Monthly Archives: May 2011

On Crisis

Reinhart and Rogoff are looking at historical evidence of defaults and make a strong case about what prerequisites will allow for a crisis to precipitate. Right now, Greece, Spain, Portugal, and Ireland are in the most precipitous situation and stand ready to create a replay of the crisis that followed in the wake of German default in the late 20s.

Is this a stretch? I don’t think so.

Zimbabwe, Argentina, and others went bust either singly or as part of a regional financial crisis. We’re looking today at a global situation, with much more going on in more countries than in any other crisis since 1927-1933. Look at Spain’s recent election results: the Socialists that advocated austerity were swept aside in favor of populist parties. Greece isn’t likely to accept a surrender of fiscal independence to a band of German bankers, so look for a political trump there of any possible economic solution involving staying in the Euro with austerity. Italy’s and Belgium’s debt outlooks have both been lowered, and Italy is one of the G7/G8 nations: they’re a whale to the minnow of Greece.

The outcome of a crisis is never certain: one only knows that a crisis will precipitate an outcome that is in many ways significantly different from the set of conditions that existed prior to the crisis. While hindsight is also clearer than what people see at the time events are happening, it’s also insulting to those that experienced the events. By that, I mean we need to take a look at how people react in the midst of a crisis and what causes them to realize what will happen down the road. What danger signs do people consider? What events do they consider significant?

In Nazi Germany at the time of WW2, roughly half the Jews there had fled, while roughly half remained. While there were likely many Jews that could not afford to travel, there were those who could afford to do so that felt things would be all right in the long run. For those who fled, different things acted as triggers to their decision to depart. As the events became more obvious, escape became more difficult to accomplish, but remained possible. From a man who wrote “Mein Kampf” leading a coalition government to the Reichstag fire to the Enabling Act to Kristallnacht to the Nuremberg Laws to Rhineland occupation to Anschluss to Sudetenland to the Danzig crisis, events mounted in seriousness and yet war and its consequences still came as a surprise to many observers. Such will happen again in the current crisis.

This is not to say that we’re going to see, specifically, Nazism, World War, and a Holocaust. But I do believe we will see more political extremism and populism, increased tensions that will lead to more conflicts, increased opportunities for small nations to wage war as the bigger nations are preoccupied with internal troubles, and increased opportunities for ethnic-based conflict as the peacekeepers turn inward. We’re already witnessing the various Arab states dealing with their outbreaks of democracy in their own ways, and none of them are finished with their internal turmoil.

A huge question mark in my mind is China. It recently had to declare martial law in Inner Mongolia, adding that region to its list of ethnic hotspots. Couple that with increasing unemployment and inflation, and the necessary preconditions exist for a potential violent regime change in China – political infighting within the CPC at the very least and open warlordism with a breakdown of central authority as a real possibility.

Now back to Europe. 45% of Spain’s under-25s are unemployed. Massive anti-government protests have happened across the nation. This is on the level of what took place in Tunisia and elsewhere, this time in Europe. Greece had similar protests, and those are sure to worsen as the economy there worsens. Italy could be next. On the strategic side, the Visegrad nations of Poland, Hungary, Czech Republic, and Slovakia have agreed to form a battlegroup under Polish command. This is significant because they would not feel compelled to do so if both Russian power were not on the ascendant and protection guarantees from NATO were credible. The Visegrad nations are seeking to extend their alliance to Romania and Bulgaria, to formalize a vision of Pilsudski’s to create an “intermarium” alliance between nations that were traditionally in the orbit of either Russia or Germany, or both.

When was the sign that got me thinking along these lines? When Russia invaded Georgia in 2008 and the rich world watched on, impotently.

Wilson’s “The New Freedom”

The New Freedom was written by Woodrow Wilson in 1912. I am finding it a fascinating read. While I do not agree completely with everything Wilson says, I do find his observations on the vast changes the USA underwent from 1890 to 1910 to make for compelling reading. Much of what he says resonates today. I would say his comments resonate even more so, since there have been nearly 100 years since he wrote for the forces he observed to continue their work.

Change the Government?

Said the message board poster to me: “If government debt only benefits the wealthy then clearly society should get rid of it.”

Easier said than done. Government benefits the wealthy largely because the wealthy benefit the government. It’s a two-way street, to boot.

It’s not all doe-eyed politicians falling under the sway of evil Big Money. I’ve heard a good number of anecdotes about how politicians can’t take your calls because they’re too busy speed-dialing every multi-millionaire in the country. Then there was the story related by a former president of Standard Oil when he went to Congress to see why it was passing so much legislation against his company.

He went to the head of one committee, who flatly stated that the laws against Standard Oil would stop as soon as that company dumped its current legal representation and signed a contract with the committee chair’s legal partners back in New York. The representative was basically demanding a huge bribe for himself and his partners, and the president of Standard Oil refused to play ball that way… but I think we all know that it continues.

Because of the two national parties and their primary systems, we only get to choose leaders that are pre-approved by some segment of the powers that be. We don’t get to draft our own local heroes and have them battle it out for the political mindshare of the nation: we get Tweedle-Dum and Tweedle-Dumber. We’re free to think that Tweedle-Dumber is the other party’s man, but there really isn’t enough difference between the two – except on social issues and in personal style – to truly make a difference.

The level of institutional change necessary to effect a change in the way the USA is governed is sufficient to be described as revolutionary at the very least and cataclysmic in only slightly more extreme scenarios.

George Friedman of Stratfor has said that the struggle in the USA between empire and the republic is very real. I’ve read a set of books from the turn of the previous century to indicate that the struggle was already finished by 1919 and the forces of empire emerged victorious. Even then, authors complained of media concentration in the hands of the elites and the use of propaganda to distract people from actual goings-on. Every thing said in these books from 1902, 1919, and 1921 resonates today, but even more strongly because not one condition they decried 100 years ago has done anything but increase in intensity.

Many consider Eisenhower’s speech about the military-industrial complex to have been a warning back in the 1950s: It was only an echo of sentiments voiced by Wilson in 1912, in his “The New Freedom.” The problems we worry over today were already intractable a century ago.

The Flipside of the Monroe Doctrine

Whenever I heard about the Monroe Doctrine in school, it was always about how the USA put it forward to protect the Latin American republics from European interference. Never once was it mentioned that the Monroe Doctrine also effectively meant the USA could exercise a veto power on any Latin American relationship with the rest of the world. The new republics never asked for the doctrine in the first place and it was useless whenever the British navy didn’t feel like blockading France… until 1898.

After 1898, the USA could use the Monroe Doctrine to extend a condition of empire over the whole of Latin America. Rather than incorporate the lands politically and then have to deal later on with questions of citizenship and rights, as did the Roman Empire, the USA allowed for political separation to exist in legal terms, but managed to nevertheless control Latin American nations through forced treaty obligations and military interventions. This, in turn, meant that US corporations could use the puppet governments propped up by US forces and US-trained forces to create unfair economic arrangements to suck natural resources out of Latin America to make cheaper goods for US citizens. Slavery existed, just not in a jurisdiction where it was both illegal and where law enforcement would act to put an end to it.

Non-Muslim Mercenaries in the UAE

Why isn’t this stuff in the major media? It’s because advertisers don’t want it. Therefore, you need to start getting news from ad-free sources. The story about the UAE contracting with Blackwater’s founder to provide specifically non-Muslim mercenaries to provide crowd control is absolutely sickening.

The upshot of this is that the UAE anticipates pro-democracy rallies and has chosen to put them down with brutality. The USA supports this move. Many of the mercenaries for the 800-man unit are from Colombia and South Africa, areas with a history of extralegal killings and rogue paramilitary forces. The guys the UAE is bringing in are mass-murdering thugs that will be ready and willing to pour hot lead into rioting crowds of enslaved foreign workers – and the USA is ready to smile on that sort of thing.

Drug Violence Moving Through Central America

Democracy Now! reports that Los Zetas mass-murdered 27 people on a drug dealer’s ranch in Guatemala. Los Zetas used to be centered on Mexico: now their reach extends beyond that nation’s borders. One wonders what they’re doing in the USA, if this sort of thing is going on in Guatemala.

I’ll tell you: drug dealing concentrates money very quickly. The concentration of money leads to economic and political power. Simple as that. Of course, Los Zetas can’t just sit on their money: they have to launder it, and that means it hits the banking system.

Money laundering is the third biggest industry in the world, by some estimates. That makes the global banking system something that goes hand in hand with the drug cartels. It’s not just the cartels that make money off of drugs: banks got some skin in that game, as well. That means the influence of drug money and drug power can be exerted by the banks in addition to the cartels. This stuff reaches to the highest levels.

Economics Joke

Four economists are taking a shower. One’s a classical, one’s a Keynesian, one’s a monetarist, and one is a Marxist.

The hot water goes out because someone started the dishwasher.

The classical economist stands there for 90 minutes, shivering in the cold water. He does that because he believes that the hot water will eventually come back on and there’s nothing he should do to bring it back sooner.

The Keynesian starts fiddling with both the hot and cold water valves in an attempt to fine-tune the system while using a government-issued emergency hot water supply he had installed in his shower. Unfortunately, the supply only delivers the hot water to certain sectors of the shower and most of it goes down the drain. Darn leakage!

The monetarist doesn’t want to shiver and he doesn’t want to waste water. He just turns off the cold water and enjoys the warmth of a slowly increasing trickle of warm water. This works well until 2008, when the pipes freeze and the velocity of the water goes almost to zero.

The Marxist thinks the other three are total idiots and lashes out by smashing the hot water tank, leaving everyone and everything equally dirty. Showering was an opiate of the masses.