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Annual Wrap Up. Her brief is wide-ranging and her coverage very interesting so I would like to make
some comments about what I perceive as her and Solari`s world view.
instruments inflate and deflate at different times and rates. Increases in employment that are being put
forth in the U.S. as evidence of recovery are mostly based on estimates (see Birth/Death Model). The
Media is not much help in this regard as any sensible commentary is buried in a mountain of promotion.
The financial cable outlets have been suffering a considerable loss of viewership as individuals slowly
wake up to the shortage of reliable content.
At the same time, financial firms often act to manipulate markets at the behest of government. In
return, they are allowed to carry out said manipulations plus fraudulent acts of their own with a
minimum risk of punishment. Very few persons have gone to jail as a result of the actions that resulted
in the crisis of 2007-2008 and the succession of settlements and fines have actually been a form of
taxation that will continue for a while yet. There is a great show put on, but much of the settlement cash
vanishes in accounting manoeuvres while the rest goes to general revenue.
Ms. Fitts estimated that there has been a $40 trillion wealth transfer and I regard that number as good
as any. Much of that is represented by a massive increase in that value of assets including equities, real
estate and government debt instruments. The main limitation on this wealth is that it is far too large to
be liquid. It can, however be used to take increasing control of all economies in the world. Companies
are transferred by stock deals and exchanges of debt instruments just as effectively as with cash.
Meanwhile, the securitization of bad debt is growing again since it is so very profitable. It is not that
nothing has been learned; it is just that nothing has changed.
currently subject to sanctions wielded by the Americans via their domination of the financial apparatus
of the planet.
Mr. Global apparently wants to speed up a transition to more neutral forms of reserve currency. The
Chinese are doing their part by making bilateral deals to do trade directly using their own currency. Iran
and Russia have been mastering the art of bypassing the sanctions. For example, India has been able to
trade for oil using gold and rubles in place of dollars and get a discount in the process. A decline in the
importance of the U.S. is bound to have a negative effect on U.S. power, but it will take years to
develop.
It would appear that the Saudis are fed up with waiting for a direct military response from the U.S. and
decided to crash the price of oil. This directly punishes Russia and Iran who are their rivals in the wars
going on in Syria and Iraq. It is quite likely that many American officials are on board with this since the
drop in oil revenue is a far more effective punishment than the other sanctions they have tried. It also
benefits much of the U.S. economy at the expense of the oil industry who dont have as many friends as
they used to.
Chaos as Policy
The U.S. dollar is crashing upward and this is just as much a symptom of growing chaos as the recent
downward crash in oil. Countries are failing as a result of half-baked intervention. Trust in authority is
declining in areas where it used to be rock-solid. This is a process that chips away at Power.
Ultimately, the power of America to influence the world and to remain powerful is rooted in its military
superiority. Rome survived two centuries of hyperinflation and economic decline (280 492AD) and in
the end, lost only the western third of the economy and population. It maintained military superiority
over individual opponents and managed to go on to several resurgences after the currency was
reformed. Great powers do not vanish overnight.
In Flyover Country, most people still believe in America and it is still possible to recruit loyal citizens for
the Legions. This is Americas great strength, bolstered by superior organization and technology
accumulated over time. Russia and China have had a lot of problems trying to build effective Aircraft
Carriers and flight groups and a lot of issues with nuclear submarines. Eventually someone may succeed
in these areas and others, but it will take a few more decades and a few wars for practice.
In the meantime, there is a great glowing Joker in the deck. Nuclear weapons are a genie that is
definitely out of the bottle. The current great powers understand that nukes neutralize each other and
cant be used in the proxy wars that they wage against each other, but not everyone is motivated by the
international regime of mutual understanding. North Korea is a regime based on what amounts to
organized crime at the state level and expects their possession of the bomb to gain them a great deal of
extortion money from America, Japan, and yes China and Russia. This cannot end well.
The Pakistani weapons program was financed largely by the Saudis and it is strongly hinted that they
have some of the devices. China sold IRBMs to the Kingdom and recently updated them, which makes
no sense whatever unless the Saudis intend to mount nukes on them. It also possible that Pakistani
devices have been sold to whoever is willing to pay the price. This is a great, gaping hole in the current
tattered garment of World Security.
Forgive Iran if they feel surrounded by hostile nuclear powers Pakistan, Israel, Saudi Arabia, possibly
Russia and definitely U.S. bases in the area. That is why they will never give up their development
program, but will continue to stall and prevaricate.
Non-Executive Summary
I wont comment at length on investment advice for individuals except to say that this is a time of
increasing disorder and declining trust. Some things will develop slowly but others could come on quite
quickly. We are in fact engaged in a world war, done a bit at a time in remote places, but the process has
begun to bring down quite sizable states. As trust declines in government and in business, each person
needs to become well-informed if only to protect themselves and their families.