeatedly tested by adversity, and we are hard enough for the hard times.

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