Tuesday, April 02, 2019

Is the USS Ship of Fools Taking on Water?

It certainly appears to be doing so, and the rate is accelerating. Having spent the last three weeks at an undisclosed location away from the internet has allowed me to observe the increase in its rate of sinkage. There was wifi at the airport and I downloaded three weeks' worth of articles, which I read on the long flight back to civilization. What I read came as a bit of a shock, especially after three weeks of nothing but surf, sea birds, crabs scampering about and lots of happy, friendly people who couldn't possibly care any less about the US.

For some time people have been telling me that I should watch the movie Idiocracy because it shows what the US is turning into. Well, I am not sure that a move about idiocy can avoid being idiotic, so I'll pass, but there is a definite increase in the level of stupidity displayed by those who are part of the US establishment. This shouldn't come as a surprise; after all, why would anyone possessed of wisdom and integrity want to have anything to do with it by this time? Points of extreme stupidity—so stupid it hurts to watch—are all around us at the moment. Let me point out a few important ones.

While I was busy twinkling my toes in the azure waters, special investigator Robert Mueller finally released his report. He had left no stupid stone unturned, but failed to accomplish his assigned task, which was to prove that Trump had colluded with Russia. In his report he claimed that although he found no evidence of collusion or obstruction of justice, his report does not exonerate Trump. Note these two points of extreme stupidity. First point: if there was no collusion, there was no crime, and no course of justice to obstruct. Second point: if, as Mueller admits, no crime has been committed, there is nothing to exonerate Trump from.

The Democrats, who have been hoping to impeach Trump on the basis of Mueller's report, should perhaps take hope in the fact that Mueller has turned out to be so incompetent that he can't understand such basics of his profession; perhaps there was collusion after all, but Mueller was too stupid to find evidence of it. Or perhaps the Democrats should collapse in a paroxysm of despair, because Mueller was their best and last chance and now they look like idiots for believing in him.

Next in the stupids parade we have attorney general William Barr, who, in his summary of Mueller's report, uncritically accepted the claims that Russian meddling in the 2016 presidential election did take place. What meddling was that?

There was a St. Petersburg troll farm run by somebody who was said to have once cooked for Putin. The trolls put up click-bait ads on social media. The scope of their operation was minuscule and most of their activity took place after the election, making the claim that they manipulated the election preposterous. Mueller's effort to prosecute them stalled out when their lawyers turned up in court and demanded to see the evidence. Mueller couldn't let that happen because it would have caused the entire courtroom to die laughing.

There was also the claim that Russian hackers hacked into an email server at the DNC, stole a bunch of emails showing an effort to rig the primaries against Bernie Sanders, and leaked them to Wikileaks. But there is evidence that these emails were not hacked but leaked by being copied to a thumb drive by somebody with physical access to the server.

Is Barr too stupid to realize the foolishness of his claims that "the Russians"—whatever that means—had manipulated the US election? Yes, it appears to be the case. With officials this stupid, how stupid was it for the Democrats to spend two years nurturing their dream of getting rid of Trump with their help?

And so Trump is here to stay. Is this where stupidity ends? No, of course not, for here we simply enter the next circle of stupidity. Trump dreams of "making America great again"; but is his dream stupid? Let's look at the results.

His idea was to renegotiate trade deals in America's favor and to repatriate manufacturing which had been offshored to low-wage countries around the world, slash the trade deficit and create lots of good jobs. Seems like a good plan, but let's step back for a moment and look at what the real issue is.

The real issue is that there is a massive imbalance in the US between what Americans produce and what Americans consume: they consume a lot more than they can afford.

One solution would be to slash consumption, but it makes up 70% of the economy, and doing so would shrink it, blowing up the already disproportionately large debt bubble and sending the US economy into deepest depression. This doesn't sound great at all.

Another solution would be to devalue the dollar through uncontrolled dollar emission. This would make American exports competitive with those of lower-wage countries. But this would undermine the US dollar as a reserve currency, cause US debt holders around the world to stampede toward the exits and result in a hyperinflationary shock that would send the US economy into deepest depression, again. This doesn't sound great either, but that was the plan floated by Trump's former advisor Steve Bannon. Perhaps Steve is a bit dense.

Yet another solution, proposed by William Dudley of the Federal Reserve, was to use fiscal methods to stimulate a rebirth of production within the US, and this is the one that Trump fell for and cut corporate taxes, allowing companies to repatriate their foreign earnings tax-free. Did this work? Of course not! Instead of investing in production, the companies used the money to buy back their own stocks, allowing their major stockholders to sell their shares profitably at public expense. Here is Alice Walton, 10% owner of Walmart, liquidating over 700 million of her stock in just the month of March.

We can be sure that Alice Walton won't be investing this 700 million in retail stocks. Was it stupid of Dudley and Trump to think that this plan would ever work? Apparently so.

And so here is where the plan to "make America great again" currently stands. The economy is tanking. The Federal Reserve can't pull it out of the nosedive by lowering interest rates because they are already too low. There is massive carnage in the retail sector and numerous US companies are about to go bankrupt. The once great General Electric has been kicked out of Down Jones and is busy selling its crown jewels to the Russians. What is there left to do?

Enter Janet Yellen, the former Federal Reserve chair, with a plan that is truly stunning in its stupidity. She proposes that the Federal Reserve intervene and start directly buying up corporate debt using newly printed money. Note how Yellen's plan beautifully combines the stupidity of Bannon's plan (pulling the rug out from under the US dollar) with the stupidity of Dudley's plan (giving corporations another chance to buy back their own shares so that their major shareholders can continue bailing out and making a profit at public expense). Here's a chart showing how well that's going even without Yellen's brilliant suggestion.

This dearth of non-stupid ideas leaves Trump bouncing around in his padded cell issuing stupid tweets such as the following: "Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil getting too high. Thank you!" Meanwhile, he banned US heavy oil imports from Venezuela (needed to make diesel) while US light oil exports (from fracking) are running into problems because of low quality, investment in fracking has fallen off a cliff, and energy companies that are in the fracking business, most of which never made any money, are reporting that there is a shortage of productive new places to drill for oil. It is stupid to think that tweeting will fix any of these problems.

To summarize, this ship of fools is taking on water and all of the proposals voiced so far are stupid ones and amount to attempting to bail it out using a sieve. It's really nauseating to watch! It makes me want to fly back to that beach and there to subsist on coconut milk, fresh-caught fish and tropical fruit, and to never connect to the internet again.

But I'll suck it up and carry on as before. Tuesdays will still be freebie days, while on Thursdays I'll treat my faithful supporters to grand new visions. Coming up next: the human ethnosphere, as an evolutionary aspect of the biosphere—a topic I thoroughly reserached while lying on the beach. It holds the key to understanding the life cycle of nations, some of which are full of energy and drive while others are well past their prime and run by some manifestly stupid people.


jerry said...

As an American, my situation is so bad that I can't even think of any non-stupid ideas. My only hope is that I might still be able to recognize a good idea if I see one.

Dmitry, do you read the Australian blogger Caitlin Johnstone? She's just put out an amusing call for good ideas...


Jon said...

Dmitry, your last sentence reminded me of a tour I took across the Trans Siberian Railroad last summer. I've been trying to divine the soul of Russia. This is what I finally came up with.



RB Seymour said...

"But I'll suck it up and carry on as before."
I hope so. Don't go soft on us.

de amateureconoom said...

Dmitry, isn't there going to be way more suffering when the system finally collapses.
Everyone who has more then 2 braincells must see by now that a solution will not come from the people running the system, nor from there possible replacements. Is it not ultimately the idea that we the people start building new systems based on human and other well being. Venus project seems a viable way and filosophy to achieve more peace (literally and figuratively).your thoughts and how to establish this?any idea's

NoobishPineapple said...

America is suffering from the oldest ailment in western civilization usury. When we borrow our entire money supply at interest from private banks, then wealth will be stripped away from the majority of the population and handed over to the bankers and the leisure investor class. The only solution to this problem is to return to our original financial system based on labor monetization and sovereign money, rather than monetized debt and private money creation.

In the mean time, we need to stockpile necessites now, while the economy is still semi functional. Think of all of the things that you would miss if the banks all closed and your cash was becoming worthless. Get the things that you would need the most right now.

Stan said...

Oh my, Idiocracy was a prophetic documentary! (a new genre?) As you clearly possess a sense of humor, in the face of so much policy and behavioral idiocy, you really do owe it to yourself to enjoy this additional context for our dire circumstances!

Seshette said...

Well, they're all scrambling in a last ditch effort to save what they can of the economy, but the inevitable is simply that. The dollar will be relegated to second-class status; it really has already. Many countries have been ditching their US treasuries and there haven't been any true buyers of Treasury securities for at least the last 2 years. Even zerohedge has reported this. Russia and China are using US Tnotes to finance massive construction of just about everything, but primarily transportation infrastructure.

Some have said that allowing the gold price to rise will alleviate some of the pressure on the dollar, but that the current budget and trade deficits are making it nearly impossible for the US to stay above water. The current Qualcomm/Intel debacle seems to be a bit of a trade aggression, perhaps to force APPLE and others to bring some of their production back to the US. But anyone with half a brain knows that we can't meet our computing and cellphone needs with production here because so many toxic elements are used in these machines.

So Trump is trying to relax environmental laws, at least that what's his handlers are having him do, but the liberal push back is massive ( and not entirely wrong). You can't have your cake and eat it too. I just read that China is curtailing the amount of toxic tech waste it's willing to take from the US and this is causing serious concern at the municipal levels because townships don't know what to do with the stuff. Well, we should have thought of that all along.

Ban the plastic, scale back the computer tech, shut down shale extraction, bring back the technologies that EXXON and other oil giants bought up and destroyed that would get us off oil. They're out there. Shut down the Middle East, Rein in Israel, deflate British Intelligence and stop sending money to foreign countries, and funding black ops designed to facilitate regime change anywhere and everywhere. There's money out there, we just never see it at the public level.

Alex said...

Dmitry, I think it would be great if you did a post on the outline & workings of economy. It's a problem for a lot of people to understand (myself included). It seems to have to do with arbitrary values of things in the consumer price index & owners of various industries (raw materials, their use in military/fuel/media/medicine/etc industries- seems they, whoever they actually are, want to get in on the ground floor of people's Boyd Cycles, too).

sapien said...

the news are NOT a cause to celebrate. Capitalism works by exploitation, thievery and outright stealing resources. When that fails, Capitalism resorts to what it knows best: war. WWII saved capitalism from collapse. So we should expect USA to start a major war within 2 years.

Bob Fearn said...

Why do so many people spell CRAPITALISM incorrectly???

elderlyrstaff said...

Dmitry, Thierry Messan has U.S. grand strategy as working out nicely. Interesting contrast.