Part 4. The virus is the pin that deflated the bubble of everything
“ In less than three decades, a mere blink of the eye in historical terms, the United States has gone from the world’s sole superpower to a massive foundering wreck that is helpless before the coronavirus and intent on blaming the rest of the world for its own shortcomings. … But how and why did this pitiable condition come about? Is it all Donald Trump’s fault as so many now assume? Or did the process begin earlier?
The answer for any serious student of imperial politics is the latter. ... two things are clear. One is that the process did not start under Trump, while the other is that it will undoubtedly continue regardless of who wins in November. Once collapse sets in, it’s impossible to stop.” (1)
Make no mistake ‘the greatest depression ever’ that the world is now entering was caused by big capital which over the last 50 years commandeered the central banks to emit ever larger amounts of fiat money to bail them out of their lost gambles while their neo-liberal policies dismantled state protection institutions (2). This pushed their loan costs down and by the end of 2008 their loans became literally free of charge. In the meanwhile the traditional protections of the citizens have been withering. Interest on their savings have vanished while their loans are being charged non negligible rates in the range of 3-5 %.
In other words the last 50 years have seen a redistribution of wealth from society at large to the biggest capital holders and their servants who are more commonly called the 1%. This redistribution of wealth is without any historical precedent but history teaches us that bouts of extreme inequality were always followed by violent social disruptions that ended in a new power formation. If history offers any guidance our present record levels of inequality imply that we are on the cusps of a historical societal turning point that announces the end of Late-Modernity and the emergence of a new historical era that I call After-Modernity…
4.1. Economic illusions
The Corona-virus was the last shock to the Western societal systems. It played the role of a catalyst putting in motion a chain reaction among different factors amidst the particular context of the day :
• a mountain of debts suddenly becomes unpayable,
• "Biblical" Wave Of Bankruptcies Is About To Flood The US
• in the US alone job layoffs reached 22 million in 4 weeks …
• social misery intensifies rapidly and is fostering the real possibility of social explosions …
Without having had the time to rationalize what is happening we have entered ‘the greatest depression ever’. Minds are in shock and fail to question where big capital and its servants are leading Western nations. What should be clear by now is that they have destroyed the idea that interest should remunerate loans and that true price discovery is what establishes the level playing field of markets. Central banks are now purchasing corporate bonds and soon they’ll be buying equities too. Does this mean that the West is abandoning free markets and is heading for centralized planning to avoid collapse ?
If that is the case big capital and its servants will have total power to determine the winners and the losers in the economic game. But one would think that the citizens will not tolerate the emergence of such a new feudalism. Or will the institutions of power gain access to all information pertaining to the individuals thus ensuring their coercion into complete submission ? An answer in 4 steps :
4.1.1. Unlimited fiat money creation has 2 tangible and radical consequences :
1. Money creation has gone out of the limits of the real needs of productive market exchanges (3) giving investor-speculators (big capital) access to free money to purchase indebted companies, that experience difficulties to service their debts, nationally and internationally. In the meantime the managerial class used this limitless free money creation to buy-back the stocks of their corporations in order to boost their own incomes or stock options. The biggest capital holders tolerated this because it concentrated the ownership of corporations in their hands. This process came to be called economic financialization.
But inflating the monetary base has never worked out well and as Brandon Smith writes :
“ No money printing scheme in history has ever successfully solved an economic crisis. Not one. At most it can slow down the collapse for a time, but not stop it.
2. the relentless application of neo-liberal policies inflicted an incessant pauperization of savers and workers. In other words the middle-class was melting away and societies divided in two separate worlds. The top 1% is siphoning most of the benefits resulting from the higher productivity rates of society at large while the 99% received the crumbs falling from the table. This is how Western societies divided in two distinct world : the world of the 1% and the world of the 99%. By owning the political decision-making process of Western countries the 1% furthermore rewarded itself with legal favoritism in the issuance of new laws and further laxity in the application of existing laws.The real answer to the problem is one that the banking elites will never acknowledge: decentralization and localization. Localized production, self-sustaining independent economies in which trade and manufacturing is promoted on the micro-level, not to mention local scrip backed by commodities, as well as gold and silver as money alternatives; these can create redundancies in cities and counties and states that could save them from national and global level disasters. The sad thing is people will not consider these solutions until they are already mired in the crash. “ (4)
The corruption of the economic game jumped the shark by the beginning of the eighties and intensified along the following decades. By the time the Corona-virus came along the game was literally rotten and corruption was everywhere.
“Too much debt, too much malinvestment, and too little honest pricing of assets and interest rates made America uniquely vulnerable to economic contagion”. (5)
In such a context it was just a question of time for such a catalyst to emerge from nowhere. The virus was like the pin that collapsed the balloon. A minority of astute observers had rightly been predicting since years that a depression was coming that would be the worst in a life-time. They also informed that a new world would await at the end of this chain reaction in which the economic fundamentals would once again take central stage.
The mountain of debt that had been accumulating all along is now under enormous pressure and borrowers are starting to default one after another. It is to be expected that once the velocity of this borrower shake-up passes a certain threshold central banks will most probably lose control of interest rates which then easily could shoot up to 10% and higher. In this new world money will no longer be free and abundant and savers will again be rewarded for their frugality while investors will definitely shy risky speculations for a long time to come.
4.1.2. But is the corona crisis going to impose again the rigors of the known economic fundamentals ?
I ask this rhetorical question because the fact is that this scenario does not fit into the game-plan of Western big capital holders. Accepting the economic fundamentals would wipe out their dreams of total control so they are now positioning the political decision making process to use the ensuing social chaos as a springboard to further enlarge their capture of the world’s wealth that is already historically out of proportion (CARES act + conditional dollar swaps).
Their strategy is a dangerous winner takes all game catapulting the financialization of the last decades at a stratospheric level by exploding fiat US dollar money creation exponentially. Western big private capital holders and their servants are so mad at the prospect to lose their hegemony over the world that they are betting the house in the hope to ensure their continuous hegemonic reign. But this is a dangerous bet that they could very well lose and in that case the Western 99% would be sucked in a maelstrom of social misery.
Some $10 trillion in new internal bailout money is already in the pipeline in the US and this figure will continue to grow until the bad debts or failed investments, of NYC based multinational finance, are being taken over by the fed. And the same kind of money creation, for bailing out big capital holders, is underway in all Western financial centers. In total Western money creation could reach tens of trillions of dollars within a few months time. Nobody knows for sure how the principle of reality is going to handle such a mountain of fiat currency. But if history is of any guidance it will end with a lot of social misery and the precipitated death of Western Modernity.
Now the enormity of this Western experiment in money creation, while doomed to crash the US dollar reserve currency status, could still reserve us some surprises. For one :
“The US dollar share of global reserves today is 62%, almost exactly what it was in 2008. (...) The dollar is used in 40% of the world’s debt, 80% of global payments and nearly 100% of its oil sales”. (6)
Furthermore the present worldwide dollar liquidity shortfall is reinforcing the demand for dollars thus increasing its value.
Lastly, if we go by the standard set by Japan’s monetary experiment that saw an increase in the balance sheet of the Bank of japan’s at over 100% of the country’s GDP by end of 2018 (7), the Fed’s remaining capacity to create more money out of thin air is still far from being extinguished. With the help of prayers it could, perhaps, be in the order of ‘US GDP minus present balance sheet’ [21.5 - 6] which gives something in the order of $15.5 Trillion. Wow !
But as mentioned here above “why would this present bout of craziness end any differently than in the past?”. I personally think that the nature of human economic activities has not changed. What goes on presently is no different than what went on in the past. So I advise seat-belts please !
4.1.3. The wild gamble of Western big capital holders
What the standard set by Japan’s monetary experiment shows us is that the Fed’s largess could still perhaps have room to power some further the grand strategy of Western big capital holders. Their strategy is a worldwide class war for total dominance that is fought along 2 avenues :
1. Western central banks will continue to: –- supply big capital holders and their corporations with free dollars for some time to come, -- while extending conditional dollar swap lines to countries in need of dollars. And this strategy will continue to be applied for as long as it takes to successfully complete Western big capital’s conquest of the world at least until the principle of reality crashes the illusion...
2. The Western working man, no longer being an indispensable factor of production, lost his usefulness for a capitalist society and his existence will be sacrificed by the ‘reason that is at work within capital’. Neoliberal policies have been at work eliminating state protection policies since some time already and the plan is to liquidate all social, health, environmental public expenses as soon as the political process permits…
This strategy targets a worldwide radical reset in the following fields : justify;"
• the relations between labor and capital (capital has won)
• human daily life (hyper-individualism and social darwinism )
• the standing of nations (state governance)
• the relations between nations (geo-political power play)
What this grand strategy entails is a grab of a greater share of existing assets by big capital that is intended to force a drastic reinforcement of neoliberalism and austerity which, if successful, will inevitably lead to the emergence of a new political economy and social system characterized by the following :
1. big capital and its army of servants will manage their worldwide holdings free of national laws and taxes from supra-national islands out of reach of any national legislation
2. within the borders of the traditional nation-states poverty will increase at levels not seen in the present and we’ll assist at a worldwide acceleration of human misery that will reach unprecedented historical levels
3. dystopian national governance systems will try to ensure that ordinary people stay put and submit to the new order while they plan the economy (central planning)
4. national governance will be delegated to a fringe vassal middle-class of servants who will act as :
4.1. a new feudal power within nations: the new vassals, or local representatives of the supra-national class of big capital holders, will impose their authority over the institutions of power of nation-states
4.2. managers of the national branches of Multi National Corporations : the vassals will act like yesteryear lords, towering over a mass of peasants who till the land, buying their produce for distribution. They’ll head the corporations in charge of maintaining the infrastructure and manage the factories and their workers, chosen among the mass of have-not, will be remunerated at third-world starvation level wages.
But we have to remain clear-minded. The grand strategy of big capital and its servants is a last stand against the march forward of history. Its a gamble and its success is thus not guaranteed. It is like going broke by betting all you have against the tide. But the reality is that the reset of the governance-world takes place in the very special context of Late-Modernity which is characterized by the following 2 heavy trends :
• the governance-word is already in the midst of an advanced shift that displaced economic might from the West to the East. The graph “20 nations GDP PPP – 2019” here under visualizes the reality of what is going on :
• the multiple side-effects of Modernity are suddenly converging and their interactions are escalating ever larger damages to the habitats of the different living species. Humanity is a few seconds before midnight on the day of life on earth. And to perpetuate life in the future all nations need to rush into a worldwide collaboration to devise answers …
The patterns of the game, that Western big capital wants to imprint in the substance of Late-Modernity, are so many signs that their game is a last stand against these 2 heavy historical tsunamis. One can thus understand their eagerness to impose a further run of their hegemony over the world. The fact is that the context of the day is definitely not propitious for such an endeavor.
But there is more.
Their game is such a risky bet that its consequences could be dramatic for life on earth. The Bulletin of Atomic Scientists announced prior to the corona-virus outbreak that we are “100 seconds to midnight” in the day of life. Here are the words of their announcement :
"Humanity continues to face two simultaneous existential dangers—nuclear war and climate change—that are compounded by a threat multiplier, cyber-enabled information warfare, that undercuts society’s ability to respond. The international security situation is dire, not just because these threats exist, but because world leaders have allowed the international political infrastructure for managing them to erode.” (8)
The last stand corona-virus gamble of Western big capital holders is bringing the needle ever nearer to midnight …
4.1.4. Illusions might work until they do no longer work
But what about the warning by astute observers who have been predicting since years that an economic depression is coming and that a new world would await at the end of this chain reaction in which the economic fundamentals would once again take central stage ?
I side unambiguously with these observers in predicting a return to the economic fundamentals and in this sense I don’t think that the gamble of Western big capital holders has any chance to last long. That being said I think that their strategy is destined to mark the unfolding societal realities for a limited time before they come crashing down.
How long will it take before the strategy of big capital holders comes crashing down ? Nobody has a good answer to that question. It could be next week. It could be next year and it could also be some years down the road. Historical processes are gradual and when a strategy leads to a downwards trend collapse eventually sets in but only after having reached a certain threshold or tipping point. We have unfortunately no clue when the tipping point occurs. We’ll know it afterwards.
But as I wrote here above I don’t think that the gamble of Western big capital holders has any chance to last long. The contradictions in societal systems are indeed entrenched by now and they are ever intensifying. Having said that since their gamble is impacting societal realities the world over we have to take their gamble seriously. It is indeed part of the downward trend. Hopefully it is a last gasp before death. Just as Strauss & Howe wrote over two decades ago :
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” (9)
The corona-virus was an extremely powerful spark and societies literally stopped in their tracks conforming the magnitude of a crisis that ends a historical cycle.
Strauss & Howe’s 4th turning is understood to be a last turning within a cycle of 80 to 90 years (Saeculum). A recovery follows that starts a new cycle at its highest point with strong institutions and communal values, that will be gradually eroded by generational archetypes like individualism which gradually open the path to another crisis.
In my humble opinion Strauss & Howe’s 4th turning cycle finds its real significance when it is framed within the larger cycle of the societal evolution of worldviews. I have been writing extensively about the turning of worldviews in blog posts 199 to 236. My conclusion is that Strauss & Howe’s present 4th turning is fusing with the larger turning in the cycle of worldviews corresponding to the dyeing of Late-Modernity and the emergence of a new worldview that I call After-Modernity. I call this After-Modernity for no other reason that future generations are the ones who will give it its real life title.
4.2. the last stand of ‘big capital holders’
The corona-virus did not break the economies of Western countries. They had been broken a long time ago under the ideological assault of neoliberal policies that dismantled all public services at the exception of the institutions of force that are meant to impose the decisions of power. Public services were never thoroughly renewed nor repaired. They were left to rot. Big capital holders, and their servants the national decision makers, had other plans and the need for repairs was camouflaged under duct tape while some wire gave the illusion that the parts of the state machinery were still attached together. But, as the corona-virus showed, they came crashing at the shock of a first systemic disturbance. The corona-virus suddenly uncovered the real condition of Western economies for all to see. Everyone was surprised at the utter dis-functionality of Western governance.
A small minority knew all too well that the real economy was in a state of profound disrepair and that Trump’s imaging, of the strongest US economy ever, was nothing else than cynical propaganda to try keeping the power.
“ ...before the COVID-19 reached our shores, the US was already in a horrible debt crisis.
Fiscal conservatives are angered that the US National Debt has reached $24.5 trillion while at the same time adamantly ignoring that the US Total Debt now hovers above $77 trillion. Neither party shows concern about Americans’ increasing personal debt (mortgage, credit card, auto, student loans, etc), nor the rise in corporate, state and city debts.
When we take into consideration $144.6 trillion in US Unfunded Liabilities, $20.4 trillion in Social Security Liability, and $31.6 trillion in Medicare liability, the nation lingers on the precipice a total collapse.
(...) the millennial and iGen generations are the victimized recipients of this debt bequeathed to them by older generations. They are further compromised with the inability to secure jobs equal to their educational level nor secure a satisfying living wage. They are burdened with high interest student loans. They also are far more aware of the impact climate change will have on their futurs. Therefore, millions of young adults are rapidly losing faith in America’s neoliberal capitalist system and our self-centered culture of predation. “ (10)
Western big capital holders’ have always been well aware of the financial mess the US and Europe have gradually created for themselves. The core of their strategy now is to suck all they can out of their countries of origin and the easiest conduit to realize just that is through the national banks’ money creation capabilities. The recently approved Cares’ act in the US gives them the legal cover they need to ensure a non-stop supply of free dollars from the Fed all the while imposing ‘the reason that is at work within capital’ to society at large.
The Cares’ act is the first step of a hastily conceived financial strategy to try to push through a radical worldwide reset of the governance-world. The plan is to finance a campaign to maximize the control of big capital holders over the whole earth by affecting the following 3 determinant factors of the governance-world :
__________
Notes
1. “From
Overstretch to Collapse “ in
Strategic Culture by Daniel
Lazare. 2020-05-09
2. State protection institutions are the social, environmental, health, education, and other institutions that protect society and the citizens from imbalances originating in the market. By the beginning of the 20th century capital started to submit to the pressure of the street, for social policies, to deflect the risk of social and political revolution. But by the seventies the populations of Western countries had largely been sedated by individualism and consumerism. This is when big capital and its state servants started to impose their new vision of globalization, High-technology, and hyper-consumerism that was framed into a set of neo-liberal policies whose functions were to liquidate all State protection institutions while reinforcing the apparatus of all State institutions of power (police, military, courts, prisons, propaganda and so on).
3. Yes
there is a real limit to safe money creation. It corresponds to the
financial needs of productive market exchanges. This definition comes
from classical economics which saw finance as a function of
production. Neoliberalism turned this equation on its head and
production was made a function of finance while money creation became
limitless. But this is against economic nature and so the edifice
comes eventually crashing down.
4. “The
Enslavement Of Infinite Money” Birch Gold Group.
Brandon Smith. 2020-05-06.
5. “How
To Think About The Fed Now”
The
Mises Institute by Jeff Deist. 2020-04-15.
6. “No,
the dollar will only strengthen post-corona, as usual: it’s a
crisis, after all” in
The Vineyard of the Saker by
Ramin
Mazaheri. 2020-04-16.
7. “Bank
of Japan's balance sheet now larger than country's GDP” Reuters
Business news by Hideyuki
Sano and
Tomo Uetake. 2018-11-18.
In 2018 the Bank
of Japan held
553.6
trillion yen ($4.87 trillion) of assets. In
March 2020 its asset holdings increased to 604.4 trillion yen ($5,6
trillion).
8. “Closer
than ever: It is 100 seconds to midnight” Bulletin
of the Atomic Scientists. 2020-01-22.
9. “The
Fourth Turning”
Strauss & Howe.
10. The
COVID-19 “Economic Holocaust” … Bankrupting the Nation”
Global
Research by Richard Gale and Dr. Gary Null. 2020-04-28.
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