Paradigm and Nervous Breakdown: Globalization Goes Into Reverse as Inflation/Scarcity Crisis Accelerates

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Your humble blogger has pointedly ignored a lot of day to day excitement even though it might have made for fun and even instructive posts, like the repo panic of a few years back, SPACs, NFTs, cyrpto gyrations, because they weren’t of systemic importance and I didn’t want to dignify some of the prevailing story lines by trying to debunk them.1 I had thought to write about inflation tonight but was instead arrested by the front page of the Financial Times. It struck me that the evidence of a multi-fronted breakdown of our political/economic system is becoming too great to ignore.

Of course, when I looked again, hours later, warmongering had returned to the lead stories: Biden pledges to defend Taiwan militarily if China were to invade and The Big Read. How war in Ukraine convinced Germany to rebuild its army. But let’s focus on the mountain evidence of the current order unraveling.

The headline for the upcoming Davos (in person! gah!) is Business leaders warn that three-decade era of globalisation is ending. However, this group sees a reduction in trade as vexing rather than catastrophic:

The three-decade era of globalisation risks going into reverse according to company executives and investors, as world leaders prepare to meet in the Swiss town of Davos for the first time since the coronavirus pandemic began.

The geopolitical fallout from Russia’s war in Ukraine, combined with the disruption to global supply chains caused by the virus, recent market turmoil and the rapidly worsening economic outlook leave corporate leaders and investors grappling with vital strategic decisions, several told the Financial Times in interviews….

Onshoring, renationalisation and regionalisation had become the latest trends for companies, slowing the pace of globalisation, he [osé Manuel Barroso, chair of Goldman Sachs International and a former president of the European Commission] added: “[Globalisation faces] friction from nationalism, protectionism, nativism, chauvinism if you wish, or even sometimes xenophobia, and for me, it is not clear who is going to win.”…

Christophe Weber, chief executive of Takeda, which is headquartered in Tokyo, Japan, said drugmakers would continue to seek growth in international markets, particularly China because of its high potential. But corporate focus had shifted to a more sustainable form of globalisation, he said: “It’s a question of de-risking your supply chain.”…

Consumer industries are also experiencing a shift away from globalisation, according to Rachid Mohamed Rachid, chair of Valentino and Balmain.

Some luxury companies are rethinking their strategy, which tended to rely heavily on global branding, selling to tourists and shipping goods around the world, he said: “The business has gone local . . . Stores today in London or Paris or Milan are now catering for their local residents more than they used to before.”

There’s a whistling-past-the-graveyard quality to this discussion. Maybe they don’t want to spook investors, but they act as if they can’t see the train bearing down on them/ Capitalism in advanced economies is at real risk of not delivering on its promise of provisioning at least adequately for the majority of people, particularly those who work.

There’s also a failure to admit to the political and economic fault lines between the US and Europe, and their Asian protectorates, Japan and South Korea, versus China, Russia, India, the Middle East, and the Global South. That schism is made worse by Russia’s strong market position in many key commodities and the West having allowed China to become the factory of the world. If things get really ugly, China and India overwhelmingly dominate the production of active ingredients for the pharmaceutical industry, as well as making many end products. China also has a virtual monopoly in the production of Vitamin C, which among other things is an important food preservative.

Let’s look at the UK, which admittedly is serving as an advanced economy canary in the coal mine. It’s official inflation rate is already 9% YoY.

The headline story tonight is how by October (as in before winter cold really sets in), 40% of UK households will be facing fuel poverty, which is a polite way of saying you are like to have to choose between having a full belly and being warm. From the BBC:

Energy regulator Ofgem lifted the price cap on gas and electricity bills in April, adding around £700 to the average household energy bill to take it to £1,971.

For the 4.5 million people on pre-payment meters – which are typically used by people on lower incomes – the price of energy has now risen further, by an average £708, to £2,017 a year.

Due to the rising cost of wholesale gas, however, the price cap is expected to increase and take the typical energy bill to as much as £2,800, if not higher.

Mind you, the UK also had a petrol shortage last year and could have one again in as soon as a month if workers at the UK’s biggest refinery vote to strike.

And we have coming global food shortages, which will hit the UK hard by virtue of relying significantly on imports. Last week, Bank of England described them as “apocaylptic”. From the Telegraph:

The Governor of the Bank of England has warned of “apocalyptic” global food price rises and said he is “helpless” in the face of surging inflation as the economy is battered by the war in Ukraine.

Andrew Bailey said he has “run out of horsemen” when counting the shocks facing Britain, with runaway energy and food costs driven by global market forces beyond his control.

Prices are rising at the fastest rate in 30 years, creating a “very big income shock” that is expected to intensify in coming months with a risk of double-digit inflation before the end of the year.

Bailey singles out Russia for a “blockade” allegedly preventing Ukraine’s wheat and sunflower oil from getting to market. But experts were predicting food shortages for 2022 even before the conflict erupted. Ukraine is the #5 grain exporter, at just under 7% of global supply. The #2, #3, and #4 exporters are in order Canada, the US, and France. France is expected to have a very poor year due to drought. US winter wheat output is projected to be down 8%. Canada’s is projected be up due to very high prices leading farmers to shift acreage to wheat.

And the blockade charge is a fabrication. It’s Ukraine that mined Black Sea ports and is continuing to blockade them. The International Maritime Organization confirms Russia’s claims that it has established “humanitarian corridors” that remain open daily but that Ukraine that is preventing them from operating properly.2

Oh, and on top of that, the UK might have a rail strike in coming weeks. The Sky News headline gives a good overview: Fears ‘biggest rail strike in modern history’ will create ‘serious challenges’ in keeping goods moving and supermarkets stocked. From the article proper:

RMT general secretary Mick Lynch said its members had been praised during the pandemic as “key workers” but their pay had not kept in line with inflation and rising costs of living and there had been “repeated attacks” on their terms and conditions of employment….

“A national rail strike will bring the country to a standstill, but our members’ livelihoods and passenger safety are our priorities.”

There’s other fresj evidence of globalization breakdown. China’s house organ Global Times noted Unilateral sanctions add to evidence that it’s no longer safe to hold assets in US. While that may seem obvious, it’s one thing in China to think it and quite another to start making policy statements/official warnings. From the article:

US Treasury Secretary Janet Yellen said recently that it “would not be legal now” for the US to seize Russian government assets to pay for Ukraine reconstruction…

According to Reuters, US Treasury officials have expressed concerns about setting precedents and eroding other countries’ confidence in holding their central bank assets in the US. We believe Yellen is very aware of the severity of the problem. It seems there is a deliberate “good cop, bad cop” strategy in place – the White House plays an active role in calling for seizing Russian assets, in a bid to comfort its allies in Europe, while Yellen tries to comfort the market with a rational voice that helps to persuade investors it’s still safe to hold their assets in the US.

Their little trick is crystal clear for international investors and should be condemned. As a result of unilateral sanctions, the US has frozen tens of billions worth of assets belonging to Russians and their government. If foreign assets – public and private – can be frozen in a split second by a reserve-currency country with selfish political interests, politicians should not even waste their time to claim that it’s safe for people to hold their assets in the country. US credibility in the economic world was undermined by its decision to freeze Russian assets via unilateral sanctions. Even if the US transfers the proceeds to Ukraine, freezing the assets has been enough to make people lose trust in the country.

This adds to the evidence that the US is no longer a safe place to store reserves. The US has global financial hegemony, but such hegemony is two-way. The US needs to provide services to the world, and depends on the world’s support. If the US abuses its position to use sanctions as a geopolitical tool against rivals, it will be the death knell for its financial hegemony. Sanctions on Russia’s financial system, such as the freezing of the central bank’s reserves, will probably become a turning-point for US financial hegemony.

China having reservation about holding assets in the US is far more serious that it seems. The US runs ginormous sustained trade deficits with China. That means China accumulates US financial assets. The usual approach for a country in China’s position is hold a combination in pretty liquid form, as a defense against a run on the currency, and to invest the rest in the importer’s economy, ideally in productive investment like companies (foreign operations of Chinese companies, or “foreign direct investment” such as buying all or parts of US companies) or real estate, or if push comes to shove, buying stocks and making loans. Being restricted to holding liquid assets in Chinese or other friendly countries’ banks considerably lowers the attractiveness of trading with the US. It would not be crazy for China to start imposting export tariffs on shipments to the US to give preference to safer trade partners.

And to keep this post to a manageable length, we will only mention in passing that we can’t imagine the big news of the evening has made China any more trusting of the US. Recall that Biden himself in his last call to Xi reaffirmed that the US respected the “one China” policy. That just went out the window. See CNBC’s Biden says U.S. willing to use force to defend Taiwan — prompting backlash from China for one of many accounts.

Now of course WTO rules won’t allow China to do anything so crude as selective export tariffs (Japan in the old days had the wonderfully effective whisper and nod of “administrative guidance”). But in another smaller sign of how globalization is breaking down, India just imposed 15% “export taxes” on steel products, which will hit European buyers. Note they are already suffering due to the fall in Ukraine and Russian steel imports, as updated in the Financial Times a week before the surprise India tax imposition.

And on a pettier note, Poland is demanding that Norway sell oil and gas to them on the cheap….because Poland is having a very big hissy! That is not much of an exaggeration. From Notes from Poland:

Speaking to a youth forum in Warsaw, Mateusz Morawiecki noted that profits from oil and gas this year for Norway, “a small country of five million [people], will be over €100 billion” higher than in recent years.

“This is not normal, this is not fair” and Norway “should share this excess, gigantic profit”, continued the prime minister. “It is preying – unintentionally of course, because it is not Norway’s fault, this war in Ukraine – but it is indirect preying on what is happening, the war caused by Putin.”

“We are all indignant at Russia, and rightly so,” said the prime minister. “But ladies and gentlemen, young people, something is not right. Write to your young friends in Norway…They should share it, not necessarily with Poland [but] for Ukraine, for those most affected by this war. Isn’t that normal?”

Funny but I have yet to see anyone in Europe complain about US energy profiteering, particularly on the LNG it has promised to Europe….or admitting that the reason energy prices have spiked since the war started is not the direct impact on the conflict, which is actually not a very big war by war standards, but the sanctions, which the West did to itself.

Mind you, that’s only one of the “Things aren’t going the way they are supposed to” stories at the Financial Times tonight. Another is of Saudi Arabia continuing to reject US dictates regarding Russia: Saudi Arabia signals support for Russia’s role in Opec+ as sanctions pressure mounts. The IMF whistles past the graveyard in a global growth forecast that oddly does not mention sanctions blowback or even high energy prices and commodity, erm, sourcing issues. It’s a wee bit too oblique. From IMF warns of ‘multiple challenges’ to global economic recovery:

The global economic recovery from coronavirus will run into “multiple challenges” this year, the IMF said on Tuesday, warning of lower growth and higher inflation.

Significantly downgrading its 2022 forecasts for economic activity in the world’s two largest economies, China and the US, the updated economic forecasts from the fund show it becoming more pessimistic about the scope for a full recovery from the pandemic.

The outlook would be even worse, the IMF added, if central banks have to take firmer action to quell inflation or geopolitical tensions in Ukraine intensify.

The upside, one supposes, is at least the IMF is not making Russia, oh, Putin, responsible for everything bad happening in the world right now.

Although there were other sobering stories on the landing page, we’ll round out our Financial Times cheery sightings with Overdue reality check for Fed and markets has barely begun. Note that this piece does not include the fact that producer prices rose by 11% year on year as of April, a harbinger of future retail price hikes:

The US Federal Reserve and financial markets are experiencing a long overdue reality check on inflation and interest rates. But markets have barely begun to take into account how far the world has changed…

Markets anticipate that US economic growth will slow as we head into 2023 — and here I would agree….

Financial markets have been conditioned to believe that the Fed will react to this slowdown in growth in the same way it always has in the post-financial crisis period: by loosening monetary policy quickly and decisively. This is where I expect things will play out differently.

This time when growth slows, inflation will in all likelihood still be too high for the Fed to stop tightening. Month-on-month headline consumer price inflation has averaged 0.6 per cent since the start of last year. Even if that monthly pace halves, inflation will end 2022 close to 6 per cent year over year, and will be running at an average of 4.5 per cent in the first quarter of 2023.

If financial markets are nonetheless expecting the Fed to quickly ease policy again, it’s at least in part because their cognitive dissonance has been abetted by a significant degree of wishful thinking that seems to inform the central bank’s own outlook….

I therefore expect that even as growth slows, the Fed will keep hiking rates during the first half of next year, in order to bring inflation back under control. And that once markets realise the Fed cannot afford to reverse course, long-term yields will also move higher still.

We still need to acknowledge fully that inflation has become self-sustaining and bringing it back under control will be harder and more painful than the central bank hopes and financial markets are pricing in.

In other words, look out below!

In the headline, I referred to “paradigm breakdown”. This is from ECONNED, one of the four possible responses to the financial crisis, and the one I deemed most likely:

Paradigm breakdown, meaning key elements of the current system are no longer viable, but that is a possibility that no one is prepared to face, since the old system seemed to work well for a protracted period. Thus the authorities reflexively put duct tape on the machinery rather than hazard a teardown.

I must admit that I lacked the imagination to foresee that the ripple effects of the crisis could extend to the geopolitical realm, even though the neoliberal economic model depended on globalization to discipline worker wages in advanced economies. The fix to give the appearance of rising living standards was asset price inflation and rising levels of consumer borrowing. That hit its limit when subprime borrowers, on a widespread basis, were engaging in Ponzi finance: getting teaser loans that presumed they could refi attractively due to home price appreciation, and often extracting equity by refi-ing more than the old loan balance (we’re skipping over the derivatives turbocharging for now).

But how we got where we are, into what we’ve now admitted is a proxy war with Russia (and if you look back to 2014, we’ve worked hard to stymie Russia’s efforts to de-escalate the civil war in Donbass), the US could be argued to have had colossal bad luck in terms of how events played out. Obama’s failure to engage in adequate post-crisis reforms, and then give the banks a second bailout via a “get out of jail nearly free” for mortgage chain of title liability, deepened and extended the damage of the crisis via millions of otherwise preventable foreclosures. That widened inequality, particularly by destroying black wealth. Making the Fed primarily responsible for stimulus, as opposed to having the Federal government focus on increasing productive capacity, made matters worse by inflating asset values and promoting rampant speculation.

Widening inequality and a very slow recovery contributed to the hemorrhaging of Democratic party representation at all levels of government, resulting in a weak and geriatric bench. It also paved the way for the unanticipated rise of Donald Trump, due to the him having the unexpected break of running against an unappealing Hillary Clinton, who managed to make herself even more so over the campaign.

Hillary, via her tenure as Secretary of State and her warmongering (recall that Obama checked her worst schemes; she still campaigned on launching a hot war with Russia, coded as a no-fly zone in Syria), was deeply enmeshed with the Blob. Had she not been the candidate, the plan to mix things with Russia might not have been front burner. But we learned when she lost how many college tuitions in the Beltway depended on intensifying that conflict. Recall how the defense-intel state quickly and frontally attacked Trump, with its press stooges suggesting that he should not be President because the military did not support him (openly saying America should run on third world authoritarian lines), then trying to flip electors, then running unfounded RussiaRussia! allegations that went splat when investigated.

This is a very long digression on how outcomes are path dependent. If Obama hadn’t given Hillary the consolation prize of being Secretary of State, setting her up for another run, we probably would not have wound up at this juncture. America would never give up its hegemony gracefully, but it’s hard to imagine, absent nuclear war (which is not out of the picture) a more ferocious self-immolation.


1 Social psychology research has found that repeating a story line for the purpose of trying to refute it winds up reinforcing it, so if you are serious about the exercise, you have to be very careful in how you go about doing it. For instance, article that sought to disprove the claim that Saddam Hussein was in cahoots with Osama bin Laden wound up reinforcing the idea that they were connected merely by having their names in the same paragraph.

2 Now one could charge the Russian invasion as being the cause of the shipping freeze in the Black Sea, simply because the start of the conflict led commercial ships to high tail it out of there, due to correct concerns about their insurance not operating once hostilities broke out. Yet accusation that Russia is affirmatively cordoning the ports and therefore causing hardship is universal and it’s very hard to find the counter-evidence via search engines, such as the remarks by Russia’s UN representative Vasily Nebenzya. From TASS:

Nebenzya said that grain exports from Ukrainian ports have been blocked because of actions by Ukraine, not Russia.

“You claim that we are allegedly blocking the possibility of exporting agricultural products from Ukraine by sea,” he said at a UN Security Council meeting on food security. “However, the truth is that it’s Ukraine, not Russia, that continues to block 75 foreign ships from 17 states in the ports of Nikolayev, Kherson, Chernomorsk, Mariupol, Ochakov, Odessa and Yuzhny, and it was Ukraine that mined the waterways.”

“Given that, how can we talk about grain export?” he said. “And no matter what you say here today, only you can change this situation, gentlemen.”.

Exported Ukrainian grain does not go to countries in need, but is being loaded in EU storages – possibly as payment for arms shipments, Nebenzya said.

“A logical question arises: where do these shipments [of Ukrainian grain] go? What do they have to do with ensuring food security in the world?” Nebenzya said. “We have justified suspicion that the grain does not go to aid the starving global South, but is being loaded in European states’ grain storages. As we understand, this is how Ukraine pays for weapons being shipped by the West.”.

The International Maritime Organization confirms Russia’s claims that it has set up corridors to allow the safe passage of ships….but it’s Ukraine that won’t let them leave its territorial waters:

The Russian Federation has informed IMO that it had established a humanitarian corridor, to provide for the safe evacuation of ships once outside the territorial waters of the Ukraine. Despite this initiative, there remain many safety and security issues which hamper access to the corridor and the ability for ships to depart from their berth in Ukrainian ports.

Ukraine’s ports are at MARSEC (maritime security) level 3 and remain closed for entry and exit. Sea mines have been laid in port approaches and some port exits are blocked by sunken barges and cranes. Many ships no longer have sufficient crew onboard to sail.

Ukraine also provided their preconditions for the safe evacuation of ships from their ports. These include an end to hostilities, the withdrawal of troops and ensuring the freedom of navigation in the Black Sea and Sea of Azov, including carrying out mine-sweeping activities with the involvement of Black Sea littoral states.

As Moon of Alabama underscored:

The MARSEC level of a port is determined by the local authorities. Ukraine is simply prohibiting ships from entering or leaving the ports it controls. It has taken these hostage and makes unreasonable demands for their release.

Yet par for the course, the Financial Times ran a willfully, egregiously misleading story on the Black Sea impasse on May 19. It not ignored the fact that Russia has established “humanitarian” shipping corridors in the non-Ukraine-controlled Black Sea waters, but acted as if shipping corridors would have to be established by force against Russia’s will! And the pink paper referenced the International Maritime Organization report, but didn’t link to it, so they can’t pretend they didn’t know better.

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  1. Steve H.

    : >Sooo does anyone else not use Dollars anymore? Or is it just me… ugh this is so sad

    Biden spent Thanksgiving at David Rubenstein’s manor. If Rubenstein is to Biden as Kolomoisky is to Zelensky, then Biden may have told his biggest lie when he said, “Nothing will fundamentally change.” The possible bombshell being to Whom he said that, which is those used to being Who.

    When Kylie Jenner said “Sooo does anyone else not open Snapchat anymore?”, she created insider information for the Kardashian clan. They were able to time the market on an instant billion dollar drop is Snapchat’s stock value. Musk plays the same games.

    The equations Pandit et al used to analyze class structure resolve to hierarchy at low n. Who gets to be the fattest crocodile? How much wealth could you accrue if you knew the globe was going to dedollarize, if you knew when the US would seize Russia’s assets? Would a gazillionaire actually tank the global system if it meant they ‘won’?

    See Turchin on Intraelite Competition. If this is the case…

    When elephants fight, it is the grass that gets trampled.

    1. super extra

      if this is the case wouldn’t there have been evidence of wealth ‘flying to safety’ in the run up? Out of dollars into… what? If there was a planned fire sale it was intended to be in Europe or Russia or the Global South after the sanctions kicked in. If there were any collaborators, it really seems like it is more likely to have been the UK intelligence agency people (Dearlove et al as discussed in the recent Greyzone piece) who were hustling to ‘Get Brexit done’ at any cost by the deadline. Because Trump won they had to delay the start until Biden got in. Because of the pandemic they had a really narrow window of time to kick it off. US national champions like Intel were clearly warned to get their chip manufacturing aquisitions taken care of before the kickoff (alas they only managed to scoop up a low-end chip manuf in Israel) because of the likely supply chain snags. It was deemed ‘okay’ to slag off Russia over space because we have Elon and he’ll build out Space Force.

      I agree there is intraelite competition at play, but given how catastrophically bad things are actually going for the west, I think they drank the koolaid and had no alternate plan for if it went off the rails.

  2. sd

    Bleak – thank you for your blunt assessment. Eyes wide open to the signs ahead. Forewarned is forearmed. NC being one of the few places to reliably stay grounded in reality.

    I caught an interview with a farmer over the weekend on the radio. Maybe NPR though I don’t usually listen to the station anymore. Short version – the gains of those rising prices of commodities in the stores are not passed on to farmers. Inflation and fuel increases are putting them in a very precarious position.

    The only good news out there is the wildfire spread of union organizing…I’m hoping it’s ushering in a new era of leaders.

    1. anotherLiam

      As someone managing to survive in the shrimp industry, I can tell you that the same thing is happening to us. The local store prices are the highest they’ve been in years. The local cbs affiliate has already run news stories bemoaning that fact. Yet the prices we receive at the dock are the lowest they’ve been since 2015. And yes, I have the records to prove it.

      Diesel and ice prices are up drastically and we’re surviving solely due to sales of fresh 16/20 size shrimp to locals. When the supply of large shrimp runs out, which is imminent, the coastal season which generally runs to July will be over for us.

      The real danger is the white shrimp season which lasts from roughly late August to early January. The bulk of our income usually comes from the sale of smaller shrimp during that season. If prices (shrimp or diesel) don’t recover, the season will be over before it begins. Filling the boat just to pay the fuel bill is not a recipe for success.

    2. Alyosha

      As my FIL (retired dairy and crop farmer) says, the price he received for milk wholesale in 1977 was about what he received when he retired in 2005. It’s just that everything else got more expensive.

      He also confirms the dire news reports about availability and cost of inputs this year ($300/ton for urea last year, $1400/ton this year). Wholesale prices at harvest may be higher than last year, but not that much. All but the biggest corporate farms basically borrow to make it through each season. Many will fail this year.

  3. The Rev Kev

    Some of the stuff you read about what countries are doing right now as a result of this war and the breakdown of globalization are starting to make me wonder if the governments of some countries can or have become psychotic. Since this post mentioned the subject of grain and shipping, I will give an example. So ‘Egypt has been hit particularly hard by the wheat shortage, as it is the world’s biggest importer of the grain’ and Egypt’s Finance Minister was saying that food shortages could kill millions around the world-

    So here is the thing. You go through that article and you can see how serious the situation is for a country like Egypt. But then you read how the Ukraine has thanked Egypt for turning away a Russian ship containing grain which it said was stolen from them and Egypt was claiming that the paperwork was not in order. Are they serious? Who were they trying to please? And being a cynic, I have little doubt that pretty soon that ship will dock and unload at an EU dock-

    1. Steve H.

      The problem with trying to apply Howard Becker’s Machine Trick is that we have insufficient information.

      What you call psychosis I call class structure. High moments of skew and kurtosis in the uneven distributions. Eva Braun kept dancing while Berlin crumbled.

    2. Colonel Smithers

      Thank you, Rev. That sounds like the persistent rumour that some of the weaponry sent to Ukraine is being sold, not deployed, and the FREE(!) money sent to Ukraine and banked at, as (one of my favourite) French politician(s) Arnaud Montebourg delightfully calls them, “les paradis fiscaux de Sa Majeste”.

      Further to Africa and food, there was a evening reception at a palatial town house just off the Boulevard Haussmann, Paris 8eme, the week after the invasion in honour of former Rothschild bankster and Benin PM Lionel Zinsou. Zinsou was in town to publicise the launch of a pan African bank payment and settlement system, an initiative his firm, SouthBridge, helped set up. Some of the French establishment, including some his former colleagues and counterparts, were there.

      Zinsou explained how the war would have an impact on Africa, including the risk of famine and mass movement of refugees, and wondered if western elites ever thought about what they do when playing with fire. He also pointed out the hypocrisy of the west and, before sanctions had been imposed, correctly forecast that few countries outside the west would censure Russia.

    3. anon y'mouse

      maybe a food crisis is desired.

      what better “victims” than the undesirables that every country appears to have in overabundance?

      two birds, one stone.

      the trick is to maintain control or be able to grab it because of the political instability fallout. or to be able to blame a fall guy sufficiently that one’s rabble sympathizes with your “difficult task” (BidenTime has this down to a science, it seems).

      guess i will have to read up on the countries that are anticipating the most trouble brewing from these coming food shortages, and how desirable regime change is in those places, and by whom.

      damn, gofundme new eyeballs.

    4. Skip Intro

      There is this universal frame ‘because fo the war’ or in media, because of Russia’s war. In reality so many of the problems discussed stem from the economic retaliation by the US and its vassals. Those were absolutely choices, premeditated at that. The consequences can not all be unexpected.

    5. steve2241

      Maybe Egypt needs to stop planting rice and cotton for export and start planting wheat to feed their people!

      “Egypt has the largest irrigation area among Nile Basin countries. The total area equipped for irrigation in Egypt is estimated at 3.45 million hectares (3.4% of the total area of the country) and a cropped area estimated at about 5 million hectares. 85% of this is in the Nile Valley and Delta.”,the%20Nile%20Valley%20and%20Delta.

      “Rice is one of the major field crops [in Egypt], grown on nearly 500 000 feddans, and is considered the second most important export crop after cotton. “

      1. RobertC

        Rice and cotton are two of the most water-intensive crops to grow.

        Comparatively they don’t offer much economic contribution to exports but they keep an unskilled workforce using traditional farming techniques employed.

        As the climate changes and Ethiopia fills its Renaissance Dam, water shortages will increase internal and external conflicts.

        Top Export Goods And Partners

        Egypt exported $33.2 billion worth of goods in 2014*, making it the 62nd largest export economy in the world. Its principal exports include crude petroleum ($6.84 billion), refined petroleum ($1.34 billion), insulated wire ($996 million), video displays ($757 million), and gold ($667 million). The majority of exports leaving Egypt are imported by the following countries: Italy ($3.28 billion), Germany ($2.03 billion), Saudi Arabia ($1.95 billion), India ($1.86 billion), and Turkey ($1.77 billion).

        * this is the latest consolidated data I could find but I didn’t look that hard either.

        1. steve2241

          Perhaps the Egyptian climate isn’t amenable to growing wheat. During Ireland’s Potato Famine, many opted to emigrate to the U.S. Many died on an island surrounded by a body of water abundant with fish. Maybe Egypt will experience a famine due to an aversion to rice, as the Irish appear to have had an aversion to fish. I make light of it as I’m not familiar with the particulars of the Potato Famine in Ireland. I know the majority were oppressed by the landowners there, but to starve to death? I’m quite taken aback by that. Kind of jaw-dropping. No?

          1. RobertC

            Steve — your insight is 100% accurate. If you haven’t read it yet may I suggest Jared Diamond’s Collapse. One example was the Vikings in Iceland where they refused to eat the available fish and allowed their sheep to destroy the grasslands.

          2. drumlin woodchuckles

            If too few famine-era Irish had fishing boats and tools to catch enough fish to make a difference, and too few famine-era Irish had any money at all to buy any fish at all with, their non-eating of fish might not have been due to an aversion to fish. If might have been due to brute zero-availability of any fish to any of the zero-money Irish.

            But if anyone has evidence that someone offered fish to starving Irish and the starving Irish chose to leave the offered fish uneaten, this would be the place to bring such evidence.

            1. The Rev Kev

              Even if fishing boats were an answer, the British would have probably put an extra tax on them. The British use to decry how Ireland was so backward and underdeveloped. Primitive even and the place was an embarrassment to the Empire. But the truth of the matter was that if an Irishmen was renting land and made some improvement like with irrigation, then he would find that his rent would jump to take into account the increased productivity of that land. And that rent was astronomical as it was. And that was what killed Irish initiative here. Come to think of it, 19th century Ireland would be a good case study in living in a rentier society. They owned nothing but they were certainly not happy. And we all know how Ireland turned out at the beginning of the 20th century because of it.

  4. RobertC

    The next two weeks may be the most dangerous for the US/NATO-Russia war as the US uses its UNSC presidency to organize a naval mission[1] to enter the Black Sea to ‘rescue’ the Ukrainian crops from the Russian ‘blockade’, perhaps within the Responsibility-To-Protect rationale.

    Turkey President Recep Tayyip Erdoğan’s concerns about Sweden’s and Finland’s NATO membership together with Turkey’s Montreux Convention enforcement of Black Sea entry makes for a complex diplomatic environment. The question isn’t if Erdoğan will use this opportunity to maximum advantage but rather how.

    And when the NATO mission enters the Black Sea who fires the first shot? (Why doesn’t matter.)

    [1] NATO ships and aircraft, perhaps reflagged, equipped with anti-ship and anti-submarine sensors and weapons supplemented by ashore anti-ship weapons and C2.

    1. kgw

      How are these ships going to enter the Black Sea without being in violation of the closure of the Bosporus Strait by Turkey, according to the treaty? Turkey invoked the treaty weeks ago…

    2. RobertC

      Turkey’s Montreux Convention enforcement

      Turkey can change the terms of enforcement. A recent example is refusing entry to Russian naval ships that weren’t home-ported in the Black Sea (the existing non-home-ported ships could leave but not return). Russia accepted this temporary restriction. Similarly Turkey can allow naval ships, especially if they are appropriately re-flagged for optics reasons.

      As I said this is a complex diplomatic environment and Erdoğan is an opportunistic risk-taker.

    3. RobertC

      Battlespace preparation Harpoon Anti-Ship Missiles Headed To Ukraine From Denmark Shore-launched Harpoon missiles will bolster Ukraine’s ability to put Russian ships at risk, but they cannot break a blockade on their own.

      …All told, it remains to be seen exactly what Ukraine’s future ground-based Harpoon missile force may look like and how long it will take the country’s armed forces to begin putting those weapons to effective use. At the same time, just the announcement of the planned delivery of those weapons to the Ukrainian military sends a signal to Russia about the international community’s resolve, as well as the very real additional threats Russian warships are now set to face in the Black Sea. A response from Russia is also inevitable as these are the first standoff missiles supplied to Ukraine and they absolutely represent an escalation in NATO arms transfers to Ukraine. If one were to sink a Russian ship, how Russia would respond is also a wild card.

      1. The Rev Kev

        If a Russian naval ship is sunk by one of these Danish Harpoon missiles and Russians killed, I would not want to be Denmark for quids. How is Washington/Brussels going to escalate that war even more? By giving the Ukraine cruise missiles? The methodology is staying the same. Whenever there is a serious setback, always double down. Never re-assess.

    4. RobertC

      I believe this is a likely scenario (Yves’s term of art is spitballing).

      The NATO naval mission is reflagged as Romanian and Turkey allows it to enter the Black Sea under the fiction of ‘rescuing’ Ukraine’s grain shipments.

      Russia does not want to engage in weapons exchanges with NATO forces because that’s outside the scope of Putin’s objectives and is an undesired and extremely dangerous escalation of the conflict.

      So I believe the Russian naval forces will retreat to territorial waters, including leaving Snake Island, which leaves NATO forces without a rationale to ‘fire the first shot’. And that Putin’s territorial objectives will be downscaled to the two new republics and retaining Crimea.

      Putin may even extend an invitation to visit Crimea (Yes I’m serious).

      But NATO ships may continue to press Russia’s boundaries. Russia’s response could be to bring their grain transport ships into the field acting as interference via blocking and shouldering maneuvers. Russia will be careful to not fire the first shot.

      In the background will be Russia’s strategic forces at a heightened level of readiness.

      The situation of course will be much more complex than this scenario but the key elements are there: Russia will avoid confrontation with NATO to the boundaries of the two new republics and Crimea.

      Will NATO exercise similar care?

      1. Yves Smith Post author

        I don’t think this is a precedent Turkey would want to set for its own safety. It’s already mad at Ukraine for doing such a bad job of mining that its mines have floated into Turkish waters, endangering its ships.

        And it is an ally of Russia. It plays both sides of the street. Remember Turkey is very mad at NATO re telling Turkey to fuck off over its objections to NATO arming Greece. The business about the Kurds and Sweden is just a cover. Turkey has asked for huge concessions to get its approval for Sweden and Finland entering. This would be a huge additional ask. What currency does NATO have to offer Turkey for this?

        1. RobertC

          Yves — I concur the situation is dangerous for Turkey too. It’s just that Erdogan has repeatedly taken risks to achieve his Ottoman restoration.

          The relationship between Turkey and Russia is difficult starting with the downing of the Russian fighter in Syria and continuing with supplying Ukraine with drones today.

          Maybe an Austin-Shoigu phone call discussing Rules of Engagement with Russia announcing it has no objections to NATO’s ‘rescue’ of Ukraine’s grain shipments thereby removing Erdogan’s leverage and dissipating US aggressiveness?

          I don’t have an answer to your question but I have a bad feeling we’re at risk for a “no-fly zone” moment.

          1. Yves Smith Post author

            Please read the second footnote. Russia has set up corridors in the waters it controls from 800 to 1900 hours. It updates the information every fifteen minutes. It is Ukraine that is blockading, not Russia. Russia has no reason to play along with bogus scapegoating.

            1. RobertC

              Yves — I agree with you completely on Russia’s actions. I almost posted that IMO link but thought it was too esoteric. Thank you for posting it with explanation as part of your essay.

              But the West’s media-driven perception of Russian blockage remains even though it is the insurance companies, departure of crews, etc due to Ukraine’s actions and to US/EU sanctions’ secondary effects.

              And that perception is enabling the US to push for a NATO naval mission in the Black Sea.

              With its complex geography (are Crimea’s 12-mile territorial waters Russian or Ukrainian) and devastating weapon-to-target ratio (a single cruise missile can remove a capital ship from the fray).

              The best outcome is Austin and Shoigu established boundaries of operation and rules of engagement which everyone, including Ukrainian shore forces, adhere to.

              It gets more dangerous from there because here are too many “I don’t care about consequences” Ukrainian and non-Ukrainian hot heads for a predictable outcome. For example Iranian Air Flight 655.

              Again, I really wish I could offer you something more substantial than my agitation over a collection of trendlines.

              1. Yves Smith Post author

                Ukraine is no more agreement capable than the US. Remember, they kept screwing with the humanitarian corridors out of Mariupol and kept blaming it on Russia, which the press happily took up. They would do the same here.

                Russia has zero incentive to help Ukraine when 1. Russia is winning; 2. The West lies non-stop about Russia.

    5. RobertC

      Go Big or Go Home Analysis: Erdogan’s vow to expand Syria operations raises stakes in Turkey-NATO row

      ISTANBUL, May 24 (Reuters) – President Tayyip Erdogan’s pledge to launch military operations soon to expand safe zones already set up across Turkey’s southern borders has raised the stakes in his row with NATO partners over Finland and Sweden joining the alliance.

      Analysts said Erdogan’s surprise announcement on Monday reflected his belief that the West would not oppose such operations at a time when it needs Ankara’s support for the Nordic countries’ bid to join NATO.

      …”President Erdogan’s style of meeting international challenges is upping the ante – and it almost always works in causing NATO allies to blink,” [Asli Aydintasbas, Istanbul-based senior policy fellow at the European Council on Foreign Relations] said.

      It worked in the eastern Mediterranean and in Syria in the past – why not try again.”

      …Erdogan said the planned military operation would reveal which countries respected Turkey’s security concerns and which did not – an issue that cuts to the heart of the current NATO row.

  5. Thuto

    A decades-long run of being the uncontested engine of growth and prosperity (or so it was sold by corporate spin masters) is coming to an end, globalization is facing its first real stress test, and alas, it’s not faring well. After the elevation of its high priests to secular sainthood, the moment of reckoning has arrived and one suspects corporate spin and double speak won’t do the trick of keeping the proletariat sedated as they marinade in the misery caused by all the gains of the system being hoovered up the economic pyramid. The vulnerabilities of said system are being laid bare and their effects are all too evident for even the most unsophisticated of ordinary people to ignore, reducing drastically the surface area for scapegoating that the PR hired guns will shortly try to engage in.

    1. Anonymous 2

      Well, I reckon, in the UK, foreigners and the ‘enemy within’ will be scapegoated as usual. It generally works rather well.

    2. Henry Moon Pie

      “hoovered up the economic pyramid”

      A pyramid built not as a mausoleum but for the further profit and enjoyment of our modern pharaohs. (They won’t need a mausoleum. They’ll put their heads on a box and wheel around like Cap’n PIke in the original Star Trek.)

      And we now enter a time when we will be told to make bricks without straw. And an allusion to Hoover always comes in handy in such times.

  6. DJG, Reality Czar

    Yves Smith:

    Funny but I have yet to see anyone in Europe complain about US energy profiteering, particularly on the LNG it has promised to Europe….or admitting that the reason energy prices have spiked since the war started is not the direct impact on the conflict, which is actually not a very big war by war standards, but the sanctions, which the West did to itself.

    I’m seeing a breakdown of consensus in Italy already. Alessandro di Battista is fiery and contentious–but he isn’t out of the mainstream:

    He quotes a number of other Italian skeptics and critics who have been pointing out, particularly since Biden “slipped” and announced regime change in the offing, that U.S. interests and Italian interests don’t coincide. I will also throw in Marco Travaglio, Sabina Guzzanti, and Michele Santoro.

    1. Kouros

      Only Hungary complained officially in the past that the cause of refugees from ME and Africa in Europe are the US wars…

  7. RobertC

    Biden pledges to defend Taiwan militarily if China were to invade

    China isn’t going to invade its “wandering” province unless Biden stupidly increases the US military presence beyond training or US diplomatic presence beyond the current American Institute. And even then use of military force against Taiwan itself would be the last resort[1].

    Instead China would repel any US military actions outside the Joint Communique. If you examine the flight routing for China’s ADIZ ‘violations’ they demonstrate China was exercising combined forces A2AD operations against US military actions, not Taiwan invasion. China didn’t build the DF-21D missile to invade Taiwan. Its a message to the US to mind its own business.

    [1] Yes I know about China’s full-size mockup of Taiwan’s Presidential Office Building. What’s your point?

    1. digi_owl

      Now that you mention it, China would likely benefit more by pulling a Hong Kong on Taiwan. Envelop it militarily, take control of the export paths, and leave the locals to simmer.

  8. Carolinian

    Back during USSR time product shortages and retail queues were used as evidence of communism’s economic failure.

    Now Gilbert Doctorow in St. Petersburg reports that goods are readily available even as we in the US find many of our shelves empty (although admittedly nothing like the Soviet days). Time for a little US capitalist Glasnost?

  9. wolfepenguin

    Thank you for the very brutal assessment of the current situation. I have to say, however, where does that leave the rest of plebs? If the system is on the verge of implosion and governments are insane, how do we survive this process? I feel like I’m in the scene in the latest Indiana Jones movie where Indy is abandoned at the nuclear bomb testing facility in New Mexico, and we’re stuck looking to hide in a fridge that will most definitely not save us…

    1. Spoofs desu

      “where does that leave the rest of plebs?”

      Of course that’s the million dollar question, to which I might say, lapsing into the Mr. Rogers vernacular, “can you say ‘quarantines for positive PCR for monkey pox?’”

  10. Kengferno

    So, a serious question…with the complete tanking of the economy and since I don’t have a pension, only a few 401s, what is the best strategy for planning for the future in a world where the old rules don’t seem to apply? Just work until I drop? Gold? Burial in mattresses?

    1. Mikel

      Yes, lots of questions among many of us.
      One question I’ll be pondering for the week, my question of the week for myself is this:
      How serious is the USA about tackling extreme wealth inequality?

        1. Wukchumni

          Pro sports paved the way to extreme wealth inequality in my opinion, they were making such vast amounts of money compared to anyone else at the time in terms of CEO pay, and once they raised the bar on recompense, I think it inspired the titans of industry to be on similar footing.

          From what i’ve been reading online, there are ever more apartmentless (homeless is such unobtainable goal at this time) on the streets of big cities, who of course represent nadir to the illionaires zenith.

          The chasm betwixt the two might look like the Grand Canyon if you were to put it on a chart.

          All my life Americans have worshiped money, practically under its very spell, bound to make more, a report card.

          Rev Kev mentioned on Links, that why didn’t a billionaire send over baby formula from Europe on his or her own Dime?

          Oh, as far as your query?

          America is not a serious country, we’re in horse racing parlance a thoroughbred that was formerly contentious at much higher levels of horseflesh while performing at the oval office, but is dropping down and they call a horse such as that, running on ‘past class’ and sometimes a good gelding will race in graded races and you’ll see them years later still making a living in much lower ranks, it’d be tantamount to taking Boit and running him against college athletes and then maybe against high school sprinters, that sort of thing.

          1. Greg

            I really like “illionaires” – it both functionally describes the m-b-t variants, but also nicely focuses the mind on the sickness inherent in gross accumulation.

      1. steve2241

        If the USA were serious about tackling extreme wealth inequality, they’d not have a pro open border policy in place.

      2. drumlin woodchuckles

        Well, the leaders, rulers and elites are very serious about maintaining it.

    2. chris

      I wouldn’t expect anyone here to offer investment advice.

      For myself and my family, I’m working on securing the important components for life and then working out from there. We’re minimizing use of electric appliances. We’re getting solar options for power. We have an emergency generator. We have back-up power. We have on site storage of fuel for things just in case all that goes wrong, and we have plenty of wood for fires on top of that. We have extra freezer storage for food to take advantage of deals when we find them and to let us get ahead of inflation by buying a lot at a time. We have a working well pump with spare parts on hand. We have a functioning septic system with a healthy field. We have a new roof and all trees that could fall on the house or important utilities have been cut down. We have several gardens that we can grow food in. All our main power lines are buried. The transformer connection is in a safe place and was recently repaired and updated. We have an on call doctor service. We have numerous plans for investments but none we’ll need to think about tapping for 20 years. The mortgage on our home is manageable and has a low interest rate. It will be paid off before we want to retire. We did a variety of things for the kids so that they’ll have a starting nest egg regardless of whether the market crashes or not. We have disability and life insurance policies that we locked in prior to 2020. And our house is defensible if need be. We’re also making sure we have good relationships with our neighbors so it shouldn’t have to be.

      That’s how I’m seeing this right now. Do the best you can for you and yours and try to ride out the crazy that’s coming. There’s not much else that can be done.

      Good luck.

      1. Tom Pfotzer

        Nice work, Chris! And a good list for others to consider. It takes a bit of time and effort to get all that work done.


        A while back I decided that financial assets, owned by someone else and “claimed” by me, were less reliable and more volatile than productive assets which I owned and had direct possession of.

      2. Fiery Hunt

        You could have just said “I’ve got a house and land.”
        On call doctor service?? Seriously?
        But you didn’t say where the income is from….

        Smells like FIRE or TECH money. to me.

        1. chris

          That poster was asking for advice. I can’t provide investment advice. And Yves has said in the past things like medical advice and investment decisions shouldn’t be posted. So instead I tried to offer a run down of what my family has worked hard to put in place over the last 6 years. I was trying to be helpful.

          The answer to whether I’m in FIRE or TECH is neither. I’m an honest to god engineer. I help people solve problems and I deal with building real things as opposed to software. My partner does too. I’m sorry if that doesn’t meet your expectations. I guess you’ll just have to be disappointed?

          1. Fiery Hunt

            Not disappointed, just clear.

            You got yours.

            The rest of us will just have to deal with the scraps your excessive wealth has made inaccessible.

            Worked for a large, maybe global corporation did ya?
            Improved the bottom line, eh?

            I’d bet my favorite hat you worked in real estate as initially guessed. Maybe transportation or dam building but my money’s on COMMERICIAL DEVELOPMENT.
            Called it.

            Sleep easy. Guilt only afflicts those with a conscience.

            1. drumlin woodchuckles

              In all fairness, how much excessive wealth can an engineer, or even a married couple of engineers accumulate? It sounds like more than what I have, but it doesn’t sound like millions and millions, or even millions.

              He has laid out a bunch of things that he has thought about and tried to address.
              Some of them are above my pay-grade or resource-level, but some of them might make sense and be within the reach of even the modest homedweller. For example, that bit about trimming or cutting down the trees which could fall on a house during the global warming superstorms to come. I suspect quite a few of the people reading these threads have a house with some danger-trees around it which should come down.

              If he was doing real-estate engineering as you guess, then he could well have been collaborating with the class enemy. But I don’t know that.

              So for now, I will be aiming my hatred rather further up the class ladder, (and aiming my hatred toward those who spread covid to all of us on purpose, of course, though that is another question.)

              1. Fiery Hunt

                Yeah, you’re right. drumlin.

                Guess I had a rougher Monday than Id like to admit….and coming home to a crappy apartment in a a crappy neighborhood in a crappy city…

                Well, I guess I just didn’t need to read about somebody bragging about how well set up they are.

                But that’s on me, not them.

                My apologies, chris.

                And thanks drumlin for the nudge.

            2. Vermont Farm Wife

              That’s unnecessarily cruel. Chris does not have to be wealthy to have done all those things over time. We have done many of them and I can assure you that we aren’t rolling in money. My husband’s primary career was as an electrician, and over the last several decades he’s averaged about $40,000/year. A couple of years were higher, but in all of 2009 he didn’t work a single day at his official job. I stayed home to raise and homeschool our children so I had nothing but occasional income for odd jobs. I learned from my extremely frugal grandmas how to live happily on not much money. Thank goodness I had the sense as a child and teen to pay attention to what they taught me.

              Right now the husband is retired, because he has an autoimmune disease as a direct result of a common medical procedure (Thanks ____ Medical Center!) so he has trouble walking. Nonetheless, he still does construction jobs around our small farm – utterly run down and in need of massive repairs when we bought it – although they take longer than they used to; he tires quickly. He does have a pension: $2200/month, but we’re not going to live high on the hog on that.

              When he got an estate settlement after the death of a relative a few years ago, we opted to put solar on the house instead of sticking the $ in the bank, and every time the power goes down in a storm we’re glad we did. We have 60′ x 60′ garden (entirely dug by hand by me, and I am a smallish, not especially strong, person), some livestock, lots of fruit trees I planted, I’m a beekeeper of several decades – none of this costs a lot, but it takes a great deal of time every day. If I got a full-time job I’d probably work fewer hours, especially from late July to September when canning season is in full swing. We get help when we need it from guys at our small church and, like Chris, we have cultivated good relationships with our neighbors even though our political and religious affiliations are completely different from theirs.

              There are still things to do and I don’t know when we’ll get to them. We’re not self-sufficient, whatever that means, but we can take care of ourselves reasonably well by our own work, we can help our now-adult sons, and we are able to help our neighbors. All good.

  11. Acacia

    Davos men meeting in person, you say?

    Sans masks, to beam those psycho smiles, perhaps?

    Feature, not bug.

      1. drumlin woodchuckles

        May they all get covid. May all their covid be long. May God smash them flat beneath the knuckles of His Fist of Divine Justice.

  12. nippersdad

    I am used to going to places like Politico to find out what TPTB want me to think, so it was a real surprise when I read that globalization has been disastrous for the world food markets. What ever happened to not letting a perfectly good engineered crisis go to waste?

    Self critiques in such publications are so rare as to raise eyebrows when one sees them. When Axel Springer bought Politico, his new guidance that there would be no criticism of the international “free market” system made the news, after all.*

    “World leaders are scrambling to contain a food crisis spurred by Russia’s invasion of Ukraine, but experts say that their response is gravely flawed as it repeats the failures of a broken model, setting countries up for similar crises in the future.”

    I wonder if Axel approved this message or if there is a writer out there looking for a new job. The answer to that question would be more interesting than the article itself.

    * Upon its acquisition of Politico and Business Insider, Axel Springer announced that all employees must support a free market economy, a united Europe, and Israel’s “right to exist”.

    1. Mighty Drunken

      The rhetoric against globalisation started getting press around the 2016-2017 with Trump’s trade war with China. Considering John Pilger’s 2016 film, The coming war against China it looks like the American security apparatus have been thinking about this for awhile.
      Naturally, not everyone is onboard.

  13. super extra

    Since we’re talking about paradigm breakdown, it’s not completely off topic to touch on what comes next. Even though, to Yves’ point above, outcomes are very path-dependent, I think there are the outlines of what may be coming (domestic USA) making the following assumptions, which may be too far for many:

    – US wins neither proxy battle (Ukraine and Taiwan)
    – EU drags feet on various NATO schemes until governments fall
    – Dems get trounced in midterms this fall and lose majorities in both House and Senate
    – Nuclear brinksmanship blinks and some form of mutual detente via escalation is found

    So fast-forward to the 2024 presidential campaign. What are the winning candidates going to campaign on? I propose the winning coalition – and I think it has the potential to be bipartisan after the reality starts sinking in next year – will run on the 3W’s – workers, wages, and weed. I think it has the potential to even turn into something akin to American Peronism, where this coalition may successfully break the duopoly (or at least Whigify the Dems by taking the less-right-wing role). Losing issues will be militarism, idpol/culture wars, and hopey/changey bs artistry.

    I think some of the big unknown unknowns are:

    – how bad is the coming “recession” going to be? A Greater Depression seems more likely to me
    – how kinetic is the US losing phase going to be? Is it going to require a demonstration of capabilities against North America?
    – how vindictive is the domestic response to the leaders they deem responsible for this failure going to be? Imagine a significant percentage of upper middle class people having their 401ks wiped out and also seeing their homes lose significant value.

    1. Alyosha

      Weed is going to be killed in this economic environment because big weed is a hot money scam that cannot be profitable as a business in the way it’s currently constructed. Which is mostly about over-leveraging investments for getting bought out or going public. The states have built in onerous analytical requirements and/or insane tax regimes. And in much of the country cultivation is a massive energy suck. I know of one major operation that uses more electricity than the nearby GM assembly plant (yeah, they were dumb and built out with HID instead of LED but the energy savings with LED aren’t orders of magnitude over HID lighting).

      With federal legalization the outdoor crops of CA might be profitable again, but it’s going to get sticky with both state analytical regs (which outdoor will never pass) and entrenched interests in the importing states.

      Most of the big weed firms, and they absolutely dominate the industry, are run by incompetent Chads with dad’s money. I know a huge one that’s had 5 COOs in 4 years. Everyone promises things that can’t be delivered and then quits or gets fired, restarting the cycle. Same place has had at least 6 directors of cultivation and 7 directors of extraction/infusion. But so long as the investors keep over subscribing to debt/equity issues, it all just repeats.

      1. super extra

        I guess my view of this is colored by my state’s (Oklahoma) experience but I did live on the west coast for many years and saw what you’re describing in the recreational weed situation of the west coast. OK’s medical legalization seemed to sneak through without the usual shepherding by the interests who wrote the regulations so it created a really strong market with limited restrictions (including individual home grow) which created some problems with too much growth too fast and now there are big players pushing out the first wave of smaller businesses. But OK is also already an ag state so a lot of the problems in practice happen around the political situation here, which is dominated by an anglo gas/oil + law enforcement faction vs the tribes on the other side. The unclear situation on the federal level is used opportunistically by the first faction (along with abortion and other “Texas-style” Koch-trained tactics) to do raids and shakedowns for petty financial and power reasons.

        As long as any state maintains a recreational or medical regime of any kind, it will move across state borders, and a lot of money is being made in places where there aren’t really any other industries. Mexico legalized under AMLO (tho doesn’t have laws on distribution yet) and of course there’s Canada. I think it will eventually become another commodity crop, especially if it is legalized and treated as a commodity crop by a states like Kentucky who have never really recovered from the loss of the tobacco industry.

        1. drumlin woodchuckles

          Currently the Michigan state-legal cannabis law-by-referrendum permits any resident to grow 12 plants per year for personal use.

      2. Henry Moon Pie

        As a political issue, I think the only way “weed” works is to base it on legalizing home grow. We had a reasonable proposal a few years back that piggy-backed onto a legal weed shop with state-designated corporate grow. Oscar Robertson was on the board to get us old guys on the team. NORML opposed it, and it failed though it got a lot of votes.

        The right crafting of a home grow bill could do a lot of positive things, including ditching the negatives that corporate approaches bring. Maybe make it a “gateway drug” to gardening. Have some classes that teach things people need to know to have healthy soil in which to grow that weed.

        You never know what you might catch with that net. A few years ago, four plants appeared in the back yard of the then vacant house behind us. They were there in the midst of a lot of milkweed that was higher than your waist. It made me a little nervous because I didn’t want a big uproar over a pot grow across the fence from me. Now nobody ever came back to water or harvest those plants. They died before they formed buds. But somebody was trying to grow something.

  14. flora

    Thanks for this post. I think if O had swept out the big banks in 2009-10 a lot of the financial frauds (and rewards for fraud) would have stopped. Banks would have been on notice. But that didn’t happen. Banks got bigger and even more fragile, and govt finances got bigger and more reckless. Here we are. Banks are starting to mumble about “new currency” systems, as if that would change the underlying problems. / oy.

    Is globalization the root problem or is financialization the root problem? Or is that a chicken-and-egg question?

    1. Mikel

      Global trade and globalization are two different things in my mind. Global trade has been going on since ships were a thing. Globalization, in my mind, is tied to the financialization of a global economy under a hegemony.

      1. deplorado

        This is a good distinction indeed, helpful to keep in mind that trade does not have to mean “globalization” – i.e. global corporations running unbridled across jurisdictions and ecosystems.

        1. drumlin woodchuckles

          And it doesn’t have to be free, either. It can be rigidly regulated.

    2. Glen

      Yes, totally agree. Obama was there to put the brakes on the corruption, but he bailed out the banks with trillions and nobody went to jail.

      It made him rich, but the Wall St management disease (lying and corruption) is now endemic.

  15. Pookah Harvey

    Pepe Escobar believes that the former economic advisor to Putin, Sergay Glazyev, was the orchestrator for the current economic defense of Russia. Glazyev wrote a book, ‘The Last World War’, in 2016. It is available as a free English download from several sites. From a quick scan it seems to be very prescient for a book written 6 years ago.


    Unleashing the Ukrainian-Russian war, the U.S. try its best to involved in it NATO countries as well, seeking to weaken the EU through anti-Russian economic sanctions and strengthening its control over Brussels. Whereas participation in anti-Russian sanctions will cost the EU countries, in expert opinion, a trillion euros in losses


    However, nursing the Ukrainian crisis into the world war against Russia, the U.S. is forced to play an all-or-nothing game. They cannot allow defeat and lose the image of the superpower controlling the world…..
    Therefore, the American aggression in Ukraine will build up. The pressure on the Nazi junta will increase to further escalate hostilities in the Donbass. Kiev leaders will be forced to wage war to the last Ukrainian, regardless of the massacres of civilians.

    1. BradN

      Many thanks PH!
      Sergei Glazyev is a wonderful find and I have been reading a bunch of his interviews.
      Very informative and his predictions of how this will all unfold are both compelling and surprising.
      Much food for thought.

  16. Dave in Austin

    The two stories today “Globalization Goes Into Reverse” and “Biden Drops Sanctions on Venezuela” are closely related.

    A variety of stresses, both short-term (Covid, the shipping crisis, the Ukrainian War) and long-term (globalization, trade and financial imbalances, the rise of China, explosive population growth) have worked their way through the system and have now added uncertainty and down-side risk to policy-makers’ equations. As in the 1900-1913 and 1929-1938 periods, risk and uncertainty rise and individuals, nations and trading blocs seek safety and “cocoon”, even if that means getting close to neighbors and relatives they may not like or approve of. As in the two previous periods of stress, the level of national propaganda, misinformation and barely-visible social repression are increasing dramatically. Cognitive dissonance becomes mandatory feature of public discourse.

    Venezuela is an American neighbor. In the lead-up to WWII its heavy oil became a strategic asset to the US and the processing of Venezuela’s heavy oil became big business for the Dutch in Aruba and the Americans in Texas. Half the US Pacific Fleet early in WWII was fueled by Venezuelan oil. The UK depended on Iranian oil. So did the British Fleet, India and Australia. The US learned to accept the Mexican oil nationalization and we pretended to be friends. Both the US and UK were willing to overlook some of the less savory aspects of the oil states in the name of national security.

    During the 1929-38 period, those with oil- Romania, the USSR and the Dutch in Borneo- got nervous as their powerful “Have no oil” neighbors like Germany and Japan eyed them hungrily. Industry, war and a high standard of living require fuel and food. People will kill and die for them. And in 1938 the supply of both had become uncertain.

    Today an apparently accelerating trend in insecurity and unpredictability is the greatest threat to world peace and security. Biden’s comments on Taiwan, Europe’s ending Russian ties and moving to fund African natural gas projects, the sudden increase in the value of coal worldwide, all are indications to me that “Locking in the allies” and “Securing the resources for our nation” are on the front burner everywhere. Welcome to a potential world of zero-sum calculations… like 1914 and 1939.

    1. jsn

      Thank you for a great summary! I’ve been having what I’ve thought of as a “pre-war” feeling your comment gives tangible shape to.

  17. Susan the other

    The only thing we mobilize for is war. The rest of our existence is driven by the Free Market. But how screwy can things get when you run out of oil? Nothing is as it was. The military can’t function without oil; industry can’t function without oil; the Free Market becomes a fiction. And the country does not know how to mobilize to maintain the distribution of essential goods and services. Internationally, the only thing we have to barter is the military. Protection services. Special Ops. Maybe globalization will distill itself into an oil for protection racket. It does seem to have already aligned itself that way. Nobody knows how to govern in this country; everybody knows how to kill.

    1. Alan Roxdale

      War is the traditional means for rulers to escape domestic pressures. This whole Russian hysteria has been serving that function since 2014 at least.

  18. Sound of the Suburbs

    Ricardo’s Law of Comparative Advantage

    What else did Ricardo think?
    There were three groups in the capitalist system in Ricardo’s world (and there still are).
    Workers / Employees
    Capitalists / Employers
    Rentiers / Landowners / Landlords / other skimmers, who are just skimming out of the system, not contributing to its success

    Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
    What does our man on free trade, Ricardo, mean?

    Disposable income = wages – (taxes + the cost of living)
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    Employees get less disposable income after the landlords rent has gone.
    Employers have to cover the landlord’s rents in wages reducing profit.
    Ricardo is just talking about housing costs, employees all rented in those days.
    Low housing costs work best for employers and employees.

    What does this mean for free trade?
    The interests of the rentiers and capitalists are opposed with free trade.
    This nearly split the Tory Party in the 19th century over the Repeal of the Corn Laws.
    The rentiers gains push up the cost of living.
    The landowners wanted to get a high price for their crops, so they could make more money.
    The capitalists want a low cost of living as they have to pay that in wages.
    The capitalists wanted cheap bread, as that was the staple food of the working class, and they would be paying for it through wages.

    Ricardo supported the Repeal of the Corn Laws to get the cost of living down in the UK so we could compete in a free trade world.

    You need a low cost of living with free trade.
    The West had a high cost of living and its companies off-shored to where they get things done at a lower cost.

    1. Sound of the Suburbs

      The early neoclassical economists took the rentiers out of economics.
      Michael Hudson was right.
      Hiding rentier activity in the economy does have some surprising consequences.

    2. flora

      The globalists ‘solved’ the low wage problem by offshoring manufacturing to low wage countries. Are globalists the new capitalist class or the new rentier class?

        1. Wukchumni

          i dig especially the part about local banks for local bidness.

          National Bank Notes would have been the cats meow, each of the 14,000 odd banks issued their own currency which looked the same other than the name of the bank and the president and treasurer’s signature on the bottom line.

          It was all local money (that could be spent anywhere-but didn’t really travel all that much) and it worked well for 70 years until FDR came along and changed things around a bit.

          Prior to the American Civil War, state banks and chartered private banks issued their own banknotes. Privately issued banknotes were nominally backed by specie (hard money) or financial securities held by the banks but oversight of issuing banks often was lax and encouraged wildcat banking, in which fraudulent institutions issued worthless banknotes. During the Civil War, in 1863, the National Banking Act established a system of National Banks which were empowered to issue National Bank Notes subject to federal oversight. The chartering of banks and administrative control over the issuance of National Bank Notes were the responsibility of the Office of the Comptroller of the Currency.

          From 1863 to 1935, National Bank Notes were issued by banks throughout the country and in US territories. Banks with a federal charter would deposit bonds in the US Treasury. The banks then could issue banknotes worth up to 90 percent of the value of the bonds. The federal government would back the value of the notes—the issuance of which created a demand for the government bonds needed to back them.

          The program was a form of monetization of the Federal debt. Bonds eligible as collateral for posting to the Treasury were said to have the “circulation privilege” and the interest they bore provided seigniorage to the National Banks.

          1. Sound of the Suburbs

            It’s always been the same.

            “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

            The bankers messed about with the money supply to engineer booms and busts.
            They issued lots of credit to make the economy boom, and then cut back on credit to cause a bust.
            People bought lots of stuff on credit in the boom, and couldn’t afford to make the repayments in the bust.
            They then repossessed your private property.

        2. flora

          I agree about using local banks.
          Thanks for the link. Thinking about planning “what comes next” that’s good economics for most people, not just for Wall St., is important.

          1. Tom Pfotzer

            Yes, I always liked the idea of local banks, esp. employee-owned or co-op banks, and ones where the loan evaluation committee consisted of a few bank officers, or board members, and some community members, so the community had full visibility into the loan issuance decisions.

            Not only does that provide some transparency, but it teaches the community about loan evaluation criteria. That’s useful info if you’re a small biz operator. It helps you learn to think like an angel (early stage) investor.

            One of the really big obstacles that I encountered early in my career was the dearth of early stage investment. It’s not just the startup capital that’s missing; by far the biggest deficit is the thinking and rationale of the investment decision. Thinking like an investor, and like the partner to an investor is not something that comes naturally to most people, and that knowledge can make a huge difference in startup viability.

            Amfortas – thx for the link. Good read, and even better into to Ellen Brown.

            1. RobertC

              But how many of us choose Wells Fargo over our local credit union to save a few dollars or gain remote banking features?

              1. Tom Pfotzer

                Of course you’re right, RobertC. There is only one co-op bank in my area – that I know of – and the county population is about 350K.

                And that co-op is only available to the employees of the local water works, if I remember right.

                I keep wondering…. how do I find and join a bunch of crazies that know how to work as a team, to build / create things like pooled capital, a tools-bank, a motor pool…all those local gizmos that would be really handy to have around….

                And then, in spite of all the good it would do me, I still dither, fuss, and contradict myself about joining the local Maker shop.

                They have some really cool tools, incl a decent-sized metal milling machine, which I have been pining for … a long time.

                Milling machine, you ask?

                Yes. I am easily dazzled by manufacturing gadgetry.

                1. drumlin woodchuckles

                  I have read of ” tool lending libraries” which try to be libraries, but for tools instead of books. Here is a link to finding a tool library ” near you”. ( Maybe even literally near you specifically).

                  People in a group like that have already made a beginning at working as a team to make tools available to people on a trackable rotating basis. They might be willing to carefully extend themselves to more and bigger tools. And then maybe to “checking out” or “lending out” scheduled use-times at tools-in-place which are too big to be moved.

                  And maker-groups might also be good, of course.

              2. Amfortas the hippie

                aye. i’m fortunate.
                2 of our 3 banks(county pop:4500) are more than an hundred years old, locally owned and run, with people everyone knows both working there and running them.
                i’ve often stated that this lends a certain small-c conservatism to these banks, and the bankers…everyone knows where they live, their parents and grandparents, and so on….it serves as a check on any “irrational exuberance”, as it were.

    3. drumlin woodchuckles

      You don’t need a “low cost of living” if you disallow Free Trade.

  19. Tim

    I didn’t see it mentioned in the article, but there is magnifying driver of inflation due to globalization going in reverse. It is the lack of new viable low-cost labor source countries, and that the old low cost countries aren’t that low cost any more (so going back in country to eliminate trade risk isn’t as expensive as it used to be).

    So at the root of much goods inflation is the elimination of labor arbitrage as an option.

  20. drumlin woodchuckles

    Perhaps we should begin to think about a conceptual and analytical difference between “America” and “Turtle Island” and ” DC FedRegimestan”. Perhaps people should learn to understand the separate and unique features of these three things, and people may have to decide which one they will be loyal to.

    1. Tom Pfotzer

      Aright, I’ll bite.

      I think I know what America is (don’t laugh; I’ve discovered that it isn’t quite what I used to think I knew for sure!).

      I’m not sure I know what DC FedRegimestan is, but I’ll guess “Deep State” or “Bureaucracy”.

      No idea what Turtle Island is, in this context. There’s a Turtle Island – a little bitty island in Lake Erie that’s claimed by Ohio and Michigan, but … not obvious to me how that might fit in, except it’s sort of a no-man’s land. No one lives there. That’s why they call it turtle island, I guess.

      So, in order for me to choose where to invest my loyalty, I feel I have to ask for another clue, please.

      1. drumlin woodchuckles

        ” Turtle Island” is said to be one of several Native Indigenous names for what we non-Indigenous-descended persons call North America. Here is an image illustrating the concept.
        There are better images but today’s search obstruction engines make them hard to find.

        “America” is the settler-descendants’ name for the “United States” part of either “North America” or “Turtle Island” depending on how you see it.

        DC FedRegimestan is the Nazi PaperClipper DeepState core and the visible government Containment Dome and all the people who feel their first loyalty to this particular current government order we labor under.

        My thoughts on all this are still semi-unformed and not fully specific.

        I think I remember reading once that a Tuscarora Medicine Man named “Mad Bear” Anderson asked a question in the early 1960’s . . . . ” If an Indian is disloyal ( to the United States of America I assume this meant), is he deported? And if so, where to?”

        If more and more people come to decide that “America” is an idea whose time is gone, more and more people will begin thinking about questions like this.

        To the subject of the post, if the only way to free ouselves from Free Trade Slavery on the Corporate Globalonial Plantation is to accelerationize the delamination process being described in this article, then how do we mere citizens accelerationize the delamination?

        With that in mind, I begin to think the Russia Ukraine war may be a life-saving therapy and very strong medicine, IF we don’t die of the possible nuclear war side effects. The longer that war goes on the further the current Corporate Globalonial Plantation World Order is broken down into pieces.
        Perhaps we should try to keep the Russia Ukraine war going as long as possible, in hopes that it can go on long enough to build a watertight bulkhead of zero contact and zero exchange between MacKinder World Island and the NATO EUFUKUS zone. If the war could be kept going even longer than that, it could begin to break NATO EUFUKUS itself into un-rejoinable pieces. Will Norway really tolerate the PolandGov’s arrogant demands for a share of Norway’s oil and gas money, for example?

        And the survivalist community would work on community economies and societies designed to outlast the Great Deconstruction and have a chance to conquer and rearrange the pieces faster than the eagerly waiting nazis can do it.

        1. Tom Pfotzer

          That clears it up nicely. Glad I bothered to ask.

          DW, you need your own cartoon strip.

          “…is to accelerationize the delamination process being described in this article” is just aching for comic expression.

          Better yet, you need to get hired to be the Editor of the village rag. Pick the right village, and you’d be … well, acknowledged and occasionally bought drinks at the pub.

          The right village would know to not encourage you overmuch.

          1. Tom Pfotzer

            “An Iconoclast, but with Imagination”

            A hush falls like a cloud’s shadow as the new issue hit the streets. People peer out from shuttered windows, wondering who’ll be first to step out to read what awaits.

            The very air trembles.

          2. drumlin woodchuckles

            Hmmm . . . . perhaps you have already encouraged me overmuch right here.

            Actually, I am still full-time working but when ( if) I am able to be retired, I may well try to do something like this. Maybe just find a good village rag editor one of who’s contributing opinionizers I can be.

        2. Sibiryak

          DW: Will Norway really tolerate the PolandGov’s arrogant demands for a share of Norway’s oil and gas money, for example?

          RT News:

          Norway has made it clear that it’s not going to give in to Poland’s demand for it to share its growing profits from the oil and gas trade with either Warsaw or Kiev.

          On Sunday, Polish Prime Minister Mateusz Morawiecki claimed that Norway would earn an extra €100 billion ($106.9 billion) from energy sales this year due to a spike in oil and gas prices caused by the conflict in Ukraine and international sanctions on Russia.

          […]However, Norwegian Deputy Foreign Minister Eivind Vad Petersson questioned Morawiecki’s calculations on Monday.

          He explained that excess oil and gas revenues go into the country’s pension fund, also known as the Oil Fund, which was established in 1990 to make sure that this wealth serves the current and future generations of Norwegians.

          “Although petroleum revenues have increased as a result of the war in Ukraine, the value of the fund has fallen”, Vad Petersson pointed out.

          Since the start of the year, the pension fund has lost 550 billion Norwegian krone (around $56 billion) due to turbulence on the stock market, the diplomat said.

          “The Norwegian economy and Norwegian consumers are also being hit by higher prices for electricity and petrol”, he added.

  21. zleo99

    So, everyone can see that the US financial system is about to implode, which will stop any freight moving anywhere. The world’s people will starve/fight/ etc if the problem is not sorted very fast.
    If we know about it, then the elites know about it, hence the gloom reported at Davos.
    Someone is going to have to solve this problem – some relevant people must already be discussing what the F to do.
    WILL USA Russia China EU be able to work together to solve it in the interests of everyone? Will the US voluntarily say “We are only going to fix this for the USA, everyone else can go to hell”, and retreat into its sort-of self-sufficient world a bit sooner than Peter Zeihan is prediciting??

    1. drumlin woodchuckles

      If the US can run off the Corporate Globalonial Plantation and become a semi-self-sufficient semi-autarky, that will free everyone else to run off the Corporate Globalonial Plantation and set up their own semi-self-sufficient autarkies as well.

      The US ” going self-sufficient” isn’t telling everyone else that “everyone else can go to hell”. It would be telling everyone else that ” everyone else is now free to run away from hell too”. The Hell of Free Trade and the Corporate Globalonial Plantation. Which is where all of us currently are today.

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