The horizon is not so far as we can see, but as far as we can imagine

Month: January 2015 Page 1 of 2

The Venezuela edition of “imports will kill’ya”

So, the New York Times has an article on how Venezuelan stores are running out of basic goods, because they import so much, and with the drop in oil prices, they don’t have enough hard currency to buy what they need.

Repeat after me for the 100th time, “all resource booms end.”

All of them.  Always.  Gold, oil, rubber: it always ends.  Period.  The question is only when.

Back around 2004, myself and Stirling pointed on the late (and defunct) BOP News that Chavez was screwing up his revolution.  That’s not a way of saying I disapprove of his goals, I very much agree with what he was doing in general terms. But in specific, he was not making his country independent of high oil prices.

What a country needs it must either be able to produce, or have product it knows it can sell to someone who can produce what it needs, and who is a reliable partner. (No Western country is a reliable partner to an actual left wing revolutionary government.)


If you do not, things may go well for a long time, but you are ALWAYS vulnerable to the hegemonic economic state and its allies.  Right now that’s the West.  For a long time, if the West were jerks to you, you could run to the USSR, but right now there is no complete replacement, though China, as leader of the BRICS, is coming on strong.

Note that when the USSR fell, Russian support for Cuba almost entirely went away.

It was a huge shock, but Cuba survived it.

Chavez was a great friend of Castro’s, but he did not learn from Castro.  He did not figure out how his country could survive being cut off from what amounted to essentially it’s only source of support (in his case, oil sales).

Now Venezuelans pay the price.

Learn the lesson.

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Is Declining Violence Only A Good Thing?

Stephen Pinker, in 2011, for the Wall Street Journal, wrote an article on the decline of violence, arguing that it has been decreasing for thousands of years for a number of reasons, including the rise of states.  Pre-state periods had a lot of violence (15% according to Pinker.)  This sweeps a lot of pre-history into the basket (violence was not that high when humans were far below carrying capacity), but I’m willing to grant the point for the sake of argument.

What I want to say is something different: the decline of violence due to repression has a price.  To be sure, a subject of the Pharoahs was much less likely to be killed by their neighbour.  But they had a vastly increased incidence of disease, worked far longer hours, lost their teeth by the time they were 40, were forced to labor for their overlords and not allowed to keep much of the proceeds of their own labor, almost certainly died more frequently in childbirth, and didn’t live as long if they avoided a death by violence.

The power of the state is, as Pinker notes, used to reduce violence so that assets useful to the state (people) are not destroyed.  But the state’s primary means of reducing violence is that it is much better at violence than individuals or small groups.  People put up with living conditions and political conditions they would not put up with if they had recourse to violence.  (They also don’t get as involved in feuds and so on, which is a good thing.)

This is visible even in very recent history in the United States.  Everyone likes to go on about how violence was reduced in the United States from the 80s on, or so.

So was equality.  This is not unrelated.  The more powerful the means of repression, the less violence there will be

That doesn’t mean that reductions in violence always mean reductions in equality.  But all other things being equal, a reduction in the capacity for non state/government/chieftain violence will generally lead to a reduction of equality, and that loss of equality will lead to an increase in other types of suffering (inequality is correlated with everything bad from heart attacks to depression, even controlling for objective material possessions.)

I will also note two other things, though there is much more one could note about incidental deaths from things like famines and pogroms.

The old Chinese maxim of “too soon to tell” applies.  Our capacity for murder is so great now that all it would take is one world war to erase all the gains.

Second: we have displaced the death to the natural world.  We may not be killing each other, but we are creating a great die-off.  A lot of non-humans are dying for our peace.

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So, the Separatists are now on the offensive in the Ukraine

Granted, I think the evidence points to significant Russian support.  Nonetheless, the Ukrainian army is just embarrassing at this point.

Back in 2008 I wrote that Crimea and the Ukraine would be the next likely flashpoint, and that Russia would never tolerate any possibility of losing Sevastapol.  The serious people who know how the world works told me how wrong I was—that the Ukraine and Europe and Russia were in a mutually beneficial arrangement.

But arrangements change, and Russia has always been a country with a clear view on what its strategic interests are.

So now we have an economic war against Russia and a shooting war in the Ukraine, encouraged by the Russians (and by the Americans: the first big Ukrainian offensive occurred after CIA chief Brennan visited.)

Sanctions did little to the Russian economy, but crashing oil prices did.  Russian currency dropped almost exactly in concert with the drop of oil.  Given the consensus that dropping oil prices so precipitously was a Saudi decision, meant in part to take out high cost unconventional oil production, but also in part to damage Russia and Iran, this can only be seen as hostile foreign action by the Russians.

Russia’s vulnerability is due to mistakes made by the Russians.  The lack of diversification of the economy, and the vast corruption made Russia a petro-state, reliant almost entirely on oil revenues.  Countries which need to import a great deal are always vulnerable to foreign economic action.

The question, then, is this: how threatened does Putin and the rest of the Russian leadership feel?  Putin is unlikely to survive a leadership change for long unless it is his hand-picked heir who takes over, and maybe not even then.  Many others in his government would similarly be in danger.

If they feel endangered, then the traditional thing to do is start a war.  This proxy-war in the Ukraine may not be enough.

Keep an eye on the security of Putin’s leadership.  If it starts looking insecure, the Americans will think they are close to getting what they want: a new leader, who will understand he rules only so long as they are kept happy.  But it will also be the point Russia becomes most dangerous.

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Yes Virginia all that money printing did show up as inflation

One of the great “mysteries” of the last 7 years or so is why all the money from unconventional monetary policy hasn’t shown up as inflation.  Many analysts thought that printing that much money must surely increase prices, but inflation indices in most of the developed world are barely up, and in many cases are flirting with deflation.

The answer is obvious, but you’ll hardly see anyone point it out.

First, who was the money given to?

Rich people and corporations.

Ok then, what do rich people and corporations spend their money on?  Stocks, and real estate—high end real estate.

In America as a whole, let alone New York, housing prices have not returned to pre-financial crisis values.  But luxury apartment prices now exceed pre-financial crisis pricesReal estate prices, period, in London, are now higher than pre-financial collapse.

Meanwhile, the Dow Jones Industrial Index is up about 175% off its lows of 2009. The annualized gain is therefore about 29% a year.  GDP has not risen anything like that, neither have wages.  Corporations, however, are flush with money, and they have spent a great deal of it on stock buy-backs, while rich people, of course, have bought stocks.

Inflation has, then, shown up exactly where one would expect, in the assets bought by the people who were given money.  Ordinary people did not receive the largesse from unconventional monetary policy, rich people and corporations did.

This is not hard, this is not difficult, this is not complex.  The fact that mainstream analysts and pundits do not connect the dots on this is because they do not want to.

That inflation has not shown up in much (though not all) of the rest of the economy is simply based on the fact that no one else except the rich and corporations has received (I can’t call it “earned”) more money.  Nothing more, nothing less.

This economy is entirely artificial. It is based on giving money (in various ways) to those who already have a lot of it.  This is in no way a competitive market, certainly not a free market, and barely deserves to be called a market at all.  It is pure oligarchical abuse of the power of printing money in all its modern guises.

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People are very strange: murder edition

I have a simple question for those who read this:

Why is it not OK to kill people in the name of a religion, but it is OK to kill people in the name of a nation?

I’ve always had a great deal of trouble with the way most people run their morality and ethics.  Objectively, the Iraqi blockade of the 90s killed vastly more people than 9/11.  I once got to see an Iraki pediatrician writing in real time about all the children who died in the 90s, whom she could have saved, if she had had the medicine the West was denying Iraq.

The Vietnam war killed more people.  The Chechen war killed more people.  The (insert war here) killed more people.

I can run through the intellectual arguments, but on a fundamental level I don’t understand: why is it ok for nations to kill on a mass scale but no one else can? (Well, except some corporations.  See Bhopal, India and Union Carbide).

The true decline of religion in the West is, in fact, indicated exactly by the fact that many people think it isn’t OK to kill in the name of your religion.  The Crusades, and the religious wars of the Reformation and the Counter Reformation would like to chat with you about that.

For that matter, austerity has certainly killed more people in the West than religious-based terrorism has.  Heck, practically everything that does kill people, kills more.

Humans are just very odd.  Very, fundamentally, stupid and foolish.  Barely conscious.

Spend some time thinking about this.  Because it’s a question that is more important than it seems (and it should seem important enough as is.)

Let’s Talk Turkey About Greece

In light of the upcoming Greek elections and the possibility of a Euro exist, this article from 2012 is worth revisiting.

1) Greece is very likely to exit the Euro.

2) When Greece exits the Euro it will be punished severely by the monetary authorities.  They intend to let Greeks starve.  They will cut off food supplies, and Greeks will not be able to afford food.  Oil is also going to be a problem.  Greeks will probably not be able to flee to other countries.

3) The reason they will punish the Greeks is because they can.  They couldn’t punish the Argentinians (well, they’re working on it) or the Icelanders, because both those countries can feed themselves.  They can punish the Greeks.  They need to make an example, because they are worried about Spain, Portugal, Ireland and other countries.  (Heck, even the Dutch are having problems.  The Dutch!  If the Dutch can’t make it in the Euro, no one can.)  This isn’t, contra Lagarde about “bad Greeks”, while it is true that Greece should never have been let in to the Euro, well, everyone knew that.  Including the countries that let Greece in.

4) Greece is going to have get hardcore and creative about creating a new economy.  Since the monetary authorities intend to starve them and deprive them of oil, they must retaliate hard.  Greece has a number of options, and this is what Greece should do You don’t play nice with people who are trying to cause a famine in your country.

  • Greece has a large fleet.  Use it to strip mine the Mediterranean of all resources possible.  Yes, the Med is a fragile ecosystem.  If the other Euros don’t like it, they can not punish Greece, otherwise Greece will have to feed itself.  The Euros could send fleets, but as the British-Iceland fishing war proved, that’s prohibitively expensive.
  • Start gun-running and other black market activities up.  European gun-running currently goes through Albania.  Greece has much better ports.  If the Euros don’t like it, they can militarize Greece’s borders at a cost much higher than feeding the Greeks.
  • Become a full on black-hole for banking.  If anyone wants to store money in Greece, they can.  No questions asked, no forms needed.
  • Make deals with other “pariah” and semi-pariah nations.  Start with Iran and Russia for oil (Iran will be happy to give oil in exchange for black market help).  Make a deal with various 2nd world nations for food, start with Argentina, they have no reason to love the IMF or the European Union, which promised to “punish” them for nationalizing oil in Argentina.  In exchange Greece can offer use of their fleet, for cheap, and port rights for the Russian navy.  They’ve wanted a true warm water port for some time.  Offer them a nice island in the Med with a 30 year lease.
  • Hold on for a couple years.  Odds are that soon enough Ireland, Spain, Portugal and maybe others will leave the Euro.  They won’t be in any mood to screw Greece for their ex-Euro masters.  Heck, odds are 50/50 that there won’t be a Euro zone at all in 3 years, since Germany wants to screw everyone, including France.
  • Nationalize basically every industry.  It’s unfortunate, but it’s going to be necessary.  Hundreds of billions of dollars have fled Greece in the past 3 years, in fact that was one of the main reasons for dragging out the “bailouts” (really, bailouts of German banks), to let the money flee.  All Greek assets are going to be frozen overseas, so the Greeks will need to work with what they have.
  • No more money goes out of the country.  Slap on currency controls, to make sure what money is there doesn’t leave (this is aimed at Greece’s rich).  If any banker or anyone else circumvents them, throw them in jail, the sentence should be life, generous, since they are committing treason.
  • Seriously change the tax system, and insist on really taxing the rich.  Go to heavily progressive taxation, reduce the burden on the poor (a large number of people now), this will buy support.
  • A food rationing system, with cards and delivery to every person in the country will be necessary.  It won’t be fun, but combined with the above, you can make sure that no one starves.

Greece has been under siege for years now, and traitors within its own country (its politicians) have betrayed it.  This means Greeks are in serious danger of suffering a famine.  The response to that, by Greeks, will have to be pragmatic and severe.  If non-Greeks don’t like it, that’s too bad.  When millions of people are in danger of starving, a country does what it has to.

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A few notes on the economy

1) While job growth is decent in the US, the essential job picture remains unchanged.  The percentage of adults with jobs is still about where it was after the financial crisis, and wages are flat.  The last US job report was good, but wages dropped.  That is not an indication of a good job market.

2) The Eurozone is flirting with deflation, and commodities have heavily deflated (almost all of them, not just oil).  This is due to reduced demand.  Reduced demand is bad.  Let me repeat, bad.

3) The reason there is reduced demand is because most people are poorer than they were pre financial crisis, and governments are engaged in austerity.

4) The stock market is a ponzi scheme.  Its prices are justified by the fact that corporations are being given essentially free money by the Fed (directly or indirectly) and allowed to engage in oligopoly pricing of services which people must have (like the internet, or phone service).  This has led to high profits, and some of those profits are pumped back into the stock market, which is in executives interests, so they can cash out their options at a profit.

5) The entire gain of this business cycle has gone to the top 10%, and by the top 10% we really mean to the top 3% or so, with the .1% and .01% being the real winners.  The bottom 90% has lost ground.

6) Rich people buy securities.  The middle class and below buy goods.

7) While low oil prices are good for many countries, that they are driven by soft demand is not good.

Predicting this economy remains difficult because it is driven by the decisions of a very few people.  Less than a hundred worldwide are key.  The people who can create money, as credit, are key.  They are almost completely unhinged from the economy as a whole: money creation is fiat, and being treated as such.

The great realization of the financial crisis was “hey, we can just create money and give it to the people we approve of and no one can stop us.”  The people they approve of, unfortunately, are rich people playing ponzi games.  Giving money to bankers who don’t lend to the regular economy (and why would they, regular people aren’t getting raises and don’t have vastly inflated housing prices) does very little for the economy that most people live in.

This leads to strong relative gains: not only are the rich richer, but everyone else is poorer.  Austerity lets them buy up oligopolistic assets at fire-sale prices (see dismantling of the NHS in England for an example.)  Their money increases, their relative power increases, and these policies are a win for them.

The thing is, hardly anyone has pricing power except people who are in an oligopolistic position.  It makes no sense to loan money right now to anyone who doesn’t have pricing power, because they can’t pay it back.

There will be; there are, ways out of this. But they do require creating actual pricing power for the masses, breaking up oligopolies and dealing properly with the energy problem.  The creation of some actual competitive markets (gasp!) combined with allowing anyone but the rich to have pricing power would do wonders for the world economy.

But that isn’t something your lords and masters want.  The current situation suits them perfectly—compared to everyone else they are getting richer and more powerful.  There is no reason for them to change how they are doing things.

Or is there?  The resource barons are hurting, and they will want changes.  But I doubt they are willing to see anything like widespread prosperity as a solution, because it would lead to a long term collapse of many of their fortunes, rather than a boom and bust cycle which the smart resource barons are perfectly capable of riding and using to their advantage.

Until the calculus of the powerful is changed, or they lose their power, while there will be ups and down the basic feature of the economy of the developed world (Depression) will not change, and the rest of the world will continue to suffer through huge boom bust cycles.

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Why is Privilege the wrong word?

The lesson is not that white men should be treated like African Americans or women, but that they should be treated like white men.

Privilege is the wrong word, the wrong framework because what white males have is what everyone should have.

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