Category Archives: Economics

Bretton Woods III

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Note: The Monday Taki post is up and related to this post. All of a sudden, macroeconomics is becoming an important topic again. The Sunday podcast is also up behind the green door.

The technical definition of money is “something generally accepted as a medium of exchange, a measure of value, or a means of payment.” For most people this has always meant the legal tender of their homeland. Until fairly recent, this was a coin with the face of the king on it. The better the reputation of the king, the more valuable his coin, because traders were more likely to accept it. A good king made sure his coins had a consistent amount of gold or silver in it.

The reason for that is precious metals like gold and silver were always the world’s reserve currency. Everyone in the world would accept gold and silver for payment, even in places that restricted the use of the metals. You could always take the metal to the king’s mint and exchange it for his coins. Granted, he took a fee for himself and you were charged the cost of minting the coins, but that was predictable. In the end, all currency was measured in gold and silver.

We no longer use gold coin for money. Every country in the world uses what the economist call fiat currency. This is a government-issued currency that is not backed by a physical commodity, such as gold or silver. Instead, it is backed by the “full faith and credit” of the issuing government. Money is now an expression of the government power behind it. The US dollar is the reserve currency of the world largely due to the fact the American government was the most trusted.

Hard money enthusiasts assume this means the United States can  print as much money as it needs, but this is not exactly true. The international monetary system that evolved after the collapse of the Bretton Woods system in the 1970’s is a framework that controls the exchange rate of the major currencies. Every major currency is based on the dollar, just as oil and gas are priced in dollars. The petrodollar was created in the 1970’s when the Bretton Woods system collapsed.

What the current system does, in effect, is link currencies to the supply of crude oil through the dollar. How much oil you can buy with your home currency is dependent upon how many dollars you can buy with it. It is not a direct link, as oil production rises and falls and the supply of dollars rises and falls, relative to other major currencies like the Euro or Chinese Yuan. In effect, America controls the world by controlling the price of commodities like crude oil and natural gas.

In the old days, minting coins was a profit center for the king. A strong king would restrict the use of other coins in his domain. His people had to take their foreign coins, gold and silver to his mint for conversion to his coin. In addition to the cost of production, he tacked on a profit for himself. This is called seigniorage and it works the same for fiat money as it does hard money. This profit from controlling the global currency is one way the United States has grown so rich.

One of the consequences of this system is the world has an insatiable appetite for US government debt. Because it is denominated in dollars and considered the safest of financial bets, it makes the ideal collateral. This has allowed the United States and other Western countries to run massive trade and spending deficits. The world wants the debt and the world wants to sell the West their products. US debt was 30% of GDP in 1980 and now it is 127% of GDP.

This is the subtext of the Russo-Ukrainian war. Russia and China, especially China, are tired of this arrangement. They correctly see it as to the advantage of Washington at their expense. This is why China is backing Russia’s play to demand rubles for its energy and agricultural products. This would pave the way for China demanding yuan for its products and the right to pay for energy in yuan. India is also quietly supporting what the Russians are doing for the same reasons.

This is why Washington is in no mood to strike a deal over Ukraine. It is not the only reason, but it is a big part of the plan to protect the dollar. If Washington can break the Putin government through financial war, China and India will drop their plans to buck the dollar in the global economy. A century after the Great War, the new global war is being mainly fought in finance. The West, led by America, is now at war with the world over control of the global currency system.

It is probably a war that the West cannot win. The reason is the same reason the king would put his face on his coins. Money is the physical expression of power. The strong king could enforce his monetary policy in his domain and his money had a predictable amount of gold and silver. In effect, his money was the representation of his people and the cultural that defined them. The legal tender of a country is the measure of that country’s wealth and power relative to the world.

The West no longer makes or invents anything useful. The power of the West is the legacy power to control the financial system. It is a system arranged by Mercurian people in order to control the Apollonians. The former are the people who operate as middlemen and service providers, while the latter are the people who grow the food, make the goods and keep the gears properly lubricated. The former operates in the West, while the latter exist outside the West.

Reality is the thing that does not go away when you stop believing in it and reality says that growing and making things counts for more than thinking of things. The reason Washington has not crushed the Russian economy is the world needs the stuff Russia pulls pout of the earth. In this economic war of attrition, Russian can feed itself and keep its homes warm, while Europe will have to hope America can provide the food and energy at a reasonable fee.

The most likely outcome of this global conflict is something people have suspected for quite some time. The global currency will become a basket of commodities like natural gas and crude oil. Maybe agricultural products will be in the mix. The reason for this is the world runs on energy and food. Bretton Woods III, as some are calling it, will be a new set of currency arrangements whereby money is based on its purchasing power for the agreed upon basket of products.

What this means in the short run is that the West is about to get poorer as governments are forced to cut spending and debase the currency to get out from under domestic debt obligations like pension payments. It also means the end of globalism as has been defined by Washington for three decades. Trade will continue, but between countries rather than independent global enterprises. Thirty years after the Cold War the world is about to start healing and return to something close to normal.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

Fighting Time

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One of the puzzles from the Great War is how the leaders on both sides allowed themselves to get drawn into the war. There are plenty of reasons why each country would want war, including the infamous one that caused a certain Austrian fellow to coin the term “the big lie.” The problem with all of the reasons is they made little sense in light of the obvious costs of war. As a result, the Great War is a great example of how events can tale on a life of their own.

The remarkable thing about that war is that once it settled into trench warfare no one realized the hopelessness of it. One can understand how the initial events would spiral into a global conflict. That is not a new phenomenon. Similarly, you can see how the initial moves in the war made a lot of sense to the leaders on both sides. This was the first industrial war, so they had a lot to learn. New weapons needed new tactics but few people realized that at the start of the war.

The great puzzle of the war is that the sides did not see the hopelessness of the situation once in settled into a stalemate. Both sides were losing tens of thousands of men with each attack, only to gain a few yards of ground. The Battle of the Marne and the subsequent race to the sea made sense. The losses were high, but both sides had hope for quick victory. Two years later the French and Germans lost over a million men at Verdun and the winner got nothing for their trouble.

A century on and we are getting some fresh insight into why the Western leaders in the Great War were incapable of seeing things clearly. The war in Ukraine is proving to be nothing like Western planners imagined. They assumed the Ukrainians would stall the Russians into a stalemate of urban warfare. The world would rally to the sanctions regime and it would quickly be a question of how long the Russians could suffer the economic consequences of the sanctions.

After just one month it is clear this is not happening. The Russians did not fight like the NATO planners imagined. Instead of rushing to Kiev, they pinned the Ukrainian army in the north, using classic maneuver tactics. Meanwhile their main army is systematically destroying the Ukrainian army in the south and east. It also appears the Russians were well prepared for the Ukrainian tactic of digging into urban areas. It is now just a matter of time before the Ukrainian army in the east is lost.

That is just one miscalculation by the West, but it should be concerning. The Russians are not doing anything novel in Ukraine. They are using classic tactics that have been used in Europe since Napoleon. Further, they are following a doctrine they evolved in the Second Chechen war. That was a doctrine Vladimir Putin created as the guy running that war for Russia. It seems that no one in the west bothered to study the man they claim is the new Hitler.

That is only one small part of the miscalculation. The decision to cutoff the Russian central bank appears to have been a massive blunder. The Russians, faced with the threat of their dollar and Euro assets being seized by Western banks have told the West they must pay for goods in rubles. Otherwise, they are forced to send product to the West but not be paid for it. Alternatively, they would have to make concessions in order to get their assets unfrozen by the West.

Why anyone in the West thought this was a good idea is a mystery. It turns out that the Biden administration did not consult with the Federal Reserve. Europe appears to have just followed along without questioning the policy. Now that Russia has countered their move, Europe is in a terrible position. They either support the ruble with massive purchases or they face an imminent shortage of natural gas. That means rationing of energy products could happen as soon as next month.

Of course, the words “shortage” and “rationing” will trigger the natural response, which is hording and price gouging. That will also mean a political response. The German political elite appear to be embracing their inner Marie Antoinette by telling the Germans to wear a sweater as they shiver in the dark. Presumably, they will tell the people to eat bugs when the food shortages hit this summer. Maybe German TV will start celebrating the Turnip Winter as a way to motivate the public.

In fairness, we have to no idea how the Russians and Chinese are viewing this thing as Western media refuses to cover that aspect. We should assume the lack of food riots and social unrest in Russia means they are not teetering on collapse. This was the prediction at the start of this war. The best and brightest in the American managerial elite predicted the Russians would have collapsed by now. They also assumed China would be wavering in their support at this stage.

The point is, we are seeing in real time how supposedly clever political leaders can stagger from one blunder to the next. Unlike the Great War, this war has one side that seems to have updated its thinking since the last century. The Russians are planning for tomorrow, while the West is planning for 1985. The Biden people actually thought his speech in Poland would be his Brandenburg Gate moment. That is the most terrifying event of this crisis so far.

There we see the best parallel to the Great War. The men moving pieces on the board were men of a prior age. They were trying to fight the old wars. Similarly, the political leaders were operating in a 19th century mindset. The trouble was they were armed with 20th century weaponry. Today, the West is led by 20th century men desperate to maintain 20th century arrangements. Their opponent is not Russian, China or the new world order, but the passage of time.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

The False Society

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Imagine you are the head of a grocery chain and one of your executives comes to you with a plan to boost sales of over-the-counter remedies. These are the things you buy for a sore throat or an upset stomach. His plan involves subtly infecting the customers with a mild virus. They will get sick and then come back to buy something to remedy the symptoms of the virus. The virus will be mild, but enough to cause most people some symptoms in the week after having been infected.

Unless you are a sociopath, you will think the guy is nuts. Odds are you will think it is some sort of elaborate gag. If he is serious, then you will call security to have the guy removed from the building. The reason is not just the ghoulish plan to poison people, but the fact that he could think of such a thing. You would quickly start to wonder what else this guy is capable of doing. If he is willing to poison thousands of people to boost sales, he is capable of anything.

The truth is though, companies are full of people who think like the ghoulish executive in that short example. For example, there was someone at the multinational that owns the Häagen-Dazs brand who decided to start shrinking the pint. It used to be that a pint is a pound the world around, but no more. A pint of ice cream in the United States has shrunk down to 14-ounces. The container has been subtly changed so the shrinkage is not as obvious to the consumer.

Shrinkflation has been a thing for a couple of decades now. Bottles of beer have started to shrink as well. Many are 11-ounces now. They changed the shape of the bottle to trick the consumer. This was a trick they started at ballgames. They made cups taller, but narrower, so they could call the regular sized beverage a large, when it was the same amount of fluid as the smaller size. Packaging science is now mostly about tricking the consumer into thinking less is more.

The marketplace has always been about deception. The seller is motivated to lie about his product and the consumer is motivated to lie about his interest. Since the dawn of the marketplace, authorities have promulgated rules in an effort to keep the lying to a minimum and therefore maintain a peaceful market. Those rules have fallen away in the modern age, where deception has now become a virtue. In this age, only suckers are honest in their dealings.

Mass media is the prime example. The big media operations publish stories that they know are false when they post them. They are not simply wrong about a few facts, but deliberately designed by a staff of people to tell a false story. We saw that with the Russian collusion hoax in the Trump years. The Post and Times had teams whose job was to make up fake stories, with the help of friends in government. Everyone involved volunteered for the job of deceiving the public.

We see this with the war coverage. This story is being pushed by the Drudge alternative called Revolver News. It looks very official, but a quick search of the three authors reveals they are Ukrainian activists sponsored by the usual suspects. All three are children, fresh from school, with no experience in this area. The people behind that institute had them do the copy editing and let them put their name on it in order to add to their resume. It is a common fraud in Washington.

That is the thing though. It is a swindle and a well-known one. Operations like “Institute for the Study of War” are just lie machines. Their task is to pump out regime friendly information that will get circulated by the media. The media, of course, knows this better than anyone, but they choose to pass it along anyway. Given what we saw in the Trump years, it is possible that the Washington Post put out an RFP for a fake study to fit the latest narrative on the war.

Joseph de Maistre famously said, “False opinions are like false money, struck first of all by guilty men and thereafter circulated by honest people who perpetuate the crime without knowing what they are doing.” This is true, in that the authorities in this age pump out false opinion in immeasurable volume. Normal people inevitably believe some of it and pass it onto friends. That gives it authority and before long a third of the public wants nuclear war over Ukraine.

Of course, that survey could be entirely fake. That is something else that has changed over the last several decades. It used to be that polling firms guarded their reputations by avoiding sensationalism. Now they only care about getting noticed, so we have polling firms publishing complete nonsense. Many are happy to give the customer what they want and those customers are sociopaths in the media. Polling is just a corrupt as everything else now.

If we return to our grocery store CEO and his psychopathic executive, the issue is not the scheme, but the person behind it. The sort of person who thinks it is normal to poison people is not going to think twice about poisoning his boss. Similarly, the sorts of people who think it is normal to fabricate studies, stories and so on in order to fool the general public is no different from the psychopathic executive. These are people who lack the ability to tell right from wrong.

It is tempting to think this is just the way the world is and we just see it more clearly now thanks to the mass media age. Some of that is true, but we also know that this sort of behavior was a primary concern in the past. Medieval governments passed rules to limit deception in the law and the marketplace. The ancients had draconian punishments for those who deceived the public. The ancient Persians treated deception more harshly than murder. People used to worry about this problem.

In this age, we have turned this on its head. Deception is a valued skill. The media selects for sociopathy. Our political parties admire those with a natural skill to deceive and quickly raise them to national status. That grocery store CEO would not exist as described, because he would have hand-picked that executive and probably gave him the idea for the mass poisoning campaign. The lie is the coin of the realm and the liars are the new aristocracy.

America is often called a great experiment and that is true. This is the first society to exist with nothing holding it together but impersonal economic relations. We are reaching the point where there are no rules, just who can get over on whom. It is the anarcho-capitalist society in which no one can trust anyone or anything. Instead, a war of all against all, it is an endless series of confidence games. Everyone has an angle and is trying to get over on someone else.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

The Great Divide

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If you are one of the tens of millions who voted for Trump in two elections, you are probably a bit puzzled by what is happening in “right-wing” media. If you have made the journey to this side of the great divide over the last decade, the distance between where you are now and those old voices on the Right seems much greater. It is one of those undiscussed aspects of the war in Europe. The great divide between the Cloud People and Dirt People has grown wider.

Right-wing talk radio which largely serves the over-sixty crowd now sounds a lot like it did in the 1990’s during the Balkan conflict. Back then they were demanding troops on the ground rather than the limited use of air power by Clinton. He was Neville Chamberlain and Slobodan Milošević was the new Hitler. Today the Sean Hannity types are demanding an invasion of Russia because this time Joe Biden is Chamberlain and Vladimir Putin is Hitler.

It is not just mainstream conservatism that has pulled out the old outfits from yesterday in order to indulge in nostalgia. Populist Inc., which formed up during the Trump presidency, suddenly sounds like every neocon nutter, demanding no-fly zones and full-scale economic war. In many cases, they are racing to out-crazy the neocon crazies on this issue. It turns out that the America first rhetoric was just a public relations campaign for the same old conservative grift.

What this reveals is that the people inside the political bubble never learned anything from the last decade. It brings to mind the famous quip misattributed to Talleyrand but written by a French naval officer. “Nobody has been corrected; no one has known to forget, nor yet to learn anything.” A little more than a year after the great danger was purged from their ranks, the Cloud People are carrying on as if the world is right back to where they left it in the fall of 2016.

One of the things forgotten is that people care about practical things like the condition of their roads, their living standards and the safety of their communities. They will respond to abstract concepts like patriotism, for sure, but only if the call to act is in defense of where they live and how they live. The reason a TV pitchman won the 2016 election was that he spoke about the things that mattered, while his opponents blathered on about “who we are.”

It seems that the disconnect between the Cloud People and the Dirt People has managed to grow during the last decade of troubles. This post by one of the zombies of Conservative Inc. is illustrative. Even though he uses a profile picture from thirty years ago, Kyle Smith is a middle-aged man. He should be aware that all around him is raging a weird 1980’s nostalgia. He should also be aware that there has always been a strong isolationist strain in American politics.

In fact, the default American position until the 20th century was to not go abroad in search of monsters to destroy. America was the well-wisher of those seeking their freedom, however they defined it, but otherwise, the American creed said that the goal of foreign policy was to avoid getting involved in the affairs of other nations. To go around trying to set the world right would mean the “fundamental maxims” of our policy would “insensibly change from liberty to force.”

Put another way, Kyle Smith does not seem to know much about the country or the American Right, of which he claims to be a part. He is not alone. The flagship site of Buckley-style conservatism is equally ridiculous. Jim Geraghty is their main guy now and he seems to get all of his information from far-left news sites. This post reads like some sort of weird Ukrainian fan fiction. For him and his fellow travelers, the whole “fake news” thing is long forgotten.

It is not just the right-side of the political class that has learned nothing from the last decade of populist tumult. Progressive Inc. is now willing to tolerate ten dollar gasoline and bread lines just so they can show their solidarity with Ukraine. They have suddenly got over their fear of fascism in order to support actual fascist like the Azov Battalion fighting in Ukraine. Maybe they will start offering amnesty to J6 prisoners if they agree to wear a Ukrainian lapel pin on TV.

Again, you see people who have learned nothing from the past. In 2016 the people voted for the ultimate protest candidate. Donald Trump was the anti-candidate who crudely mocked Cloud People values. That was when gas was under three dollars, the grocery shelves were stuffed with cheap food and no one had the sniffles. Will the people be more willing to go along with this lunacy when they now have to worry about paying their bills every month?

Again, from this side of the great divide, the madness now gripping the beautiful people with regards to the war seems so alien and strange. Many can remember getting emotionally drawn into the war fever of the Bush years only to learn that it was all a big lie perpetrated by people who were never on your side. To see the same people selling the same lies from media platforms is confirmation that there is no bridging the gap that lies between the two sides of the great divide.

The war in Europe and the reaction to it is revealing a truth about the great divide that is the final step for the dissident. There is no bridging the gap because there is no reforming the Cloud People. All that can be done is prepare for the point when reality finally comes calling for the ruling class. That moment may be upon as prices soar due to the gears of the New World Order grinding to a halt. Soon, rule by expert is not going to sound very appealing.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

The Worst Case

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It is assumed that the worst case scenario for the Russo-Ukrainian conflict is the direct or even indirect involvement of NATO in Ukraine. If NATO forces came into direct conflict with Russian forces, the result would be total war and total war could easily and quickly lead to nuclear war. This is a remote possibility as NATO has been adamant about not getting militarily involved. The West is content to use the economic weapons at its disposal that it assumes the Russians have anticipated.

While there is nothing worse than nuclear war, the fact that it is the least likely outcome means it is not the worst probable outcome. The fact is, the Cold War was a good lesson in the use and non-use of these weapons. Nuclear weapons are last resort defensive tools. A nation will use them as a last gasp at survival. This is why Israel stole the technology from America in the last century. It is why North Korea is developing the ability to deliver a nuke to North America.

If nuclear holocaust is off the table and a wider scale war in Europe is off the table, then that leaves the softer, less predictable outcomes. We are already seeing big ripples in the financial markets as people try to figure out the downstream consequences of the economic sanctions on Russia. Despite what the media may claim, Russia, Belarus and Ukraine are not hermit kingdoms. They have a lot of economic links to the rest of the world and are a vital part of the global supply chain.

For example, one bottleneck in the chip supply chain is in Ukraine. The world has just started to turn the tide on the chip shortage, but now a vital bottleneck has been closed due to the war. Optimistic predictions said the chip shortage would be over by the end of 2022, but now that date is pushed well into the future. Everyone in the dreaded private sector knows the mischief caused by the chip shortage. That mischief is now going to play out for a much longer period than expected.

That last part is where to focus. Economics is about expectations. People will stock up on something, for example, if they anticipate a shortage or price hike. On the other hand, people will take risks in good times, risks like starting a business, buying a new home or hiring new staff. A massive amount of risk has been dumped into the global economy as a result of this war and the response from the West. For the first time in a long time everyone has a reason to not take any risks.

On the more tangible side, energy prices are spiking at a time when we have spiraling food prices globally. The last time this happened there was civil unrest throughout the Middle East and North Africa. The so-called Arab Spring was marketed as a quest for freedom but it was a revolt over food and fuel shortages. It is good to remember that the same people who sold those results as a positive are the ones responsible for the mess in Ukraine and responsible for managing the fallout.

Ten years ago, the Arab Spring was watched in America during a time of historically low inflation and interest rates. The population was fairly content. Today, America has double-digit inflation and is now about to get an energy cost spike. The population is also at each other’s throats because the people in charge are sure one half of the population are evil insurrectionists. A global depression is not going to help sooth the social tensions that exist in Western nations.

Wide-scale supply chain and financial disruptions is probably the rosy scenario end of this conflict in Ukraine. Shippers are already hesitating to take on Russian products, even those products are not sanctioned. It is conceivable that deliveries of vital natural resources like fertilizer, food and energy from Russia, Belarus and Ukraine will be delayed for the next several months. These countries ship a lot of food to the global south, so it is a profoundly serious problem.

If that is not enough to consider, think about the last time waves of men flooded into Europe from the south. That was largely driven by economics. Given the socio-economic mood in Europe right now, how well will they handle a million men marching into the heart of Europe from the Middle East and Africa? Who will be blamed this time for the demographic calamity that would follow? Far-right candidate Eric Zemmour could end up sounding like a moderate.

The global order that the West, led by the United States, has evolved over the last several decades assumed certain things. For example, populism was assumed to be impossible in a system that efficiently delivered quality consumer goods. It assumed that price shocks were a thing of the past. Similarly, inflation was assumed to be controlled by the judicious control of the money supply. It assumed the free flow of goods, capital and information.

The system struggled to contend with the populist revolts of the last decade. Two years of mismanagement of the Covid crisis have brought populism back to the fore and called into question key economic axioms. We have labor shortages all over the place, despite rising wages, but we also have spiraling inflation. This is at a time of historically low interest rates. Prior to the war, this combination was assumed to be impossible and now it will only get worse as a result of the crisis.

When the axioms of a system begin to crumble, people quickly begin to doubt the system that rests on those axioms. Confidence in the socio-political order was already falling as a result of demographics and mismanagement. The banging of war drums by the geriatrics ruling Washington is not going to change this. In fact, it is clear that the public blames those geriatrics for the Ukrainian mess. We are entering uncharted territory with regards to public confidence in the system.

It very well may be that the worst case scenario is upon us with regards to the Russo-Ukrainian conflict. A fragile system that was already wobbling due to demographics and mismanagement is now about to receive a series of economic body blows. Europe may be getting a new wave of demographic reality. The worst case scenario may be a revolution in public consciousness about the socio-economic order. The elites may be blowing their world up the old fashioned way.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

Storm Clouds

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If you are over a certain age, something you will remember is that the economy used to be a central part of the daily news feed. People talked about the economy because it was always in the mass media. Of course, you had lots of news about finance, especially the stock market. This dovetailed with the stories about the federal budget and the resulting deficits. People used to talk about the federal debt because it was a number that was easy to conceptualize.

All of this has been pushed aside in favor of other topics now. Look at the front page of the New York Times on any day and the one thing you are not going to see is news about the debt or even the economy. Instead it is foreign affairs or perhaps a long story on the fight against Trumpism. The Washington Post is pretty much just a copy and paste operation, relying on press releases from government agencies. It is as if the economy and related topics no longer exist.

One reason people are not talking about the economy over lunch is the mass media has been told to drop it. The real power of corporate media is the power to ignore, which is what they have done with economics. When was the last time the New York Times did a big story on the finances of the government? There was a time when this was a stock feature. People used to know the size of the federal debt because it was a number that was made meaningful by the media.

Another reason econ-talk has moved to the fringes of the public debate is the people in charge launched a culture war against the people back in the Bush years. That is when the great shift in media focus started. Bush became Hitler and the Left reorganized itself around the great crusade against fascism. This academic psychosis started to spill into the retail politics of the Left. By fascism they mean anything and anyone that opposes the grab bag of incoherent beliefs now called the Left.

The great leaving alone of the economy was also made possible by the fact that the system seemed to be on autopilot. The mortgage meltdown of 2008 did not result in bread lines or mass unemployment. The accounting scandals from the prior decade had no impact on daily life. We have had several market crashes over the last twenty years and no traders have leaped from their office windows. Like war, the gyrations of the economy have been “made for television” events.

The truth is the economy is something people care about and it is something they can know about without the media. If you are a Dirt Person, you have been watching your food bill tick up over the last year or so. You have chatted about this with people at work and with friends at parties. Food inflation is becoming a feature of life. Now gas prices are starting to creep into the conversation. The solons in the mass media may not notice it, but everyone else sees it when they gas up.

The last time inflation was a thing, Reagan was going around the country while running for president, saying, “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” This sounds way over the top, but it resonated with people because at one level he was right. Crime is about social trust and the crime of inflation robs the people of their trust in the basic functioning of society. Inflation puts everything about economic life up for grabs.

Compounding things now is the fact that the core demographic responsible for there being an economy has lost all trust in the government. The inflation numbers recently posted were met with scornful laughs. Everyone knows they are under-gunning the inflation numbers, because these are people who have lied about everything for the last decade or more. The same people who wear ceremonial face gear and lie about the Covid problem are now reporting seven percent inflation. Right.

This is why inflation should be the number one topic on people’s minds as we proceed through the long dark winter Biden has inflicted on us. Even the fake numbers the government released say that something must be done. The Fed has committed to tightening the money supply starting in March. History makes clear this will result in a recession and an uptick in unemployment. Put another way, the bad news on the economy is just getting started.

How will the public respond to the first real recession in decades? How will they respond to the rambling about it by a geriatric old fool who can barely put two sentences together? How will Americans respond to the stream of managerial sociopaths that will be sent out to insult our intelligence? How will the media respond? They have been the Greek chorus for the system for so long, are they even capable of dealing with a practical issue at this point?

This long vacation from reality that our ruling class has enjoyed since the end of the Cold War is about to end. They can stick to whatever theories they remember from their grad-school seminar on diversity and equity but the reality of the human condition has not changed. The ruling class of any society is responsible for the general welfare of the people in that society. When they fail, they are held accountable. This is an immutable law of human organization that never goes away.

This is why the situation in Canada bears watching. Trudeau is a simpleton who has no business being in charge of anything. Contrary to the old chestnuts about democracy, he is not the ruler the people deserve. He reflects the competence of the ruling class that installed him in office. The people who thought this feckless pansy was right for the job are so far proving to be incapable of managing this trucker crisis. They have made Canada the first English speaking dictatorship.

The American people are far more docile and subservient than Canadians, but until a few weeks ago people assumed the Canadians were a beaten people. It turns out that there is still some life left in Canadians, which suggests there may be a flicker of life left in Americans as well. Put enough pressure on people and they will find the courage to rebel against their masters. Inflation, recession and widescale unrest is the sort of pressure Americans may need to find their spine again.

The holiday from reality is over and we are about to enter into a period in which serious topics with real meaning return to the fore. The reckless sissies and addle minded old fools who have been playing make believe for the last few decades will now have to face a real crisis. Similarly, a lethargic and prostrate people will now have to remember how to stand up for themselves again. It will not be long before the last few years of the culture war seem like a golden age of tranquility.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

The Pirate’s Cove

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An observation made by paleocons in the last century was that the political system had been purchased by the financial system. By that they did not mean bankers were handing bags of cash to specific politicians. That has been going on since both money and politics have existed. What they meant was that the financial system had started to overwhelm the political system. More specifically, the ethics of the emerging new financial system had overwhelmed the political system.

In the money game, every rule is seen as an obstacle to be circumvented, rather than a limit on activity. The only thing that matters is profit. No one in the world of finance has ever considered if their trade is ethical, outside of some areas where there are agreed upon rules or the state imposes rules. In these exceptional cases, it is not ethics that restrains the activity, but force. Banking has always been a Darwinian game where the strong eat the weak. Morality has no role.

Government, on the other hand, has to be a game of morality, in which the boundary between right and wrong is policed. That is the point of government. The starting place of every human organization is answering the question, “Who are we?” What flows from that is a set of rules to define the answer. Government is either granted the power to enforce the rules or the elites seize power in order to enforce the rules, depending upon your philosophical outlook. That is the point of the state.

What some of the paleos observed in the 1980’s is that the ethics of the financial class had overtaken the ethics of the government. Politicians were now thinking the same way a banker thinks when he sees a rule. The first and only thought is how can I get around this in order to profit? Of course, those who are good at solving the puzzle are rewarded, while those who are bad at it or refused to abide by the new ethics of government, are eliminated.

If you look at a graph of the Dow Jones from the start of the last century to the present, what you notice is a sharp tick up in the 1980’s. From WW2 into the early 80’s the graph is a smooth upward trend, reflecting the post-war expansion. Then all of a sudden, when the post-war expansion was clearly over, the graph turns sharply upward and has climbed to heights thought impossible. It also corresponds with the collapse in political ethics that started in the 1980’s.

Cynics will say this all sounds naïve as politicians have always been crooked, but that confuses the personal with the systemic. Men are not angels and every system, no matter how ethical, will have some unethical people in it. The reason we know politicians are crooks is we used to regularly arrest crooked politicians for taking bribes or running schemes. In other words, they fell afoul of the rules. Note that we no longer arrest politicians for financial corruption.

Those old enough to remember the before times know that the corruption surrounding the Biden family would have been disqualifying a generation ago. Taking any money from a foreign source was going to be a problem. Today, it is rare to find a pol in either party who is not paid by foreigners. One member of the House intelligence committee was sleeping with a Chinese spy. The normalization of bribery over the last generation is well outside the norms of traditional politics.

This is what those paleos were talking about in the 1980’s. Here is a good example of this from Pedro Gonzales in Chronicles. He got access to a Telegram channel where a payola scheme was openly discussed. There was a time within living memory when this would have been devastating. Careers would have been ruined. Today everyone inside the political system shrugs, because everyone is on the take. Pens for hire are so common that no one thinks it is odd.

This is why National Review, for example, created the National Review Institute, a not-for-profit that operates National Review. The not-for-profit does not have to disclose its donors, so no one knows who is calling the tune. That money is used to pay for content, often supplied by allies of the donor as guest content. There are shops all over now that hire writers to produce white box content for interest groups, who then sell it to these sites for the benefit of their donors.

This is not an accident. Just about every mainstream media outlet aligned with the two parties sits around thinking about how to do this. They know it would not sit well with the public, which is why they setup the not-for-profit entity. Like the bankers who hide their grifts in mountains of regulation, the political press hides their corruption in the tax code, fund raisers and phony book deals. Like the bankers, they look at the rubes on Main Street as suckers to be played.

Of course, if you want a career as a pundit, you better figure out quickly that the game is to make the donors happy. Since those donors are in one way or another aligned with finance or technology, the issues are simple. The reason National Review will never have a discouraging word to say about tech censorship is they rely on tech money to keep themselves in the lifestyle they believe they deserve. Whether they believe it or not, everyone involved is a pen for hire now.

Again, this is not about some people being corrupt. This is a about a revolution in the ethics of the vast political system itself. Forty years ago, people across the political spectrum operated from the assumption that the goal of public policy was good government, which they defined in utilitarian terms. Good government was the greatest benefit to the greatest number of people. No one talks like this now, because no one thinks like this anymore. Everyone thinks like a banker.

The irony here is that the last forty years have been a great test of the libertarian claims about the nature of man and society. America has been transformed into a pirate’s cove where the only limit on your profit is your conscience. The one thing everyone agrees upon is that this system is horrible. Soon the other thing everyone will agree upon is that we need a strong hand to reimpose order. Right now, the left-authoritarians have the advantage, but the right-authoritarians have the numbers.

If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link. If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

Everything Is Broken

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Way back when the government kicked off the Covid panic, smart people pointing out that shutting down the world to bend the curve was not a cost free way of addressing the problem. In fact, it was a very expensive and risky solution to a problem that was best addressed through traditional means. The world has a pandemic every 15 years and a severe one at least once a generation. Humans have figured out to tough out these naturally occurring events.

Shutting down the world and making people stay home from work is a novel invention, so there was no way to know what would happen. Human societies are tough, so it took a while for the problems to manifest. Initially, those who could work from home worked from home and those unemployed were supported with subsidies. This could never be a permanent condition, so we have been trying to transition back to normalcy for the last six months, but things are nowhere near normal.

The Brits have gasoline shortages, and they are facing a winter with spiraling natural gas prices, because the energy supply chain is a mess. Keeping people at home meant keeping people out of their cars, which collapsed fuel consumption. The trucks and truck drivers were put to other uses and now that demand is returning, they suddenly have a shortage of trucks and truck drivers. This will soon hit other parts of the supply chain as demand suddenly increases for goods and services.

In the US, ports are a mess as they face similar supply chain problems. The ports in America are weird systems. The labor is unionized, but the unions are pretty much run by the government under an array of consent decrees. Demand for labor is driven by the ships in port needing to be loaded and unloaded. The stevedoring firms hire when they need to unload a ship, but they keep few fulltime people. They simply draw from the pool of longshoremen that operate at the port.

During the shutdowns, fewer ships came into port, so fewer people were needed to unload ships and fewer trucks were needed to cart the goods out of the port. That is why ships are stacked up at the ports now. The system for unloading those ships had atrophied during the pandemic, so it is now over-capacity. This leads to shortages and price disruptions throughout the economy. For example, America has been suffering an aluminum shortage for close to a year.

A good example of how throwing wrenches into the system has unpredictable long term effects is the automobile industry. When the government shut down the country, the travel industry was flattened. The car rental firms did the prudent thing. They liquidated their car fleets. After all, if you make your money renting cars and no one is renting cars, those cars are direct hits to the bottom line. In order to weather the storm, they sold off their fleets and furloughed their staff.

The trouble is a big source of used cars is the car rental industry. They get cars on programs from the manufacturers. They can be three, six or nine month programs where the company takes the new cars for a monthly fee and then returns them to the manufacturers after the term of the program. Those cars end up in the new car dealer lots as discounted used cars. Look around the car lots in America and what you see is lots of empty spaces where cars used to sit.

Once things opened up, the car rental companies went looking for cars, so they went to the used car auctions. Other shortages have made it impossible for the manufacturers to get cars to their own dealers, much less supply program cars to the rental fleets, so that left the used car market. Used car prices are now spiking to record levels because the supply chain is a mess. It will take years for this to normalize, and the cost will be in the tens of billions.

Of course, everyone who buys food has noticed that food is suddenly much more expensive and there are weird shortages. Like everything else, the broken supply chain is the main culprit. Those trucking companies suddenly put out of business by government fiat did not sit around waiting to open up again. They fired their staff, sold off their trucks and found other ways to survive. Rebuilding the many small links of the supply chain will take years and show up in higher food prices.

In a modern liberal democracy, every event requires a response, and every response requires a response and so on. The smallest pebble tossed into the water can potentially result in a flood. In this context it means government jumping in to mitigate the consequences of their fix for something else they broke. Inflation will get calls for more spending, which will get more inflation. The central banks will then try to redirect that inflation from goods to assets.

In other words, the shutdowns have created a dynamic of chaos that will take years to settle out, assuming no further shocks. The Biden administration is promising another meteor strike with their Build Back Better nonsense. You see, they broke everything and now see it as a chance to remake the world in their image. When crazy stupid people want to try to make the world, the only thing that can follow is chaos. We may be at the cusp of an age of unimaginable economic madness.

This is a good example of something said by Will Durant. “Out of every hundred new ideas ninety-nine or more will probably be inferior to the traditional responses which they propose to replace. No one man, however brilliant or well-informed, can come in one lifetime to such fullness of understanding as to safely judge and dismiss the customs or institutions of his society, for those are the wisdom of generations after centuries of experiment in the laboratory of history.”

In the fullness of time, after the West is a ruin of its own making, this age will be remembered as a gross and sustained violation of that sentiment. If over the last thirty years the people in charge had done nothing but entertain themselves with their toys, none of this would be happening. Instead, they kept trying to prove nature wrong and overturn the wisdom of ages. Reality does not take kindly to this amount of abuse, so there will be consequences.

The crackdown by the oligarchs on dissidents has had the happy result of a proliferation of new ways to support your favorite creator. If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link.   If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

The Limits Of Vampirism

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Imagine if tomorrow, the Federal Reserve announced that the top ten home builders in the United States are insolvent. They would cease paying interest on debt and probably would default on principal payments. Further, their bonds would be frozen for some period as the Fed sorted through their finances. It is not too hard to imagine as 13 years ago something close happened when Lehmen Brothers collapsed. It started a long financial panic and then a long recession.

Something similar is now happening in China. The nation’s largest developer is no longer able to pay its creditors. The Chinese government announced yesterday that the firm will not make interest payments and probably will default on principal payments, although that remains unclear. China Evergrande has liabilities over $300 billion, but this is China, so no one knows the real number. All anyone knows is they sit at the heart of the Chinese financial and real estate system.

One thing that is universally true in all times and all places, even in China, is that real estate is the base asset. Mother Nature is not making more of it, so it remains a constant and therefore the basis of all value. It is why this development is not just another story of corrupt financial dealings. As in the West, all land in China is leveraged and that leverage is treated as an asset, which means it is leveraged. If Evergrande stops paying its bill, many other firms stop paying their bills.

At this point, the financial world is not all that concerned with what is happening in Chinese real estate, but they were not concerned about the mortgage crisis in the United States until it was a pending disaster. The old claim that financial markets look forward and therefore offer a glimpse of the future was always nonsense, but the Lehman disaster proved that markets are not the future. The world of finance assumes tomorrow will be yesterday but better.

At the minimum, the Evergrande crisis is a test of the new Chinese model of governance ushered in under Xi Jinping. The relatively loose days of Chinese capitalism are coming to a close as the party imposes new rules on the economy and cracks down on its pirates. The focus is now on domestic growth, rather than cheap labor and exports. China is no longer the cheapest or most productive labor market in the world, so it cannot remain an export economy.

No one really knows if China can successfully make the turn from export economy to one driven by domestic consumption. The breathtaking modernization of the country is impressive, but that required massive cooperation from the West. If the United States had a ruling class concerned with the welfare of the American people, for example, the Chinese miracle never would have occurred. The feckless American ruling class cannot help China transition to a domestic demand driven economy.

The bigger question with regards to China and this current financial crisis is can the Western financial model survive the Chinese transition. For the last thirty years the corrupt Western ruling class has preserved itself like all corrupt ruling classes have done and that is with bread and circuses. The Chinese economic miracle has kept inflation down and money printing up. Cheap goods from China have been an essential part of maintaining stability in the West.

Inflation is already becoming a problem in America. In most parts of the economy, the food markets are plagued with supply chain problems and rising prices. Then there are labor market problems, some of which were created by the Covid panic, but others are the result of demographics. Those Baby Boomers taking early retirement due to the Covid panic are not going to be replaced by the magical people that we see on television shows and commercials.

Of course, the great retirement boom that is just started in the US will put massive strain on programs like Social Security and Medicare. Those programs represent trillions in debt that can never be paid in current dollars. Medicare is now projected to run out of cash in ten years. Social Security has been insolvent for a long time now, based on generally accepted accounting practices. Its assets were spent years ago by the government, leaving it with worthless IOU’s.

People are pointing to the current crisis in China as a replay of the Lehman debacle 13 years ago, but in reality, it is a continuation of it. Starting in the 1980’s, the people actually in charge of the world began to transition the global economy away from an asset based system to a credit based system. The great debt explosion that ensued took many forms and the rise of China was one aspect. Without the massive growth in global debt, China’s growth would have been impossible.

The thing with debt is that it has to eventually be repaid. That means there is a hard limit to the amount of debt that can be generated. A system based on the assumption that debt can expand forever will naturally end in a crisis when that that assumption runs into the reality of the debt limit. In this regard, Lehman, the mortgage crisis and now the Evergrande crisis should be seen as warning tremors. One day soon there will be no way to paper over one of these crises.

Step back and look at what has happened over the last half century and what you see is an effort to mitigate the demographic decline of the West. The reason China was so attractive to the West is she was full of young people. China’s utility to the West is in decline because she is rapidly getting old. The massively complex system that is the Western financial modern is just a way to turn the youth of other societies into cash for the Western welfare state. Their vigor is our safety net.

The trouble is the system drains the vitality of all those exposed to it. Japan was the first example of a formerly fecund society drained of its youth and vitality by exposure to the Western economic model. Korea soon followed. Now we see all of the same signs in China as she nears the end of her economic cycle. The only place left with lots of young people is Africa, but even the scheming of Western elites will never be enough to conquer the dark continent in this way.

In this context, what is happening in China is a sign that the system of endless credit expansion is really the implementation of a system that converts civilizational vigor into cash for a tiny minority. The natural limit on the expansion of credit is set by the limit of young people available to be consumed. China’s future was written in her one child policy and ultimately that would set the end times for the West. Once we run out of kids to convert to credit, the plates stop spinning.

The crackdown by the oligarchs on dissidents has had the happy result of a proliferation of new ways to support your favorite creator. If you like my work and wish to kick in a few bucks, you can buy me a beer. You can sign up for a SubscribeStar subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars to: Z Media LLC P.O. Box 432 Cockeysville, MD 21030-0432. Thank you for your support!

Promotions: We have a new addition to the list. Havamal Soap Works is the maker of natural, handmade soap and bath products. If you are looking to reduce the volume of man-made chemicals in your life, all-natural personal products are a good start. If you use this link you get 15% off of your purchase.

The good folks at Alaska Chaga are offering a ten percent discount to readers of this site. You just click on the this link and they take care of the rest. About a year ago they sent me some of their stuff. Up until that point, I had never heard of chaga, but I gave a try and it is very good. It is a tea, but it has a mild flavor. It’s autumn here in Lagos, so it is my daily beverage now.

Minter & Richter Designs makes high-quality, hand-made by one guy in Boston, titanium wedding rings for men and women and they are now offering readers a fifteen percent discount on purchases if you use this link.   If you are headed to Boston, they are also offering my readers 20% off their 5-star rated Airbnb.  Just email them directly to book at sa***@*********************ns.com.

College Sportsball

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Note: The weekly Taki post is up. Behind the green door we have the Sunday podcast, a post on the joy of work and a review of the movie Giant, which I hated. Most of this is  available to those who buy me a beer. They are not hosting podcasts yet, so that is exclusive to SubscribeStar for now.

Last week, the American sporting world was sent into a frenzy over news that the University of Texas and the University of Oklahoma were planning to leave the Big 12 conference for the Southeastern Conference. In addition to stripping the Big 12 of its flagship institutions, it would make the SEC into a juggernaut. They would have half of the dozen or so major brands in college football. This would no doubt set off a frenzy of moves by the rest of college football in order to keep pace.

For those outside the United States, college athletics is a big business and a big part of the sporting tradition in America. It all started innocently enough when groups of young men at college would challenge the young men of another college in some sort of athletic competition. Before long it was formalized and became a part of the identity of the college, a way for the students and alumni to bond. The colleges found it was good advertising, so they would offer good players free tuition.

Into the 1980’s college sports, not unlike professional sports, was mostly the plaything of rich people. Wealthy alumni would give money to the school so they could build arenas, pay players, and hire top coaches. To be a top donor to a college was a prestigious thing, so successful alumni were motivated to give back. Then the world changed in the 1980’s with the explosion of television. With the spread of cable, television revenue exploded, and it poured into college sports.

It is fair to say that college sports, particularly college football and college basketball, shifted from semi-professional and informal to professional and formal. Prior to the cable age, top coaches made a nice living, but the rest were paid like any other employee of the university. Today, top coaches are the highest paid employees on campus, by a factor of ten. The college athletics department is a 100 million dollar enterprise with hundreds of staff and players.

College football is the primary driver. Football is the most popular television sport in America by far. College basketball also plays a role, but it is primarily football that is driving the economic revolution in college sports. Unlike the NFL, the fans of college football have a bond with the players, as the players, in theory, are attending classes at their school and will be proud alumni one day. Despite the obvious exceptions, this is true, and the players remain part of the community forever.

Both college basketball and college football offer good examples of the dangers of an unregulated marketplace. Into the 1980’s, all college sports were governed by the NCAA, which tried to maintain college athletics as amateur endeavors. With the flood of TV money, the power of the NCAA has declined to the point where they have little say over the governance of football or basketball. Instead, what has erupted is a free market free-for-all where the big try to eat the small and even some of the big.

Prior to the financialization of college sports via the conduit of television money, college sports were a regional enterprise. Schools organized locally into conferences, which supplemented the NCAA in governing the sports and provided local management of the routine items like scheduling and tournaments. With billions in TV money, these conferences were not only empowered to break free of NCAA governance, but they could also go to war with one another in an effort to gain market share.

Contrary to what libertarians claim, this explosion in competition among suppliers did not result in lower prices to consumers or great variety of product, but rather a massive contraction of the marketplace along with spirally costs to consumers. In the 1980’s colleges gave their students free tickets. A college football game was a cheap afternoon of fun for the fans. Today, students pay for seats through their tuition and the fans often have to donate thousands for the right to buy tickets.

Further, the sport of college football is contracting. That is the significance of the latest news about Texas and Oklahoma. The old model was a conference anchored by a few big brands, like Texas and Oklahoma. The league shared revenue and cooperated in scheduling and promotion. The anchor schools got to control the league for allowing the smaller programs to freeload off their brand a little. That model is collapsing as the big brands now seek to combine and exclude the smaller schools.

Like the computer business, college football is headed to a world in which a small number of big names control the market and work to exclude everyone else from the revenue stream. In the 1980’s there was a dozen computer makers with different takes on the home computer. Today there is basically one type of PC. The same happened with mobile phones. The unregulated technology market collapsed into an oligarchy, and we are seeing the same thing happen with college athletics.

Something similar happened with boxing in the 1980’s. It used to be that every large city had weekly boxing shows where up and coming fighters battled one another for recognition and the dream of a title shot. Television put boxing on every week as a normal part of its content. Friday night fights was a thing into the 1970’s, until the cable television explosion. Within short order, greed and corruption removed boxing from the public square and now it is barely an afterthought.

This will probably happen with college sports. There are now minor leagues popping up to pay high school basketball players rather than have them compete in amateur leagues or go to college. It will soon be like tennis, in which promising players turn pro once they hit puberty. Also, like tennis, the interest from the general public will decline. A few stars will make millions, but the rest will be used to maintain a system that was busted out by the usual suspects.

The point of all this is that markets are man-made things. They are not like mushrooms that spring up wherever man leaves nature alone. In order for a market to function, each transaction in the market must have a disinterested third party with the power to enforce both ends of the transaction. It must also have the power to prevent a monopoly of supply or demand. Like a sea wall, this governing authority prevents nature from taking its course and turning the market into an oligarchy.

Boxing never had a governing body to impose order, so it collapsed into a chaos of greed and corruption. College athletics is going through the same process and will meet the same end. Without some entity to guard the interest of the whole, the participants will cannibalize one another until the system collapses. This is the nature of markets and it is why markets can only exist when a controlling authority tasked with preserving the market has the power to impose order on the market actors.

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