Today we have a little daydream about what might happen in American society if unemployment were to skyrocket, as it appears very likely to do.
The scenario might go something like this. Official unemployment soars to twenty, may be thirty percent, such that the number of idle males of working age in America is one in three or one in two. They have no money, their children are hungry, their wives are bitter and angry. There is no point staying at home, so the men walk the streets looking for work, looking for food and looking for trouble. The police find themselves becoming busier and busier picking up loiterers and shoplifters or busting swap meets selling black market goods. Everybody is a criminal nowadays, the police say among themselves. Many of these unemployed men have never stolen anything before and did not anticipate the sophistication of modern shop security systems, nor the heavy handedness of some elements of the police force. Scuffles have been breaking out here and there with angry shoppers or at long queues at soup kitchens, but it’s all orderly 30’s Depression style stuff so far.
One day some inner city police come across a disheveled looking man in his thirties, catch him for jay-walking or some other minor offence (he “looks” suspicious). To teach a quick lesson, they ‘taser’ him in broad daylight, in front of a half dozen nuns on their way to a prayer meeting. The event gets filmed by a teenager with a stolen handy-cam. The man resists and is zapped again, then kicked, and so on. The nuns look on in horror and fear. A police officer sees the teenager filming and confronts the kid, who flees. The kid gets caught and beaten, a short distance up the road. One policeman gets a flower pot thrown on his head by a woman looking down from her apartment above. The nuns rush to the policeman’s aid. Reinforcements arrive in the form of riot police. The nuns are mistaken for having assaulted the police officer (who can’t remember anything) and are arrested and beaten. Every one in sight is rounded up and driven off to detention. Two of the six nuns die en route from heart attacks, since they are in their late eighties. None of this appears in any newspaper or any news network for some days, as is the new policy of media outlets “in the interests of public peace and fairness”.
Almost the same thing happened a week before, but no one heard about it because there was no captured footage. There are only rumours. On this occasion, however, a police clerk handling the evidence happens to be related to one of the deceased nuns and leaks the confiscated video footage, in high definition, on Youtube. People instantly recognize the disheveled looking man as the local guy who runs the soup kitchen network (affectionally known as “Stan The Soup Man”). The local Catholic bishop expresses his outrage at the death of two nuns. Everybody in the city takes to the streets demanding the release of Stan The Soup Man, including the mayor and the bishop. It’s all peaceful, albeit noisy. Most of the people in the crowd have come as families of the unemployed men; wives, children, babies, pet dogs.
They march to police headquarters, demanding an explanation. The police chief is there, on the top step, about to give an announcement of apology and an explanation of events, hoping to assure the crowd that Stan The Soup Man is okay and was merely detained for questioning over an unrelated matter. Just in case, riot police are assembled out of view, a couple of streets away. They are told by their superior officer that “it’s nuttin’ much, just a bunch of women and kids”. However, during his speech, unbenknownst to the police chief, Stan The Soup Man now lay unconscious in a prison cell, bleeding into his head. He was fine several minutes ago, but Stan was always very sensitive about his Hispanic roots, and one police guard had just made a racist taunt agains him. Stan couldn’t hold back and said something in return. A beating ensues, and now Stan was minutes away from inevitable death. At the closing words of the police chief’s speech, an SMS message is received from within the police compound that Stan had just died. Chaos and a blood bath ensues. Women and children are shot and killed. Within hours, protests, sit ins, and riots across the country break out.
It’s not difficult for such an even to happen. Similar mistakes are made by the police, probably every few minutes, but like stray sparks of an electric motor, they mean nothing unless the surrounding conditions are such that an explosion results. Looking at the various developments in the US economy currently, with nationalization of the remnants of US manufacturing, the loss of over 400,000 jobs per month around the country and the increasing aggressiveness, both politically and economically, of America’s biggest trading partner, China, it is very likely that an explosive social situation will develop soon.
There is nothing, currently, to prevent the coming dip in living standards headed for the United States. That said, there is a long way for those standards to fall before one could consider America ‘poor’. The task for government lies in preventing poverty to turn to hunger and starvation. It is when the most basic needs of people are not met that civil disorder becomes most likely.
Will the Obama administration find within itself the skills and wisdom to carry out the successful rescue of the coming wave of an American Underclass? This is not likely, given how poorly eveyrthing else has been managed. The White House itself appears directionless and desperate. All they have is contingency plans, but no way forward, despite all the rhetoric to the contrary. It’s also not realistic to see an atheist, materialistic regime embarking on any kind of genuine charitable enterprise. To US Government policy makers, people are not souls, but numbers and statistics. They are a resource to be managed and exploited. The War on Drugs is the clearest example of how decisions are made in America, where two thirds of the prison population are there because of drug related crimes.
The likely path to be taken by America is to boost its military. It will come in the mass recruitment of the unemployed in exchange for food stamps, housing assistance and health insurance. If there are no wars to fight, the soldiers can be let loose on America’s streets to “help” the police, or to clean the streets, or do some other brain-numbing task. This may be the lesser of two evils, and would likely be sold to the public as such, but it can only result in the further brutalisation and dehumanisaiton of American society.
A report on MSN news estimates US unemployment at 20%, citing inaccuracies and bias in data collection and methods of calculating the unemployment rate in America. Ah, America, the nation where Freedom of Speech really means freedom of the rich to tell lies with impunity. It’s the nation drunk on ignorance, the land of make-believe, where Michael Jackson with his Neverland and Disney with his Disneyland were quite at home and nothing out of the ordinary.
Any reports about economic developments, positive or negative, coming out of mainstream U.S. media, need to be taken with a grain of salt. However, when you get an official unemployment rate at just under 10% (which people think is already staggeringly high), and an expert opinion claiming it is more like 20%, it’s worth a second thought. There certainly has been an ongoing trend of absolute bollocks posing as news over the past few years. The Iraq War was going to be a rip-roaring success, with soldiers greeted by cute Iraqi children in folk dress, with tears of joy, laying flowers at the curbside as American tanks rolled in. It was supposed to usher in a “new Springtime” for the US economy and peace in the Middle East. The Lehman Bros. company collapse was going to be isolated, easily patched up. The world would chuckle and move on. That is, according to all the major newspapers and news networks. Many people suspected, however, that it was complete rubbish. They were dead right.
What can be predicted from a society that lies to itself to the extent that occurs in America is the same as could be predicted of a con man. People believe him at first, but after a while the trail of destruction becomes a little too obvious, the cons too ambitious, and suddenly a few intelligent people take the time to do a bit of background reading. Soon enough, the con man is busted and the game is up.
This brings us to another issue: expiring unemployment benefits. Continuing unemployment claims fell 53,000 to 6.7 million last week, but Deutsche Bank’s chief U.S. economist Joseph LaVorgna wonders how much of this decline is due people exhausting their standard 26-week benefit. He says: “We are concerned about what will happen when a significant share of out-of-work individuals’ benefits completely expire, because this could lead consumer spending to re-weaken, hence jeopardizing a fragile recovery.”
It’s likely that unemployment is massively understated in America, as it is in most countries. No politician likes to boast about the figures, and aspiring politicians are cautious to doubt them, lest they themselves get elected and are forced to revise the figures upwards.
The usefulness of this information lies in avoiding bad investments in the short term (like shares or apartments), and planning for one’s own unemployment. A 1 in 5 figure means that any safety nets in place are likely to be already strained to breaking point. If the figure advances to 2 in 5, then the term “safety net” is not even worth remembering. At this stage, people ought to stop believing newspapers and be well on their way to preparing to hunker down for a long, cold economic winter. Survival is the name of the game now.
Industries likely to ride out the difficult times are those that provide essential services, support military infrastructure or produce food. However, for America, new opportunities are going to appear when, finally, the U.S. dollar collapses. Local manufacturing will suddenly become a good idea, but at the expense of working conditions. Belonging to the military will suddenly become an obviously bad idea. What exists now in Mexico is prehaps a foretaste of things to come for those who are North of the Border. Who knows, there may not even be a border anymore.
Articles on Bloomberg are entertaining, juicy, and just a tad biased. That’s what makes Bloomberg a much better read than most news outlets (since the news is additionally entertaining and juicy).
In a recent article with the understated and rather misleading title “Goldman Sach’s Investment in Trading Code Put at Risk by Theft”, a computer geek employed at the company is accused of running off with a vital piece of company software, it is quoted:
Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.
The man was travelling. Anyone who knows about travel in the United States understands that one must not, under any circumstances, carry any information on a hard drive that could be worth something to anyone. So it is standard practice to transfer one’s information (including any projects one might be working on) in a secure manner to the Internet, like a VPN, and securely wiping the hard drive prior to leaving for the airport.
But the comment that makes one laugh comes from the prosecution:
The prosecutor added, “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.”
The proprietary code lets the firm do “sophisticated, high-speed and high-volume trades on various stock and commodities markets,” prosecutors said in court papers. The trades generate “many millions of dollars” each year.
In other words, the software allows Goldman Sachs to, basically, cheat. And if the software was released, it would let everybody, well, cheat. And that would not be fair, because it goes against the whole principle of, err, cheating. That is, if everybody cheats the same way, then it ceases to be cheating.
The defense attorney is also quoted:
“If Goldman Sachs cannot possibly protect this kind of proprietary information that the government wants you to think is worth the entire United States market, one has to question how they plan to accommodate every other breach,” she said.
The defense is right of course, but it’s not that the government has any more dignity to lose. Many know very well how Wall Street operates and how the government helps, but not everybody believes it yet.
Perhaps George H.W. Bush’s infamous 2006 quotation will some day come true:
“if the American people knew what we have done, they would string us up from the lamp posts.”
Perhaps the real worry for Goldman Sachs is that the leakage of such sensitive software would reveal just how the markets are rigged by the big players, and how the honest majority is swindled at every turn.
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.
Whew. With all the pigs flying around, it’s hard to keep your eye on the important things in life. Hysteria, while once considered an uncommon disorder of uterine function, is now so widespread, traversing the sexes and affecting all age groups, that if you are not in a panic about Swine Flu, then people think you should have your head read. Meanwhile, other, more real things are happening to the world.
If you beat a dead horse hard enough, it will probably move a few inches. Actually, if you hit it with a freight train, it will probably roll a few hundred meters. That can look rather dramatic, especially if you ignore the freight train. In the news today, it is reported that Japan’s industrial output rose by 1.6%, on the back of continuous sharp declines over the last year or so. It’s like a flicker of light in the dark, which would once have been considered dire news. Instead, today it’s seen as the flicker of sunlight over the horizon at the crack of dawn. In the land of the rising sun, no less.
Until now, Japan’s production was practically at a stand still, with people laid off work, factories shut down, nothing in, nothing out (or at least, not much). This has reached the point that basic items, the demand for which can only dip for a time, are running out. Yes, companies are delaying the purchase of new fleet cars and others are holding onto their used cars a little longer, but in the end, people are still driving around everywhere, and mechanical objects wear out and die.
What can be expected is something of an economic recovery in manufacturing nations such as Japan and China. The stimulus money being distributed around the world is of such a massive sum that it cannot but have some effect, but the situation has changed from one that may have existed during previous recessions. The meaning of fiat money is being called into question like never before. The world is realigning itself, political and economic powers are changing rapidly and severe imbalances are developing.
If all else were equal, if the US dollar maintained its value, one could expect a recovery sometime soon (if you expand the money supply and put it into everybody’s pockets without there being any inflation, suddenly everyone thinks they are richer). However, the laws of mechanics are analogous to all natural systems, in that every action invokes an inverse reaction to maintain equilibrium. Spreading out the money supply only dilutes its value, and the US dollar cannot logically maintain its current value without some kind of extraordinary pressure on other nations to pretend that it does. If nature takes its course, we can reasonably expect an economic recovery only when the US accepts its loss of superiority as an economic power and takes a back seat, allowing other markets to emerge. That could take many years.
But this is not a natural system. The US will probably not want to accept a peaceful and graceful decline, but will throw itself into turmoil and take others with it. In the meantime, it will try to bully itself out of the mess it is in, Swine Flu notwithstanding. Rather, Swine Flu is a very convenient distraction at the moment, since it’s a disaster that has no obvious human cause. It allows the American public to forget a much greater threat, but only for a time.
An article appeared today in Pravda.ru entitled: “USA has two options to save its economy: declare default or trigger off war”:
Inga Foksha, an analyst with Aton Investment Company, agrees that the US default is quite possible, although she is certain that it will not happen unless the world finds an alternative to the US dollar. The dollar will collapse immediately in case of default, which is absolutely unacceptable, because 63 percent of world reserves are saved in dollars. Their collapse will trigger the global economic collapse.
While the analysis is quite good, they have the title wrong. It should read:
The USA has but one option: declare default and trigger off war.
The US Dollar, as a fiat currency, is on track to losing all credibility. The United States of America is already practically bankrupt. And since “63 percent of world reserves are saved in dollars”, the Federal Reserve’s action to dilute the value of the dollar by issuing irrational amounts of new money without any kind of capital to back it up will act to offend the holders of that 63 percent. Anyone who thinks it will all be taken lying down is kidding himself.
The sea incident involving the USNS Impeccable was suspicious from the start. It has now become a little clearer, in that the US has admitted that its vessel was sub-hunting and was intercepted, probably because China was fully aware of what the Impeccable was up to. This raises anew the question of what exactly is China’s military capability at the present time and just how worried is the United States about this. Being no expert in these matters, I had a dig around and tried to summarize what knowledge is readily available in the public arena. The question has become more important now, as trade based friendship between China and the United States appears to be coming to an end:
Chinese exports slumped 25.7 per cent in February as the collapse in global demand caught up with the country’s exporters and overshadowed a sharp rise in domestic investment.
Will China look for a military solution to its internal social problems? Will it put its unemployed to work in a new military industrial push, in order to avoid revolution?
China’s military capability was previously assessed from the point of view of a possible invasion of Taiwan in addition to otherwise defensive or deterrent capabilities against more distant foes. As such, it has been known for quite some time that China has land-based intercontinental ballistic missiles capable of delivering nuclear warheads to targets 13,000km away, plus hundreds of mobile weapons mounted on aircraft, ships, submarines and so on.
China’s submarine fleet had previously been assessed as limited, due to technical problems with its existing nuclear powered subs. However, over the past decade, China’s spending on military projects has risen sharply and it is quite possible that China now has what could be termed “full submarine capability”, meaning that it may have enough submarines in continuous operation and armed sufficiently to take out any of the major military powers worldwide, although I could not find confirmation of this. The point being that submerged craft are, most of the time, not targets and can be relied upon to deliver an unstoppable volley of missiles to annihilate any nation, including the United States. Once China enters the club of nations capable of promising “mutually assured destruction”, things are set to change substantially with regards to political and military posturing.
As for China’s invasive capability, it has over 2 million active personnel in its formal military forces, with roughly half that number in reserve, plus an unknown number of paramilitary personnel. It’s a very large force, which has been criticized in the past for being unwieldy and armed with low technology weaponry, but should a Chinese invasion (of Taiwan) occur, the massive numbers of available troops makes the probability of success very real. Modernization of China’s military continues, but in comparison it is thought to be far behind Western forces in technological prowess. The current trend is towards automation of weaponry and vehicles, especially with unmanned aircraft (which can eliminate the dead leg of a bombing mission) and tanks, but it is unlikely if human fighters will ever become obsolete, especially in urban combat and the “regime change” phase of invasion. One can even envisage a role for displaced, unemployed or otherwise condemned civilians used to colonize cities which have been cleared of inhabitants by military forces.
However, in assessments made roughly five years ago, a sea-based invasion of Taiwan by China did not appear to be a real threat in the medium term (until around 2015), especially since Taiwan would probably receive defensive assistance from the United States. However, in 2007, it was reported that China has been advancing more rapidly than expected in sea-based invasive capability and could be ready for a Taiwanese invasion by 2010. Other, more sensational reports, suggest that China will soon be second only to the United States in overall military capability.
Is it a coincidence that the plug would be pulled on the world economy at the end of 2008, just a year or two before the estimated time that China would be ready to take on its neighbors militarily? Could there have been a method to the economic madness? It’s difficult to say, but given that, in American circles, there is increasing talk of China’s threat both economically and militarily, one cannot discount such a possibility. The fear of war with Iran has been placed at forefront of the paid news media’s attention over the past year or two, however Iran’s economic significance, or its ability and likelihood to invade its neighbors, is probably much less than that of China’s.
As suggested previously, the world economic crisis cannot have merely monetary consequences. No nation wants to be poor, yet the game appears to be up for the United States as an economic superpower. The United States still has the world’s most advanced military outfit, but it has still shown an inability to overcome even the comparatively low-tech resistance mounted against it in Afghanistan. It is therefore vulnerable to being bogged down in other regional conflicts which could prompt China to carry out some of its long term strategic aims in Asia.
With its main export base vanishing, China may also be tempted to pump its excess productive capacity into its own military, which could see an extremely rapid and unpredictable build-up of its military capability. This would be a logical approach to managing its massive working population which has suddenly been rendered idle (a dangerous scenario if left unchecked). The alternative is to wait for the world to consume again, which could take a decade, or to face massive civil unrest and, potentially, the fall of the Chinese Government.