First economic: The US dollar is down 5% over the last six months against a basket of currencies. And over the past year, it’s lost 9.6%. The biggest winner against a dollar has been the euro which has gone up 13% however, which truly is a win for Europe because it makes their natural gas imports from the US less expensive. But their natural gas imports are still a poison chalice. Expect the dollar to continue its slide, perhaps precipitously at some point in the New Year.
There were large moves out of US equities in the spring confirming the adage “sell in May and go away.” What September will look like is anyone’s guess, especially as Israel is more than likely to start the second phase of its war against Iran? Or October—that worst of months for Wall Street? What happens if Iran closes the Straits of Hormuz and oil goes above 100 dollars a barrel? That would be great for oil producers, but it would be terrible for markets across the globe, even China, possibly leading to a worldwide recession, especially with Chinese growth being somewhere between 4% and 5% at present.
Regardless of what happens in September or October—both always being bad month’s economically for the US economy, America’s bond market and the value of the dollar will continue its downward trajectory because America’s lenders are now demanding gold for loans instead of treasuries. This smells to me like the beginning of the end of dollar hegemony.
It makes me wonder what kind of “store of value” the BRICS will adopt to support their currency? Will it be a basket of their currencies? Will it be backed by gold and petroleum? That would be truly hard-core, because it would mean we were in for a long era of tight money. Our entire lives, actually, the entire history has been based on easy money. And as you know money creation is only possible when using a fiat currency.
There are many ways to imagine what they’ll do. Maybe blockchain? Who really knows? But there are other commodities that do have a store value, silver among them, maybe even rare earths and others they could use. It certainly is an interesting time to live.
Second domestic political: Niall Ferguson in his interview by Charlie Rose posted a week ago on the Internet was asked about Trump‘s challenges of outright ignoring the constitution with the following question: are we the Roman Republic, is this or are we witnessing the collapse of the constitutional order like the Roman republic. Rose asks if Trump is Augustus. He clearly is not. I would say that Trump is more like Marius and the Kennedys were more like the brothers Gracchi. In fact, I made this argument on a graduate school paper that I got a very good grade on, but in which my professor seriously disagreed with my analogies. Regardless I would say that we are at the beginning of the end of our constitutional order, and that we are looking down the barrel of Caesarism. It’s on the way. Maybe two years, maybe four years but it’s coming. Will it be a general? Will it be a politician? Those are questions we simply can’t answer. But as Ian Welsh has consistently predicted America is heading for a collapse, be it constitutional or economic or both it’s gonna happen and there isn’t anything anyone of us can do about it. Besides, Ferguson, while whip-smart, is kind of a tool.
Third is about some weaknessess the SCO currently must contend with if they are to become the anti-NATO military block. Here they are in no particular order of importance: One, the nations that make up the SCO are too diverse and often times their interests do not align with everyone in the SCO. For example, China and India have serious border issues. Pakistan and India have serious issues in Kashmir. Those are just two examples of several potential conflicts between members of a block, supposedly to oppose NATO. The issues between Pakistan and India make the intra-NATO issues between Greece and Turkey look like a family arguement on Thanksgiving.
Second, as the former director general of Russian international affairs Council said in a recent interview, “ the mandate of the SCO is too general.” The SCO can focus on security, development, or terrorism. Not all three.
Third, China is by far the most powerful member of the SCO and that creates a dangerous asymmetry in the organization. Much like the United States dominated NATO for so long and skewed it’s purpose after the Cold War for its own unfathomable means.
Fourth: This essay on the relative merits of “Superradiance,”. Is well worth the three minutes it will take to read, plus it is comprehensible to the layman. The essay describes Superradiance as “a collective quantum optical effect in which a group of emitters, such as atoms or molecules, emit light in a highly coherent and amplified manner. In the context of mammalian neural systems, superradiance occurs when a group of neurons collectively emit photons, resulting in a stronger and more coherent signal compared to individual neuron emissions. This coordinated emission of photons across vast networks of microtubules within neurons could potentially achieve the long-range coherence necessary for the emergence of consciousness.”
The essay stands as a correction of sorts to Sir Roger Penrose’s “Orchestrated objective reduction (Orch OR)” theory of human consciousness, which Wikipedia describes thusly: Orch Or “is a controversial theory postulating that consciousness originates at the quantum level inside neurons (rather than being a product of neural connections).” In short, says Penrose, “Consciousness does not collapse the wave function; instead it is the collapse of the wave function that produces consciousness.”
One thing we do know is that consciouness is decidely not computational and most likely occurs in the quantum realm.
As you can tell, I dig this kind of stuff.
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Purple Library Guy
The stuff about stores of value and tight money made me think of something I learned today. I was looking up “mercantilism” on wikipedia, to try to get a more detailed idea about just what it is considered to be. I’d always realized that one major element was an insistence on, basically, pushing hard for trade surpluses above almost all other considerations. But when I was reading about it I realized that mercantilism was a big thing largely when there was a gold standard, and I suddenly dug what it was really for:
Increasing the money supply!
On the gold standard, if you want there to be more money in circulation, there are only three ways to do it:
1. Mine it.
2. Sack the Aztec and Inca empires.
3. Get it in return for exports.
And only option 3 is generalizable as an economic prescription. So on the gold standard, if you want more/easier money, you have to increase exports (or reduce imports). Totally makes sense!
GrimJim
Once the real collapse begins, there won’t be a Federal government, and most states will be lucky to hold on to any kind of organized system.
The Federal government is held together entirely by taxes paid by the Commons. Once the economy collapses, no more taxes.
The US Military requires a massive global supply chain that even the most efficient government coukd not manage to hold together with a proper command economy.
Thus, the Federal government, civilian and military alike, collapse, and so too follow the state governments, as they are even more fragile, taxes-wise.
Some warlords will arise where they are able to hold onto some important resources. Some will have a fig leaf of Federal or State or Local government claim, but most will be local strongmen with ethno-religious militia power.
Food, oil, weapons — these will be the new currency. Dollars will be used as toilet paper.
The result will be a mashup of Yugoslavia and the Rwandan Genocide through a Mad Max lens, such that makes the worst Levantine chaos seem idyllic by comparison.
Most other countries will be doing what they can to keep themselves from collapsing. No one will have any resources to interfere, except maybe China, to make sure no maniacs get control of significant quantities of nukes. I’m guessing an EMP or three will be sufficient.
20 years down the line, any significant foreign survivors should be readily able to colonize remaining resource rich areas of the former US, which by that point will be down to 5 to 10% of its former population.
Sean Paul Kelley
@Grimjim: good grief. You had a blow-job lately? Might I suggest a bong hit or two?
Sorry, Ian, I know that is in poor taste, but wow. I thought I was a pessimist.
GrimJim
“good grief. You had a blow-job lately? Might I suggest a bong hit or two?
Sorry, Ian, I know that is in poor taste, but wow. I thought I was a pessimist.”
LOL. That you seem to think that any major government in the US could survive an economic collapse, I think, puts you in the “Optimist” category.
Any other government than the current one? Maybe, very iffy, might hold on to something.
But this government, a regime run by bootlicking podcasters and social media personalities? When every other nation on earth has been completely screwed by said regime?
We are totally screwed. We’re not looking at Depression-level collapse, we are looking at Yugoslavia-level collapse.
Ian Welsh
This post is by Sean-Paul Kelley, not Ian Welsh.
Jorge
The whole Roman Republic -> Imperial transition requires an Augustus with all of his marbles. Trump strikes me much more as Henry the VIII taking over the British wing of the Catholic Church for his own petty needs.
GrimJim
The US is not a republic transitioning to an empire.
The US is and always has been an empire, with trappings of republicanism and democracy.
The US is not Rome; it is Byzantium to England’s Rome.
The US is in the throes of end-of-empire; in this it is more like a combination of Rome and Byzantium, with the self-generated Crisis of the Third Century being exacerbated by the enmity of highly organized states as Constantinople faced with the Muslim and Turkish states.
Trump is not Augustus; he is more along the lines of Justinian II, if Justinian was possessed by the spirit of Nero.
Sean Paul Kelley
@GrimJim: wow, you sure conflated several historical eras into one turbid analogy. Let me see if I can unpack it.
First: Byzantium to England’s Rome. Nope. The proper analogy is America is Rome to England’s Greece. Yes, Byzantium was a syncretic successor state of Rome, part Greek, part Latin. But, the Roman Republic adopted Hellenic ideas, clothing, philosophy, etc. . . just as the US adopted much of WASP culture.
Two: US is in the throes of end-of-empire. Like a combination of Rome and Byzantium, the Third Century Crisis exacerbated by 8th century Muslims and 11th century Turks? Wha? So it took the Roman Empire (and its successor state) eight centuries to collapse? You’re losing me fast here. I’d argue you are confusing “imperial” with “empire.” We are an empire–on this continent by genocide and conquest and globally with our several hundred military bases. But, our government is not imperial. There is no successor to Trump–at least not yet, I pray. So, conflate three separate Roman epochs if you must. But maybe do it better?
Three: Trump is not Augustus. On that we agree. But he is no Justinian II–Justinian was more possessed by the spirit of Caracalla than Nero. JII was brutal and despotic. And while Trump has a touch of the despot in him, he listens to the last person who he has spoken with and he’s a coward at heart, which is still dangerous in a leader. Plus, neither JII, not Caracalla or Augusutus were elected Trump was. Odds are our next president will be. That means, by definition, we will remain a republic, until such time as the entire electoral system is cast aside and our presidents or whatever they will be called, chose their own successor.
Republic, from the Latin, res publica, a thing of the people. That defines how we govern ourselves still. We are no monarchy, nor dictatorial republic–although we are getting close.
Am I a martinet when it comes to using the proper meaning of words? Yup, dat’s me.
Tailhedgetrader
China is going to turn Hong Kong into a gold trading hub. They’ll use egold as trading settlement, which will be re-priced to $17k+ an ounce ir higher.