#Arkhaven INFOGALACTIC #Castalia House
In fact, you might do well to be downright terrified. When it comes to economics news, it doesn’t get much more grim than this.
Fortunately, he only said “could mark”. He didn’t actually declare that the banking crisis had ended. So hope yet remains. It might only be that this is a sign of First Republic Bank’s survival.
The British people are told to shut up and accept their national impoverishment. But at least they’ll have the satisfaction of knowing their poverty was caused by choosing the wrong side and backing a certain loser:
British households and businesses need to accept that they are worse off and should stop asking for wage increases and pushing prices higher, the Bank of England’s chief economist, Huw Pill, said on Tuesday. According to Pill, “a series of inflationary shocks” generated by the pandemic, the conflict in Ukraine, and crop shortages have sent prices in the UK to a 40-year high. He claimed that in response to surging bills and other rising costs, workers and businesses are attempting to transfer the impact of inflation onto each other.
The neoliberal world order’s promised benefits to the nations of the West are failing at a remarkable rate. Remember, all of the nations of the West are suffering massive invasion and crime because importing foreigners was supposed to be good for their economies. Only it observably hasn’t been while the societal costs have been catastrophic. The end results have been the complete opposite of the shiny happy seculatopia that was promised.
And yet, there is an easy fix for most of the problems of Clown World, from the economy to the environment. And that is mass deportation on a scale that has seldom been seen before. It may be unthinkable at the moment, but it is inevitable because the alternative is chaos and violence that will ultimately produce the same results at a much higher price to everyone.
Argentina abandons the dollar in favor of the yuan for trade with China:
Argentina will aim to pay for the bulk of its monthly imports from China in yuan rather than US dollars, Economy Minister Sergio Massa announced on Wednesday. Buenos Aires and Beijing signed a currency swap agreement last year, aimed at stemming the outflow of foreign currency from Argentina’s central bank.
China is currently Argentina’s second largest trade partner after Brazil, and the second biggest destination for Argentinian exports. Argentina’s total imports from China was around $13.5bn in 2021, according to the United Nations database on international trade.
Massa said that Buenos Aires will pay the equivalent of $1 billion in yuan for Chinese goods and services this month, with $790 million of monthly imports paid for in yuan each month thereafter. The currency swap agreement, expanded and finalized earlier this year, also allows Argentinian exporters to make settlements in yuan or dollars, to help balance the flows of foreign currencies in the central bank.
Even the neoclown Robert Kagan warned of the potential consequences for the neoliberal world order if the USA were to abuse its privileged position, which it generally avoided doing between 1945 and 2020.
The success of the order, however, also depended on the United States abiding by some basic rules. Chief among these was that it not exploit the system it dominated to gain lasting economic advantages at the expense of the other powers in the order. Put simply, it could not use its military dominance to win the economic competition against fellow members of the order, nor could it treat the economic competition as a zero-sum game and insist on always winning.
The Jungle Grows Back, Robert Kagan, 2019
The decision to weaponize the dollar in lieu of challenging Russia directly in a military context may prove to be one of the more catastrophic errors in the history of empires. Astute historians such as Victor Davis Hanson have for some time been wondering exactly when, and where, the Imperial USA’s Syracuse moment of imperial overstretch would take place; in The Father of Us All, published in 2010, VDH argued that the Iraq War was not likely to be a serious candidate for the Moment.
Athens’s disastrous 415 B.C. expedition against Sicily, the largest democracy in the Greek world, may not prefigure our war in Iraq. (A hypothetical parallel to democratic Athens’s preemptive attack on the neutral, distant, far larger, and equally democratic Syracuse in the midst of an ongoing though dormant war with Sparta would be America’s dropping its struggle with al-Qaeda to invade India).
However, it increasingly appears that the attempt to control Russia using the leash of the dollar reserve system may have marked that long-anticipated Moment, as dropping its economic neutrality and putting pressure on the rest of the participants in the global economy in order to pressure Russia into withdrawing from Crimea and the Donbass, then doubling down on that mistake by financing the Kiev regime’s war appears to have been even more devastating to the neoliberal world order than an invasion of India.
UPDATE: The Global Times expresses China’s belief that de-dollarization is not merely desirable, but inevitable.
One of the most direct reasons behind the global de-dollarization trend is that the US has been increasingly weaponizing US dollar hegemony to impose economic sanctions as well as political repression. For instance, key Russia banks have been excluded from the SWIFT system, a service that facilitates global transactions among thousands of financial institutions.
What’s perhaps more surprising – and potentially worrying for Washington – is how expensive and scarce offshore US dollars are becoming. As the US Federal Reserve’s aggressive interest rate hikes hit global financial systems, an increasing amount of foreign capital flowed back to the US, leading to a global US dollar shortage. The US’ interest rate hikes and the resulting shortage of US dollars serve as another important factor driving more countries to push for a quicker pace of de-dollarization.
Jesus said debts should be forgiven. So did the ancient Greeks, as Rev. Matt points out.
One of the most consistent arguments made against the policy of society wide debt forgiveness is this: “You need a Christian or believing (in the sense of ancient Israelite) nation for it to work. It cannot work in a nation like ours because it is non-Christian, so either people will not go for it, or they will abuse it and it will not work.” Almost every time I have made a case for debt forgiveness somebody makes this argument. But it is a fallacious one, both historically and logically.
It is fallacious logically because there is nothing inherent to many pagan philosophies saying that debt cannot be forgiven. Forgiveness, liberty and debt cancellation were all concepts that existed before either Israel or Christianity had graced the face of the earth. Indeed, the most ancient usage of words that can be translated as “liberty” were pagan words referring to debt forgiveness.
It is fallacious historically, because we have countless examples throughout history of ancient societies practicing debt forgiveness. From the ancient Sumerians, Akkadians, and other Near Eastern societies, on through to Greek city states and the Roman public, we see that debt forgiveness was either practiced, debated, or offered in various contexts. In fact, many ancient pagan leaders saw it, correctly, as an effective means of shoring up popular support for their reign, and limiting the damage their nobles could do to both their reign and their society.
Many examples of debt forgiveness in pagan societies can be given, here is one from ancient Athens,
“Now later writers observe that the ancient Athenians used to cover up the ugliness of things with auspicious and kindly terms, giving them polite and endearing names. Thus they called harlots “companions”, taxes “contributions”, the garrison of a city its “guard”, and the prison a “chamber”. But Solon was the first, it would seem, to use this device, when he called his cancelling of debts a “disburdenment”. For the first of his public measures was an enactment that existing debts should be remitted, and that in future no one should lend money on the person of a borrower.”
Debt enforcement and the refusal to cancel fraudulent debts such as student loans is neither moral nor Christian. Precisely how is it “progress” for a modern society to be observably less moral and less forgiving than ancient pagan societies?
The largest Muslim nation in the world has abandoned the US trade dollar:
Indonesia is following the lead of the BRICS group in its policy of shifting away from the US dollar in trade and financial transactions, according to the country’s central bank.
Jakarta has introduced transactions in the local currency to settle cross-border trades, the portal SINDOnews has reported, citing Bank of Indonesia Governor Perry Warjiyo.
“Indonesia has initiated diversification of the use of currency in the form of LCT [local currency trading]. The direction is the same as the BRICS. In fact, Indonesia is more concrete,” Warjiyo said on Friday, addressing a press conference with the board of governors meeting.
Indonesia has already implemented the practice with a number of countries, such as Thailand, Malaysia, China, and Japan, he added. It also plans to sign a cooperation agreement with South Korea regarding local currency trading in early May.
Warjiyo’s statement comes as the BRICS economic bloc – comprising Brazil, Russia, India, China, and South Africa – claims to be working on establishing a joint payment network to cut reliance on the Western financial system, and on the dollar in particular.
In related news, India and Bangladesh have dropped the dollar for use in their bilateral trade.
India and Bangladesh are moving away from using the US dollar in bilateral trade, the Bangladesh-based news website The Business Standard reported this week. According to the report, the two countries have reached a deal that will see a part of trade transactions carried out in their respective domestic currencies, the rupee and the taka.
It’s fascinating to see that the imperial overstep by the United States was not an invasion like Syracuse or even the suppression of a potential military rival like the World Wars fought between England and Germany, but the weaponization of its financial hegemony.
I always expected de-dollarization to follow both a) an economic crisis and b) a major military defeat, but instead, it appears to have preceded both due to the very rational fears of countries observing how Russia was attacked economically via the global dollar system.
The Tree of Woe contemplates the fallacies of free trade:
Fletcher’s assault on Fortress Free Trade consists of five interlocking theoretical arguments and one empirical argument. He begins by undermining the assumptions at the foundation of Ricardian free trade theory.
Labor and Capital are Mobile. Go back and re-read the examples above. Did you notice what was excluded from the hypothetical? The movement of capital and labor. That’s because Ricardian free trade theory simply assumes as given that labor and capital are immobile. All competition is via industry or product.
But this is not the case nowadays. Nowadays both labor and capital can move. The result of that is that investment capital and labor pursue absolute, rather than comparative, advantage. And with capital and labor mobility, absolute advantage trumps and gains from trade evaporate.
Let’s imagine that the advantage that accrues to British labor is due to better capital investment: each man-hour of labor is more productive in Britain because it has better factories. Let’s also imagine that Britain and Portugal have foolishly agreed to enter some sort of “union” which allowed their workers to work and live in either country. Labor is now mobile so each worker can move where the best jobs are available. Since labor wages tend to increase when productivity increases, the Portuguese workers will realize they can earn more and tend to move to Britain. The outcome is not happy Portuguese vineyard workers, but Portuguese immigrants trying to get jobs in British wool and wine factories.2
Now let’s imagine that the advantage that accrues to British labor is due to the fact that hourly wages are lower and working hours longer than in Portugal. The factories are equally the same, but you can get 60 hours of British labor for the cost of 35 hours of Portuguese labor. Let’s also imagine that Britain and Portugal have deepened their union such that financial investments can flow freely between the countries. Obviously, what happens is that the Portuguese investors invest their capital in Great Britain, where they can take advantage of the cheap labor. Many high-paying Portuguese jobs vanish as the capital flight causes the factories to shutter. This is, of course, exactly what has happened between the US and China.
Capital is Not Fungible. Go back and re-read the examples again. Did you notice that I said “each has enough factories to let 500 workers work in each industry” initially, but that when they began trading, “each specialize in the area where they have absolute advantage, changing their factories to the new type they need.” I didn’t allocate any cost to this switch — there was no depreciation of the old factories, no loss of investment, no scrap metal yards filled with wool-spinning machines the Portuguese no longer need, etc. Ricardian free trade theory just assumes that capital is fungible – an investment into wool factories is convertible into an investment into wine factories.
In the real world, we know this is not true. If it were true, the entire globe wouldn’t be fixated on Taiwan’s chip manufacturing factories. Capital is very much not fungible. To the extent that capital is not fungible, it means there are deadweight costs to free trade, in the form of shuttered factories, depreciated machines, and so on, that Ricardian theory does not take into account.
An orthodox Ricardian will reply to this criticism by asserting that in the long run capital is fungible and that the long term gains from trade will more than make up for the short-run costs. This argument will be accompanied by a complex econometric paper that uses 10 pages of math written in Greek symbols that says exactly the same thing as I just said in one sentence.
Not so fast, mathemagicians. Fletcher has another howitzer to fire at Fortress Free Trade, and it demonstrates why the infungibility of capital is a much bigger deal than the orthodoxy wants to admit.
Read the whole thing, particularly if you don’t fully understand why free trade doesn’t work. My Free Trade Efficiency and Labor Mobility critique is mentioned, but nothing more since it isn’t actually relevant to Fletcher’s critique of David Ricardo’s theory of comparative advantage. However, I do think it would be easier for people to understand if someone else were to explain it, as most people don’t appear to understand the real consequences if free trade were to actually work as advertised.
The countries that have sanctioned Russia may soon find themselves on the wrong side of the exclusion equation.
The India-based Megh Updates platform, one of the world’s largest online informational platforms in terms of views, has stated that BRICS countries have officially overtaken G7 in share of world PPP GDP, and that this trend can be expected to continue.
The BRICS currently include Brazil, Russia, India, China and South Africa, while the G7 includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union. The BRICS is also expanding – Bangladesh, Egypt and the UAE have all just joined the BRICS New Development Bank, with numerous other countries poised to do the same.
A real shake up is also to be expected these coming days with Mexico, long part of the North American free trade bloc NAFTA (now superseded by the Canada-United States-Mexico Agreement (CUSMA) agreement) poised to join BRICS. That will be seen as a direct affront to Mexico’s US relations and a sign that global economies, even on America’s border, are having serious doubts about the US ability to trade on fair and equal terms.
The current BRICS five now contribute 31.5% of global GDP, while the G7 share has fallen to 30%. The BRICS is expected to contribute over 50% of global GDP by 2030, with the proposed enlargement almost certainly bringing that forward.
It’s going to be particularly interesting when Mexico and other countries in the Americas agree to host Chinese military bases and Russian missiles. Because, in the aftermath of Ukraine and other imperial engagements, the rest of the world simply isn’t listening to the US narrative anymore.
E.O Wilson had Richard Dawkins to explain his work to the masses. Apparently I have Skarn of the Razorforce to talk to the Bears, as he explains what the Tree of Woe and I have been pointing out about how the decline of the US military and NATO’s failure in Ukraine means the end of the USD-based Clown World economic system.
Can someone please explain to me like I am five as the real cause and effect of the recent TOW on VP? I can’t follow. It doesn’t make sense to a point where I can’t even ask a question.
Currencies have to be backed by something for them to be accepted. For the majority of history it has been precious metals. The US was on a gold standard but defaulted in 1933. WW2 gave the US the chance to become the global currency of choice due to holding the rest of the world’s gold. Thus Bretton woods agreement in 1944. However, the US continued to spend more than it earned, using credit to cover the difference. The rest of the world started asking for gold instead of dollars, coming to a head in 1971, when Nixon closed the gold window (ie no more exchanging foreigner held dollars for gold). To replace this, an agreement with the Saudis was reached to only allow the exchange of OPEC and Saudi oil in US Dollars, restoring the foreign demand for US dollars. The consequence was the US had to prevent oil from being traded in any other currency than USD.
However, between the constant USD printing and debt, making dollars less valuable to hold, the weaponization of the currency exchange and holdings system, and weakness of US is now allowing countries to bypass the USD, it’s all over but the tears, unless the US wins decisively in Ukraine and elsewhere, which doesn’t seem likely.
Thanks so much. it is the last part that I can’t follow, How is the weaponization of the currency allowing countries to bypass the USD?
The weaponization makes USD less valuable because foreign reserves held by countries can now be seized if the US doesn’t like your country’s policies. Such reserves are usually held in country of origin or close, aka Yen in Japan, to facilitate transactions. Or the SWIFT banking system. So stealing Russia’s USD and Euro reserves makes the carrot less attractive due to sovereign risk, at the same time the stick (US military interventions, sanctions, etc) is also weakening.
That’s a useful and reasonable summary that successfully gets the point across in a manner that most people should be able to understand despite the media’s best efforts to keep them in the dark. In support of these conclusions about the consequences of the US failure in Ukraine, it might be useful to read this recent observation by the Ayatollah Khamenei of Iran.
The US is no longer the power it once was, and has failed to rally the Arab world against Iran and curtail its nuclear program, Iranian Supreme Leader Ayatollah Ali Khamenei said in a speech to senior officials on Tuesday.
“Facts show that America was weaker under Obama’s administration than Bush’s administration. The US was weaker under Trump’s administration than the way it was under Obama’s administration. The US is weaker under [Joe Biden’s] administration than it was under Trump’s administration,” Khamenei proclaimed, according to Iran’s Tasnim news agency.
Khamenei noted that the US has failed to rally its Middle Eastern allies against Iran, declaring that “what has happened is the opposite.”
The Ayatollah went on to note the rise of several “anti-American” governments in Latin America, the declining importance of the dollar in global trade, the political chaos in Israel, and the diplomatic consequences of the EU “taking the brunt of the war” in Ukraine on Washington’s behalf as examples of the US’ waning influence.
By the way, the original Bear should be respected for doing the smart thing, and asking for a detailed explanation to help him understand the matter at hand rather than nodding, smiling, and pretending that he understood when he didn’t. Never forget that the difference between understanding a concept and having heard of its existence is greater than the difference between knowing about it and not knowing about it.
UPDATE: Nassim Nicholas Taleb isn’t too worried about the dollar’s status as the reserve currency… yet.
You will only start worrying about the dollar status as a reserve currency when you see long lines outside the Brazilian, Russian, Iranian, and Chinese consulates full of young professionals seeking immigration visas.
Of course, by then it will be too late. And there are already signs of smaller corporations establishing themselves in Russia and China, in particular, in preparation for the Great Bifurcation.
UPDATE: Start worrying.
About 300 German residents are ready to move to the Nizhny Novgorod region. By the end of 2023, this number of applicants can reach 1,000 people, said Olga Guseva, director of the department of external relations of the region. According to her, such activity is due to the fact that Germans see great potential in cooperation with the Nizhny Novgorod region in the automotive industry, construction, infrastructure development .Most of the people who want to relocate are specialists in the field of metalworking: welders, machine operators, technologists, as well as shipbuilding and the automotive industry.
The Tree of Woe takes a victory lap concerning his prediction about the end of the US dollar hegemony:
In his novel Goldfinger, Ian Fleming famously said “Once is happenstance. Twice is coincidence. Three times is enemy action.” We’re well past three events. This is not a “trend”. This is a globally coordinated action against the petrodollar and there’s no mistaking what it means.
It means the Petrodollar System that has served as the bedrock of world finance since the 1970s is over.
It means I’ve been proven right even faster than I expected.
What is altogether depressing, yet not at all surprising, is how the press coverage of these shocking events has (a) utterly misunderstood their causality and (b) grossly underestimated their gravity. I’m going to use article over at VisualCapitalist.com as my punching bag because it so perfectly captures everything that’s wrong with our mainstream elite… Being either ignorant of or unwilling to acknowledge the petro-military basis of our financial order, VisualCapitalist.com then proceeds to misdiagnose the reason for the dollar’s precipitous decline, writing:
Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony…
They have entirely confused cause and effect. Other nations have been testing alternatives to reduce the dollar’s hegemony since, well, since the dollar has been hegemonic. All prior “tests” have resulted in the destructing of whichever regime was performing the test. Ask Muammar Gaddafi how his gold dinar worked out.
As I documented in Running on Empty (now available as a book!), since 1971 America’s dominance over the global financial system has been based on America’s military dominance over the Middle East. Now that America’s military dominance has declined, athe country’s dominance over global finance has declined, too. Therefore, the honest way to report the news would be to say:
Unconcerned about America’s purported military dominance and tired of the country’s increasingly punitive attempts to ‘weaponize’ the dollar to make up for it, nations have been testing alternatives to reduce the dollar’s hegemony…
Because that is what is actually happening. Of course no one will say that.
And what will be the consequences of this global event? Our friends at VisualCapitalist.com assert:
Despite these movements, few expect to see the end of the dollar’s global sovereign status anytime soon.
And they’re right. Very few experts expect to see the end of the dollar’s global sovereign status anytime soon. That’s because the majority of experts are too stupid to realize it’s already ended.
He’s absolutely right. It’s already over, and every single day, we’re seeing more countries taking steps to free themselves of the economic chains imposed by the petrodollar. The key, as the Tree of Woe repeatedly points out, is that the decline of the US military combined with the rise of the Chinese and Russian militaries, means that the nations of the world are free agents for the first time in seven decades.
As I pointed out in a recent Darkstream, the reason all the Clown World intellectuals declared the absolute necessity of winning the war in Ukraine, much to the confusion of the people of the USA and Europe who don’t understand why Ukraine matters when Afghanistan didn’t, is because Ukraine clearly shows the limits of US military power. And the whole system rested on the idea that any nation that attempted to evade the dollar tax would be punished with military invasion and regime change.
But the global superpower is no more. Everyone can see that the Empire has no army. Which means the nations are now free to buy and sell as they choose, in whatever medium of exchange they choose, rather than having to pay a tax to the US bankers on every single transaction. And the rapidity with which each of the steps taken by countries from Argentina to India, and from Brazil to Malaysia, indicates the eagerness with which the peoples of the world seek to free themselves from their dollar chains.
Despite importing millions of Arabs and Africans since 2015, the German mortgage market is collapsing, soon to be followed by the real estate market.
According to the latest report issued by the consultancy, the Eurozone’s largest economy saw mortgage lending fall by a record 54% year over year. The report noted, “The decline in March will be even worse due to a base effect, given the record new business of €32.3 billion in 2022.”
The consultancy, based out of Dusseldorf, pointed out that the total new mortgage business figure of €12 billion ($13 billion) in February 2023 was the lowest reading since 2010, adding, “And this does not even take into account house price inflation.”
Germans have been under harsh economic pressures, as a worsening cost of living crisis has merged with rapidly rising interest rates to put the dream of home ownership out of reach for many Germans.
A recent poll of economists by the Reuters news agency found that experts are predicting a much steeper fall in home prices than previously expected as higher interest rates weigh heavily on demand.
It is projected that the average price of a home in Germany will fall 5.8% in 2023, and 2.5% in 2024.
A report by the German Property Federation noted in February that the shortage of housing in Germany was the worst seen in two decades. In addition, new residential construction is forecast to decline even further in the coming year.
The idea that immigrants are not only satisfactory substitutes for the native population, but are actually necessary for the growth of an economy is one of the most poisonous and destructive lies ever told. What we’re seeing in Germany is disproving generations of economic theory that was never based on anything but pure globalist propaganda.
Qualitative matters cannot always be solved by quantitative means.