Coup de Grace

We all feel it coming... the Fed's "slosh" tightens, the trade indices continue to collapse. Riots emerging in non-indebted countries: Russia, China, Iran.

Putin knew that the preserve sovereignty, he had to extinguish Russia's foreign debt, and he did that successfully. Putin tragically overlooked the flaw in his method: he depended entirely on foreign consumption... consumption created by fractional reserve banking where 90% of the money was backed by loans made into bubble, both foreign and domestic.

The Chinese, likewise, fell exactly into the same trap. Ditto Iran, which barely merits mentioning since Iran is an utterly emasculated state.


What I am trying to emphasize here is that the situation right now is actually quite simple, contrary to the obfuscation declaimed by various academics and other tortoise-mutilating analysts: we are witnessing an epic contraction in credit, and without NEW credit from a NEW issuer, there is NO way the current economic order will avoid collapse.

China and Russia are the two key sovereigns outside The Club. Why are they outside The Club? Because they have pretensions of sovereignty! The labor of China and the resources of Russia are still not under the control of the Fed nor the IMF. Why did Obama have a "buy american" clause in his infrastructure bill? Well, of course, it was meant to punish the Chinese! The US will starve China of markets and become highly mercantalist SO LONG as it suits the interests of the Fed and IMF to further weaken the Chinese economy and foment a dependency on foreign credit to finance domestic consumption.

Russia and China suffer the same problem, and neither really have any prospects for autarky or financing without going through the NY Fed or the IMF. The Chinese still continue to grope for a larger stake in the IMF, but this protracted battle will only exacerbate the depression.

The options are clear:

1) a global bank issues new debt to every nation, approtioned according to its "expected" GNP and power, and reignites the flow of capital flows.

2) War, and I am not being glib here. We are on a path to war, and it will happen with metaphysical certainty if China and Russia resist subordinating themselves to the new debt-issuing authority that will soon be contrived.

There's no need to waste time on esoteric economics: this is all about power, and so let's focus on the politics at hand: can the Chinese and Russians find a way to forestall #1? The answer, I think, is not without #2.