GM through Kresa’s Eyes
Whenever reading news, it’s far more entertaining to see how they fit within a hypothesis than to simply soak the information up unquestioningly like a sponge. The latter approach seems to be the norm, however, judging from conversations overheard at coffee houses, markets and workplaces. This week we considered once again how things might be setting themselves up for one of our pet doomsday scenarios – global war. War, of course, is not an end in itself, but a means, among other aims, of establishing a new system of world government.. Such a goal requires the dissolution of systems obstructing its implementation, such as national sovereignty which is usually enshrined in constitutional law and held in high regard by the masses. In many nations, abrogating this would require referenda or absolute majorities of Parliament. This is a lengthy and uncertain undertaking, but using war as a pretext can speed things along nicely.
A very interesting and important economic development was noticed in an article by Fareed Zakaria at Clear Markets entitled “Boom Times are Back, Outside the U.S.”:
Around the globe, though, markets are humming. China’s Shanghai index is up 45 percent, India’s Sensex is up 44 percent, Brazil’s Bovespa is up 38 percent and the Indonesia index is up 32 percent. Now, stock markets don’t tell the whole story, but the reason many of these are rising is that the underlying economies of most of these countries are still registering significant growth. The evidence abounds. …
When all was right with the world (for some people anyway), the ones with all the money had all the weapons (the United States of American and NATO). But today, the economies with healthy balance sheets, sustainable debt levels and growing, hard working and productive populations are those with weak military capabilities. Indeed, it’s frequently stated that the world’s combined naval capacity is still no match for that of the United States. This may appear to be the case on paper, but in practice things might be very different.
A little while ago there was an article in the New York Times and elsewhere, describing the scenario of all out war with Iran as being potentially the same as that of a memorable 2002 war simulation where the US navy was resoundingly defeated in record time by being swarmed by small boats. “The whole thing was over in 5, maybe 10 minutes.” were the words of Lt. Gen. Paul K. Van Riper of the winning team. It just shows in a practical way that in modern warfare, defence is easier than offence. It is also not surprising that the U.S. is particularly cold footed on the idea of an Israeli attack on its perceived arch enemy. Currently, the U.S. is neither ready for another ground based invasion, nor is it likely to come out unscathed from an air war with Iran.
While some might see the wealth of the Second World against the military might of the First World as a form of balance, it is in reality a serious imbalance. If two men in the street face eachother, one with a sack of gold and the other with a loaded pistol, the likely outcome is easy to imagine. The man with the gold might swallow his pride and share the gold, but he still risks being shot, because, as has been described by many great thinkers, authors and historians, statecraft is, at best, amoral.
Another thing to consider is what impact the American financial crisis will have on its military capability. As explained today by Bill Bonner on The Daily Reckoning, the General Motors bankruptcy is indeed a foretaste of things to come for the United States as a nation. If the key manufacturers of the U.S. are divided up and sold off, probably to foreign interests, does this not compromise the U.S. military supply chain?
The General Motors bankruptcy would, ordinarily, strike at the heart of the U.S. Military Industrial Complex (MIC). This, however, will not be the case. The new CEO who will likely oversee the subdivision and sell off of GM, already appointed, is Kent Kresa:
Northrop Grumman CEO Kent Kresa and other executives are part of “St. Andrew’s Prep,” an informal network of Andrew Marshall protégés. Marshall directs the Pentagon’s Office of Net Assessment and is an iconoclastic military strategist who was given wide power to define future defense priorities by Defense Secretary Donald Rumsfeld.
This is significant, because it will ensure that the firesale will avoid the risk of key GM assets falling into foreign hands but remaining under the influence of the MIC. It confirms the very sensible theory that a nation’s military infrastructure is actively protected from economic storms. Funny money can do whatever it likes; the US dollar can turn itself into a Peso, but the things that matter happen regardless.
The U.S. is not going to give up its military supremacy, just because central bankers have decided to throw the populace into the throes of poverty and unrest. On the contrary, this can only serve to provide the MIC with ample supply of intelligent but desperate men who until now could not be enticed to join (and die prematurely from serving in) the armed forces. If anyone wonders how the US was going to meet its CO2 production targets as a result of the Waxman-Markey Bill, what with population growth continuing and social change so difficult to achieve, this may be what is coming.
It is still unclear, however, who would want to stand up to the U.S. in a military standoff. North Korea (which frequently looks like China’s alter-ego) doesn’t look anything close to being organized enough to take on its enemies. Consideration for other more realistic players, such as Russia or China (or both together), as being players in an international conflict with Western powers, needs to be taken seriously. Russia, for example, is building its military, showing that it anticipates regional instability in coming years, coming from NATO. China has been doing the same for a long time now, and is likely to ramp up efforts to make best use of its surplus productive capacity (just like the U.S. has always done).
So at this stage, we’re still of the expectation that the Global Financial Crisis, which it should be stressed is an entirely human-made one (nothing natural about it whatsoever) will continue along a fairly predictable path, peacefully. This goes for the next year or two. But after that, when various new military projects mature and the economic fallout starts soiling the currently tidy international relations enjoyed by various powers, things might get interesting. The wrong kind of interesting.