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The EU’s Crisis Is Global: Neocolonialism, Hyper-Financialization and Hyper-Globalization Come Home to Roost

The EU’s Crisis Is Global: Neocolonialism, Hyper-Financialization and Hyper-Globalization Come Home to Roost

The EU’s crisis isn’t limited to energy. It is a manifestation of the global breakdown of Neocolonialism, Financialization and Globalization.

The European Union (EU) was seen as the culmination of a centuries-long process of integration that would finally put an end to the ceaseless conflicts that had led to disastrous wars in the 20th century that had knocked Europe from global preeminence.

Wary of the predations of the U.S. and rising Asian powers, European nations sought the economic and diplomatic strength of a confederation that would be greater than the sum of its parts, a union that would restore Europe’s rightful place as a global power.

This worthy goal was undermined by the destructive dynamics of the past forty years: Neocolonialism, Financialization and Globalization.

These dynamics are unstable due to their internal contradictions. In classical colonialism, the Core dominates the Periphery with force, extracting economic value by exploiting the subject states’ commodities and forcing the colonies to buy the valued-added finished goods produced by the colonial power’s domestic economy.

This extractive model was at odds with the liberal worldview of the colonial powers which held self-rule and open markets as necessary to stable prosperity. The contradictions of classical colonialism led to its collapse as colonies broke free and the colonial powers were forced to navigate a more open global economy.

Beneath the glossy vibe of strength through unity, the EU institutionalized a Neocolonial Model in which some EU members are more equal than others, a divide that was starkly revealed in the debt crisis of 2011-2012.

I described the EU’s version of the Neocolonial Model in 2012: The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

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The Fed Can’t Stop Supply-Side Inflation

The Fed Can’t Stop Supply-Side Inflation

The Fed and other central banks have zero control of supply-driven inflation, period.

America’s financial punditry is bewitched by four fatal fantasies:

1. Inflation is demand-driven. If the Federal Reserve (or other central banks) reduce demand with monetary tools like raising interest rates, inflation will cool.

2. Substitution of high-cost goods with lower-cost goods reduces inflation, and substitution is infinite: there’s always cheaper chicken if beef gets too pricey.

3. Higher prices will lead suppliers to increase production, which will increase supply and reduce prices.

4. The Federal Reserve has control of all these inflation-reducing dynamics via interest rates and its balance sheet (buying or selling various durations of Treasury bonds).

All of these are fantasies, fantasies that are fatal because they’re flat-out false. The Fed has no control over supply-driven inflation, which is what we have now. Consider eggs. The price has skyrocketed not because consumers suddenly ramped up demand that is now outstripping supply, but because essential inputs to supply such as feed and energy have soared in price and constraints that have nothing to do with interest rates such as the spread of bird viruses.

These essential inputs are going up in cost due to factors completely unrelated to interest rates or monetary policy. Drought and weather extremes are constraining the supply of animal feed stocks, and energy prices are being driven by geopolitical forces completely outside central bank control.

Infinite substitution is also false. What’s the substitute for eggs? Silkworm goo squeezed into plastic eggs? Well, not yet… there are no substitutes for eggs. And with the soaring input costs of producing chickens, chicken is no longer that cheap.

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Rather Than Focus on What You Don’t Control (“The News”), Focus on What You Do Control: What You Grow, Eat and Own

Rather Than Focus on What You Don’t Control (“The News”), Focus on What You Do Control: What You Grow, Eat and Own

Now that globalization and financialization are finally unraveling, people are slowly awakening to the national security foundations of localizing production.

What exactly is “the news” other than an inducement to passivity, despair and derangement? Since we exert zero control over what happens in distant lands and global economies, why waste time passively consuming “if it bleeds it leads” offal designed to addict us to a steady stream of despair and derangement?

Why not ditch “the news” in favor of focusing on what we do control: what we grow, eat and own? It’s almost a binary choice: either focus on screens of addictive offal for hours every day or act on our own behalf in the real world.

Food inflation is highlighting the financial value of home gardens. Paul of the Silver Doctors and I discuss turning gardening savings into more ownership of something we control (for example, precious metals) in Save Money On Food, Get Free Gold & Silver, Beat Price Inflation (1:08 hrs).

I’ve been posting about the value of gardening for over a decade, describing the financial and health benefits. I Dig Dirt: The Remedy for Derealization (July 23, 2011)         The Hidden Value of Gardens (September 13, 2014)

Food inflation simply increases the gains: One Solution to Soaring Food Prices: Start Your 2022 Garden Now (November 6, 2021).

Municipalities can either encourage or hinder local food production. Cities once grew between a third and a half of their own food within city limits: Could Urban Gardens Supply 1/3 of a City’s Food? Yes. (March 13, 2010).

If we’re not allowed to grow food, that’s a problem that can be solved by local lobbying or moving to a place where there are fewer restrictions on growing our own food…

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The Most Valuable Form of Money Nobody’s Seen–Yet

The Most Valuable Form of Money Nobody’s Seen–Yet

What is “money”? “Money” is a claim on the essentials of life. Ration cards are claims on essentials.

Many people expect “money” will soon be tied to commodities. Agreed. It’s called a ration card that grants the holder the right to buy a specific quantity of essential goods at a specified price.

This right is a form of “money” directly tied to the value of commodities.

Ration cards are the only fair way to distribute essentials in times of chronic scarcity. Markets work fine when there’s a substitute for whatever is scarce, but there are no substitutes for electricity, food, fuel or fresh water, the FEW essentials (Food, energy, water).

Leaving the distribution of scarce, no-substitutes essentials up to the market leads to the rich eating very well indeed and the poor going hungry. This leads to a little thing called the overthrow of the failed status quo and the destruction of a good chunk of its ruling class (Payback’s a witch, etc.). No bread? Let them eat iPhones.

We know ration cards work because a mass experiment in rationing essentials was conducted in World War II. Maybe fairness no longer matters (and if it doesn’t, then prepare for the overthrow of the failed status quo and the destruction of a good chunk of its ruling class), but if fairness matters–or the ruling elite wish to keep all their power and all their goodies–then rationing and the ruthless suppression of price gouging are as good as gold.

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The Age of Discord

The Age of Discord

It’s very difficult to find common ground that supports cooperation in the disintegrative stage of scarcities, rising prices, catastrophically centralized power and social discord.

Today’s topic echoes Peter Turchin’s 2016 book, Ages of Discord, which I have often referenced in blog posts.

I’ll also discuss two other books I’ve often referenced, Global Crisis: War, Climate Change and Catastrophe in the Seventeenth Century by Geoffrey Parker and The Great Wave: Price Revolutions and the Rhythm of History by David Hackett Fischer.

Turchin proposes repeating cycles of history of social integration (people finding reasons to cooperate) and disintegration (people finding reasons to not cooperate).

Clearly, we’re in a disintegrative stage.

Fischer proposed a repeating cycle of history in which humans expand their numbers and economy to consume all available resources.

Once all the low-hanging fruit has been consumed, scarcities arise, pushing prices above what commoners can afford, and the result is economic stagnation and social/political revolution.

Either humans exploit a new energy source at scale to provide for the larger population and higher consumption per person, or the population and consumption decline to fit available resources.

Parker covers the mutually reinforcing climate, political, social and economic crises of the 17th century. A long cycle of cold, wet summers reduced crop yields, leading to hunger and strife.

Parker also identifies another cause of the tumultuous, war-plagued 1600s: political leaders had consolidated too much power, enabling them to pursue disastrous wars without any restraint from competing domestic social-political interests.

Clearly, we’re in Fischer’s stage of overshoot and resource scarcity and Parker’s extremes of centralized power free to pursue catastrophic wars of choice.

In the 1600s, those launching wars reckoned a clean, decisive victory was within easy reach. In every case, the wars dragged on inconclusively or generated even wider conflicts.

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The Difference Between a Forecast and a Guess

The Difference Between a Forecast and a Guess

Every forecast or guess has one refreshing quality: one will be right and the rest will be wrong.

What’s the difference between a forecast and a guess? On one level, the answer is “none”: the future is unknown and even the most informed forecast is still a guess. The evidence for this is the remarkable number of informed forecasts that prove to be as completely off-base as the wildest guesses.

On another level, there is a big difference between an informed forecast and a guess–if the informed forecast has the consequential system dynamics right. The world is complicated and discerning the consequential dynamics in the tangle of complexity is difficult.

Context and perspective matter. So do incentives. To take one example of many, war planners in the Vietnam era looked at war from the perspective of “scientific metrics” that focused on collecting data on the efficacy of sorties and combat missions. This resulted in the infamous “body counts.”

The larger context was that war could be productively distilled down to metrics, costs and attrition: the enemy was presumed to be a rational player who will give up when the pain and cost become too high.

Planners slouching in comfortable offices have many incentives to “go along to get along”: and veering off into dynamics that can’t be conveniently measured and questioning the entire foundation of the war’s planning and execution will get you sent to bureaucratic Siberia. “Getting with the program” will get you kudos and promotion.

Hmm, which will most people choose? The Pentagon Papers circulated among hundreds of senior officials, and parts of the report circulated among thousands of lower-ranking employees. Only one person took the risks of sharing the report with the American public.

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Our Economy In a Nutshell

Our Economy In a Nutshell

The economy has reached an inflection point where everything that is unsustainable finally starts unraveling.

Our economy is in a crisis that’s been brewing for decades. The Chinese characters for the English word crisis are famously–and incorrectly–translated as danger and opportunity. The more accurate translation is precarious plus critical juncture or inflection point.

Beneath its surface stability, our economy is precarious because the foundation of the global economy– cheap energy–has reached an inflection point: from now on, energy will become more expensive.

The cost will be too low for energy producers to make enough money to invest in future energy production, and too high for consumers to have enough money left after paying for the essentials of energy, food, shelter, etc., to spend freely.

For the hundred years that resources were cheap and abundant, we could waste everything and call it growth: when an appliance went to the landfill because it was designed to fail (planned obsolescence) so a new one would have to be purchased, that waste was called growth because the Gross Domestic Product (GDP) went up when the replacement was purchased.

A million vehicles idling in a traffic jam was also called growth because more gasoline was consumed, even though the gasoline was wasted.

This is why the global economy is a “waste is growth” Landfill Economy. The faster something ends up in the landfill, the higher the growth.

Now that we’ve consumed all the easy-to-get resources, all that’s left is hard to get and expensive. For example, minerals buried in mountains hundreds of miles from paved roads and harbors require enormous investments in infrastructure just to reach the deposits, extract, process and ship them to distant mills and refineries. Oil deposits that are deep beneath the ocean floor are not cheap to get.

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For Freak’s Sake, People, Even the Crash Test Dummies Are Nervous

For Freak’s Sake, People, Even the Crash Test Dummies Are Nervous

Those trusting the Fed to be visibly weak, corrupt and incompetent forever might be in for an unwelcome surprise.

When even the crash test dummies are nervous, it pays to pay attention. Being in a mild crash isn’t too bad if all the protective devices inflate as intended. But in a horrific crash where nothing goes as planned, it’s like speeding in a ready-to-explode Pinto and being side-swiped by a semi on Dead Man’s Curve.

The stock market is in the Pinto, and the smell of gasoline is so strong it’s overpowering the smell of old Cheetos and stale beer. The Federal Reserve is driving, and it’s got a crazy glint in its eyes that everyone dismisses– to their immense regret when the Pinto goes off the cliff and flames envelop the wreckage.

We’re talking metaphorically here. The pain of catastrophic financial losses isn’t physical. But that doesn’t mean it won’t hurt for years or even decades.

Here’s a brief recap: The Fed says inflation is under control, will soon subside, and is no biggie.

In other words, the Fed believed it wielded Jedi Mind Tricks (to convince the masses that there was nothing to worry about as “this isn’t the inflation you’re looking for”) and that it was living in a Wizard of Oz world in which it possessed supernatural powers: if we say inflation is declining, it will decline.

Put simply, the Fed is completely delusional. If you need more proof, consider their risible claim that Fed policies aren’t the cause of soaring wealth inequality, when the evidence that the Fed has destabilized society by boosting wealth inequality to new heights is incontestable to all but con artists and the delusional.

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Eventually the “flock of timid and industrious animals” changes their minds about how much exploitation by the few is acceptable.

You may have noticed the news flow beyond the hot war in Ukraine is largely focused on capital: financial capital (markets, liquidity, interest rates, commodities, central bank tightening, etc.) and political capital (geopolitical maneuvering, sanctions, revising energy and defense policies, etc.)

Notice who’s left out, unnoticed and invisible? The serfs, the bottom 90% who have been decapitalized in the developed world and exploited in the developing world for the past 45 years.

With capital ascendant, the vast majority of financial and political gains flowed to the top tier of speculative capital (banks and billionaires) while the purchasing power of labor (i.e. wages) has been in a 45-year descent. (See chart below)

This disemboweling of labor transferred $50 trillion from labor to capital in the U.S. alone. Financialization and globalization devalued labor and working-class assets such as savings and boosted leveraged speculative bets only available to financiers and corporations, for example, stock buybacks funded by the tsunami of free money for financiers unleashed by the Federal Reserve and other central banks. (See chart below)

Even though the corporate media gives it no notice, serf-expression will become increasingly consequential. No, serf-expression is not a typo for self-expression, the core doctrine of modernism. By serf-expression I mean the serf’s expression of what is no longer acceptable. Another term for this is cultural revolution. I address social and cultural revolutions in my new book, Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States.

Is a Cultural Revolution Brewing in America? (April 9, 2021)

When the serfs no longer believe in the divine right of banks and billionaires, then the concentration of economic and political power in the hands of the few will no longer be acceptabl…

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What If It Breaks?

What If It Breaks?

Making your entire economy a Landfill Economy dependent on the fantasy of infinite replacements and substitutions is the height of hubris and folly.

Very few people ask: what if it breaks? It’s a question we can ask of a great many things: touchscreens, motherboards, tools, vehicles, supply chains and entire systems: what if it breaks?

The first thing we notice is the great number of things which can’t be repaired, they can only be replaced. Good luck repairing the touchscreen or motherboard in your vehicle. Oops, the puncture in your tire is in the sidewall, no repair possible, buy a new tire.

The entire economic system assumes two things: 1) there will always be replacements for everything that can’t be repaired and 2) there will always be substitutes for everything we want. Beef too expensive? Then buy fake-meat. If that’s too expensive, substitute chicken. And so on: there will always be a substitute that can scale globally that will get cheaper as it scales.

Unfortunately, both assumptions are false. There are no replacements for oil and fertilizers. What we have are ifs: if we build 1,000 nuclear reactors, then we can convert this electricity into hydrogen which will be the fuel of the future. And so on. If, if, if. Nice, but getting beyond if is non-trivial: oops, we need hydrocarbon energy to build the 1,000 nuclear reactors and all the complex equipment to convert seawater into hydrogen on a scale large enough to matter.

Not only are there no substitutes for many things, there are no replacement parts, either. Too bad about your entire Smart Home system going down. The vendor of the do-hickey that’s connected to your hub went out of business and so there’s no replacement parts or software upgrades….

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Geopolitics and Degrowth

Geopolitics and Degrowth

The Geopolitics of Degrowth holds that real power flows not from waste, centralization and coercion but from decentralization, relocalization and the free flow of value.

Conventional geopolitics is all about more: more military power, more sanctions, more coercion, more influence.

The Geopolitics of Degrowth is all about the the power of less: wasting less, consuming less, needing less from other nations, reducing dependence on rivals, reducing coercion and centralized over-reach.

Conventional geopolitics concentrates wealth and political power in a giant dam on the biggest river. Centralized control of massed power is considered the acme of geopolitical strength. Everyone is coerced into funding and relying on the dam.

But this has it backwards: when the centralized dam bursts, the nation is in ruins. This vulnerability isn’t power, it’s weakness. The Degrowth model of strength is to make local use of every rivulet, stream and tributary, carefully shepherding its sustainability and use.

Unbeknownst to the mainstream, the world has entered an era of scarcity. The current abundance is a temporary flush of the last of the cheap-to-extract resources. Once this illusory abundance has been consumed, all that’s left is hard-to-extract, costly resources.

In an era of scarcity, power flows not from coercion but from needing less by consuming less by eliminating the tremendous waste and friction that consumes resources, capital and time without generating any positive returns.

The conventional mindset is deadset on maintaining this waste and friction, as if it was positive rather than negative. By focusing on “growth” in GDP, our system optimizes waste, fraud, friction and a throwaway mentality. The reality that 40% of everything we consume is wasted is not even recognized. In the conventional mindset, the goal is to waste more by accelerating The Landfill Economy of buying some product that fails or is obsoleted even faster than the previous generation.

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Our Financial System Is Optimized for Sociopaths and Exploitation

Our Financial System Is Optimized for Sociopaths and Exploitation

Let’s call this financial system what it really is: the MetaPerverse, a conjured world of self-serving cons.

We live in a peculiar juncture of history in which truth has been banished as a threat to the maximization of private gain, i.e. the hyper-pursuit of self-interest. Evidence that supports a causal chain has been replaced by cherry-picked data that supports a self-serving narrative: both the evidence and narrative are manufactured to serve the interests of the few at the expense of the many.

In this juncture of history, evidence is easily disputed because the process of manufacturing self-serving evidence has been perfected. Indeed, self-serving evidence is now a commodity which can be purchased wholesale: rig the sample size, massage the data statistically, conjure up a context that serves to frame the evidence in a slippery self-interested fashion, omit disinterested evidence and contexts, top with arcane math and voila, evidence and narrative are presented as “facts” rather than what they really are, an elaborate, well-staged con designed to maximize the private gains of the few by exploiting the many.

Organizing the entire system to serve the pathological greed of the few is best served by devaluing truth to mere opinion and causal chains to mere narratives. In this juncture of history, truth has been revealed as a chimera; there is only opinion, and all opinions are equal. Opinions are beliefs, and all beliefs are equal. All narratives are equal. All questions boil down to values: values are all equally detached, free-floating and of the same value: zero.

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Our Leaders Made a Pact with the Devil, and Now the Devil Wants His Due

Our Leaders Made a Pact with the Devil, and Now the Devil Wants His Due

The unprecedented credit-fueled bubbles in stocks, bonds and real estate are popping, and America’s corrupt leaders can only stammer and spew excuses and empty promises.

Unbeknownst to most people, America’s leadership made a pact with the Devil: rather than face the constraints and injustices of our economic-financial system directly, a reckoning that would require difficult choices and some sacrifice by the ruling financial-political elites, our leaders chose the Devil’s Pact: substitute the creation of asset-bubble “wealth” in the hands of the few for widespread prosperity.

The Devil’s promise: that some thin trickle of the trillions of dollars bestowed on the few would magically trickle down to the many. This was as visibly foolish as the promise of immortality on Planet Earth, but our craven, greedy leadership quickly sealed the deal with the Devil and promptly inflated the greatest credit-asset bubble in human history.

Rather than trade away one’s soul, America’s leaders traded away the future security and stability of the nation. By refusing to deal with the real problems exposed by the collapsing financial scams in 2008-09, our leaders–both the unelected Federal Reserve and the elected “best government money can buy”–chose to bail out the scammers who had greased their palms so generously and sacrificed the prosperity of the many to do so.

This is more or less the equivalent of sacrificing innocents at the altar of the gods to ensure the leaders’ rule will continue to be successful.

The Devil was delighted to serve up the illusion of godlike powers to our corrupt, greedy leaders. The deal looked oh-so win-win: we enrich the top few percent and offload the costs and sacrifices on the powerless many, who were told that they would benefit from the trickle of cash leaking out of the super-wealthy’s bulging pockets.

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Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

The Empire is striking back, protecting what really counts, and the Billionaire Bubble sideshow is folding its tents.

One of the most enduring conceits of the modern era is that the Federal Reserve acts to goose growth and therefore employment while keeping inflation moderate (whatever that means–the definition is adjustable). This conceit is extremely handy as PR cover: the Fed really, really cares about little old us and expanding our ballooning wealth.

Nice, except it doesn’t. The Fed’s one real job is defending the U.S. dollar, which is the foundation of America’s global hegemony a.k.a. The Empire.

One thing and one thing alone enables global dominance: being able to create “money” out of thin air and use that “money” to buy real stuff in the real world. The nations that can create “money” out of thin air and trade it for magnesium, oil, semiconductors, etc. have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials.

The trick is to maintain global confidence in one’s currency. There is no one way to manage this, as confidence in a herd animal such as human beings is always contingent. Once the herd gets skittish, all bets are off.

The herd is exquisitely sensitive to movements on the edge of the herd, where threats arise. There are various tricks one can deploy to maintain confidence: pay a higher rate of interest on bonds denominated in one’s currency, so global capital flows into your currency; treat this capital well with a transparent set of tax laws and judiciary / regulatory oversight, maintain a deep pool of liquidity so capital can enter and exit without stampeding the herd, and having at least a semi-productive, diverse economy that generates goods, services and income streams to support the currency.

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Politics Is Dead, Here’s What Killed It

Politics Is Dead, Here’s What Killed It

Here’s “politics” in America now: come with mega-millions or don’t even bother to show up.

Representational democracy–a.k.a. politics as a solution to social and economic problems–has passed away. It did not die a natural death. Politics developed a cancer very early in life (circa the early 1800s), caused by wealth outweighing public opinion. This cancer spread slowly but metastasized in the past few decades, spreading to every nook and cranny of our society and economy as “democracy” devolved into an invitation-only auction of elections and political favors.

Politics might have had a fighting chance but three forces betrayed the nation and its citizenry.

1. The Federal Reserve transferred trillions of dollars of unearned wealth into the feeding troughs of the super-wealthy and corporations, vastly increasing the wealth the top 0.01% had to buy elections and favors. The Federal Reserve cloaked its treachery with jargon– quantitative easing, stimulus, etc.–and then stabbed the nation’s representational democracy in the back.

2. The Supreme Court betrayed the nation’s representative democracy by labeling corporations buying elections and political favors a form of “free speech.” (Please don’t hurt yourself laughing too hard.) The Supreme Court’s equating wealth buying elections and favors with individual citizens’ sacrosanct right of free speech was a knife in the back of the nation and its citizenry.

3. The two political parties betrayed their traditional voter bases to kneel at the altar of corporate / elite wealth, wealth which bought elections and political favors. The Democrats, traditional champions of the workforce in the 20th century, abandoned workers in favor of serving their corporate masters, masking their betrayal with fine-sounding phrases.

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Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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