Post: #51

(03-10-2016 10:11 PM)NASA Test Pilot Wrote:  War is a way of teaching geography.

Wow that's such a brilliant statement, and can explain so many things in the world. If you combine that with Diversity + Proximity = war, then you get something like...with diversity and proximity you have to teach geography, or you will have war. That's why we need walls between such "diverse" groups, or we will all be at war.

Post: #52

The following was from my post on Russia Entering the Syrian Conflict relating to the Russia´s recent (apparent) withdraw.

On a strategic level it means that the Syrian Army is in a significantly stronger position. The probability that the Syrian Army and a relatively smaller Russian support can, at a minimum extend and delay the rebuilding of the opposition, if not defeat them within a medium timeframe is high. It is in the Russian best interest, long term, to de-escalate in Syria. They will play the long game with the Chinese economically to shift the balance from the west. If they get into a more protracted ground offensive, it will strengthen the U.S. military-industrial complex and artificially support the dollar short term. The decrease in Syrian exchanges will most likely mean reduced (non-proxy) Saudi forces that can be focused internally or at the southern border. Russia can use this via Chinese influence as they attempt to decrease Shia-Sunni conflict and promote trade in general and the movement toward a Russian-Gulf Oil Cartel.

The greater wild card is Turkey, but with Russia pulling back Turkey will have a more difficult publicity issue on the world stage as they push the Kurds. Stability (to include developing an international identity for the Kurds) is the center of gravity for the Russian long game. They will gain a marginal victory in the second half of the 21st century if they can do this as well as increase economic ties between Eurasian countries, and develop a new energy cartel using something other than U.S. dollars as payment. This will lead to more trade in other international goods in something other than U.S. dollars.

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The second part was from my post on Why Free Trade Cannot Co-Exist With Currency Manipulators in relation to trade tariffs. Bits and pieces have been discussed here on the geo-political thread, but I did not sugar coat it below. I then went into a longer explanation on trade tariffs for those interested (the thread is also worth a look), the more detailed trade tariff post is here:

/thread-54249...pid1252374


As the United States passes trade tariffs against major world powers, it will lead to trade wars, then to proxy wars and finally to more direct national conflicts between multiple nations. This is because the United States uses an inherently dishonest means of settling trade negotiations; the U.S. Dollar in terms of U.S. Treasury Notes and U.S. Treasury Bills. The U.S. can create them freely, unlike other nations (who can create their own currency and treasury notes) and then attempt to coerce other nations to use them in trade being backed up by the might of the U.S. armed forces. The use of currency in this (dishonest) manner is an act of (economic) warfare.

The U.S. was in a unique position after WWII as most of the world´s capital (in terms of gold and production of goods) was held by and/or stored in the U.S. and most major nations were destroyed and/or in debt after WWII. The U.S. Dollar was convertible to gold and used to settle trade between nations as of 1944. This is no longer the case, but prices for commodities (oil, wheat, sugar, silver, etc., etc.) are settle in U.S. Dollars. When a nation (whether it be China, Panama, Saudi Arabia, Hong Kong or any other) pegs (with the intention to manipulate) its currency (not money) to the U.S. Dollar it is doing so in order to defend itself. To impose an import tariff on a country that is trading with the U.S. while the U.S. is operating the largest currency manipulation in the history of the world is an additional act of (economic) war. To expect a nation with a measure of common sense not to defend itself is foolish.

If a prudent man had business dealings with another man (trader) who was dishonest or who had cheated them or others, he would stop doing business with this trader, as the prudent man will lose more in the long run. If the prudent man thought that this trader was going to kill him because he would not trade with the trader; and the prudent man was unable to defend himself (currently), he would build himself up to a point and join forces with others (prudent men) to where they could defend themselves and break relations with the dishonest trader. Until the prudent man could do this, he would deal with the trader in a way to protect himself and minimize interactions with the trader until he could stand on his own. To expect any nation that desires to survive to do any less is unreasonable.

Post: #53

@NTP

Thank you for posting your perspectives on these things.

I have only read the first page, but your perspective does seem to contain what you might call "tunnel vision." While your comments about finance/econ being used as/the basis for warfare are poignant, the focus on what you call "US Dollar Hegemony" is not understood.

My primary contention would be that you seem to take building a consumption driven economy for granted; that any nation can easily have such an economy. In fact, China is discovering how difficult that sort of transition actually is. I recently saw a Marxist forum video where Zizek talked about the Chinese govt actually allowing workers to strike at FoxConn, etc. for this very reason. In the past, they would have crushed such protests immediately.

Second, what exactly do you think trading oil in yuan or rubles does for China and Russia? They still have to convince the actual producer nations to want financial assets denominated in yuan and rubles. Do you think Russia and China are currently doing a good job of this marketing campaign? Both seem to be poised for conflict in many regions, as you state. Why are you thinking the Saudi's, Iranians, and other ME producers are going to want to hold assets denominated in the currencies of an explicitly Communist country and a recently Communist country?

Third, you mentioned Iran "angling" for payment in Euro. This would possibly have a better justification (Iran is terrified of US asset seizures which would be much easier if denominated and held in our system), but why do you think that is terrible for the dollar?

Post: #54

"The U.S. can create them freely, unlike other nations (who can create their own currency and treasury notes) and then attempt to coerce other nations to use them in trade being backed up by the might of the U.S. armed forces. The use of currency in this (dishonest) manner is an act of (economic) warfare."

What is your alternative reality where this is not the case?

If China uses a yuan contract to buy oil from the ME:
1) The producer can either buy assets denominated in yuan like a bond
2) Trade the currency (or contract if delivery hasn't occured) of yuan for the currency in which the assets it would like to hold are denominated and then buy those assets. This actually puts downward pressure on the yuan and increases the demand of the desired currency.

How is this any different from what the US does? (besides the fact that other nations WANT to hold US$ assets for more reasons than simply the military)

Post: #55

Economically speaking, my frame of reference is not about building a consumption driven economy, rather it is about allowing capitalism to flourish under relatively free (fair, equitable, non-manipulated) trade. Free trade and capitalism are built on sound money and mutually enforced contract laws. Trade is enhanced when the parties trust one another and there are standard weights and measures of value and equitable means of resolving disputes. In terms of political policy I am of the mindset that less regulation is better than more regulation in terms of the citizenry internally and this would also be mirrored in external relations with other nations.

Trading Yuan for Rubbles and vice versa is an intermediate step that allows countries to use bilateral means (which can be used for other currencies as well) to bypass a system (dollar based hegemony where the dollar is based on nothing tangible other than the full faith and confidence of the American tax payers ability to produce and therefore to pay (with interest) an increasing debt or the U.S. military to back the U.S. dollar with force) that provides an advantage to a third party (the U.S. in the case of dollar hegemony) who may otherwise not be providing value (which is not true all of the time). As I have stated in other posts, I am of the opinion that another type of equitable mechanism for the resolution of trade is being developed; something like a gold-backed trade note. After another trade system is being used by more nations around the world, more world-wide financial changes (and eventually currency changes) will also occur, I have allude to this in other posts like here:

/thread-53166...pid1201257


Other nations understand this at the trade level and that is why there are well over one hundred countries that have developed and are beginning to use Yuan swap facilities to settle trade in something other than U.S. dollars. The issue is that a large percentage of the population is not aware of this, not that it does not exist or is moving in that direction. Those who control media groups are powerful and have the ability to suppress and manipulate the minds of large numbers of people.

The conflict that you see on the screen of life is real and part of the issue is that many powerful nations understand that it is not in their best long term interest to go head to head with the U.S. militarily (and/or NATO) as they will lose (or lose more in the long run) and are choosing to fight a long game that is not based on sending rounds down range. As I read more and more history, I can see the detailed similarities of the decline of one system and the rise of another and the seeds of the eventual downfall of the newer system and on and on.

It is not that countries want to hold assets in communist countries; rather that they (more countries) want to have trade with a commonly desired medium of exchange (honest money as an example) that will in the long run be beneficial (relatively more free and fair) from their point of view. If one country says it wants to trade its oil (goods/services) and it wants XXX (not U.S. Dollars), but another country attempts to prevent (through various means) this, it is yet another type of manipulation. When these manipulations are introduced, we will (and we have) see(n) other types of currency manipulations and tariffs being used as a way to protect themselves as one party (country) does not believe the trade (or trading) is equitable.

Asset seizure by the U.S. or any country is a real issue as well and can be seen on a larger scale with any nation (China) having a lot (trillion dollars) of U.S Treasury Bonds. If the nation dumps the U.S. Treasury Bonds, their value goes down (while they still hold many more) and it is, in effect, having their wealth diminished, confiscated or seized. The nations will attempt to minimize all asset and wealth seizure as it is generally in their best interest. This is also true at the individual level within a nation, especially in the U.S. as its citizens have more (paper) in general.

It is bad for the U.S. dollar and people who hold U.S. dollars (particular people living in the U.S.) when a good and/or service such as oil is sold or traded in something other than dollars because the demand for U.S. Dollars (Treasury Bonds and Notes) decreases. When one country trades with another country (for its oil, sugar, wheat, corn or anything) they need dollars to settle the trade. When countries say, I do not need your dollars any more, the dollars created by the U.S. to pay for U.S. imports must flow back to the shores of the U.S. and the value of the dollar depreciates and the citizenry feels the effects of inflation as the other countries now say, we want something other than your U.S. dollars for our goods and services. The U.S must then do without the goods and/or services, produce the goods locally (which requires capital input), or provide something else in exchange for the goods and services that it desires, which in turn raises the value of that ´something else´ instead of the U.S. Dollars.

Over the last decade other countries first moved (their reserves) out of long term U.S. Treasury Bonds From 30 years, to 20 years, to 15 years, to 10 years, to 5 years down to 2 years to increasing shorter maturities and now have larger percentages of their U.S Treasury holdings in 3 month and 6 month U.S. Treasury Notes. They have also moved their reserves into more tangible assets whether they are land (to include building islands), mining facilities, mineral deposits, infrastructure, building of cities, port facilities, rail roads, gold or various others. As a side note, Euros are not economically better than U.S. dollars.

As the Yuan is now being integrated into the SDR basket, watch in 2017 for China to begin to peg their currency against a basket of currencies. More specifically, watch for them (over the next 4-5 years) to rotate their peg versus a part of a (the) basket of currencies (and that part of the basket may continuously rotate). This will make it harder for currency speculators to attack the Yuan. Furthermore, watch for the Chinese to trade (sell) their U.S. Treasury Notes in exchange for more industrial commodities (to include stockpiling) as they shift the population (again) to more technical jobs and services. Many people will think that it is the commodity prices that are going up, but it will be the dollar going down. On a larger prognostic point, look for things like gold to be revalued (probably in increasing increments). I propose that China is going to try to do in the next 20-25 years what the West did in 100 years.

If geo-politics was more like hard science, things would be easier (for me), but that is not reality. These are all good points that posters bring up and I do not mind being challenged. I do have strong experience but it is far from perfect and like each of you, I am a work in progress.

Post: #56

Quote:Economically speaking, my frame of reference is not about building a consumption driven economy,

Let's try an argument to the absurd to show my perception of a disconnect in your view and why it is dependent on a consumption driven economy.

Country "Consumer" has a well diversified economy where consumption accounts for 70% of demand. Country "Exporter" has an economy with domestic demand only enough to accommodate around subsistence level standard of living. However, they produce far more "goods" than their domestic needs and export them to Consumer. This allows the capitalists in Exporter to receive financial assets from Consumer in exchange for their real goods. The capitalists in Exporter have a choice. They can either (1) accumulate Consumer financial assets or (2) sell the Consumer financial assets back to Consumer in exchange for imported goods. If they choose (2), who buys their imported goods?

Does that help show the link between a consumer economy and your claims that China is trying to usurp the American role?

Quote:Free trade and capitalism are built on sound money and mutually enforced contract laws. Trade is enhanced when the parties trust one another and there are standard weights and measures of value and equitable means of resolving disputes.

Do you not believe that China is one of (if not the largest) IP pirates on the planet? Last I looked into it, China had frozen the market for a majority of companies listed on its exchanges. China also created a policy which enabled the government to label nearly any asset seller it chose (eg. any insufficiently pure politically) as a criminal attempting to undermine their economy. An asset manager's fiduciary duty to their client as a bad joke. Blaming Dollar Hegemony for this is like a feminist blaming men for the destruction of chivalry.

Again, writing a contract for oil in yuan only matters if the oil exporter wants to hold yuan denominated assets. If they don't (and the oil exporters exchange the yuan for another currency), this actually puts downward pressure on the yuan. This goes back to the question, do you think China, etc. are doing a good job of advertising their financial markets as good stores of value?

Quote:As I have stated in other posts, I am of the opinion that another type of equitable mechanism for the resolution of trade is being developed; something like a gold-backed trade note.

Countries can already buy gold with their dollars if they so choose. Humans ultimately want goods they can use, not gold. Let's say a country settles trade in a "gold-backed trade note." Do they just accumulate these notes? Or do they sell them for other currencies and/or goods?

Quote:After another trade system is being used by more nations around the world, more world-wide financial changes (and eventually currency changes) will also occur, I have allude to this in other posts like here:

Considering your background in the military, do you see a similarity between your thinking on destroying "dollar hegemony" and the thinking of progressives regarding the Arab Spring? I do not understand your faith in globalism. At all.

Quote:It is not that countries want to hold assets in communist countries; rather that they (more countries) want to have trade with a commonly desired medium of exchange (honest money as an example) that will in the long run be beneficial (relatively more free and fair) from their point of view. If one country says it wants to trade its oil (goods/services) and it wants XXX (not U.S. Dollars), but another country attempts to prevent (through various means) this, it is yet another type of manipulation. When these manipulations are introduced, we will (and we have) see(n) other types of currency manipulations and tariffs being used as a way to protect themselves as one party (country) does not believe the trade (or trading) is equitable.

Unsure if this will be understandable, but here goes: You constantly use the terms "fair, equitable, etc." Economics isn't about maximizing production or trade. It is about power and control. Econ is a question of "who," not "what." "What" is a fantasy until it actually exists, at which time the question solely becomes "who."

Quote:It is bad for the U.S. dollar and people who hold U.S. dollars (particular people living in the U.S.) when a good and/or service such as oil is sold or traded in something other than dollars because the demand for U.S. Dollars (Treasury Bonds and Notes) decreases.

(I realize I am hammering this point, but it needs to be hammered) What the import (ie, oil) is settled in is not the important issue. The important issue is "Which currency does the exporter want its assets denominated in?" Again, if a ME country accepts yuan for its oil but decides it doesn't want Chinese assets, this actually puts downward pressure on the yuan (and means the ME country is actively devaluing any future contracts nominally denominated in yuan; hence it is a harmful policy to create contracts in a currency that you don't intend to hold assets in). Your interpretation of the world requires that the world want yuan denominated assets. Again, do you think the Chinese are doing a good job of this marketing campaign?

Post: #57

I do not think that China is trying to usurp America´s role (although this may happen). I think that they are trying to protecting themselves firstly and insure regional stability. Part of the perspective before was (and is) pure economics, when countries are fighting one another my perspective adjusts as pure economics does not exist (fair, free, equitable trade).

I concur with your though experiment. I further believe that China is giving enough goods back to their people to keep them happy (historically they understand the need for harmony among 40+ ethnicities) and want them to build up savings in tangible assets. They will sell excess production increasingly for what they deem as valuable (dollars, gold, seashell). I posit that they have built up their infrastructure to insane levels, to include ghost cities, for the future when the U.S. dollar will be worth less relative to the things they need (and cannot produce domestically) like raw materials they are purchasing for the building of their industry or infrastructure.

The purchase of raw materials are also related to Chinese capital investing in the U.S. where Chinese intermediaries own companies geographically located in industrial areas in all 50 states where one quarter to one third of the production (like copper tubing, alfalfa, etc.) is being shipped back to China. Many of containers being exported are often considered American goods (but they are made by Chinese intermediary companies with the intent to send the needed raw materials or basic goods back home). I would look for this to continue and also in the next two to three decades, I would look for an increased automation of the production and the reduction of U.S. workers (not to include the initial new workers that are hired when a new company is started) in these companies. Furthermore, I would look to see how future international trade laws resolve disputes with these foreign intermediary companies and the citizens of the host country (of which the U.S. would be an example)

I continue to believe that ¨Free trade and capitalism are built on sound money and mutually enforced contract laws. Trade is enhanced when the parties trust one another and there are standard weights and measures of value and equitable means of resolving disputes.¨ I would add that this will lead to more peace and less war. Yes, China is a huge pirate and there are many other nations pirating as well; fiduciary responsibilities all around are not as is intended and dishonesty is rampant; hence trade is not free, fair and often not equitable, hostilities are rising and countries are warring with one another. I am not defending piracy, freezing markets or the like, it is inefficient and will increase hostilities.

Writing a contract for/in Yuan is not necessarily about only wanting Yuan, it is also about not wanting dollars (or something else). The trader wants what he considers to have more value, and in warfare he is trying to force a shift away from the other nation and encourage others to do the same (which often lead to embargoes and then physical conflict). This will send those other currencies (say US dollars) back to their home shores. The demand for Yuan will increase as they are needed to complete the trade; without the desired medium, there is no trade. If you are producing more goods than you are consuming, the currency is generally stronger (unless you create such massive amounts in relation to the goods and services) and will be more desired; with the increase formation of capital the economy will grow as new business spring up and people become emplyed in these businesses. This needs to be one of the keys in my opinion.

As to whether China is doing a good job marketing their financial markets as a good value; I need to watch it unfold. The number of Yuan swap facilities has increased significantly over the last 5 years and the number of countries willing to trade in Yuan (bilaterally) has also increased in the last 5 years. Also if the Yuan becomes a part of the SDR this October as planned, I would expect to see more Yuan bonds used to back international debt and that will increase the demand for the Yuan bonds and decrease the demand for U.S. Treasuries as well as other SDR member´s (Euro, Pound, and Yen denominated) Treasury bonds relatively speaking (this will be the world wanting Yuan indirectly). So I would watch for further flows here to make a better determination; this would be a long term view. In a limited sense I would say the marketing is better compared to 10 years ago.

I have proposed in the past, that this is only an interim measure in terms of warfare. As countries print more currency, it will decrease the value. What I would compare are two differential equations between the rate of change of Yuan currency with Chinese goods and services (to include the surplus/deficit of goods) compared to the rate of change of U.S. dollar with U.S. goods and service (to include the surplus/deficit of goods). This is war, let us see what happens. I read the tea leaves as the economic war is going in favor of the Eurasian trade zone and therefore the west will use their military might if they (the west) lose too much ground; which I believe has been the case since 2014.

Buying gold with dollars is more detailed and entails (the process of) mining (from capital investing, obtaining permits, re-opening, physical mining, transport, etc.), refining and the element of time. If any country (U.S., China, Saudi Arabia, Russia, etc.) were to buy too much gold (existing available refined gold bars) at any one time, the price would sky rocket and the foreign country´s (buying the gold) treasury surplus would be worth less relatively to the amount of tons they wish to purchase.

The question of availability is primary. Being able to source refined gold bars gold is not easy now. I have a number of friends who do this hundreds of tons at a time for various sovereign countries (and wealth funds). They tell me that the markets are tight! Furthermore, these markets have become increasing tighter over the past 5 years. I posit that a point is coming when the physical availability (for large purchases) will become a challenge (compared to the physical demand) and that is when you will see the price of gold escalate and the dollar fall further and there will be a call for more trade in currencies other than U.S. Dollars. As to how gold-trade notes will be used, I think that they will be mandated by more and more countries for trade (they want something that they consider more desired) as time goes by after their introduction. What will change is the relative amount a country´s currency (to include U.S. dollars) needed to exchange for this type of note.

I disagree with your point that, what the import (ie, oil) is settled in is not the important issue. If you are correct, time will bear this out (minus militarily pushing a country into submission). I would agree that the MORE important issue is what you state; which currency (and even more importantly which money, which is not currency - my emphasis) does the exporter want its assets denominated. It only temporarily a less harmful policy to create contracts in a currency that you don't intend to hold assets as this currency is an intermediary until the country can divest itself of the original asset (U.S. Dollars) and gets the tangibles that they ultimately want (raw materials, gold, land, building of (capital) infrastructure).

Great post Combat Diet.

Post: #58

Quote:I think that they are trying to protecting themselves firstly and insure regional stability.

They are certainly trying to protect themselves. As to insuring regional stability, that is a matter of perspective. They certainly have no interest in insuring any-other-than-China as the dominating stability provider in the region.

Quote:Part of the perspective before was (and is) pure economics, when countries are fighting one another my perspective adjusts as pure economics does not exist (fair, free, equitable trade).

Disabusing yourself of "pure" economics would likely assist you. Look at the way you were forced into describing it, as if it is some kind of Platonic form.

Quote:I concur with your though experiment. I further believe that China is giving enough goods back to their people to keep them happy (historically they understand the need for harmony among 40+ ethnicities) and want them to build up savings in tangible assets.

That is one of the largest difficulties in creating a functional consumption driven economy. Look at what has become of the men and (especially) women in the West. Can such an economy even exist when "Loyalty to the Athiestic Communist Party" is the measure of a citizens worth?

Quote:I posit that they have built up their infrastructure to insane levels, to include ghost cities, for the future when the U.S. dollar will be worth less relative to the things they need (and cannot produce domestically) like raw materials they are purchasing for the building of their industry or infrastructure.

I posit that they did those things precisely because they do not require a consumer economy, yet make use of the abundant labor China contains. However, I certainly agree that a side-effect of such programs may turn out to be what you describe.

Quote:I would look for this to continue and also in the next two to three decades, I would look for an increased automation of the production and the reduction of U.S. workers

Agree. That said, China faces many of these exact problems as well and have also taken to offshoring certain industries like textiles. China has over 1B humans with a larger than normal excess of males from the single child policy.4

Quote:Writing a contract for/in Yuan is not necessarily about only wanting Yuan, it is also about not wanting dollars (or something else).

I think I understand the gist of what you are saying, but I disagree. It must be about wanting something else over dollars. Gold doesn't work for this due to the fact that labor, taxes, etc are all settled in a currency. Hence, gold still must be exchanged for the producers currency (even if you pay the producer in gold, there must exist a workable market for him to exchange it to the necessary currency).

This exchange (and your projection about gold-backed notes) begs the question: are you a gold standard/abolish the Fed guy?

Quote:This is war, let us see what happens. I read the tea leaves as the economic war is going in favor of the Eurasian trade zone and therefore the west will use their military might if they (the west) lose too much ground; which I believe has been the case since 2014.

Strange. I certainly see the EU project unraveling, but am unsure how the US is "losing ground" to Eurasia.

Quote: I posit that a point is coming when the physical availability (for large purchases) will become a challenge (compared to the physical demand) and that is when you will see the price of gold escalate and the dollar fall further and there will be a call for more trade in currencies other than U.S. Dollars.

This is not making sense to me. The price of gold in dollars isn't what matters, FX is what matters.

Quote:As to how gold-trade notes will be used, I think that they will be mandated by more and more countries for trade (they want something that they consider more desired) as time goes by after their introduction. What will change is the relative amount a country´s currency (to include U.S. dollars) needed to exchange for this type of note.

This is the highlight of your post from my view. Do you recognize that these "gold-trade notes" are a two way street? Meaning that if they confer too much advantage to the exporter (which is essentially what you are arguing for), only an idiotic or desperate importer would agree to such terms. If such exporters "demand" they receive an advantage the importer sees as a purely one-sided affair, why would such an arrangement decrease conflict and hostility?

Frankly, this all seems to come back to some sort of moral problem you have with the US conduct of trade. Which it seems has been abstracted from holding something similar to a Platonic form as your conception of economics.

Quote:Great post Combat Diet.

Thanks. It is a pleasure. You are certainly a bright spot of this forum.

Post: #59

CombatDiet is correct that the price of gold does not matter, and I state emphatically that it is the ounces of gold that the nation (actually and physically) has that matters. With the physical availability of gold, what I am saying is that the time is rapidly approaching when a country (China or whomever) is going to say I want to purchase 100 tons, 500 tons, 1,000 tons of gold for delivery to be transported and stored in my country at depository X. If (when) the counter-party is unable to physically source (obtain) this tonnage for delivery, the paper market (short positions) will suffer a loss and the price for delivery will escalate. If (when) this happens, the FX market is going to be seen for the manipulated illusion that it is. If this happens as I project, you will see an ever increasing difference between the spot price and the paper price, until some type of revaluation agreement is made to stop the slide. My sources tell me that such an agreement was made in February 2014, but the U.S. backed out. The trade window will be used instead to force a global change, after which there will be more financial changes and eventually currency changes. The question will be one of how much fighting, destruction of capital and loss of life will occur in the interim.

My modern issue compared to a more idealistic trade (which is just that, an ideal to which we strive that has existed in part throughout the history of the world) would be with what happened on August 15th, 1971 and the U.S. closed the gold window. They essentially said that they will no longer honor the agreement to give another nation gold in exchange for the dollars that were initially exchanged (per Bretton Woods agreement) to the other nation for the goods and services that the other nation delivered (to the U.S. in this case). These goods and services were made (created) through the fruits and labors of that other nation. To me this is theft (to include inflation) and an example of dishonesty. If a man did this to me in a personal business transaction, it would be cause for conflict and trust would be broken.

Post: #60

Thanks for making your point on gold more explicit.

Do you have an estimate for daily volume of physical gold? One ton costs ~$30MM (12x2000x~1250) at current prices, correct? That sort of transaction would practically require a broker and a very long time window if volume is normally much lower.

But that said, what do you see as the difference between your gold scenario and say a central bank putting in an order for like $30 billion of some $400 billion market cap stock? Surely you wouldn't cede that the dramatic revaluation of US$ or CNY or whatever in relation to that stock makes current FX rates an illusion?

Quote:If a man did this to me in a personal business transaction, it would be cause for conflict and trust would be broken.

I had never considered this perspective, so thanks.

What led to the decision to go off the gold standard from your perspective?

Post: #61

Combatdiet, your posts and ability to play ball with NTP on subjects that are over my head deserves a +1.

NTP, I have thoroughly enjoyed reading your posts and analyses on these issues. You've helped illuminate several machinations going on that I would not have been able to pick apart on my own in my limited free time during the day.

I have a few questions for you regarding a few points you made on page 2:

1. In relation to the German long game, how does the migrant crisis play into the long game? Is this a manifestation of the new money (US Hegemony/political class) battling it out with the old money(industry) or something else? I don't see how this plays into the larger picture. Wouldn't China and Russia be against the whole crisis for its destabilizing effects?

2. How does Trump play into the current US trade deal scheme? Are his policies antagonistic to the globalist class and able to foil China's plans to change the world's centers of gravity?

3. Finally, the million dollar question: How do we time this as it plays out? My biggest frustration is filtering noise from signal and generally by the time I figure it out it's too late.

Thanks for your time NTP! Appreciate the work you've put into your posts.

Post: #62

The U.S. went off of the gold standard because nations, led by the example of President Charles De Gaulle of France began to ask for significant tonnage of their gold in 1968. He actually started this recovery of gold when he was elected in 1958. He had a stabilization plan for France to regain its economic independence. He wanted a greater equity in nations. As soon as France had restored its balance of trade payments and paid down its debts (they were fully paid off by 1963 including IMF and WWII debt), he began building up a surplus. He built France´s surplus to about 3 billion USD by 1964. He then sent the French navy to repatriate Banque de France gold reserves deposited in New York with the Federal Reserve Bank.

Here was a former war hero, now president of a nation, with a rich history that had no debt and was bringing its gold home. De Gaulle was publically criticizing a system where nations feared running short of dollars. An international instrument of payment was devised, along the lines of the European Payment Union settlement mechanism (1950-1958), which would be based on both gold and a "basket" of major currencies and which would be used by central banks in their reciprocal settlement procedures (the "Collective Reserve Unit"). An agreement was never reached and in early 1965, De Gaulle called for a return to the traditional gold standard (not the dollar-gold trade standard of Bretton woods). Other nations listened and agreed (in principle) that the U.S. Dollar had unfair privileges. The problem was there was no alternate to a system with comprehensive credit facilities.

If this is starting to sound familiar, that is good. This is when the system if the SDR (Special Drawing Rights) was developed that would be a basket of currencies and gold (which was a principle of the European Payment Union settlement mechanism a decade earlier. De Gaulle did not like this idea. In late 1968 France went through economic turmoil with large wage increases and a serious crisis of confidence that led to a flight of capital out of the country that weakened the French Franc. De Gaulle; however, would not devalue the Franc because the devaluation would be a failure without a sufficiently rigorous stabilization plan. In 1969 De Gaulle stepped down, the French Franc was devalued and the SDR was introduced with France´s support. Other nations slowly traded their dollars and asked for gold in return until 1971 when it was no longer allowed.

The U.S. Gold reserves were about 500 tons in 1900 and went up to almost 2500 tons after WWI. They stood at about 9,000 tons in 1939 before the start of WWII and shot up to 19,500 tons in 1940 after the WWII began in Europe. After WWII, the U.S. gold Reserves went down to a little under 18,000 tons and the Bretton Woods agreement was made. The U.S. Gold reserves peaked around 1952 at slightly under 21,000 tons. The decline began in 1958 dropping to slightly over 10,000 tons in 1965, and dropping again to slightly under 10,000 tons in 1969 and then it stood at slightly over 8,000 tons when the gold window was closed in 1971 and gold was separated from the U.S. Dollar.

I do not want to completely spoil the surprise for others to delve into the COMEX and the LBMA markets. These exchanges can mandate that gold and silver be settled for paper dollars and the metal not be exchanged. If you do this in other commodity it would be considered illegal not to have the asset available to be traded; but gold and silver are special. Look at the amounts of metal available for delivery and how long it takes for a contract to be settled (if it is ever delivered because it is usually settled in cash (electronically). Examine how the delivery contract has changed over the past 10 years and over the past 5 years. Look at which banks actually take physical delivery of the metal (some do). For extra credit begin looking into the gold derivative positions of some of the largest banks. Compare their derivative positions to the assets that they actually hold.

In January-February 2016 there were somewhere between 290-305 ounces of paper gold held for every ounce of physical gold. If two of these 300 paper holders say: ¨I would like my coin, bar, ton please,¨ there will be a run to the upside or the answer will be NO you cannot have it (a la mini-1971) and the alternate market (which may be Shanghai, ABX and others) will exert itself with an ever increasing premium. The issue then increasingly changes to one of confidence.

I encourage everyone to research and engage your critical thinking mechanisms and not submit to the cognitive dissonance that is likely to come about with your conclusions. Research and think.

Post: #63

Great questions Beast1. Here is my thinking in terms of the German long game. It depends on your point of view of course (Germany being one), but I will try to give the view of another third party. I view the migrant crisis, as a weapon used against Germany generally to turn Germany more westward (look at this crisis that we all face as Europeans, our existence is threatened (and it is!), we must come together (united Europe); as well as being a diversion for the population as the economic pressures increase) and less eastward. It is a delay to buy time (for what is the next question). Secondarily to subvert Europe as a whole such that Europe does not turn eastward for deepening trade relations and the natural consequences that would follow. I speculate that the purpose of the delay (at one level) is to provide time to put in place various trade partnerships across the Atlantic (and Pacific) as well as provide for tran-atlantic energy distribution (like LNG) to supply Europe. We are speaking of a long delay.

It is about battlefield Europe being tied to NATO and that will be used as a buffer from a Eurasian alliance (trade and beyond). I am of the opinion that the manifestation is a higher order ruse (although its consequences are real) that appears to be used by those in favor of U.S. Hegemony (and it does serve U.S. hegemony) but it has a higher purpose. In this higher order ruse, the U.S. is to still be hallowed out like a dead carcass, but before it dies (not literally, but in relation to it being a super power in a unipolar world) its can physically use its force to balance breakaway elements in the east such that the eastern world (via a trade alliance) would not become an independent engine that could drive the world in a direction that could counter the direction that those employing the ruse prefer.

Yes, China and Russia would be against the crisis; this is why looking at the black and white pieces on the chessboard is confusing. Look to the grey pieces.

As for Trump, I do not know, nor I have I made any inquiries. He is pro-US as a potential president should be. Based on this alone he is a contender. As a male, he exhibits alpha qualities that do not exist in the others and have not existed in the office in a long, long time; this is a good thing. If I take things are as they appear (which is probably not likely), his policies appear to be anti-globalist and they would make things more difficult for China short term (which would not be a bad thing for the U.S. short term). What will be interesting, if he is elected, would be to see his actions in the first two years and more importantly who he surrounds himself with as advisors and cabinet members. This will be telling. Longer term in the first four years would be his selections for Supreme Court members and how he modifies tariffs after a year or two, especially in relation to taxes, and what other things he does in relation to the promotion of capital formation. With any politician, in any country I match what they say with what they do. When there is a discrepancy I note this and if I see many of them, I am suspect. Looking at voting records is a good example of what politicians do. If a man has attempts made on his life it is often an indication that he is an outsider to those established in power. The NTP question that I have for any man is, what oaths or allegiances have you taken? This is my best indicator. Most men have none or perhaps to God, their nation, their spouse, or family. With some basic boys clubs you must play games and ask 3 times before you get an answer and on and on. It then becomes easy to see conflicts that will arise as it relates to the actions of the man.

As for timing, I do not think that is possible as even deeper third level spiral players do not know, nor do they care. There may be timelines by second level spiral (those behind the nations that use the greymen that I initially described) pieces, but they will constantly change. I would look for major developments as they relate to basic things like individual freedom (on many levels), ability to move (without restrictions), ability be independent (on many levels) to change significantly between 2020-2030 and I would forecast more 2025-2030. These developments would not be, the-be-all end-all type of thing, rather a significant increase in the temperature of the water that is in the pot that is sitting on top of the stove (where many of us dwell). So when you plan for a day, month or year, you will most likely be wrong (although with a longer timeline, the accuracy is better). I am of the opinion that you must set yourself up for a series of possibilities such that whether various events happen (now) or not; you suffer less relative to others. You need not be the fastest lion, but you do not want to be the slowest gazelle.

Distraction and mis-direction will almost always be used to keep our attention on the illusion that is being performed. Filtering the noise is part of the test that is given to the lion. With that idea in mind, I would suggest that as we (considering ourselves as lions) accept the test (to filter out the noise to discover the signal), it is yet another false paradigm that is part of yet another illusion (and test). It is like a shit test or a hoop that the real lion/alpha is trying to get us to jump through. The real lions are in touch with their instincts and they endeavor to separate us from our instincts as this is a great threat to them. So I would point to our instincts and suggest that we follow them as they will serve us well in sniffing out the illusions and these instincts will guide us as we set ourselves up for a series of possibilities. The more we do this, the greater the likelihood of success and the faster we will be.

Post: #64

@NTP

Since you appear to be a Capitalist (possibly first and foremost), do you agree that Capital views any sense of human identity apart from "human as physical/cognitive labor in pursuit of capital formation" as a threat or hindrance to "capital formation?" Why or why not?

Post: #65

NTP Wrote:CombatDiet is correct that the price of gold does not matter, and I state emphatically that it is the ounces of gold that the nation (actually and physically) has that matters. With the physical availability of gold, what I am saying is that the time is rapidly approaching when a country (China or whomever) is going to say I want to purchase 100 tons, 500 tons, 1,000 tons of gold for delivery to be transported and stored in my country at depository X. If (when) the counter-party is unable to physically source (obtain) this tonnage for delivery, the paper market (short positions) will suffer a loss and the price for delivery will escalate. If (when) this happens, the FX market is going to be seen for the manipulated illusion that it is.

It seems to me as if you are describing a problem with the gold market, not the currency market. The impact a crashing gold market would have on world economy would be a fault of gold market fuckery, not any "illusion" in the FX market. If exchanges are issuing paper gold notes at rates beyond what can be supported by actual gold stores, the effects will be like any other bubble market (in the way CDOs disguised bad mortgage assets and fed the US housing bubble).

What does "manipulated illusion" mean anyway? There is an "illusory" element of currency no matter what. Pretending as if a currency is backed by a specific commodity is the illusion. The rise of gold and silver as standard world currencies in the ancient world is an accident of history. The only intrinsic value of currency is its utility as a medium of exchange, the remainder is solely its exchange value. A good currency must be easy to exchange and discrete, appropriately denominated units of it must be sufficiently distributed among traders to cover all the economic activity. The implication of the second point is that in a growing economy, the currency in circulation should increase with economic growth to prevent a deflationary spiral. Conversely, if economic growth slows, printing money can lead to hyperinflation.

Gold is definitely bad at the first thing. Gold is cumbersome and expensive to exchange. For this reason alone, no one should be seriously considering reverting to its use as a currency.

To the second point, growth in gold production is asynchronous with global economic growth. Gold as a currency would have all the same risks of manipulation as a fiat currency, with the added variable of a conflict between the rate of production and the current economic currency needs.

I can't see a reversion to using gold as currency being a good idea for the world economy.

Post: #66

Quote:It seems to me as if you are describing a problem with the gold market, not the currency market. The impact a crashing gold market would have on world economy would be a fault of gold market fuckery, not any "illusion" in the FX market.

From what I can tell, NTP seems to be talking about someone trying to corner the gold market. Which is very likely the exact reason the COMEX/LMBA can require cash settlement.

Also, I only looked up wheat, but "paper wheat" has existed for more than 100 years. I read an excerpt about from a Cargill history books that discussed a guy cornering the wheat market all the way back in the 1890's. And contracts exist which seem to only have settlement in cash: https://www.theice.com/products/5241931/...at-Futures

Post: #67

Blaster, you seriously made me laugh with ´gold market fuckery.´ I may use it in the future (with financial fuckery) as it a good catch all for part of what I will describe below.

I am implying that the gold market and the currency markets are linked and due to the paper derivatives, the spot price (of gold) is suppressed. This influences the confidence of the Dollar (which all commodities are priced in) on the FX market. Part of the illusion is that the FX market is based on the full faith and confidence of various Governments (not simply the US) that is backed up with force and taxes that pay interest on the nation´s sovereign bonds.

I personally do not think that a gold standard will work now. If gold-trade notes do come on scene they will be limited based on actual physical (allocated, non-rehypothecated, independently audited) gold held at secured locations around the world.

A bullion bank hypothecates the gold, meaning it gives the gold or, more commonly, pledges access to it as collateral for cash. Now a creditor (call him MF Global) goes and pledges the gold that was pledged to it as collateral for another deal. The gold has now been hypothecated again, or rehypothecated.

I could go into rant about re-hypothecation, but let me state it simply that it is when a bank (to include a bullion bank or a central bank) or institution (financial or otherwise) uses assets that have been posted as collateral by their clients for their own purposes (perfectly legal). Instead here is a video with a girl and reference and article that does a decent job.

https://www.youtube.com/watch?v=AtZTGfOhB7Y

http://www.zerohedge.com/news/2015-04-24...it-matters


Recall MF Global? HSBC was exposed to multiple liabilities with respect to the disposition of various properties including gold. HSBC was holding the gold pending delivery, and the MF Global implosion threw what should have been a simple armored car trip into disarray. HSBC had to sue MF Global's trustee in the bankruptcy proceedings to figure out who actually owned the gold. But it was all straighten out right, NO (people lost their gold and they lost currency that the gold represented). In a sane and reasonable world (maybe just an honest one), there should never be any debate about who owns a physical asset. If you own it but cannot get it, that means someone stole it or is committing fraud.

In the United States, rehypothecation is capped at 140% of the value of the original collateral, but rules are made to be broken with small fines for bankers and brokers. They just need to get the money out of the country and move it to other countries where there is no limit or the legal implications to what I am calling fraud and dishonesty. Gold that came from the Fed was used as collateral for a loan. Then that collateral was used as collateral (on another deal), then again and again; from bank to broker to investment firm, the original bullion has become the basis for an endless chain of guaranteed gold. Pause, I am starting to rant…..

We have an illusion that a piece of paper with the number one on it is intrinsically more valuable than a piece of paper with a 10 or a 100 printed on it. This illusion is manipulated in many ways as any confidence game is manipulated (distraction, force, mis-direction).

The thing about ancient history and being a barbaric relic has not changed the desire for many central banks, organizations and individuals to accumulate gold (the do not call it the money of kings for nothing). When the demand by those accumulating (gold or any tangible) exceeds what the market offers (via production or storage) and the price does not increase then shortages occur. Gold also has a dual purpose with bigger players (to include central banks and wealthy entities) as a medium of exchange (in trade) and a store of value.

Scarcity will become apparent and price would normally reflect the scarcity (in a non-manipulated market), but with various swaps, derivatives (I have posted on this before with regard to the bond market, but I never went into detail about how it ties in to the gold market) and the derivatives based on derivatives (including synthetics), swaps based on derivatives, rehypothecation schemes and unallocated gold accounts (not to mention even deeper central bank games with deep storage gold (which was changed from bullion reserve if you want to journey down a not to deep rabbit hole), and a few others). One I have not mentioned before is a gold quality swap, which is exchanging deliverable bars for gold that has yet to be mined….sign me up. Wrap you head around this legal one; a swap on a gold quality swap based on a synthetic derivative (and there are numerous kinds of these) that is based on deep storage gold. Derivatives are not necessarily bad, but how they are used in financial engineering can be used to hide and mis-direct. This can be a lot of fun and you can make huge piles of cash that put lots of zeros to the left of the decimal point in your accounts, until someone says, hey, I want my metal (not unlike De Gaulle). Then watch the light show, carnage and the games that follow.

When gold is being used for anything (as money in trade or for something industrial) it means labor and energy needed to have been exerted to obtain it on an order of magnitude unlike creating 1´s and 0´s in a computer or printing paper.

It is not necessarily cornering the gold market as it is simply asking for the delivery of physical gold that does not exist in reality, but simply as a paper claim. However, I posit that there is a larger (reverse cornering) game being played where various entities are physically accumulating large hoards (cornering) of gold in order to break the (paper gold) manipulation and through this decrease U.S. Dollar hegemony; this is part of the economic war.

When some individual, group or nation wants to exchange their paper claim (IOU) for a tangible coin or bar, they are unable to do so because it does not exist in the first place; hence the illusion. The shift by the COMEX and LBMA for cash settlement was to cover this, so that confidence can be maintained. COMEX and LBMA continue serve a reasonable financial purpose now which is to speculate (whereas in the past decades it was for more than just speculation). Taking long and short positions on commodities is not a bad thing, especially if you want to hedge (as a farmer or otherwise). But in the trade (for cattle, wheat, corn or whatever) there is actual cattle, wheat and corn that stand for delivery. If one side is unable to take delivery it is fraud. Of course they do not have to take delivery, but if they want to and the commodity is not there, conflict will arise and trust vanishes. This is true on individual, institutional or national levels.

Post: #68

Great hair splitting question CombatDiet and me not being a pure capitalist will come to the fore. I do not claim to be correct, only to be me. It is also noteworthy that the term capitalism (not capitalist) was coined by none other than Karl Marx as a catch all type of word (Volume I of Das Kapital, p. 124). If you choose you may also consider that the Oxford English Dictionary (Vol II, p 863) locates its first usage in English in 1854 by William Makepeace Thackeray in his novel, The Newcomes. Marx may have read Thackeray.

I do not agree with the pure capitalist view, but it logically follows if you are a purist that Capital would view any sense of human identity apart from "human as physical/cognitive labor in pursuit of capital formation" as a threat (which has too many connotations) or hindrance to "capital formation.¨ This is mechanistic and will lead to the corporatist end-state which will be the grouping of men according to the community of their natural interests and social functions, and as organs of the group (state and or corporation) they direct and coordinate labor and capital in matters of (relative) common interests.

The notion of the corporation is important geo-politically in that it can be a functional means used to replace (in part) sociological elements related to kinships, families, tribes, clans and ethnicities. The states have existed as instruments for organized predation and exploitation, rather than allowing a network of free and voluntary exchanges in which producers work, produce, and exchange their products for the products of others at voluntarily arrived prices.

When we look at (Jean Baptiste) Say’s law it is about the division of labor. The most important point in Say's formulation is that the individual must produce something that is desirable to others, it is not simply supply creates its own demand as this is out of context.

One of the main differences is that there are not group (state or corporate) interventions and the divisions of labor are not organs of the state. Keynes, of course disputes Say´s conclusions. Say grasped the fundamental problem of economics, in that we live in a world of scarce means, but have unlimited desire or demands. If individuals wish to procure a good they must give something in return that is also desirable to individuals. Therefore in order for one to be a consumer one must first be a producer of a good in which others find utility. Thus individuals desire the commodity of money not as an end in itself* but rather as a means to procure more desirable goods. However, in order to acquire money one must first produce a good that will exchange for money.

Two points of contention by people like Thomas Malthus and John Stuart Mills were that:

• General gluts do occur, particularly during recessions and depressions.
• Economic agents may collectively choose to increase the amount of money they hold, thereby reducing demand but not supply.

Part of the basis for these contentions is that money must itself be considered as a commodity rather than simply a medium of exchange as envisioned by Say. Now people can hold an infinite amount of 1´s and 0´s, but the amount of gold and silver that can be held is limited to what can be mined and refined via human labor. Also there may be local imbalances but surpluses in some areas will be balanced by shortages in others and therefore no general gluts.

I do concur with Schumpter that an 'automatic' gold currency is part and parcel of a laissez-faire and free-trade economy and that without any innovations and innovative activities, will lead to a stationary state. The hero then is the entrepreneur who changes the stationary state. This keeps the business cycle turning and is the basis for economic development which is one of the building blocks for the development of civilization.

In terms of real business cycles, I maintain that high unemployment is due to a reduced labor supply rather than reduced demand. In other words, people choose to work less when economic conditions are poor, so that involuntary unemployment does not actually exist. Also unemployment arises from insufficient demand for specialized labor and therefore this labor must move to where it is demanded (geographically or in another expression).

*I would agree with Ricardo that neglecting the possibility of hoarding if there was a lack of investment opportunities is an oversight by Say and therefore would be used as a store of value. This has been the case for a long time. I would also concur with Ricardo that Capital is realized via production.

Say advocated private property because he viewed it as the greatest encouragement to increase national wealth. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. It is when people can enjoy the fruits of their labor that they will be inclined to produce for others.

Say wisely noted that the manipulation of the monetary value confuses the pricing system thus making the adventurer/entrepreneur hesitant to further invest in capital and production. In addition, grievous price controls and taxation usually follow such debasement, which together all greatly limit production and exchange.

The notion of Laissez-faire and more free market capitalism (as distinct from state capitalism) is where it gets more interesting in terms of regulations, privileges, tariffs and subsides. The famous cry to power was laissez faire: "let us be, let us work, produce, trade, move from one jurisdiction or country to another. Let us live and work and produce unhampered by taxes, control, regulations, or monopoly privileges" comes to mind.

Civilization is not "just there," it is not self-supporting. It is artificial and requires the artist and the artisan.

As a side note, it is interesting to ponder the relationship between the growth of civilization and the (decreasing) effect of man´s instinctual nature.

Post: #69

I have trouble agreeing with the following: "high unemployment is due to a reduced labor supply rather than reduced demand. In other words, people choose to work less when economic conditions are poor, so that involuntary unemployment does not actually exist. " Can you explain more your meaning?

to this on the other hand, I agree: "Also unemployment arises from insufficient demand for specialized labor and therefore this labor must move to where it is demanded (geographically or in another expression)."

Post: #70

@Going strong

It might be that I phrased the statement in terms of the real (theoretical) business cycle. When we have poor economic conditions, the system is in a stationary state (lack of entrepreneurs) and the business cycle is not turning. The lack of entrepreneurs is less laborers directly and secondarily the entrepreneurs are not hiring additional laborers. To have more employment (or less unemployment) we will need more entrepreneurs. This is why capital and capital investment are important.

Post: #71

(03-31-2016 09:58 PM)NASA Test Pilot Wrote:  @Going strong

It might be that I phrased the statement in terms of the real (theoretical) business cycle. When we have poor economic conditions, the system is in a stationary state (lack of entrepreneurs) and the business cycle is not turning. The lack of entrepreneurs is less laborers directly and secondarily the entrepreneurs are not hiring additional laborers. To have more employment (or less unemployment) we will need more entrepreneurs. This is why capital and capital investment are important.

Given your vast knowledge on economics, I would really like to read a post (or thread) of you on whether, in your opinion, Argentina should now pay the fondos buitres (pay its remaining debts in accordance with Griesa's "orders", discarding the fear over other claims along the road), in order to re-enter the normal FMI (loan) market. Just today, Argentina entered this path...

In other words, how do you see the future of Argentina's economics after the parliament vote today? Will easy money flood the Argentinian market? What with inflation and dollar exchange rate? I'm asking because I know that you know the country, and even the whole SouthAm continent quite well... what about Dilma's Brazil, your opinion on that? Will Brazil economy escape from recession any time soon, after a probable removal of Dilma?

Post: #72

(03-31-2016 11:33 AM)NASA Test Pilot Wrote:  Say advocated private property because he viewed it as the greatest encouragement to increase national wealth. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. It is when people can enjoy the fruits of their labor that they will be inclined to produce for others.

Civilization is not "just there," it is not self-supporting. It is artificial and requires the artist and the artisan.

As a side note, it is interesting to ponder the relationship between the growth of civilization and the (decreasing) effect of man´s instinctual nature.

This quote brought to mind a video that Molyneuax produced:

Post: #73

I kind of disagree with Stefan about a minor point. I believe some animals do fear loss of liberty, they just don't think very far into the future.

For several months I took care of a friend's dog and I had to put him in a small cage/kennel every morning. This dog picked up my morning routine quickly, and he always seemed to know when my departure was imminent and what that meant. As soon as he saw a kennel in his immediate future he would go hide and refuse to come out. If he was leashed and prevented from hiding, he's start shivering staring up at me pitifully. Finally, once I'd coaxed him into the kennel and shut the cage, the pitiful anxiety turned to panicked desperation as he looked for a way out.

Of course, a big part of the dog's fear is certainly abandonment. He wants to stay with the pack. But it's clear to me that he's afraid of the prospect of being locked up, too. If he just didn't want me to leave him home alone, he would not hide he would go sit by the door. He did not want to be shut in a small cage.

Post: #74

After the ineresting high level discussion of geopolitics, this may getting a bit too far into the weeds, but I think it's at least relevant to the thread.

The US seems to be rapidly losing it's capability as a unipolar superpower. Economically speaking, the debts that have been accumulated are laughably unsustainable, and the debts are accumulating at an exponential rate. We are as insolvent as Greece.

Who wants to buy our debt? Well, it appears from the movement of bonds and the maturity lengths of the bonds which are purchased growing increasingly shorter, the answer seems to be, not many. The yield should be much higher, and a much higher yield will force our hand economically.

Currently there is not much of note which the US actually produces. We have been blessed with one of the largest agriculturally productive landmasses on the planet. I can't think of much else. It seems to me that a big part of the reason we've been able to maintain our current economic system has been our ability to print money out of thing air, and our enforcement of the petrodollar system through military means.

While we spend dramatically more than everyone else on defense, I see it being hollowed out. Programs like the F-35 show incredible levels of financial waste, mismanagement, and prohibitive red tape. It is set to replace a large fleet of multi purpose aircraft despite being grossly over cost and rife with issues. The Navy is the projection of power internationally. The limited budget is being spent on items which are largely failed programs.

Programs like the Littoral Combat Ship (LCS) point to gross incompetence and mismanagement: producing a ship which is a maintenance nightmare, costs much more than ships of equal displacement, with much lower wartime capability. By attempting to cover multiple areas of capability (Surface warfare, Anti-sub warfare, Minesweeping), it lacks specialization and capability for all of the above. The DDG-1000 class raises questions over the fundamental seaworthiness of it's hull (will it sink itself?), and doesn't seem to fit any role other than a very expensive offshore ground support platform (with questionable relevance in the future war environments).

The remaining forces such as the DDG-52, CVNs (carriers) and submarines seem effective for the price, but there are questions over them as well. The DDGs are an aging platform and may be ineffective against modern threats. A relatively small surface (or air) to surface missile is easier to rapidly modify and develop than a multi-billion, multi-thousand ton platform. CVNs are a massive, slow, prized target. They rely on the rest of the Carrier Strike Group (CSG) to protect them. There has been a lot of work done in the realm of air defense, but whether it is enough will remain to be seen. The use of conventional ballistic missiles may be a game changer in how modern navies are structured.

Another point of vulnerability is the underwater realm. The US appears to have a very competent and advanced, if not the most advanced submarine force in the world. While Eurasian militaries may not be able to compete on a 1-1 basis, they may have focused much of their efforts on developing asymmetric technologies as a means to counter the imbalance. Eurasian militaries may not have the comparable effective range, but Diesel and AIP (Air Independent Propulsion) submarines can be extremely quiet and pack a punch to act as a regional deterrent. The use of asymmetric warfare and regional forces may act as an effective deterrent and a denial of access to the region. As seen in WWI, a military may decide not to deploy it's navy for risk of loss of massive, expensive assets if the losses would be disproportionate.

But this is all commentary. It is forecast that in the near future, the military budget will be consumed entirely by personnel costs. We are already past the peak, and the number of ships in the arsenal is declining. They are now including hospital ships and other non-combatants in the count for political reasons. And this is even before we begin a discussion on the hollowing out of the manufacturing base, and the unsustainability of a war machine over a long conflict. It is my belief that the military will not be seen as an effective way to enforce petrodollar hegemony. That is a brief discussion of the military situation, and I have to run for now but I hope to pick up this thread with a further discussion of the hollowing out of our economic base.

Post: #75

@thoughtgypsy

I think that it is good to get into the weeds here and discuss tactical things. Element #5 of the original structure of this thread was designed with this in mind. If the discussions get detailed we can move them to another thread. That is part of the spirit of this thread as it should generate other threads. An example follows with Argentina.


@Going strong

What is happening right now in Argentina is important on a few levels. Firstly, as it relates to U.S. Hegemony in Latin America, trade and industrialization; secondly as it relates to the formation of a Trade Zone of the Americas; thirdly as an example for the upcoming Trans-Pacific and Trans-Atlantic trade treaties; fourthly as an element to combat the Developing Eurasian Trade Zone as the numbers two and three develop.

Some background on the situation; a week ago, U.S. President Obama visited Argentina and was the first US president to do so in over 20 years. While there he was involved in celebrating the 40th anniversary of the military coup that installed a (repressive) regime whom the US supported during what has become known as Argentina's "Dirty War" where thousands (men women and children) were disappeared. Remembrance Park in Argentina is emotionally like the Vietnam War Memorial in Washington D.C. So this was an in your face (insulting) visit to many Argentinians. The presidents of the two countries held meetings in private. The meeting in Bariloche is interesting as that was a focal point of the Rat Lines in the 1940´s.

From 1998-2002 Argentina underwent severe economic convulsions and it is sometimes referred to as the Argentine Great Depression. It was influenced by the Russian and Brazilian crises, which were influenced by the Asian crisis in 1997 (which began in Thailand and the collapse of the Thai Baht (that was due to the lack of foreign currency to support the currency peg to the dollar and) and spread to Indonesia, South Korea, Hong Kong, Laos, Malaysia, the Philippines, Brunei, China, Singapore, Taiwan and Vietnam) with the Russian crisis additional being influenced by the decline in demand for crude oil and non-ferrous metals (thereby seriously diminishing Russian reserves (of U.S. Dollars)). The above events are important, but not the direct topic of the post.

The Argentine Peso peg to the dollar was broken and Argentinians who had (Argentine) banks accounts that were denominated in U.S. Dollars had them forcibly exchanged (read devalued) for Pesos and many lost 75% of their value (in terms of what they could purchase). Fifty percent of Argentina went into poverty and 25% of the population was so poor as to be severely lacking food, clothing, and the most basic necessities of life. If you were a foreigner at the time it was an opportunity to purchase property in the country.

In 2001 U.S. Cayman Island Hedge (Vulture) Fund NML Capital Limited began buying $832 million dollars of Argentinian Bonds for $48.7 million. Argentina defaulted on its bonds. A vulture funds generally invests in debt considered to be very weak or in imminent default and these types of entities arose in the 1970´s as a result of the first petro-dollar crisis after the U.S. went off of the gold standard. The vulture fund works by buying debt at a discounted price on a secondary market and then using numerous methods to gain a larger amount than the purchasing price. This process escalated in the 1980´s with the debt rescheduling of various Latin American countries in instruments such as the Brady Bonds. In these processes much of the debt was/is repurchased and converted into local currency by the sovereign country issuers in official debt conversion programs designed to attract investment, and in severely indebted countries through World Bank funded buy-backs.

This process is not bad as it is a means of investing capital into an economy. The issue is that the discounts can be 70-80% and the debt repayment can be a burden to the country (like a loan shark). Also, often the money used by vulture funds is a result from excess monetary creation and not capital that has been stored due to the creation and operation of productive businesses.

Argentina's economy recovered and in 2005 an Argentine debt restructuring occurred with payments on its defaulted bonds (completely paying off the IMF in 2006); in 2010 a second debt restructuring brought the percentage of bonds out of default to 93%. The 7% remaining were from Hedge funds (including NML) who declared legal war on Argentina, refusing to partake of Argentina's debt settlement. In 2014 a U.S. court under Judge Griesa's ruled that Argentina needed to compensate the Hedge funds and these bonds became known as Griesa Bonds (this was upheld in the U.S. Court of Appeals and the U.S. Supreme Court had already ruled on locating financial assets overseas in cases seeking compensation in a case with Ghana. Sovereign nation´s were being influenced by the court system of another sovereign nation. Some on the international scene viewed this as the U.S. throwing a bomb into the global economic system.

Sovereign debt collection was rare until the 1950s when sovereign immunity of government issuers was restricted. Investment in sovereign debt with the intent to recover was also restricted due to the laws of champerty and maintenance. This doctrine has been eliminated. One example was the 1957 freezing of Brazil's gold reserves held by the U.S. Federal Reserve after which the Brazilian coffee crop was used to make the debt payments.

After the US President left Argentina a few days ago, The Argentine government announced that that it is going to pay the remaining 7% and this was approved by the Argentine Congress March 31st 2016. In return Argentina will be accepted back into the fold of the global economic system and will receive loans from agencies including the IMF.

Normally a sovereign nation has the (accepted) right to default and deal with the consequences (like Iceland). This is important because it is setting the public stage, internationally, for settling trade disputes and collecting in arrears by private companies as they relate to sovereign nations. This will become central to legal mechanisms that are being proposed in the new Trans-Pacific and Trans-Atlantic trade agreements (partnerships).

Overall debt in Argentina will increase (to again be refinanced in the future and again purchase by various entities at a discount as the cycle continues) and the formation of capital will diminish in the long term. Short term, funds will be injected and there will be (mal) investment such that the ratio of production to debt will be well beyond 1:1 and probably on the order of 1:4. The Argentine economy will grow short term. Inflation will increase in the medium and long term. Brazil will probably be engulfed as well.

Brazil is pivotal as it is the first Latin nation to begin (it has been ongoing for a few decades) serious industrialization and development of mineral wealth. This happens in other countries like Columbia and Argentina, but not to the same degree. I propose that if Latin America was allowed to fully industrialize like other western (and now some eastern) nations, they would develop economic power that would not be easily controllable due to the Latin culture which is much more relaxed. Rather their food and mineral wealth (similar to the way of Africa) will be developed and exploited by both eastern and western nations.

This comes in to play when we look at the developing of a Trade Block of the Americas vs. a Eurasian Trade Zone. The Eurasian Trade Zone (under the aegis of Yuan swap facilities now) will attempt to assist (and eventually control) the development of Latin America (Especially Brazil and Venezuela) and its resources (this was done with the U.S. Dollar previously). This is part of a larger war that is in the early stages of developing. I propose that there will be three zones first (Americas, European (to eventually include Africa), and Pacific) and then it will develop into two. The timeline I propose is not short. The initial development will occur over the next few decades (with the foundation being placed now) and then extending for a few centuries. Although not pivotal, this smaller issue in Argentina is actually important in this development (legally and as another precedent).