There are some people who think the Federal Reserve is irrelevant in today’s economy. Rather than exerting control, they argue, the Fed merely “chases” the market rate of interest, eternally behind the curve and not having near the effect someone who, say, wrote a book called, It’s the Fed, Stupid might believe.
John Tamny is an example. He agrees with us free market types on most things, but not the Fed. He says the Fed is “a rate follower, not a rate setter.”
I don’t agree on the whole, but there are examples where the Fed is chasing the market, rather than making it, in terms of its interest rate policy. The recent explosion in 10-year Treasury bond yields, well beyond the Fed’s target fed funds rate, and the Fed’s subsequent interest rate increases, is an example.
But since 2008, interest rate policy and control of the money supply are not as intimately linked as they once were, for reasons I explain in today’s episode of Tom Mullen Talks Freedom. For that and other reasons I discuss, we ain’t seen nuthin’ yet in terms of the effects Fed policy is going to have on financial markets and the economy.
Of course, all the Fed is doing is trying to fight the price inflation it caused itself with previous monetary inflation. And if lowering prices was the only effect removing dollars from circulation was going to have, there would be no need to worry about it (the same is true for adding dollars – they could just give us all a million dollars a year!).
The Fed has finally found itself between that rock and hard place Austrian economists predicted they would reach, where there is no good option. Remove money from the economy aggressively and risk dramatic deflation of financial markets and economic malaise or don’t remove money and allow inflation to persist.
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A leaked draft of an opinion written by Justice Alito of the U.S. Supreme Court suggests the Court is prepared to strike down the 1973 Roe v. Wade decision that found unconstitutional state laws prohibiting abortion. The ruling would also strike down modifications made in the Planned Parenthood of Southeastern Pa. vs. Casey decision of 1992.
If the final decision is substantively the same as the draft, it will continue a process of “re-federalization” that has been gaining momentum since the 2016 election cycle. Many viewed the Donald Trump presidency as divisive, but Trump’s election was more revelatory of existing divisions than divisive itself.
Long before Trump declared his candidacy, many states had already effectively nullified federal marijuana regulations and immigration laws. Talk of Texas seceding from the union had resumed during the Obama administration; similar rumblings in California began soon after Trump was inaugurated.
What has inspired the most rancor on both sides are cultural issues: abortion, what is taught in schools, who is allowed to get married, who is and is not required to bake the wedding cake, and who is and is not allowed to cross the borders, immigration being both a cultural issue and an economic one.
There is also an underlying dissatisfaction with economic outcomes, which are most affected by the monetary system and the New Deal regulatory structure, although neither conservatives nor liberals seem anxious to address either.
None of the federal powers above, including regulating immigration, are expressly delegated to the federal government in the Constitution. They were all “discovered” by the Supreme Court using reasoning arguably as dubious as that employed in Roe v. Wade.
The whole idea of judicial review for constitutionality is a suspect one. The reason for having a written Constitution in the first place is to ensure there is no confusion about what powers the federal government has been delegated and not delegated. It should not be necessary to hold a legal proceeding, followed by a lengthy written decision by the “finest legal minds in the land” to determine whether or not a given power is delegated to the federal government in a five-page document.
If there is any doubt at all, an amendment should be offered. That is the only honest way to obtain consent of the governed for a new power. Acquiring power through the court system is a transparent attempt to do so without the consent of the governed, with knowledge aforethought that you are imposing authority that would not be granted voluntarily.
Article V of the Constitution provides the means by which consent of the governed is obtained by the federal government. It is not obtained through federal elections. They merely determine who exercises power, not what power is exercised.
Neither are amendments ratified by a simple majority of United States citizens. They are ratified by a supermajority of the states, who are the parties to the Constitution. They formed a federal government, not a national one, for the express and stated purpose of preventing a simple majority of all U.S. citizens from ruling over a unitary nation.
This is clear from notes on the constitutional convention taken by James Madison and Robert Yates. Forming a national government with the states as mere subdivisions was thoroughly discussed and rejected. The union would be a federation of states with limited powers delegated to the federal government and all others retained by the states or the people.
This is more than just academic pedantry. The United States is a boiling cauldron of political hatred about to boil over. Once the abortion decision is official, we can expect a repeat of the rioting we saw in 2020 over George Floyd. We saw even the typically orderly right give into similar behavior last January. There is no reason to believe things will simmer down anytime soon.
Article V provides a way out of this. Offering amendments to grant the federal government those powers it has illegitimately acquired in the past through the courts will result in one of three outcomes for each disputed issue: 1) the amendment will be ratified as offered, 2) the amendment will be revised through negotiation into something a supermajority of states accept and then ratified, or 3) the amendment will fail completely, making clear to all this is a power that must be reserved to the states.
Perfection is unattainable in any political process. But any of the three outcomes above would provide a pressure valve on the issue in question. Amendments should be offered for all powers obtained by the federal government through the courts in the past, no matter how long ago the acquisition occurred: regulation of abortion, immigration, healthcare, education, and marriage included.
While we’re at it, why not settle the very first constitutional crisis the way it should have been settled: an amendment granting the government the power to incorporate a bank.
Given the exponential growth of the federal government over the past one hundred years, dozens of amendments should have been offered during that period. Yet, since 1933 only six have been ratified, one of those being what would have been the Second Amendment if ratified when originally proposed in 1789.
Both conservatives and liberals are reluctant to pursue the constitutional amendment process because it is difficult by design. But there are only two ways to exercise power: with the consent of the governed and without it. Americans have chosen the latter over the past century, taking the relatively easy, dishonest route to power through the court system. That has led us to where we are now: at each other’s throats.
We would be wise to retrace our steps and determine the federal government’s powers legitimately before we have a real insurrection on our hands.
In one sense, the Covid-19 era revitalized American federalism. While every U.S. state except South Dakota at first followed the advice of the federal government’s various national public health agencies and their spokesman, Anthony Fauci, M.D., eventually more and more diversity began to emerge in the way individual states responded to the virus.
In September of 2020, after televising a roundtable of non-government scientists from Harvard and Stanford, Governor Ron DeSantis reopened Florida completely and banned local jurisdictions from fining people for noncompliance with mask mandates.
Observing the political gains DeSantis enjoyed from lifting restrictions and the absence of disaster predicted by all opposed to DeSantis politically, Iowa’s governor lifted all restrictions in February 2021, followed closely by Gov. Abbot of Texas the following month.
While states with Republican governors trumpet their states as “free states” due to generally less severe and shorter-lived lockdowns, and proponents of decentralization from across the political spectrum point to this as a triumph of local government, federalism completely failed in the most important respect. Every United States citizen, regardless of the decisions of their state and local elected leaders, is being forced to pay for lockdowns equally.
Although Covid relief was federally funded, it wasn’t paid for with higher taxes. It would have been impossible to collect more taxes from a society producing considerably less wealth. Instead, the money was created by the Federal Reserve and handed out through programs created by the CARES Act and subsequent legislation.
We are feeling the effects of that money creation combined with decreased production now. Although his Republican critics would like to blame President Biden for rising prices today (and he has certainly contributed to them, especially energy prices), the majority of the spending authorized and new money created occurred while Trump was still in office.
M1 showed the supply of dollars at $4 trillion in February 2020. It was $16 trillion by May 2020 and $18 trillion when Trump left office in January 2021. It was just over $20 trillion as of January 2022.
President Biden, on the other hand, has largely failed to get most of the spending he wanted beyond an early Covid relief bill similar in size to the CARES Act. However, due to the mechanics of the way money gets spent by the federal government after it is appropriated by Congress, even much of the money appropriated in 2020 wasn’t spent until 2021.
That and the general lag between new money creation and the resulting rise in consumer prices is why price inflation only began in earnest in 2021. But this is not to lay the blame at Trump’s or Biden’s doorstep. Rather, it was the very bipartisan departure from reality, including by most the American public, that a large percentage of the economy could be turned off while people went on consuming as they did before.
Many otherwise “fiscally conservative” people threw up their hands and justified Covid bailouts on the grounds that those ordered to close their businesses or stay home from their jobs weren’t “at fault,” and therefore were entitled to bailouts.
It doesn’t matter who was at fault for lockdowns. Goods that are not produced cannot be consumed. One cannot consume more than one produces unless someone else provides the difference. Scarcity does not make exceptions for assignment of blame, political theories, or feelings. Even if lockdowns significantly reduced Covid deaths, which they didn’t, one still had to face the reality that producing enough to survive takes priority over avoiding the virus.
The truly “federalist” approach to Covid-19 would have been to allow each state to decide and pay for the policies it chose to implement in response to the virus. Politicians spoke in absolutes, saying lockdowns were “necessary.” Well, producing enough to survive was more necessary. This would have been true even if the virus had turned out to be as deadly as it was originally touted.
Had governors been forced to face reality and decide how to respond to lockdowns without external bailout money, there may not have been any lockdowns at all. If there were, they would have been fewer, of less severity, and of shorter duration.
This would not have made a bit of difference overall in the number of Covid deaths, as the retrospective comparisons of “open” vs. “locked down” states so clearly show.
Like TARP in 2008 and every other bailout, profits have been privatized and costs socialized. People who elected governors who took a more realistic approach to Covid and who themselves balanced the personal risk of contracting the disease more realistically with the responsibility of supporting themselves are paying the same cost in runaway inflation as those whose governors closed their economies completely and kept them closed for much longer periods of time.
Today, Americans are being asked to again support a departure from reality. The U.S. government, the most prolific invader of foreign nations in the past seventy years, has proclaimed Russia’s invasion of Ukraine beyond the pale and imposed drastic sanctions in response. President Biden has acknowledged this will have a cost to American citizens, although he has vastly understated the cost.
The president and others have tried to shift the blame for present economic pain onto Putin. This is dishonest for two reasons. One, it is not Putin’s invasion but the sanctions in response to the that will cause economic hardship, just as it wasn’t “Covid” but the government response to the virus that caused the economic fallout we’re experiencing now.
Most importantly, the economic consequences of Biden’s Russia sanctions have not even begun to be felt by American consumers. They are just now suffering the effects of Covid lockdowns. The Russia sanctions could have far more onerous economic consequences, especially if they result in a new world economic order where a significant portion of the global population no longer uses the U.S. dollar as its reserve currency. That is a reality Americans are not ready to face.
Regardless of whether Putin’s invasion of Ukraine was justified, America may not be able to afford the combined cost of Biden’s sanctions and the Covid lockdowns. Ignoring that reality may have fatal consequences for both America’s economy its political order.
Outwardly, everyone condemns the Chinese government, run by the Chinese Communist Party (CCP). Their society is authoritarian and “anti-democratic” while in America, as the song goes, “at least I know I’m free.”
Yet, no one seems to believe freedom leads to greater economic prosperity or human happiness. Inherent in every political discussion about China is the idea that authoritarianism produces better results and the United States is handicapped by its devotion to freedom. Americans enviously note that when China’s central government decides to do something, they are not encumbered by adversarial processes inherent in the U.S. Constitution.
This is also the assumption underlying the trade wars. China has “taken advantage of” the United States by being more economically mercantilist while the United States has foolishly allowed its industry to migrate to China and other countries because of relatively freer trade policies.
That is demonstrably false. Manufacturing still comprises about the same percentage of real GDP as it has throughout the post-WWII period. The problem with American manufacturing isn’t the amount produced but what is produced. American manufacturing is far too skewed towards producing weapons and other items without utility, misdirected by a monetary system that allows resources to be directed towards unproductive ends.
The emergence of China as an economic power certainly provides the United States new competition, but that emergence is not a result of China’s authoritarianism. On the contrary, China’s economy has grown exponentially in the past thirty years because it is significantly less authoritarian, especially in the economic sphere, than it was previously.
Americans never seem to ask themselves why a country with four times the population didn’t have a much larger economy than the United States during the twentieth century. The answer is simple: communism. China had as authoritarian an economic system as has ever existed in human history. While they are by no means laissez faire now, they are far more “capitalist” in relative terms. This is the key to their success, not the authoritarianism that remains from the communist years.
The United States, on the other hand, is relatively less free than it was at almost any time in its history, with the exception perhaps of the 1930s and 40s. And its trajectory is towards more and more government intervention into the economy and life in general.
The United States became the most powerful economy in the world for the same reason the United Kingdom, comprised of two tiny islands with relatively small populations, was the most powerful before the United States. It had the freest markets. It was the most “capitalist,” for lack of a better single word.
The United Kingdom squandered its wealth trying to maintain a vast global empire that gave its government prestige but drained its wealth and led it to debauch its currency. Sound familiar? Empire may be made possible by capitalism, but it is not an inherent part of capitalism. Empire is anti-capitalist. Capitalism is about property rights and voluntary exchange. Empire demands taxes and misdirection of capital into production of arms and other imperial necessities that do not add to the happiness of the taxpayers.
Weapons, soldiers, and military infrastructure beyond what is needed for defense have no utility. Sooner or later, the productive part of the imperial economy can no longer afford to subsidize the unproductive part.
This has been the end of every empire in history. It is also the reason the USSR had a much more painful transition from communism to capitalism than China – it had an empire of other communist republics draining its already misdirected resources.
While the global standing army the United States maintains is a significant reason for its economic decline, it is not the only reason. In all areas of economic and social life, America has become less free with each passing year.
Americans have become accustomed to its government surveilling its phone calls, e-mails, and financial transactions. The New Deal regulatory structure, under which bureaucrats in executive branch agencies make most of the laws by fiat, rather than Congress in an adversarial process, continues to metastasize. Its entitlement programs, designed to cover the last few years of life, now demand the resources to cover decades of life beyond retirement.
The privilege of printing the world’s reserve currency has done the most damage to the dynamism of the American economy. All inflation leads to malinvestment, but the inflation made possible by the global dollar standard has led to bubbles that very well may comprise half of U.S. GDP.
Certainly, there are millions of people employed in the cartoonishly bureaucratic education and healthcare industries who are adding no value to consumers. As guaranteed student loans have redirected trillions towards the education industry, millions of administrative jobs have been added to the system that aren’t necessary to teach reading, writing, and arithmetic. Meanwhile, the education results continue to decline.
Healthcare is in much the same shape. That part of the industry on the cutting edge, where profits and losses are still available, which operates under the most capitalist circumstances, continues to produce miracles of innovation. But the rest, the heavily subsidized, increasingly bureaucratic part, is sclerotic and in decline.
In many ways, routine American medicine is still practiced the way it was in 1970. Why? Because it has no reason to improve. It’s on the dole, with half of all healthcare spending comprised of government spending. There is no reason to improve medical or business practices when your income is guaranteed by taxpayers. See the DMV.
Just ask yourself why you’re still asked to fill out multiple forms capturing your insurance information when the office already has it. In fact, they wouldn’t even give you the appointment until they not only got your insurance info but verified your eligibility with the insurer. But they still ask you to write it down on two different forms when you get to your appointment. Non-subsidized industries cannot afford inefficiencies like this.
What made America richer and more powerful in the past was being significantly freer than any other country in the world. And by “freer,” I do not mean more “democratic.” Democracy was not the key to American freedom; it was limited government. It was the fact that the vast majority of American economic and social life was not up for a vote. Rather, most decisions were left to the discretion of the private sector and the individual.
What made China destitute during the same period was its complete lack of freedom. There was nothing else keeping China from building the economy it has today. But since the late twentieth century, America has headed in one direction on the freedom scale and China in the other. It is not unreasonable to ask whether they haven’t now met at a point far lower than America’s freer past.
There is no reason for Americans to fear China eventually having a larger economy than the United States. That would be the natural result of having so much larger a population. But if America wants to regain its economic power in a post-dollar dominated world, it must stop imagining China’s success to be a product of its remaining authoritarianism and get back to what created America’s wealth in the first place: far more limited government, freer markets, and maximum individual liberty.
Us Military: List Of Us Military Bases for United States Military Bases World Map – Printable Map
Four weeks ago, I predicted, “American taxpayers are going to be regaled with propaganda about the need to increase military spending in reaction to Putin’s invasion and accede to even more troops deployed overseas.”
Right on cue, Gen. Tod Wolters, U.S. European Command chief, did precisely that.
“I think what we need to do from a U.S. force perspective is look at what takes place in Europe following the completion of Ukraine-Russia scenario and examine the European contributions, and based off the breadth and depth of the European contributions, be prepared to adjust the U.S. contributions. And my suspicion is we’re going to still need more,” he said.
Following the Ukraine-Russia scenario? So, once the Ukraine-Russia war is over, in which zero American soldiers fought, American taxpayers should pay for even more soldiers deployed in Europe to…what? Not fight again?
This isn’t to say American troops should fight in the Ukraine-Russia war, even though it was started by the U.S. State Department. It’s an acknowledgement that they cannot fight in the Ukraine-Russia war, as Joe Biden has so far retained the mental capacity to realize.
The rationalization for this would be to deter Vladimir Putin from invading the territory of a NATO country in the future. But Putin is never going to do that for the same reason Biden is not allowing U.S. troops to be involved in Ukraine. Nuclear powers cannot go to war unless they are ready for the war to end with a nuclear exchange. Period.
Thus, as I argued at the beginning of this conflict, the conclusion to draw from the past four weeks is a dramatic cut in U.S. overseas deployments. Warehousing hundreds of thousands of troops overseas that will never be used for any legitimate purpose is simply a dead weight loss on the U.S. economy.
If Joe Biden insists Americans suffer food shortages in order to signal their virtue in futile sanctions on Russia for its supposedly “unprovoked” invasion of Ukraine, then they should respond to him by demanding the overseas military government jobs program – because that’s all it is at this point – be eliminated to help ease the pain.
But what can average Americans do about this? Congress will appropriate the funds for more military spending and, no matter whom they elect president, that president will continue to deploy troops overseas.
Well, for everyone who styles themselves “politically incorrect,” believing they are tougher than the “snowflakes” who can’t bear to hear hard truths, here is some truly politically incorrect talk.
Warning: Saying something half the country will applaud you for, whether it is the liberal or conservative half, is not “politically incorrect.” Telling a truth no one wants to hear is truly politically incorrect. If you don’t want to hear that, stop reading now.
Stop joining the military. Stop encouraging your children to join the military. Stop crowing to the world about how proud you are your children joined the military. We need the military cut drastically, now more than ever.
I can already hear the rationalizations. So, let me address the most common.
“I didn’t join the military to fight unconstitutional wars; I joined to defend the Constitution.” Sorry, this excuse doesn’t hold water. The U.S. government has been fighting unconstitutional wars for almost eighty years at this point. Its record during this century alone is enough that no reasonable person can possibly believe they will be deployed to defend the Constitution.
That’s especially true because the Constitution is not under threat from any foreign power. Not even if the military were cut in half. Not even if it were cut by two-thirds. Want proof? Russia’s military spending is one tenth that of the U.S. on an annual basis. Why is their constitution still intact?
No reasonable person can believe joining the military in 2022 will result in them being deployed to do anything other than more of what the U.S. military has been doing for our entire lives.
“But the military is already stretched to exhaustion.” Yes, this is true. The military is stretched to exhaustion because the government has it doing all sorts of things that harm rather than “serve” U.S. taxpayers. Take away the personnel and U.S. presidents won’t have that choice.
“If people stop joining the military, they will just start drafting soldiers.” Fine. Let’s get to that point and talk about civil disobedience then. Massive movements have formed around vaccine mandates, wrongful police shootings, and controversial public-school curriculums. Whatever one thinks about any of those causes individually, they all pale in comparison to mass murder of foreign populations that never attacked the United States.
I wrote a few days ago that Americans are not ready for the reality that will set in when much of the world ceases to use the U.S. dollar as the world’s reserve currency. There are plenty of painful corrections in the domestic economy that are inevitable – zombie jobs that but for government spending underwritten by monetary inflation wouldn’t exist.
Disbanding the worldwide standing army would be one of the least painful corrections to bear. Not only would the net economic loss be eliminated, but hundreds of thousands of military personnel serving no useful purpose overseas would be freed up to do productive work here at home.
It’s hard to blame an eighteen-year-old for joining the military, especially when, on one hand, the government has made it so economically attractive with perks like free college and, on the other, when all of society tells him or her it is a fine and noble pursuit.
America needs to get back to its founding attitude of suspicion of standing armies. John Adams sought political favor by trying to outmaneuver Congress in taking credit for disbanding the entire army. His successor Thomas Jefferson was re-elected in 1804 based on cutting taxes and paying down the national debt after cutting military spending (mostly the navy as the army was already gone) by over 90 percent.
Americans have derived no benefit from eighty years of foreign wars. So, while we’re facing reality, let’s knock off the reflexive, “Thank you for your service.” No American taxpayer has been “served” by any of these wars.
Counter to the government’s propaganda about “freedom not being free,” Americans have become poorer and less free because of the military mischief they have allowed their government to get them into.
Before resorting to eating bugs, as their elites suggest, Americans should take foreign policy into their own hands by ceasing to join the military, discouraging their children from doing so, and ceasing to perpetuate the falsehood that Americans are freer because of the wars its government has fought.
Equities markets are slightly up today while gold and oil are down as investors digest news of progress in peace talks between Ukraine and Russia. While a deal between the countries would most importantly end the bloodshed and, secondarily, ease the immediate economic pressure the war is causing, it would not end the economic war I wrote about last week.
That war was declared by the United States when it banished Russia from its SWIFT system, seized its FOREX assets, and demanded the whole world boycott Russian exports (something even many NATO allies were unable to do).
Russia’s first response was to announce it would only accept rubles in payment for its natural gas exports to “unfriendly countries.” Over the weekend, it made another move. It put the ruble back on the gold standard domestically, allowing its central bank to buy gold at a fixed price of 5,000 rubles per gram (approximately 155,550 per troy ounce).
This immediately strengthened the ruble against the U.S. dollar. On Friday, RUB/USD was over 102. As of this writing, it had dropped to just under 88.
As Tom Luongo explains, this effectively sets up an opportunity for Russia to sell oil, natural gas, and its myriad other natural resource exports at a discount for gold. This will eventually bring the ruble back to its pre-war value in USD of 75.
Washington obtusely seeks to prevent Russia from selling its gold while Russia has no plans to do so. It is buying gold at a discount based on the demand for its exports.
Even if a treaty is secured and the U.S. offers to readmit Russia to SWIFT, releases its frozen assets, and end the boycotts, it’s hard to imagine Russia accepting the offer. Why put itself in the same position again when it is holding all the cards as an exporter of vital resources with a positive trade balance?
Not only Russia but every country in the world is now on notice that any reserves it has in dollars could be rendered worthless at the whim of the U.S. government. This provides tremendous incentive for most of the world to find a store of wealth and medium of exchange other than the U.S. dollar.
Americans are not ready for the reality that will be imposed if the dollar loses its world reserve currency status.
This isn’t immediately apparent to them because they believe they have the world’s most productive economy, based on having the largest GDP. It is true that U.S. GDP priced in dollars was the largest in the world at approximately $22 trillion in 2021. China was second at $16 trillion.
The problem with GDP is it merely measures total money spent in the economy. It does not measure the value of things that were produced. Since value is subjective, it is a matter of how much an economy produces for which people would truly be willing to give up something of value in return. This willingness depends upon what is produced having what economists call “utility,” a product’s usefulness in fulfilling some purpose for the consumer, whether a need like food or a luxury like a fancy car.
A large percentage of what the U.S. economy produces has no real market value.
Rising prices are not the only negative consequence of monetary inflation. Inflation also misdirects capital towards nonproductive use. That is why at the end of a business cycle, when the economy crashes, there is high unemployment. All of the people misdirected into unprofitable enterprises must be let go and redirected towards productive work – towards producing products whose value to others exceeds their cost of production.
The U.S. dollar’s status as the world’s reserve currency has allowed its central bank to inflate the currency far beyond what it would be able to get away with otherwise. This has caused huge distortions in the U.S. economy. In other words, it has directed capital towards producing products whose value does not exceed their cost of production.
What value have Americans received in return for spending more on their military establishment than the next ten countries combined? How were they better off for the military spending 20 years and trillions of dollars in Afghanistan? How do they benefit from maintaining a global standing army that will never be used against a nuclear power, as was just confirmed after Russia invaded Ukraine?
What additional value have they received for paying the highest prices in the world for healthcare and education?
What these and other malinvestments have in common is they are not funded voluntarily. The military is 100 percent tax funded. Half of all healthcare spending is government spending. College education is largely underwritten by government-guaranteed loans, meaning taxpayers guarantee them whether they want to or not.
Even outside of government-funded enterprises, capital is misdirected towards nonprofitable use by monetary inflation. Houses and automobiles, for example, are bid up beyond their true market value because of the artificially low interest rates of the loans that make their inflated prices affordable.
Like taxation, monetary inflation transfers purchasing power involuntarily from holders of dollars to those receiving the loans. That means there is no market discipline acting upon the borrowers and lenders. No one was asked to voluntarily give up something of value to underwrite the loan. Therefore, capital is much more likely to be invested unprofitably.
Yes, all countries in the world have fiat currencies that they inflate, but no other country has been able to do it on the scale and with the impunity the U.S. has while enjoying reserve currency status. This has directed huge amounts of people and resources towards unproductive ends.
Foreigners have paid Americans to waste resources and collect salaries for non-value producing jobs in government, health care and education bureaucracies, finance, and other bubble industries by accepting American exports of dollars in return for imports of valuable products.
Removing this privilege will cause an enormous deflation of some economic sectors and the complete disappearance of others. Millions of people employed unproductively, as well as millions of others who sell to them, will be devastated. The result will be a sharp reduction in living standards for virtually all Americans outside of the very wealthiest strata.
While this cleansing of waste in the economy might be beneficial at some point in the future, it will be unimaginably painful for most Americans in the present. For a country already near a political boiling point, the economic reality on its way could blow the lid.
In the 2005 film, Cinderella Man, James J. Braddock’s fight with contender Art Lasky reaches a turning point when Lasky hits Braddock with his best punch. Braddock’s mouthpiece flies out and he is staggered, but he doesn’t go down. He recovers, smiles at Lasky, and goes on to win the fight.
A romanticized portrayal to be sure, taken to an even more ridiculous extreme in the climactic bout between Rocky Balboa and Clubber Lang in Rocky III, but it does beg a very relevant question for the U.S. and NATO today:
What if you hit your opponent with your best shot and he doesn’t go down?
U.S.-led NATO effectively did that when it locked Russia out of the SWIFT system, seized Russia’s FOREX assets, and demanded the rest of the world cease all economic relations with Russia. Washington believed this would cripple Russia permanently, possibly leading to a coup in Russia and Putin’s ouster.
It didn’t. That’s not to say it did no damage. The ruble initially plunged in value, causing the Russian central bank to raise interest rates to 20%, effectively freezing the prospects for any investment in growth for the besieged economy. But Russia is still there, as is Putin. The war in Ukraine continues, and Putin has responded.
“A number of countries have taken illegitimate decisions on the so-called freezing of Russian assets. This collective West has actually drawn a line under the reliability of its currencies, we have already spoken about this, it crossed out the trust in these currencies. I have decided to implement a set of measures to switch over payments, as soon as possible, let’s start with our natural gas, to switch over payments for our natural gas supplied to the so-called unfriendly countries into Russian rubles.”
That punch landed, and now it’s Washington’s turn to try to smile in its opponent’s face. The reliable U.S. media ran several stories citing U.S. economists trying to minimize the effectiveness of Russia’s response. Only in this case, life will more likely imitate reality than the arts. When a boxer smiles in a real prize fight, it almost always means he has been hurt.
That’s what prompted Biden to hurry to Brussels for an emergency meeting following Putin’s announcement. Strategies expected to be discussed include redirecting non-Russian supplies of natural gas towards Europe in hopes to lessen its dependency on Russian exports. Currently, Russia supplies about 45% of Europe’s natural gas imports.
Apart from the fact this will still make life more costly for Europeans – if it were not more expensive to purchase natural gas this way, Europe would have already been doing so – it is only one commodity. Russia and Ukraine also supply about 30 percent of the world supply of wheat. Russia is a major source of steel, palladium, and neon gas needed to make computer chips. It supplies 35 percent of the world’s uranium.
Together with Belarus, Russia supplies 40 percent of the world’s potash and large percentages of ammonia and monoammonium phosphate exports. Fertilizer prices had already risen 17 percent in 2021 and are expected to rise an additional 12 percent in 2022.
As it did for decades militarily before invading Ukraine, Russia has so far shown restraint in its economic response to NATO’s sanctions. It has by no means thrown its haymaker, such as simply cutting off Europe’s natural gas completely rather than merely demanding payment in rubles. Neither has it cut off exports of uranium to the United States, although it is publicly considering it.
Of course, these economic “nuclear options” would hurt Russia as much or more as it would the U.S. and Europe. But Russia is a relatively poor country that has been living within its means. It has low debt and a population accustomed to a lower standard of living than those in NATO countries. The U.S. and NATO are quite the opposite.
While the U.S. is still a highly productive country, it has been living well beyond its means, largely made possible by the U.S. dollar’s reserve currency status, which is now in jeopardy as Russia, China, and India – whose populations alone represent 37 percent of the world’s population – take steps to get off the dollar completely. Much of the “Global South” may choose to join them.
This economic world war will harm every country in the world. Mass starvation in poor countries is a real possibility. So is economic collapse in Europe.
President Biden has admitted it will have “a cost” to Americans as well. But his portrayal and average Americans’ understanding of that cost is grossly underestimated.
Russia, China, and India are all formerly socialist countries that have experienced exponential growth since pivoting to market economies. The living standards of most of their people have grown significantly but are still low compared to those of Americans or Europeans. Their older generations remember the grinding poverty they experienced under socialism.
In The Matrix Reloaded, Neo tells the architect he doesn’t believe the machines will destroy all of humanity, because their existence relies upon human energy supplies. The architect replies, “There are levels of survival we are prepared to accept.”
Russia, China, India, and much of the world may be similarly prepared. Is the United States?
Over the past seventy years, the United States has attempted to use economic sanctions to remove world leaders it deemed unworthy in Cuba, Venezuela, Iran, Russia, and other countries. Populations in the target countries, perceiving aggression by an outside threat, have instead rallied around those leaders, preferring even despotic rule by one of their own to the U.S. empire’s meddling in their politics.
Fat, dumb, happy, and untouched by the foreign wars its government has prosecuted all over the world, the U.S. population may not be so willing to accept the “levels of survival” necessary to survive this economic war. And unlike Cuba, Iran, Russia, etc., it will not be a foreign government imposing the sanctions but its own.
How will the U.S. population react when economic reality finally comes to its door?
If you haven’t received the memo, the U.S. government is vitally interested in you seeing the Russian invasion of Ukraine one way and one way only: Russia is the aggressor due to its “unprovoked” invasion of a sovereign country. Ukraine must be supported by NATO with every economic and financial “tool” in its toolbox to punish Russia for this lawless act.
It is your duty as an upright and moral person to suffer the economic consequences of these sanctions because, “that is who we are.”
It is true that Ukraine had not committed any overt acts of war against Russia prior to the invasion. It had not breached Russia’s borders with troops. It had not conducted airstrikes on targets inside Russia’s borders. It had not released any biological weapons against Russia’s population (as far as we know).
By those parameters, Russia was certainly the aggressor in this war with Ukraine. And by the same parameters, the U.S. was the aggressor in Afghanistan, Iraq, Syria, Libya, Yemen, Yugoslavia, and Kosovo, just to name a few previous interventions. So, are there other valid reasons (by their standards) for preemptive war?
The stated reason for invading Iraq was the supposed “weapons of mass destruction” (WMD) that would be used against the United States in the future. Russia has similarly cited weapons of mass destruction (biological weapons labs) in Ukraine that could be used against Russia in the future.
The Iraqi weapons of mass destruction were not there. Plenty of people suspect the Bush administration never really believed they were and simply used them as a false pretext for the war. That invasion plans were discussed at Bush’s very first cabinet meeting, months before 9/11/2001, certainly lends indirect support to that theory.
The U.S. government vehemently denied there were any bioweapons labs in Ukraine until Victoria Nuland told Marco Rubio during her Senate testimony the Ukrainians had “research labs.” The new story became that the labs were studying “purely defensive” biotechnologies to thwart a chemical weapons attack.
This may be true. Yet, Nuland is nevertheless concerned that materials in these labs may fall into Russian hands as a result of the invasion. Just remember that narratives given full-throated support from the media often evolve:
“The Covid vaccinations are 95% effective at preventing infection.” “The Covid vaccinations’ protection may wane.” “The Covid vaccinations don’t prevent infection but do prevent serious illness.” “We never said the Covid vaccinations prevent infection.”
A similar evolution occurred regarding the lab leak theory of Covid.
At the beginning of the bioweapons lab controversy, the idea there were labs at all was pooh-poohed as “conspiracy theory.” Today, they’re “not really weapons labs but still have dangerous materials in them.” What will the story be a month from now?
Regardless, there seems to be a lot more bases for the Russian claim of bioweapons labs in Ukraine than there was for the U.S. claims of WMD in Iraq. Yet, no worldwide boycott of the U.S. occurred following its invasion of Iraq.
Russia also claims to be defending breakaway republics in Donbas against atrocities committed by the Ukrainian government. No one disputes President Zelensky was shelling the region prior to Russia’s invasion. How is this different from U.S. military interventions in Syria or Kosovo?
Kosovo is especially similar in that it was a breakaway region, populated by people of a different ethnicity, language, and culture from the rest of Yugoslavia. The U.S. took the side of the seceding region against the government of the country from which it seceded. In both Kosovo and Syria, the U.S. justified its military interventions based on supposed atrocities committed by the recognized government against the rebels.
Why is it different when Russia does it?
There are two important differences between the Russia-Ukraine conflict and any of the aforementioned U.S. military interventions. One, Russia is intervening in a conflict on its own border, not thousands of miles from it as in the case of the U.S. interventions.
Two, Russia is obviously responding to the decades-long attempt by the U.S. government to admit Ukraine into NATO, thereby justifying the deployment of NATO troops and weapons, including nuclear weapons, in Ukraine. These efforts have included running color revolutions to overthrow the Ukrainian government twice, in 2004 and 2014, for that express purpose.
To this allegation, the U.S. government-media complex responds that Ukraine is a sovereign country and can enter any alliance it wishes. Putin responds, “International documents explicitly enshrine the principle of equal and indivisible security, which, as you know, includes the obligation not to strengthen one’s own security at the expense of the security of other states. I can refer here to the OSCE Charter for European Security adopted in Istanbul in 1999 and the OSCE Declaration of Astana in 2010.”
It is Putin’s contention that Ukraine has violated these agreements. Even if it is not an official member of NATO, it has been a de facto member given the deployment of troops and weapons in Ukraine over the past eight years.
What is NATO’s response to this argument?
Does anyone really believe that if Russia not-so-covertly overthrew the government of Mexico, admitted it into an alliance against the United States that included, let’s say, Cuba and Canada, and began running military exercises within Mexico’s borders while the Mexican president mused about acquiring nuclear weapons, that the U.S. government would stand idly by because “Mexico is a sovereign country?”
The U.S. has long claimed status as the “exceptional nation,” imagining it has a mandate to police the world militarily and punish what it considers “rogue nations” for bad behavior. What “exceptional” really means is the U.S. government doesn’t believe international law applies to it the way it applies to every other country on earth.
Vladimir Putin has shown tremendous restraint while watching NATO’s long march eastward towards his borders. The U.S. government has dismissed his concerns as those of the leader of a “secondary power.” His last diplomatic effort was made in late 2021, asking for what any objective observer would describe as very reasonable assurances: a written guarantee of Ukraine’s neutrality and abstention from placing weapons near his borders.
The “exceptional nation” blew off his requests yet again. So, Putin has now made a clear statement in Ukraine: “Russia is exceptional, too.”
The Book of Proverbs says, “Pride goeth before destruction, and an haughty spirit before a fall.”
Which nation had been the proud and haughty one before this war broke out?
Yesterday, Secretary of State Anthony Blinken told Face the Nation the U.S. would “greenlight” Poland sending fighter jets to Ukraine. Later in the day, Pentagon spokesman John Kirby issued a statement indicating it would not allow Poland to use the U.S. Ramstein AFB as the middleman for this transfer. However, Kirby also said, “the decision about whether to transfer Polish-owned planes to Ukraine is ultimately one for the Polish government.”
Apparently, the Pentagon recognizes fighter jets sent to a hot war to benefit one side would be recognized as an act of war by the other. This is nothing new. See the Lusitania. But why the statement leaving it up to Poland to send the jets directly? Poland is a NATO member and any attack on a NATO member brings the United States into the war anyway.
What’s going on here?
Nothing good for Poles who remember their history. In 1939, Poland was in a dispute with Nazi Germany over a city called “Danzig” at the time (it is now Gdansk). It’s strategic significance on the Baltic coast is obvious and it had a long history of changing hands politically. However, it had been a part of the Kingdom of Prussia and subsequently the German Empire from 1793 until the end of World War I.
After regaining its independence at the end of the war, Poland wanted Danzig placed under Polish rule. However, as the city was majority ethnic Germans, the wise masters of the universe who imposed the disastrous Treaty of Versailles upon Germany made Danzig an independent city under the authority of the League of Nations.
The cartoon version of history most Americans learn says Hitler’s invasion of Poland was just the first in his quest to conquer the whole world. It wasn’t. Danzig was merely a strategic point on the map in the foreign policy plan he clearly laid out in Mein Kampf:
“We put an end to the perpetual Germanic march towards the South and West of Europe and turn our eyes towards the lands of the East. We finally put a stop to the colonial and trade policy of pre-War times and pass over to the territorial policy of the future.
But when we speak of new territory in Europe to-day we must principally think of Russia and the border States subject to her.”
By Hitler’s reasoning, communism was just part of the “Jewish conspiracy” and since Russia had become communist, “Fate robbed the Russian people of that intellectual class which had once created the Russian State and were the guarantee of its existence.” And since Germany needed land to become the first-tier power Hitler believed it must become to survive, it was entitled to carve this new territory out of the USSR, including Ukraine.
Was any of this justified? Of course not. But here is the connection to yesterday’s news. Poland had a choice to make: stand firm on keeping Danzig out of Hitler’s hands or make a deal with Hitler and allow him to proceed east towards his true objective: conquest of Ukraine and other Soviet territory. This was not a choice between good and bad. It was a choice between two bad alternatives. Giving up Danzig strengthened the evil Nazi regime. Standing firm would lead to a war Poland could not win.
It was here that the dominant global empire of that time, England, stepped in. It issued a war guarantee to Poland should Hitler invade that England could not and did not keep. This strengthened Poland’s resolve to deny Hitler Danzig.
As conservative author Pat Buchanan documents in his book, Churchill, Hitler, and “The Unnecessary War”: How Britain Lost Its Empire and the West Lost the World, Hitler did not want a war with England. Once learning of England’s war guarantee, he postponed his invasion of Poland to try to negotiate. It was only after those negotiations were unsuccessful that Hitler went ahead with his invasion, leading to war against the allies.
This isn’t “apologizing” for Hitler or diminishing Hitler’s atrocities, as Buchanan’s critics claim. It is simply a fact that Hitler did not want war with Western or Southern Europe, as he stated clearly in his own book.
Sometimes reality has no room for moralizing. When Hitler invaded Poland, England reneged on its war guarantee, as Poland should have known it would. England had disarmed itself after WWI, as had most of the Allied powers. Poland spent the next fifty-two years in darkness, occupied first by the Nazis and then the communists. Had they allowed Danzig to rejoin Germany, WWII may have been a fight to the death exclusively between Hitler and Stalin, resulting in both evil regimes being destroyed.
Is Poland facing a similar choice today? Why is the U.S. government telling Poland it is free to provide fighter jets to Ukraine, as long as they do not involve the U.S. government in doing so? If the U.S. were planning to honor its NATO commitment, it wouldn’t really matter whether those jets went directly to Ukraine or via a U.S. military base. Either scenario leads to a U.S. war with Russia should Russia retaliate against the sender.
Unless the U.S. plans to renege on its war guarantee in 2022 just as England did in 1939.
Until he invaded Ukraine, Vladimir Putin had been the world leader who showed the most restraint during this century. He had sucked up color revolutions run by the U.S. in Georgia and Ukraine in 2004-08 and Syria and Ukraine in 2012-14. Syria and Ukraine are both home to vital Russian warm water ports, while the revolutions in Georgia and Ukraine sought to install hostile governments on his border that would host NATO troops and missiles.
This in addition to constant demonization as a meddler in U.S. elections by the most prolific foreign election meddler in human history.
February 24, 2022 may have marked the end of Putin’s restraint period. Let’s hope not. If Polish military aircraft end up in Ukraine, it will only be restraint on Putin’s part that prevents a NATO country from being dragged into the war. Then, it will be a matter of whether Washington commits much of the Western World to possible nuclear annihilation or leaves Poland high and dry as England once did.
There was no good answer to Hitler in 1939. But there were plenty of strategically better ways to handle him than the one chosen, which was arguably the worst. Faced with a choice between leaving the USSR to fight Nazi Germany alone or allying with the Soviets to defeat him, hindsight says the former choice would have been better.
It was prevented by English government officials blustering about a moral duty to defend a country they could not and did not defend anyway. Does that sound familiar?
Poland should know better than to trust the current world empire.
Whatever one thinks about Vladimir Putin’s invasion of Ukraine, there are no denying two things: Russia has invaded a European country and U.S.-led NATO will not respond militarily.
President Biden’s reason for not intervening is technically that Ukraine is not a member of NATO. But the United States and NATO have launched military interventions in plenty of countries that are not members.
The real reason the U.S. won’t engage Russia to defend Ukraine is Russia is a nuclear power and nuclear powers cannot fight a war that isn’t destined to end with the possible extinction of the human race.
Thankfully, both President Biden and President Putin are keenly aware of this. That’s why you also won’t see Putin expand his military operation beyond Ukraine.
This begs the question: why are U.S. taxpayers paying for a worldwide standing army built to fight First World powers that can never be used?
The U.S. has over 50,000 troops deployed in Europe, not counting the over 9,000 in the United Kingdom. These troop levels were maintained or increased after World War II as a deterrent to the Soviet Union during the Cold War. When the Soviet Union dissolved, American taxpayers were promised a “peace dividend.”
The peace dividend would naturally be centered around bringing home those troops deployed to Europe. But over time, the story eventually evolved that Russia under Vladimir Putin – elected by the Russian people as a direct reaction against the disrespect Russia had been shown by the U.S. and NATO – was a threat that necessitated keeping those troops there, now thirty-one years since the USSR dissolved and almost eighty years since the end of WWII.
The events of the past two weeks just proved this was all either a delusion or a lie. Push has come to shove and those troops are not going to be sent into action against Russia. Some have been moved to the borders of NATO countries, but this is merely for appearances. Putin will not breach NATO, not for fear of tens of thousands of U.S. troops deployed in Europe, but because he doesn’t want to risk nuclear Armageddon any more than Joe Biden does.
So, why keep the troops there?
Ditto the 56,000 troops warehoused in Japan. These are ostensibly a deterrent to rising power China, but they are never going to fight the Chinese army for the same reasons U.S. troops in Europe will never fight the Russian army. If they do, it won’t matter much who wins.
Russia’s military budget is somewhere between $61 billion and $150 billion per year, depending upon which source you consult. Somehow, Russia is able to maintain a larger nuclear arsenal than the United States and conduct a full-scale war in Ukraine on anywhere from 10 percent to 20 percent what the United States spends on “defense.”
North Korea and Iran, also perennial boogeymen, manage to threaten the whole world on less than $20 billion per year.
The $750 billion per year (not counting military spending hidden in other departments) American taxpayers have been fleeced for produced a military that couldn’t defeat the Taliban.
As I wrote eight years ago, conventional warfare is largely obsolete in the nuclear age. The days of generals like Patton triumphantly marching into enemy capitals and accepting their counterparts’ surrenders are over. No nuclear power is going to let that happen without firing its nukes first.
If war is truly a last resort, only justifiable when one’s country faces an existential threat, then nuclear weapons are always justified before surrender. When they aren’t, the war wasn’t justified in the first place.
American taxpayers are going to be regaled with propaganda about the need to increase military spending in reaction to Putin’s invasion and accede to even more troops deployed overseas. The logical conclusion to draw from all this is precisely the opposite.
U.S. military spending should be cut drastically, and its overseas deployments ended as obsolete relics of a bygone age. America’s nuclear deterrent, air force, and useful portion of its navy could be maintained at a fraction of the gargantuan rip off currently being perpetrated against American taxpayers.
Since this bloated military won’t ever be used against a First World power and has already demonstrated its inability to defeat a Third World one, we have nothing to lose but runaway deficits and a massive debt that will eventually destroy our currency and way of life.
While we’re in cost-cutting mode, it’s time to clean house at the U.S. State Department and within the “intelligence community,” too, rooting out all the career “foreign policy experts” who get us into so much trouble around the world.
Call it “American Taxpayers First.” Someone ought to run for high office on that.
