Trust The Unhappiness

Posted on November 9, 2023 by thezman

One of the few things most everyone can agree upon is that things are not good, and everyone seems to be unhappy about something. Conversations in real life or online revolve around this general sense of unhappiness. In fact, it is fair to say that online life is just one long airing of grievances. Often, people are primarily unhappy with the unhappiness of some group that is using their unhappiness to make demands on everyone else, which makes everyone unhappy.

This is not just a case of the internet skewing perception. Polling on the issue says that people think we are headed down a bad road. Three quarters of Americans think the country is on the wrong track. As you can see in that poll, the last time a majority thought the country was on the right track was right after the January 6 protests, suggesting the people wanted to see a genuine insurrection. Since then dissatisfaction with the direction of the country has climbed steadily.

The funny thing is that most people would not be surprised to learn that record numbers of people are unhappy with the current state of affairs. If anything, they would be stunned to learn that thirty percent are content. How is it possible for these people to exist in the same reality as the rest? If the split were fifty-fifty, it would make sense as it would simply reflect the party divide. When it is seventy-thirty it means something is going on with that thirty percent.

Putting that aside, the question that naturally arises is what is it that is making people unhappy with the direction of the country? Again, polling provides a clue. The number one issue for people is inflation. The thing is the government tells us that inflation is slowly ticking down. It was 8.7% last year and is 3.7% now. If anything, people should be thrilled with the direction of inflation. In fact, they should be cheering the people who control the economy for their great work on inflation.

There is a another small clue. According to official figures, everyone who wants a job can have a job and the economy is humming along. Inflation was a problem, but it is going away, so the economy is officially in great shape. People seem to agree as unemployment is way down the list of concerns. Not only that but consumers keep spending and people keep buying houses. Despite the rise in mortgage rates, the housing market remains strong all over the country.

In other words, the economy is not a particularly good measure of happiness. Another big clue is that the one thing everyone agrees upon is the political situation in Washington is a problem, the main problem in politics. Large majorities of both parties think the endless drama in Washington is a problem. It is just behind health care, which is a serious problem with practical consequences that no one discusses. Health insurance costs continue to rise at multiples of inflation.

The thing is though, politics in a democracy is not supposed to be a polite and cooperative affair. It is supposed to be an ugly food fight. For the most part, it has always been an ugly food fight. Even in times of relative peace and tranquility the two sides torment one another. In the Reagan years, when the quality of life was near a peak, the Democrats tried to impeach Reagan. Under Clinton, when conservative actually got things they wanted, they hated Bill Clinton.

Another clue here is that there are things on the list that are complete nonsense, but they vex people to some degree. A good example is climate change, a thing that does not exist, but it worries 64% of democrats. At the same time, terrorism is not a real concern for most people, but Washington cannot shut up about it. Now they are claiming Hamas is under your bed. Last week it was racists. According to Washington, the next terroristic bogeyman is antisemites.

Put it all together and maybe the reason that the lack of cooperation is number three on the list, just below things that should matter to people, is that the people never see anyone in Washington talking about those things that matter. Not a single candidate has anything useful to say about inflation or health care costs. They have nothing to say about the drug problem or the growing crime problem. It is not that the parties do not get along. It is that they agree to ignore the important issues.

Even so, if things are good in the economy, despite some concerns over things like health care and inflation, people should be mostly content. Not only are people not happy, but there is also a sense of looming disaster in the air. The reason for that is something that is not captured in basic economic data. Things are slowly eroding for the white middle-class and that is what is causing the anxiety. A little here, a little there, middle-class white people are getting poorer.

This coincides with two other things. Once is the browning of American, which everyone sees everywhere they look. When the military put white guys back in their ads recently, everyone started laughing about it. It was assumed they did this because they are plotting a big war and will need competent soldiers. This is one of those data points that does not show up in economic data or polling. People sense the lights going out on their culture and they see signs of it in the household budgets.

Of course, they are not allowed to speak of it. That is the other side of this general unhappiness that does not turn up in polling. The ways you are allowed to express yourself have been reduced to generic economic questions or silly things like how the parties get along on your television. Not only do the people on television avoid talking about what matters to you, you are not allowed to talk about what matters to you and this is extremely frustrating for a growing number of people.

The way to think of it is the public square has fallen victim to the same forces that wrecked internet forums. The point was to create a place for vigorous debate, but certain people did not like the direction of the debate, so they found ways to shut down the debate, which crashed public trust in the system. It turns out you need high trust to maintain a vigorous public debate. With trust at all-time lows, everyone is going to be unhappy, not matter how good things are on paper.

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War With Russia

Posted on September 19, 2023 by thezman

Until recent, few people outside of the Kagan cult and the Pentagon thought about fighting a war with Russia. The former has thought of nothing but such a war since the Roman legions crossed the Alps, while the latter is tasked with wargaming every imaginable scenario, no matter how unlikely. Otherwise, war with Russia stopped being a concern with the end of the Cold War. The only wars anyone needed to think about were the wars against pipsqueak countries in the Middle East.

Of course, the West now finds itself in a proxy war with Russia in Ukraine which could easily tip into a direct war. Former Vice President and current 2024 candidate Mike Pence is promoting the idea of sending American troops to Ukraine. Other than Trump and Ramaswamy, all of the candidates for 2024 want a hot war. The Kagan cult, which runs Biden’s Ukraine policy, is doing all it can to provoke the Russians into something they can use to trigger Article 5.

Assuming war happens, could the West actually win such a war? Until this year, no one thought about this question, outside of the Pentagon. The United States had the world’s best military by far. It has been assumed that a war with Russia would mean certain defeat for the Russian army. The real question was whether the United States could beat both Russia and China at the same time. After eighteen months of war, the answer to the question of war with Russia is not so simple.

For starters you have to deal with the nuclear issue. Russia has 6,257 nuclear warheads and the United States has 5,550. Both sides have more than enough to obliterate the other side. Given the performance of the Russian missile fleet in Ukraine, we can assume that their ICBM’s are in good working order. This means that any conflict that reached the nuclear level would end in both sides being reduced to a premodern state at best.

Both sides know this and both sides know the other side’s process for readying a nuclear launch. Both sides have short-range nukes, but the real county killers are the ICBM’s, so as long as both sides maintain current protocols, neither side would have a reason to pull the trigger on total nuclear war. That leaves some room for using tactical nukes on the battlefield without triggering the end of the world. In fact, both sides would assume all aircraft are nuclear capable.

This is the issue with putting F-16’s into Ukraine. The Russians would have to assume they are flown by NATO crews because they would have to be flown from NATO bases and use NATO communications networks. Further, the F-16 is capable of carrying nuclear weapons, so their appearance over Ukraine will be assumed by the Russians to be NATO seeking to deliver nuclear weapons to the battlefield. The Russians would then be allowed to do the same thing.

If we assume both sides understand the risks of nuclear weapons, a big assumption given the behavior of the Kagan cult, it is possible for NATO to send troops into Ukraine to directly confront the Russian army. Both sides managed many proxy wars and some direct wars with the other side’s proxies during the Cold War, so it is not unthinkable that they could have a direct war without it going nuclear. Both sides could see an advantage in agreeing to such terms.

If we put the nuclear issue to one side for now, we are back to that original question about beating the Russian army. What the last eighteen months has proven is that the Russian army is not the Iraqi army. Washington spent close to ten years training and equipping the Ukrainian army for this war. They have poured untold billions into Ukraine over the course of the war. The West has levied massive sanctions on Russia and yet it is becoming clear that the Russians are winning the war.

One reason for this is the way in which the American military wants to fight is not how this war is being fought. This is a land war between peer armies. NATO would run into the same problems that Ukraine has experienced. They would be sucked into a war of attrition that is conducted from entrenched positions. This is the lesson the US Army War College has drawn from the war. In this paper released last week, they explain some of the realities of a war with Russia in the Ukraine.

The first thing the authors note is the human cost to the American army would be nothing like it has ever experienced. According to their analysis, the United States would suffer more losses in two weeks than it has suffered in twenty years of war in places like Iraq and Afghanistan. They estimate at least three thousand dead and wounded per day. Note they are using Ukraine as an example, which gives a hint as to the real losses Ukraine has suffered in this war.

They also note that NATO would quickly have to tap into its reserves, but this is a bit of a problem as those reserves do not exist. They estimate that NATO would need a reserve force of about 450-thousand men to start the war. The current number is less than 100-thousand men. Attrition war need lots of men, but modern armies need lots of trained men, so the West would need time to build their reserves. Of course, Russia has been doing this for over a year now.

Then you get into material factors. The West has run out of weapons to send to the Ukrainians after eighteen months of war. Granted, the United States still has lots of tanks and fighting vehicles in its inventory for use in a war with Russia, but the lesson so far is those stocks are not enough. Ukraine has burned through thousands of tanks and fighting vehicles. They have used millions of artillery rounds and lost hundreds of Western supplied artillery pieces.

This article in the New York Times gets to the heart of the issue. The economic sanctions have done nothing to limit Russia’s ability to wage this war. More important is the fact that Russian has a greater military industrial capacity than the West. She also has unused capacity that can be quickly converted to making weapons. Russia can make more of the stuff she needs to fight than the West can make, which means the West will have to ramp up production.

Therein lies the problem. There are no factories that can be quickly converted to military use like the Second World War. That means building new, but that also means massive new costs to the West. In that Times article it notes that it costs the West $5,000 to $6,000 to make a 155-millimeter artillery round, but it costs Russia about $600 to produce a comparable 152-millimeter artillery shell. Now apply this math to tanks, and fighting vehicles and you see the problem.

Obviously, war with Russia would mean the West would have to reorganize to fight a war of this scale, but is it possible? Would the populations tolerate the necessary changes to the economy and society? Reorganizing America for total war when most of the country hates the rest of the country is a tall order. Is such a scheme even possible in Europe? Even if we brush aside the internal problems, could the West manage to pull it off in time to avoid defeat?

Thirty years ago, Pat Buchanan ran for president, campaigning, in part, against the de-industrialization of America. One of his points was that nations win wars on their industrial capacity, not their service industry. The same people demanding war with Russia today were gleefully auctioning off the industrial base thirty years ago, telling the working men that they needed to flip burgers. Now that the warmongers need those working men, they are in China, not Pittsburgh.

This is the reality dawning on the world as the Global American Empire flounders in its war against Russia. The Global American Empire is now in decline and the rest of the world is seeing what the Army War College is trying to tell the ruling class. The empire no longer has the capacity to maintain the empire. This is why the endless bluffs from Washington now fall on deaf ears. The question now is not what happens in a war with Russia, but what happens after this war with Russia.

The BRIC Bat

Posted on August 29, 2023 by thezman

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Imagine one morning you wake up to the news that the dollar has lost twenty percent of its value against the other major currencies. Throughout the day, the dollar continues to fall as governments and banks dump dollars and treasuries. By midafternoon, the news is all about emergency meetings in Washington between the White House, Congressional leaders, and the Federal Reserve. The dollar has lost half its value and treasuries are now flooding the secondary market.

By that evening the public is starting to understand what the collapse of the dollar will mean for them, so they have shut down the internet in an effort to buy gold and silver from online dealers. The next day, retail gold and silver dealers, pawn shops and coin brokers are all closed. There are rumors of jewelry shops being looted as people look for anything of intrinsic value. By the second day of the crisis, all businesses have closed as state and local government declares martial law.

This is the dream scenario of the goldbugs and doomsday types that you find lurking around websites sponsored by precious metal dealers. Since Nixon closed the gold window, these people have been predicting the demise of the dollar. Peter Schiff has made himself rich telling people the dollar is about to collapse. The reason these predictions have not happened is this will never happen. This sort of collapse is simply not possible in the modern age.

The main reason this cannot happen is the rest of the world holds trillions in treasuries and dollars in their reserves. About seventy percent of what the world has on its balance sheets is denominated in dollars. Of course, the world’s most important and most traded commodity is energy and it is traded in dollars. There can be no collapse in the dollar like this because there is a buyer for every dollar. As soon as anyone starts to dump dollars, someone is right there to buy them.

That does not mean the dollar is a permanent feature of global commerce or that it can never lose value. The dollar rises and falls like other currencies because currencies are valued relative to one another. It just means that the dollar will disappear only after a long process by which it is replaced by something else. That process will take a long time and it will happen in fits and starts. In fact, the process has already begun and yet there is no panic in the currency markets.

One part of the process is the BRICS summit last week, where Argentina, Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates were added to Brazil, Russia, India, China, and South Africa. What started out as a handy way for traders to identify emerging economies is now a loose confederation of countries promising to cooperate with one another on global matters. Most importantly, they are working to trade with one another in their home currencies, not dollars.

This is not a small thing. These countries are some of the biggest economies in the world and they have a lot of people. About 40% of the world’s population are in this group of eleven countries. Most importantly, they control about eighty percent of the world’s energy supply. If they decide to trade energy products in something other than dollars, a slow-motion version of the scenario at the start of this post will begin to take shape as the dollar loses its primary benefit.

The way things have worked for the last fifty years is you needed dollars and dollar equivalents to trade energy on global markets. The reason for that is the big oil producers only accepted dollars for payments. The Saudis led the way on this back in the 1970’s when they agreed to use only dollars in exchange for security guarantees from Washington, as well as technology assistance. If you want to buy oil it means first getting the dollars you need to buy it.

This has had an interesting effect on the dollar. Because there has always been excess demand for dollars somewhere in the world, Washington has been able to create as many dollars as it needs to maintain the domestic economy and operate a global military empire, without inflation. Since the U.S. treasury is the best collateral on earth, it has meant unlimited low interest borrowing for American governments and for global corporations doing business in dollars.

Ultra-low borrowing rates are the result of a complex form of seigniorage. This is the difference between the cost of creating money and the value of the money, Put another way, it is the profit from having the monopoly on the currency. In the old days, the king took a profit from minting coins. Since everyone in his realm had to transact using coins with his face on them, everyone had to buy his coins in order to do business with him or anyone in his realm.

In this age, the profit Washington gets from having the world’s reserve currency comes in the form of low borrowing rates and low inflation. This in turn has allowed the domestic economy to grow, despite massive borrowing. In fact, it is borrowing that has inflated the economy over the last decades. In a weird way, borrowing has become the business of America because those treasury bills are used throughout the global economy to facilitate commerce.

That is about to change, and it is already changing. When the Russians decided to accept only rubles for payment, they did so to defend their economy against the sanctions imposed by the West. When it worked and the ruble stabilized, it showed the world that there can be life after the dollar. The world needs Russia oil, gas, agricultural products and increasingly its manufactured goods. If they demand rubles as payment, then it means the world needs rubles too.

This is why BRICS is moving from a label to an organization. If the Russians can do this, then the other countries can do this as well. The West is even more dependent on China and India than they are on Russia. Brazil is a massive exporter of energy products and agricultural products. The plan by Western environmentalist to shut down all domestic farming cannot happen unless the West can make itself dependent on food imports from countries like Brazil.

By adding these six new countries, BRICS is laying the groundwork for an alternative currency to be used for international settlement. Given the makeup of the group, this will most likely start with energy. The Saudis will be the first to accept Chinese and Indian currency for payment. The Russians are already doing this with regards to oil exports to these two countries. Once the Saudis take this step, the dollar will be joined by the yuan and rupee as petro-currencies.

What this means for King Dollar is not much right now. Demand for dollars has already been declining, which is why inflation has been high the last two years. According to the Fed, inflation remains a problem and they will continue to hike interest rates in order to achieve their target goal of two percent. In other words, as the demand for dollars declines globally, the Federal Reserve will have to reduce the supply of dollars, which means borrowing rates will keep rising.

It is important to keep in mind that the countries involved in BRICS do not want the dollar to collapse or even sharply decline. The entire world economy depends on the dollar, including their own economies. What they are aiming for is a slow transition away from dollars that lets them lead the way in de-dollarization. The dollar and its goofy little brother the euro will remain major currencies in the end, just working next to other major currencies in international trade.

The big question is whether Western leaders understand what is happening and what is about to happen to their economies. In a multipolar world with multiple currencies, each currency is judged by the underlying economy, not through the clever legerdemain of Wall Street bankers. An economy that does not make things or possess natural resources is not going to have a strong currency. This does not bode well for Western economies based on services.

Then you have the elephant in the room. The global American Empire is facing a choice over the next decades. Do we fund the old age of the swelling retired class or do we spend money on the war machine. In the Republican debate, all but one was in favor of slashing Social Security to fund Ukraine. Given the racial makeup of the retired class, you can be sure the Democrats are onboard with that as well. It is not hard to see where this is heading over the next decade.

On the other end, rising interest rates mean the young will be shut out of the housing market in most of the country. New car prices have gone up 30% over the last three years and that is before the higher cost of borrowing. In other words, it will not just be old people made poorer by this process. The young, diverse, and technically deficient will also be made poorer. The cost of politicians celebrating their generosity to foreigners is about to rise as the dollar falls.

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Back To The Future

Posted on August 9, 2023 by thezman

The 1970’s are remembered by those who were around during that era as an economically depressing time. Inflation was the defining feature of the economy, but the gas crisis was a close second. Gas lines, inflation, urban crime and history’s worst clothing styles was the 1970’s. When someone wants to produce images that are supposed to capture the mood of the period, inevitably they show people in the hideous costumes of the era, standing at a gas station.

Nixon taking the dollar off the gold standard gets the blame for inflation, but in reality, it was the interplay of energy and the dollar that caused the problem. The reason we have the petrodollar is to solve the inflation problem. This made official what had been unofficial since the end of the war. The dollar was the world’s reserve currency because it was used to trade energy on global markets. The Louvre Accord, which followed the Plaza Accord, stabilized the dollar internationally.

It is not an accident that soon after the dollar stabilized and became the default currency for international trade that the Soviet Union collapsed. The Soviets were dependent on food imports, and they raised the cash for food by selling energy products, mostly crude oil, on global markets. When oil prices declinedin the 1980’s, the Soviets suddenly found themselves struggling to raise enough dollars, which further strained an already fragile domestic economy.

The energy – currency link is an important concept to understand when thinking about what comes next for Western economies. A steady and consistent flow of energy products, along with a stable dollar, is what has allowed the West to borrow massive sums in order to underwrite the domestic economy. We are now entering a period of erratic and inconsistent energy flows, along with an unstable dollar. This is largely due to the decline of the American empire.

The energy markets are the first issue. Washington’s war on Russia has destabilized energy markets through efforts to cripple Russian energy sales. While this has failed, it has created distortions in the markets. For example, Germany now must import expensive LNG to replace the cheap pipeline gas from Russia. Meanwhile, India and China enjoy cheap energy from Russia. All of which is traded in rupees, yuan, and rubles, rather than dollars and euros.

Added to this is the realignment of the Gulf countries. Led by the Saudis, the oil producing countries have aligned themselves with their most dependable partners, Russia and China. The Saudis are now willing to trade in currencies other than the dollar, which is an enormous change. While it does not mean the end of the petrodollar, it is a step in that direction. It also means the dollar will not be the only currency used in international trade, thus lowering the demand for dollars.

Then we have the growing problems in America’s domestic energy supply which are largely due to bad policy. The growth in domestic supply has stopped. New investment is in decline as a result, so the decline in domestic supply will continue. This will inevitably drive-up global prices, but also flip North America from a net exporter to a net importer of energy products. There is only so much oil in the Strategic Petroleum Reserve, and it is at its lowest level ever recorded.

Of course, inflation is already an issue. Despite the happy talk from the government, anyone who buys things sees the problem. Food inflation remains an issue, despite low energy costs over the last year. Now that oil is creeping back up with a target of $100 per barrel, inflation will become even more obvious. Add in the softening of the economy and you see the signs of stagflation, which is the combination of high inflation and economic stagnation.

The one thing missing from this picture is brown leisure suits. While gas lines are unlikely in the near term, reckless foreign policy could easily result in the disputes with the Saudis turning into rocket high gas prices. Aggression towards the Chinese will result in shortages and inflation in other parts of the economy. This is coming at a time when the bulk of Americans are losing trust in the economic and political system, not just the people pretending to run the system.

That is where the parallels between the 1970’s and this period stop. The economic and political crisis of the 1970’s was largely due to the American political class adjusting to new global realities. Europe and Asia were back online economically, but the global currency arraignments were still tuned for the 1950’s. The West was also on the cusp of the microprocessor revolution, which would require the freeing of capital from old industry so it could flow into the new technologies.

This crisis is largely due to incompetence. The Russians were happy to sell their energy and agricultural products to the world at a good price. They just wanted the West to respect the territorial integrity of the Russkiy Mir. The Chinese are happy to be the manufacture of the world, as long as Washington refrains from trying to overthrow the Chinse government and that of its neighboring allies. The Saudis were happy with the petrodollar as long as America stayed out if its domestic affairs.

All of this is happening in the shadow of a rapidly growing debt problem magnified by higher borrowing rates. The deficit is over $31 trillion, a number that is inconceivable to most people. Debt payments are now at one trillion per year. The ongoing baby boomer retirement is going to drive both numbers higher. In 1980, Ronald Reagan ran on the promise to end deficit spending and clear the national debt. Half a century on and the problem is worse than anyone imagined possible.

America is now entering a period with the economic and social aspects of the 1970’s, but this time it is set in the world of the film Idiocracy. The main cause is not changing global conditions, but a suicidally incompetent ruling class. In the 1970’s, the solution was better policies. Fifty years on, the solution is an entirely new international order to replace the old order, which also means replacing the American ruling class with a new ruling class capable of navigating the new order.

What all this means is that this version of the 1970’s will bring us far worse things than denim leisure suits and velour car interiors. Add in the demographic problems and the picture is far grimmer than that 1970s’ picture. Instead of a 20-something in a terrycloth jumpsuit standing in a gas line, the image of this age could be a 60-somehting boomer in a golf shirt lined up at a food bank. In the end, we may look at the 1970’s as a warning about what was ahead for the American Empire.

Our Alaric Moment

Posted on July 20, 2023 by thezman

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If you were living in the Western Roman Empire in the fourth century you probably knew that things were not going well. This assumes that you were prosperous enough to have time to think about these things. You could see that the infrastructure was failing and that the empire was struggling to maintain order. On the other hand, the decline had been happening for a long time so things may have seemed normal. Without some way to compare the present to the past, you only have instinct.

Today we have mountains of facts and figures to tell us how things are doing in the Global American Empire. There was a time not so long ago when these facts and figures made up the bulk of news coverage. Economists became court wizards, explaining the latest unemployment figures or trade numbers. They were also called upon to bless whatever polices were being debated in Congress. In the Obama years, economic data was the way we measured the glories of the empire.

That has all changed now. One reason is no one in their right mind takes anything the government says at face value. People had grown used to the way the media biased the numbers depending upon who was in office, but the mortgage crisis cratered the public’s confidence in the numbers themselves. If all of the court wizards explaining the numbers could not see the mortgage fiasco coming, then why should anyone believe them about unemployment or inflation?

Then you have the general lying that has become a feature of government. The lying about Covid not only disgraced the medical profession, but it finished off whatever trust people had in the official numbers. If the government lies about how many people are dying from Covid just to move more product for the drug makers, the government will lie about how many people are working or the inflation numbers. No one trusts the numbers because no one trusts the people issuing the numbers.

There may be something else at work. Into the 1980’s, the numbers out of the stock markets were predictable. The markets went up as the economy improved out of a recession and the markets went down before a recession. In between the blue-chip stocks maintained a consistent price-to-earnings ratio between 14.00 and 16.00, which was the gold standard of the market. You could compare a stock’s performance to the S&P 500 to gauge the stability of the company.

That changed in the 1980’s with the new global currency arrangements. The P/E ratio of the S&P 500 as of this moment is 26.43. That looks high compared to the historic averages, but it is low compared to recent times. Just before the mortgage crisis the number climbed to 123.73. It collapsed soon after, but even in the midst of what they said was a near death experience for the financial system, the P/E ratio for the S&P 500 only dropped down into the historic average range.

The point here is we cannot trust the numbers if the numbers have no relationship to anything we have experienced. When the end of the world has the same numbers as what most consider to be a golden era for the empire, those numbers cease to have any meaning to us. Throw in the fact that most people do not feel like they are richer than their ancestors and those inflated stock figures carry even less weight. We are left to rely on our instincts to judge things.

Of course, our sense of things, that gut feeling, is the result of a many small things that we experience every day. Three-quarters of Americans think the country is going in the wrong direction because they go to the grocery store every week. They see that despite the crowing about inflation coming down, food remains expensive. Granted, no one is starving in America due to a lack of affordable food, but it is that thing they see every day that gives people a sense of things.

Think about something simple like a pint of premium ice cream. A few years ago, a pint was sixteen ounces. “A pint is a pint the world around” was true from peak of the British empire until just a few years ago. Now a pint is fourteen ounces. The price for the new pint is not the same as the old pint. The price is more than the old pint. A few years ago, the old pint of ice cream was five dollars. That is about 31¢ per ounce. Today the new pint is over seven dollars or 51¢ per ounce.

That is a seventy percent change in the price. This is one example and probably not a representative one, given that butterfat prices drive dairy prices. Even so, this is something people see all over the marketplace. Shrinkflation is a word because it is a thing that exists. People notice that the containers are getting smaller, or they are getting less full in the case of things like snacks. Meanwhile, prices go up. This subtly tells people that something is going wrong.

This is probably why we are no longer getting a parade of court wizards analyzing the latest economic numbers. According to the numbers, Joe Biden should be dozing into reelection with an insurmountable lead, as his court wizards flood the airwaves with the good news about the economy. Instead, no one talks about the numbers and Biden is as popular as rectal cancer. It is possible he could lose the election to a man sitting in prison or be deposed by the secret police.

This brings us back to where we started. There were those in the Roman Empire who sensed the true state of affairs. No doubt some of them lived and died expecting things to fall apart, only to stagger on long past their time. Then there were others who internalized this reality and just accepted that no matter how grim things might appear, the empire was a permanent feature of life. The people probably just tried to make the best of things, even as they noticed the decline.

All of that changed on August 24, 410 AD when Alaric led the Visigoths into the eternal city, sacking Rome and setting off the collapse of the Western empire. The empire staggered on for a bit longer, but it was over at that point. All of those bad signs people had sensed probably seemed obvious in retrospect. Even so, the sack of Rome by the Visigoths was a shock to the world. The signs seemed obvious, but people still thought that the imperial order was permanent.

This is most likely the fate of the American empire. There are lots of signs that things are going poorly for the empire. Getting whipped by a collection of bronze age goatherds in the graveyard of empires should have been a wakeup call, but the empire is now picking fights with Russia and China. Meanwhile things deteriorate domestically, both economically and culturally. Yet, we stagger on, but somewhere out there is an Alaric moment just waiting to happen.

The Future Of Fed Plenty

Posted on May 30, 2023 by thezman

Americans have been conditioned to believe we live in a market economy where producers chase customers. The subtext to American politics for generations has been protecting the marketplace from the socialists. In reality, America is more of a command economy than a market economy. We do not think of it as a command economy because that phrase brings to mind commissars arguing about why the left shoe factory has a different quota than the right shoe factory.

While we have never had five-year plans or an official industrial policy, the people in charge have always had a tight grip on the economy. The primary lever since the 1980’s has been the money supply. The bank of all banks, the Federal Reserve, controls the flow of money in the system. While it does not decide how many shoes get made, it does decide the shoe maker’s cost of money. The Fed can create a recession to reduce demand and it can create plenty through cheap money.

This is not the only lever of our command economy. The regulatory state exerts an enormous amount of power on the economy. Right now, the EPA is plotting to kill off the gas stove market in order to please Gaia. The claim is gas stoves give people the cooties or something, but the real reason is the people in the EPA are primitives who follow a spirit religion. They can and often do change economic activity based on what their shaman has to say about Gaia.

It is not just the federal administrative state with power over the economy. The states have their own junior varsity administrative state. In Maryland, for example, they have decreed that all new homes must be equipped with sprinkler systems, like the sort you see in office buildings. The National Fire Sprinkler Association just happens to be located in Maryland. Their members, conveniently enough, have the exclusive right to install and maintain sprinkler systems.

That is the other level of the command economy. Large private operators can exert enormous pressure on the administrative and politics systems. They also get favors that small players cannot purchase. Every Walmart in America enjoys free infrastructure and tax abatements from local government. One reason the big box store eliminated the small retailer is they colluded with the state. Like the Bolsheviks in the 1920’s, America’s ruling party prefers consolidation into controllable industries.

The Bolsheviks liked large enterprises because they assumed they would be easier to control, and they would drive off the vestiges of capitalism. They were somewhat right about the last part, as we see today. The first part they never got right. By the 1970’s, the Soviet system grew increasingly complicated as it became less efficient, because the scale of the system outpaced the ability to manage it. There were too many variables and too many interactions between those variables.

The American command economy would have faced the same problems, and it was headed in that direction in the 1970’s, but a couple of big things happened. For starters, the decision was made to ship the manufacturing base overseas. Instead of trying to centrally manage an industrial economy, production was handed over to the third world so they could do it. The Fed could use the money supply to control the flow of manufactured goods into the system.

The other thing that happened was the microprocessor revolution. The Soviets recognized this as their way out of the complexity problem, but they were already past the point of diminishing returns by the time cheap computers and trained computer programmers were in sufficient supply. America escaped this fate, as the economic planners were able to harness these new tools to control the economy. The managerial state would not be possible without computers.

The trouble is our system is now suffering from the same problems the Soviets faced in their command economy. The complexity is overwhelming the system. The Federal Reserve has been fighting inflation for two years now. At the same time, spending has spiraled upward with no hope of arresting the growth. This forces the Fed to create more money through various means. The recent debt ceiling drama suggests there is no political way to solve the fiscal crisis.

It may not feel like a crisis as there are plenty of jobs and there is plenty of money to buy consumer goods. People have lots of complaints, but few of them are about the economy, as far as anyone knows. Given the monolithic nature of the media, we cannot assume that what we see in the press is reality. Even so, there are no bread lines and sales of houses and consumer goods are strong. Whatever problems that exist are not showing up in consumer behavior.

Of course, the years following the death of Stalin were good times in the Soviet Union, as their economy grew faster than any economy in the West. After recovering from the devastation of the war, shops were full of basic goods and the Soviet system seemed to be working better than capitalism. The Russians were ahead of the West in the space race, and they enjoyed a missile gap. Then red plenty slowly ground to a halt and their system fell into a generation long decline.

The fed plenty that American has been enjoying for the last thirty years may be about to turn negative for the same reasons. The system has become too complicated for the masters of the system to operate. In the Soviet times, the result was too many left shoes or mountains of concrete with shortages of winter coats. In this age, it means bans of gas stoves and diversity programs because companies care more about ESG scores than the desires of their customers.

This was always the argument against command economies. It was not so much that some unelected authority made decisions. It was that over time, they would always succumb to complexity. The lack of price signals subjected the economic trade-offs to political jockeying. In the Soviet system, the politically favored got what they wanted, even when it made no economic sense. In our system, we see the same phenomenon but colored with liberal jargon.

Perhaps this is where AI steps into the breech. The next great leap in data processing and decision making will overcome the complexity issue. Instead of armies of analysts with economics degrees pouring over data to draft reports for the managers, AI systems will do the work in real time, making changes to the flow of money and information in the system to overcome bottlenecks and political jockeying. Fed Plenty will become the objective of the robots put in charge of the economy.

More Bank Shenanigans

Posted on April 27, 2023 by thezman

Just as the last bank crisis was fading from memory, a new bank crisis is emerging, this time staring First Republic Bank. Despite upbeat earnings, the bank’s stock has collapsed this week. The market cap has fallen below one billion for the first time in the bank’s existence. They are currently begging the big banks to shift some of their deposits into Republic to stem the outflow. Depositors are worried that the Feds may shutter the bank, putting their deposits at risk.

If this sounds like the crisis that brought down Silicon Valley Bank or Credit Suisse, that is because it is the same problem. Large depositors and insiders got worried and began to shift their money out of the bank. Because there are no secrets in this age and the plutocracy is relatively tiny, it does not take long for word to get out and the other large depositors begin to pull their money. Banks that rely on large dispositors will always be prone to these sorts of bank runs.

Oddly, this reveals some Dirt People wisdom. Silicon Valley Bank did not cater to the Dirt People, so Dirt People did not put their money in the bank. Instead, Dirt People end up at the big banks. The whole too big to fail thing in the prior financial crisis taught the regular guy a good lesson. The big banks are friends with the regime, so the regime will always protect them. If you want to protect your money against shenanigans from crooked bankers, put your money in a big bank.

The trouble comes when insiders in a particular industry, like the tech sector, want to conduct shenanigans away from the prying eyes of other oligarchs. This is why Silicon Valley Bank existed in the first place. It was the bank for the connected in the tech sector, so they could conduct shenanigans amongst other tech insiders. If you wanted to know what would be promoted as the next big thing in tech, you needed to be at that insider table, so doing business at SVB was necessary.

Since the American economy is nothing but shenanigans by insiders, it means all of the other areas have their insider tables too. That is where these other regional banks come into play. They will serve the large developers in a region, for example, who will park lots of cash in these banks. Those developers will draw in local warlords and potentates to their shenanigans, who will put their cash in the same local banks, so that moving money and information is simpler.

The information portion is the key to modern shenanigans. The reason the hedge funds operate in sleepy villages in Connecticut is that it is much easier to conduct shenanigans in person at a dinner party or on the golf course. If you are in New York, someone could hear you talking or you may be tempted to trust the wrong person via e-mail, so it is much safer to deal in person out in the leafy suburbs, free from the hoi polloi and the ambitious government regulator.

You can be sure this used to happen at Silicon Valley Bank. Part of what they provided to clients was introductions to other clients. One tech insider could socialize with another insider at his friend the banker’s house. If after a few drinks there were some shenanigans, who would know? This sort of thing plays out across the economy and regional banks often operate as junction points. A part of their service is putting likeminded investors together for shenanigans.

In the world of shenanigans, there is no honor, so when the money could find better deals outside of tech startups, they no longer needed Silcom Valley Bank and they pulled their money. A similar problem is happening in the commercial real estate sector, which is facing tough times. The work from home craze kicked off by Covid is here to stay, so that has cratered demand for office space. Crime waves in cities are killing urban commercial and retail properties.

The big drag on commercial real estate, as far as the banks are concerned, is the way in which property owners manage debt. If you own an apartment building, you never pay down the debt on the property. Instead, you keep borrowing against it as rents pay down the debt. That is the source of income. Of course, there are investors, who get paid from these periodic withdrawals of equity. Commercial real estate is not about the rents, but the equity, which can be pledged as collateral.

Imagine you have a property worth a million dollars. The rents far exceed the cost of maintaining the property, so it has a remarkably high cash flow. It means you pay taxes on those profits. If on the other hand, you take a mortgage against the property, the cash flow decreases, along with the taxes, but you now have a pile of cash to do things like buy another property. As rents pay down the debt, you periodically refinance the property to create a big pile of cash.

The trouble is interest rates are going up at the same time that occupancy is going down, which is driving down the value of properties. The bank is not only demanding more in interest payment, but they are also willing to loan less against the property, because of the declining occupancy. What is happening in commercial real estate is similar to what happened when the housing bubble popped. All of a sudden, lots of people are upside down on their mortgages.

This is what is pressuring regional banks. A bank that primarily works with commercial real estate is seeing a sharp decline in deposits, but also a sharp decline in many of the assets they are holding on their books. This is why everyone is suddenly nervous about the regional banks. Many of them were tied into the regional real estate markets, which are now in decline due to rising interest rates. First Republic Bank is probably the first shoe to drop in what will be another banking crisis.

Of course, the question that lingers over all of this is whether the Federal Reserve can keep the plates spinning while they work out decades of bad policy. As of this week, the Feds are not coming to rescue the local banks. They were not going to rescue Silicon Valley Bank until they had no choice. Commercial real estate has just as many powerful oligarchs as the tech sector, maybe more. That means everyone is going to be betting on yet another massive bailout of the banking sector.

All of this is a good reminder that America stopped being a market economy a long time ago due to the outsized role of banking. When you have control of the global currency, you can conjure money from thin air. When you have that power, you use it to command things of the economy that otherwise would not exist. That means this command economy is going to keep faltering as the people commanding it lose their power to command it to do things it should never have done.

Currency Wars

Posted on March 28, 2023 by thezman

One of the most overused phrases in economic discussions is “petrodollar”, especially by those inclined to doomsday theories. Right behind it is the phrase “reserve currency”, which gets tossed around almost as much as petrodollar. For most people, these are terms that no longer have a practical meaning. They are words that are supposed to mean something bad. The petrodollar as the world’s reserve currency is the tool of the evil money men in Washington.

For starters, the petrodollar is not a real thing. It is simply a term to express the fact that in the 1970’s the large oil producing countries agreed to use the dollar. If you want to buy crude from the Saudis, they accept dollars and dollar equivalents. They will accept Chinese yuan or Vietnamese dong, but they will be converted to dollars. In the case of Vietnam, they may discount the exchange due to administrative costs. Otherwise, they turn the dong into dollars.

This agreement to price energy products in dollars is what makes the dollar the world’s primary reserve currency. Everyone needs energy, so if the energy guy will always take dollars for payment, then the world will always keep a supply of dollars around, not just for energy purchases, but as a reserve. In other words, the dollar’s position as the primary reserve currency is tied to the fact that energy is priced in dollars, so everyone has to have dollars around to buy energy.

Now, why did the Saudis agree to price everything in dollars. The main reason is they got something for it in return. What they got is a guarantee that the United States would protect the kingdom from threats in the region and never side with the wrong faction among the Saudi royal family. That last part is important. Joe Biden, as Vice President, sided with the faction opposing Mohammed bin Salman, the current Crown Prince and Prime Minister of Saudi Arabia.

This is why the Saudis are now open to pricing their energy products in Chinese yuan and maybe other currencies. Since Russian products are now priced in rubles, the ruble has become one of the strongest and most stable currencies in the world. Lots of countries now need to hold rubles, because lots of countries need to buy Russian energy and agricultural products. Lots of people need to buy Chinese manufactured goods, so you can see the appeal there as well.

To finish the thought on the Saudis, they no longer see Washington holding up their end of that bargain struck fifty years ago. Russia and China, on the other hand, are willing to help in that regard. The Chinese brokered a deal between the Saudis and Iran, which is an enormous development. Iran backs the rebels in Yemen and the Saudis back anti-regime forces in Iran. This new deal solves a problem for both countries and makes the Chinese the honest broker of the region.

Further up the road, the Russians have slowly been putting together a deal between the Turks and the Syrians to end the long bloody war in Syria. That war is the result of regime change efforts by Washington aimed at Syria. The Turks had been party to that scheme, but they have changed teams and now oppose regime change. The looming settlement of this problem, brokered by the Russians, will alter the dynamics in the region and further push Washington out of the picture.

Taken together, the regional players are now looking to Russia and China to help keep the peace and be the honest broker. Getting back to that old deal between Washington and Riyad, if Washington is no longer keeping the peace, then why only accept Washington’s money for energy products? If the world is increasingly comfortable holding yuan, to buy Chinese goods, and rubles, to buy Russian products, why not hold those currencies and accept them for payment?

This is why arguments like this one promoted by Darren Beatty at Revolver News miss the point of what is happening with the dollar. The writer just assumes that because things have always been this way, they will always be this way. It is as if he thinks the dollar has magical qualities that make it the primary reserve currency. The dollar’s value in the world is pegged to practical things. If those practical things decline in value or disappear, then the dollar loses its power.

What is taking shape is that the global conflict between the Global American Empire and the emerging power centers of the world will include a currency war. Both China and Russia clearly get this aspect of the conflict. Both countries are working to not only make their currencies more stable, but they are also building out the infrastructure to make dealing in their currencies easier. China and Russia are making it easier to do business with them in their currency.

What is happening is that as we move from the monopolar world of the post-Cold War era to the multipolar world, we are sliding into a currency war. As a practical matter, Washington will no longer be able to abuse the dollar as it has recklessly done for the last thirty years. This means Washington will not be able to export inflation in the form of excess dollars to other countries. Those other countries will now have choices, with regards to investment and reserves.

This does not mean the collapse of the dollar or a collapse of the empire, at least it is not a foregone conclusion. Instead, it means Washington must enter a period of reform similar to what followed the Second World War and the collapse of the gold-backed dollar in the 1970’s. Currency wars are the result of changing political and economic relationships that demand changes in money relations. The petrodollar solved a problem at the time and its end solves a problem of this time.

Whether or not there is the talent in the ruling class to pull off the needed reforms is the great question that looms over this currency war. The Fed chair is obviously in over his head, but there is no one in Washington noticing this. The current administration is staffed by lunatics and buffoons. The Republican side is trapped in the last century, unable to accept that the world has moved on from the 1980’s. Prospects for reform are grim at the moment, which is what makes for a crisis.

Even so, we are entering a period similar to the 1970’s in that we will have periods of inflation along with declining real growth. Unreliable money relations make for unreliable economic relations. America emerged from the last century as the global hegemon because she won the currency wars of the last century. The disposition of the American empire will be defined by the new currency war and what comes out the other side of the process will also be defined by the currency war.

We Are Argentina Now

Posted on March 20, 2023 by thezman

Note #1: Behind the green door is a post about stupid people, a post about those rotten kids and their pivot tables and the Sunday podcast. You can sign up for a green door account at SubscribeStar or Substack.

The Federal Reserve and European Central Bank have for a long time now been wrestling with a problem that is truly novel. They find themselves in an interest rate trap, which means they need to restore borrowing rates to something close to the historic norm, but doing so puts the global banking system at risk. The political class is just as hooked on cheap money as the bankers, so their is no appetite for a Paul Volker like approach to solving the money problem in the West.

For a long time, the problems were abstract. Everyone knew that near zero interest rates would one day create big problems, but in the here and now they made all of the important people happy. The reckless and insane response to Covid by Western ruling classes moved the problem into the domain of reality. Massive spending by government put enormous amounts of cash into the hands of regular people, not just the bankers, and those regular people started spending it.

Compounding this was the decline in global demand for dollars. Since the 1990’s, the Chinese economy was able to soak up extra dollars and euros. Other parts of Asia could also be counted on to take dollars in the form of investment. The massive liquidity in the banking system was, in effect, sequestered from the retail economy of Western countries, so the impact was low. That and the rest of the world was happy to hold euros, dollars and bonds in those currencies.

Covid was an accelerant in many ways, but one very important way was in regards to the Chinese economy. Central to the long term plans of China is to boost domestic demand and reduce her dependence on exports to the West. Lock downs and the subsequent decline in global commerce accelerated the process. China came out of Covid with far less demand for Western investment. Those extra dollars and euros are retuning to their makers.

It is looking like the insane response by the collective West to the war in the Ukraine is another accelerant to a process that was slowly building steam. Cutting Russia off from the “rules based international order” was a wake up call for the large, non-Western economies of the world. China understood right away that the dollar was Washington’s primary weapon in international affairs. The Saudis also came to see the problem with depending upon Washington to abide by the rules.

More important, the Russian economy survived the assault by Washington and she successfully defended the ruble. When Russia demanded payment in rubles from Western nations and they went along with it, the world changed. All of a sudden, the multipolar world with multiple competing currencies came into focus. China, Russia, India and the OPEC countries have now set off on a path where the dollar and euro no longer have a special place in global trade.

The enormity of this politically and economically cannot be overstated. This week the ruler of China is making a visit to Moscow. Generations of American policy makers have worked to avoid this meeting, but the current crop in charge of American foreign policy wrecked all of that and now we have an alliance between Russia and China. The world’s largest economy is now a strategic partner with the world’s biggest nuclear power, in opposition to the Global American Empire.

The global realignment does not stop there. The Russians have been brokering a peace between the Turks and the Syrians. The goal is to squeeze out the Americans, who are in Syria stealing Syrian oil and gas. China has brokered a deal between Saudi Arabia and Iran, which promises to reorder the region. The oil producing hub of the world is suddenly in the orbit of China and Russia. Economics follows politics, so it is not hard to see what this does to the dollar and euro.

For the last year, the Fed and ECB have been facing a problem. There is far too much money in the system and the demand for their money is in decline globally, which means they have to remove money from the system. They tried to ignore the problem by spinning yarns about inflation being transitory, but rocket high food bills made that story impossible to maintain. The politicians demanded the Fed “fix” the economy for them, so the Fed started to raise rates.

That is what brings us back to the interest rate trap. The entire Western banking system depends on exclusive access to cheap money. This is their margin. They no longer provide much in the way of essential services. Much of what the banking system does could be automated at this point. The profits come from operating a casino in which the house arbitrages the difference between what it pays for money and what the suckers on the other side pay for money.

If all of a sudden the price the house pays for money closes with that which the suckers are paying, then the casino goes bust. That is what we are see now. Silicon Valley Bank and Signature Bank were just money laundering schemes for plutocrats. Once interest rates went up just a little, they were no longer viable. Credit Suisse was just bailed out by the Swiss National Bank for the same reason. These banks could only exist in the world of free money to the banks and their clients.

Over the weekend, the Fed with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank announced a global bailout of the Western banking system. They are offering unlimited cash in exchange for the illiquid assets on the bank’s books. The reason they did this is they know that every bank in the West has the same problem as Credit Suisse. That is their liabilities outweigh their assets so they are effectively broke.

Of course, you cannot fight inflation while showering the system with cash, which means the effort to rein in inflation has come to an end. The Fed will try to limit the swapping of bad assets for cash by substituting treasuries, but this sort of legerdemain is just so they can continue the game of make believe. High inflation is now the new normal in the West because it is impossible to raise rates. The West has turned itself into Argentina through bad policy and worse politics.

For generations now people have warned about the long term cost of living on borrowed money, but they were mostly wrong. Living on borrowed money is self-correcting in that the lender eventually stops lending. What the West faces is a problem where the lender cannot not stop lending. The only way to sustain this now is for the people to be impoverished through systemic inflation. Inflation is now the banker’s friend, because it promises to keep the cheap money flowing.

The Great Reckoning

Posted on March 14, 2023 by thezman

For generations, going back to the middle of the last century, people have been warning about systemic problems in American society. Some of the warnings have been tricks to continue the cultural revolution. Some have been part of the financial legerdemain that defines so much of our economy and politics. There have been, however, many sincere warnings about long term structural problems. Out of necessity and expediency they were ignored, but that may be about to change.

The most obvious is the most immediate. Going back to the Clinton years people who understood money were warning about loose money policy. People forget that Clinton winning was a surprise. After all, Bush came into the election with a huge war victory and a solid economy. The Reagan expansion was viewed not only as a miracle of Republican policy, but a rebuke of left-wing economics. Then the economy soured before the elections and Clinton was president.

Much of official Washington blamed the tight money policies of Alan Greenspan for tanking the economy under Bush. Team Clinton made sure this could never happen again, especially with a Democrat in office. Loose money became official policy and only got worse with each administration. By the Obama years, we were in a world of Zero Interest Rate Policy. Now those ZIRP chickens are coming home to roost in the form of a systemic banking failure.

No one should be deceived by what is happening. Last weekend, the Federal Reserve decided that the banks are all broke due to holding assets that have a declining market value, so the Federal Reserve effectively nationalized the banks. The only way they can regain control of money policy is to eliminate the market for long dated bonds by promising to buy them at face value. The Federal Reserve has nationalized the banks by nationalizing the bond market.

This is required to avoid a bank collapse but also allow for the long overdue reorganization of the financial sector. A generation of free money has turned Wall Street into a drug addict. It is entirely organized around getting the narcotic of free money from the government, rather than the normal practice of banking. All of its schemes are designed not to create value in the economy but to generate the need for more free money, a portion of which ends up in executive pay.

This did not happen in isolation. The great auctioning off of the manufacturing base that began in the 1980’s has finally caught up to America. The subtext to the Ukraine war is the fact that America no longer has the ability to make the weapons it requires to wage war on the world. Russia, with a third of the population, can now make more weapons for war than America. Her production of ammunition dwarfs what America can muster, which is why Russia is slowly grinding down the Ukrainians.

Of course, one main reason for the auctioning off of the manufacturing base is it raised quick money to invest in the rigged casino that is Wall Street. This fact was masked to a great degree by cheap consumer goods. In fact, the culture of cheap consumer goods has justified all of the nation wrecking policies. Everything from open borders to wholesale political corruption have been justified by cheap lawn care and cheap products sold in big box stores.

The price tag for decades of cheap goods underwritten by the sale of the manufacturing base is now coming due. The only thing America makes now is sexual deviance and lectures in favor of sexual deviance. It turns out that there is no global market for rainbow colored marital devices and films promoting the culture around them, which means America does not have a real economy. The ongoing economic crisis is about to get much worse as that reality becomes clear.

In fairness, some of the proceeds from auctioning off of the manufacturing base went into the technology sector. In the fullness of time, the robot historians may remember America for having singlehandedly created the technological revolution. This has changed the world. The trouble is, the technological revolution ended decades ago, but Silicon Valley continues to consume trillions in money. With the collapse of SVB, that great money drain is now ending.

The war with Russia and the looming war with China has also brought other chickens home to roost. For a long time people have been warning about the military industrial complex and its addiction to expensive, high tech weapons. Those whiz-bang systems look great, but they are not what wins wars. What wins a war are the tools the average soldier uses to kill the enemy. We no longer bother making them and instead focus on rocket ships and space lasers.

What the war in Ukraine has revealed is that NATO would have to use nuclear weapons in a war against Russia, because NATO lacks the men and machines to fight a ground war against the Russians. Most NATO countries would run out of ammunition in a few weeks and have to surrender. Against China, the American military would deliver some serious early blows, but then run out of supplies. Chinese manufacturing capacity is now greater than America and Europe combined.

Overlaying all of this is the crisis of competence. The SVB fiasco is a great example of a problem that permeates American society. Instead of rewarding skill and accomplishment, our system is rigged to reward nonwhites at the explicit expense of whites, especially white males. The only market that is booming in America is the racial revenge market and the result is colorful people in positions of authority who lack the basic skills to do the jobs they have been given.

Thirty years ago, people warned about this. What started as tolerance in the 1980’s, became sensitivity in the 1990’s, then diversity in the new century. It has now turned into a full blown cult of anti-whiteness. While towns in Ohio suffer from an ecological disaster, the people in charge fret of racist sidewalks. Corporate America is more concerned with its ESG and DEI scores than its financial stability. We have combined demographic reality with anti-white fanaticism into a ruling ethic.

No society can run this way. Good luck fighting China with a rainbow coalition of drag diverse drag queens trying to operate space guns. Good luck weathering a reorganization of the financial system when the banks are run by people who were just recently coaxed from caves by European explorers. Imagine surviving an end of empire crisis with the productive portion of society seething with rage at the fanatics who brought about this disaster.

One could go on a long time listing the things that should never have been allowed to happen that are now turning up in the nation’s crisis list. All of these are the result of bad polices hatched in the late 20th century and used to loot the country by the new generations of rulers ushered in by the Clintons. The bill for the great bust-out is now coming due and there is no avoiding it. Like drunks at closing time, we await the bill for generations of reckless behavior.

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