Friday, September 20, 2019

Sergei Lavrov: “World at a Crossroads and a System of International Relations for the Future”

Sergei Lavrov is a world-class diplomatic heavyweight and Russia's foreign minister. As the saying goes, if you don't deal with Lavrov, you'll end up dealing with Sergei Shoigu, defense minister. This speech is important in the context of the borderline nonexistent relations between Russia and the United States. It explains why that is and orders ways out. The question is, are American government officials capable of accepting reality and acquiescing to the fact that the world has changed and that they are no longer the ones calling the shots.



These days, the 74th session of the United Nations General Assembly opens up. So does a new international “political season”.

The session begins at a highly symbolic historical moment. Next year we will celebrate two great and interconnected anniversaries – the 75th Anniversary of the Victory in the Great Patriotic and Second World Wars, and the establishment of the UN.

Reflecting on the spiritual and moral significance of these landmark events, one needs to bear in mind the enormous political meaning of the Victory that ended one of the most brutal wars in the history of mankind.

The defeat of fascism in 1945 had fundamentally affected the further course of world history and created conditions for establishing a post-war world order. The UN Charter became its bearing frame and a key source of international law to this day. The UN-centric system still preserves its sustainability and has a great degree of resilience. It actually is kind of a safety net that ensures peaceful development of mankind amid largely natural divergence of interests and rivalries among leading powers. The War-time experience of ideology-free cooperation of states with different socioeconomic and political systems is still highly relevant.

It is regrettable that these obvious truths are being deliberately silenced or ignored by certain influential forces in the West. Moreover, some have intensified attempts at privatizing the Victory, expunging from memory the Soviet Union’s role in the defeat of Nazism, condemning to oblivion the Red Army’s feat of sacrifice and liberation, forgetting the many millions of Soviet citizens who perished during the War, wiping out from history the consequences of the ruinous policy of appeasement. From this perspective, it is easy to grasp the essence of the concept of expounding the equality of the totalitarian regimes. Its purpose is not just to belittle the Soviet contribution to the Victory, but also to retrospectively strip our country of its historic role as an architect and guarantor of the post-war world order, and label it a “revisionist power” that is posing a threat to the well-being of the so-called free world.

Trouble at the Asset Detox

Remember the term “toxic assets”? Google Trends shows a huge spike for this search term in March of 2009 and then… nothing. We don’t call them “toxic assets” any more, we just call them “assets” now, please don’t talk back and just listen. There are some things you just have to accept as facts.

For instance, the size of the US sovereign debt doesn’t matter. For instance, Americans can print all the money they want. For instance, interest rates are set by the Federal Reserve and can always be set low enough so that interest payments on the federal debt can always be made. For instance, the US dollar is the world’s reserve currency—always was and always will be.

That’s why the US federal debt will NEVER be defaulted on no matter how huge it gets. These are articles of faith in the US financial system. You want your swipey-card to continue working at the supermarket, don’t you? If so, go on believing! Not only that, but keep clapping… because if you don’t, this is what will happen and children everywhere will burst into tears.

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Tuesday, September 17, 2019

Who Blew Up The Oil Market?

It couldn’t have happened to a nicer oil processing plant. There it was, sitting out in the Saudi desert, processing seven million barrels a day of crude oil, defended by hundreds of billions of dollars’ worth of “made in the USA” weapons systems, and the Yemenis take it out using some drones they knocked together in a bombed-out garage, programmed by somebody’s nerdy AI-whiz nephew. And now, all of a sudden, 8% of global oil production can’t be shipped because until it’s processed it isn’t exactly oil. What happened, who is responsible, and what does it mean for you? Please allow me to lay it all out for you…

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Saturday, September 14, 2019

Bolt-on, Bolt-off!

Lots of people have had lots of things to say about Trump’s firing of his odious, warmongering national security advisor John Bolton, but none of them stated the obvious. And so, once again, it is my turn to step into the breach and set everyone straight on the logic behind Trump’s madness, because it actually exists and is simple, rock-solid and effective. Furthermore, it will work every time, and there is nothing anyone can do to stop him.

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Tuesday, September 10, 2019

The Bolsheviks Are Coming! (Part I)

Suppose you are an American. And suppose you spent the last 60 years laying in quiet repose in a freezer chest after expertly injecting yourself with enough glycerine to keep ice crystals from disrupting your cellular membranes. Lord only knows why the heck you did that, but that’s all past tense now. Anyhow, now it’s 2019 and for some other unfathomable reason your great-grandchildren dig you out of the freezer chest, defrost you, zap you a few times with a cattle prod to get your heart pumping, walk you around for a bit while feeding you strong black coffee and here you are again, good as new and ready for action.

Tuesday, August 27, 2019

Resurrecting the American Economy

Donald Trump has recently ordered US corporations to move production out of China and into the US. Easier said than done!—or, rather, undone. Moving production to China (and, in case of IT, to India) allowed US corporations to benefit from the large wage differential and an easier regulatory environment in order to be more profitable. They spent these excess profits by buying back their own stock, paying generous dividends to their shareholders and using their artificially inflated stock prices to justify exorbitant executive salaries and bonuses.

Along the way, they impoverished American workers by depriving them of gainful deployment, eroded the skill base of the American population and, perhaps most importantly, destroyed demand for their products because more and more Americans could no longer afford them. As these trends played out, making China prosperous and the US increasingly distressed and impoverished, with close to 100 million working-age people permanently jobless, US corporations could no longer profit from their offshored production to the same extent, and so they took advantage of low interest rates to borrow huge sums of money and use it to continue buying back their own shares, paying dividends and continuing with the exorbitant executive compensation.

By now, many of the major US corporations are financial zombies, waiting for an uptick in interest rates to drive them into bankruptcy. And it is these zombies that are being tasked with bringing production back to the US. Good luck with that! Which is to say, it is highly unlikely that such an effort could possibly succeed. But even if it could succeed, would it solve the problem—which is that the US is gradually degenerating into a bankrupt third world country? Perhaps not, because, you see, the entire theory of “making America great again” is based on a fallacy—which is that China became the world’s largest economy (by purchasing power) and the world’s factory simply by virtue of the fact that American corporations offshored production to it.

No, China’s stunning success primarily has to do with its superior economic planning and social governance. Call it Stalinism 2.0. Under Stalin, the USSR was able to produce steady double digit growth rates through a combination of central planning and market mechanisms. It also had some 4 million political prisoners, which, for a country of 200 million, seems a bit much, but that’s politics, not economics. When it comes to managing the economy, Stalinism, and especially Stalinism 2.0—its modern, Chinese version—was and is a stunning success. Fundamentally, it is a recipe for building socialism using capitalist (mainly state-capitalist) means with whatever market elements are found to be effective.

Just bringing back production from China would not save the US. To achieve results comparable to China’s, the US would have to make some changes, to bring it more in line with Stalinism 2.0. I will now sketch out a few of these changes, to give you a sense of what would be involved.

Tuesday, August 20, 2019

Going Negative

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The following article was first published three years ago. Since then the US Federal Reserve has raised interest rates above zero, only to start lowering them again. In the meantime, the total amount of negative-yielding debt in the world has reached $13 trillion (USD). This is more than the combined 2019 federal budgets of USA, China, Germany, France, the UK, Japan, Italy, Brazil and Canada (which, incidentally, are nine of the largest, most overdeveloped and most collapse-prone economies on the planet). It may seem surprising that investors are willing to lend money at a negative interest rate, but it's an offer they can't refuse: they would rather lose their money slowly over time than all at once. Some investors (and central banks) have decided that fiat currency reserves are a bad idea and are buying gold instead, but this won't change the overall economic picture. And overall picture is that global financial collapse has been on pause since 2008, but now somebody hit "play" again. In any case, this seems like an opportune moment to dust off this article and once again look at what negative interest rates are, and what they do.

Thursday, August 15, 2019

The Color Revolution Post-Mortem

Over the recent weeks two attempts at color revolution have been proceeding in parallel; one in Moscow and another in Hong Kong. While a casual observer might feel that the connection between the two is tenuous at best, a closer look reveals that the methodology is exactly the same one that had been used successfully during the various regime change exercises in the past—more than once in the case or the Ukraine—but has been misfiring of late.

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