A Great-er Depression Ahead?
There are already plenty of signs that the current malaise in America is not limited in terms of time, nor in its economic or social scope. Buckle your seat belts. . .
For some time I’ve deliberated where and how to publish this, but given the events of tonight it might as well be here. Former Pres. Donald Trump’s residence at Mar-a-Lago was raided earlier this evening. This occurrence goes along the lines of a recent trend in political thought to which I’ve joined holding that the United States is in deep economic and social decline and is in danger of losing its standing as the premier world superpower. I got a very detailed and skeptical response from a person with whom I discussed this; an Israeli video creator named Joniversity. His challenges to my hypothesis could be summarized in two questions primarily focused on the economic angle of this issue:
1) If not the US dollar, then what will be the world's reserve currency?
2) If not the United States, then who will be the world's great power?
I didn't have a ready answer because in my opinion there could be a very unstable reality in the future where there is no preeminent power that emerges immediately. The fall of Rome, which as Joniversity mentioned was a very long and winding process, nevertheless didn't give way to a successor but shattered into several Germanic "barbarian" kingdoms in the region. This led to a period called the Dark Ages. So the answer to question 2 could be take years to appear. Joniversity's question is predicated on the assumption that in order for the US to lose its premier status on the world stage a different nation state must be positioned to take the lead. That's not necessarily true. Do I think that we could see Chinese or Russian soldiers patrolling the remnants of Mt. Rushmore? No, I'd have to admit that's unlikely because both have generally sought to bolster their military reach on a more regional level rather than project it globally. But there could be a scenario where a depleted America withdraws its troops from overseas simply because it won't have the means to arm and maintain its commitments there. There also could be a situation where America enters a civil conflict. That doesn't necessarily mean pitched battles like in Antietam or Gettysburg, but perhaps a more chaotic period like in Colombia since the 1940s.
The CBDC mauls the consumer citizen
As for the issue of the dollar losing its status as the world's reserve currency, that process is well underway. Here are three examples:
In Q4 2021 the dollar's share of global foreign currency reserves fell below 59%. The IMF reported that in one example Israel had reduced its $200 billion reserve holdings by diversifying to alternatives like the yen, Australian dollar, and Chinese yuan. Current data shows that it has sunk even lower to 54% as of May.
After the Feb. 2022 outbreak of the Russian invasion of Ukraine the USA took several steps to seal off the Russian Fed. from being a part of the world's financial system through sanctions on Russian banks, enterprises and other financial institutions. This "weaponizing" of the dollar led to fears that foreign states would respond by reducing their holdings of US Treasury bonds that enable a lot of the US spending largesse.
The US Federal Reserve had been saying for months that it hoped to use increased interest rates on all loans to fight inflation while achieving a “soft landing” of the economy by avoiding a recession. But market analysts are increasingly saying that this isn’t going to happen.
There is no single answer to the question of what will be the new reserve currency. Many states have embraced the model of a Central Bank Digital Currency, a monetary model that basically places the full faith and credit of a government on a digital currency. The Federal Reserve and influential think tanks like the Brookings Institute are openly cheerleading the adoption of a CBDC. The transition to such a monetary system would have tremendous negative implications for the average person, as their capital will cease to have any tangible physical backing whatsoever and can be manipulated if needed by monetary administrators. Those that can afford to will hide their wealth in assets such as real estate, but most will be forced to make do with the uncertainty. It will depress economic activity and investment in the United States, because privacy protections will be virtually nonexistent. In the United States where the IRS was already weaponized in the early 2010s to audit conservative and anti-war non-profit groups, the message will be clear that everyone's financial dirty laundry will be open to easy access inspection. It will become much easier for authorities to impose financial consequences for dissident or non-compliant behaviour and enforce "responsible" consumer behaviour. None of this will actually benefit the US economically, because the real goal is to bend the individual into a conformable, manageable stooge fearful of losing the few creature comforts and perks that remain in his miserable life.
Woke economy, real consequences
In my discussion with Joniversity he repeatedly made mention of the corrosive social justice politics that are destroying the United States from within. I agree with his diagnosis, but he's understating the problem. Entire industries and sectors are being poisoned by these "woke" ideologues in addition to career-focused functionaries that have no core beliefs but will do whatever is asked of them in order to preserve their quality of life even if it is at the expense of the general public.
For many years Americans ignored this phenomenon, because they may have been shielded from it by living in suburbia away from the hipster hangouts of major urban areas or college campuses. Even under Pres. Obama most cabinet posts were occupied by people that had major professional accomplishments in their field, such as former Treasury Secretary Larry Summers who was the director of the National Economic Council. Obama and Bill Clinton both knew that it was a shrewd political strategy to take an aggressive populist pose on the campaign trail about corporate greed and class divisions, while getting out of Wall Street's way in practice. Clinton especially showed a skill for betraying his progressive campaign principles by creating means tests for welfare and slashing regulations in order to make nice with the Republican Congress. And it worked, because the economy overall did great during the '90s, because he inherited a post-Cold War environment where the US was the main economic power. All he had to do was get out of the way and ride the tiger. Could the same thing happen today?
I don't think so, and here's why. Under President Biden Summers' old position is held by Brian Deese (see above) who previously served as a green technology advisor to Obama and for less than a month as director of the Office of Management and Budget. Deese was also the person tasked with overseeing the restructuring of General Motors and other major US automakers in the wake of the 2008 Recession. The government bailouts and forced mergers of companies during that period ended up costing American taxpayers more than $9 billion in unrecovered funds out of a total of $79 billion in loans. That may seem tame now in an era when the US is regularly sending billions of dollars to Ukraine with no oversight provisions, but the main issue is that he is a Keynesian of the highest order. Deese was the White House face of the effort this past week to redefine the term "recession" after the second consecutive quarter of economic contraction occurred in Q2 2022 which gives Biden a major albatross going into the midterm election. He was also a core member of the Obama Administration's team that negotiated the Paris Climate Accords. He is a key proponent of the ESG financial policy philosophy through his role at Blackrock Financial, even though prominent investment analysts have long warned that there is no evidence that it actually yields returns. So far his response to the negative economic data coming out has been to make excuses and deny the issues of uncontrolled inflation and the onset of a recession. There appears to be no sign that either the White House or the Democratic congressional leadership are deterred from pursuing the same profligate spending policies. The new "Inflation Reduction Act" touted by Senate Democrats has already been panned by Bloomberg as having virtually no long term effect on inflation.
Supposing that the midterm elections return a Congress where the GOP controls the House of Representatives, the best thing that can be hoped for is that Biden (with or without Deese) agrees to reverse course on the ambitious spending packages. In such a case it would be a hard decision whether to engage in "shock therapy" by removing state subsidies, price controls and other consumer protections instantaneously. The Biden Administration would not have the stomach to absorb the approval dips from left-wing voters that would come with this pivot. Moreover any interventions taken at this point would be the equivalent of closing the barn door after the horses have already escaped.
Zelenskyy on Vogue, Blood on the steppe
It may be anecdotal, but the fallout from these economic policies is already being felt by Americans. I work with a laboratory technician who tells me of her struggle to feed her children and grandchildren, has to commute from her home in the next county with her fiance because they can only afford one car, and is being forced to draw money from her 401k retirement plan in order to pay for their upcoming wedding. Americans are not used to the economic hardship they are experiencing now, and to foreign readers this may sound like laughably mild suffering compared to that of the Chinese or Dutch weathering much rougher conditions.
In 2022 the United States is basically acting as the armourer and bank for the Ukrainian government in its effort to stave off the Russian invasion. The largest package approved in May sent $54 billion to Kiev in the form of both civilian and military aid. However, whereas early in the war there had been a projection that Russia must win fast or else risk an embarrassing defeat, the Kremlin has instead shown a resolve to grind down the Ukrainians through a slow war of attrition. The effects of this war on the US economy deserve their own space, but as for the war effort itself the hourglass is running out for the Ukrainian effort. I think that many American commentators were under the illusion that if the first attempts to attack Kyiv directly and defeat Ukraine through a blitzkrieg failed that the Russians would simply turn tail and run. That's not what happened, and as it may turn out this slower, more painful drawn out war has already caused more damage to Ukraine and the worldwide economy than if the Zelenskyy government had simply sued for peace early or rolled over for the Russians, however unjust and undignified that would have been. In contrast all of the smug assurances that Russia would collapse like a house of cards have been wrong, because the West has consistently miscalculated in thinking that sanctions were a proper deterrent to Russian invasion. In fact Russia has taken corrective measures to mitigate the effects of these sanctions and remain economically viable.
Few commentators are willing to openly declare that the longer the NATO effort to "win" the war in Ukraine, the worse the current economic crisis will become. There is a shocking lack of courage among US media - whether liberal or conservative - to face the truth of how poorly the war in Ukraine is going. Many of them are blinded by the notion that despite how repugnant they find Vladimir Putin, and how ruthless he and allied governments in Iran, Syria, and China are, he has outfoxed NATO and brought it to its knees economically. Recently I wrote an article in American Greatness about the delusional picture of the war in Ukraine presented by propagandists like Malcolm Nance. Similarly many think of the US economy as being an unsinkable ship simply because we have so much wealth and have had far fewer economic crises than our rivals. They seem to believe that the same rules governing the results of ruinous economic policies that have continued to plague Argentina don't apply to us.
Sanjurjada - War between the streets
In our elementary schools we learn about the Civil War (1861-65), also known as the "War Between the States". Unfortunately the only focus on this event in the curriculum is often the issue of slavery. The escalation of events that preceded the war such as "Bleeding Kansas" and the Harper's Ferry Raid. If one observes the history of the United States since 2012, it is easy to see escalation occurring whether in Ferguson, MO or Portland, Oregon. Another civil war could happen, but it may not be between two blocs of states. In fact, because of the power and reach of the federal government and Defense Department compared with the 1860s, it would take significantly more institutional decay here for that to happen. There certainly is a pattern at play where residents are fleeing states along the coasts and in the Midwest with Democratic state governments for Republican controlled states in the South like Tennessee and Texas.
We don't need the states to take sides in pitched battles for there to be a real conflict in which Americans are killing one another over a political rift. Many civil wars develop along class, ethnic, or religious lines. In the Spanish Civil War these fault lines were all evident. On the Republican side were radicalized urban workers and rural peasants, anarchist and communist organizers, along with Basque and Catalan nationalists seeking autonomy and separation. On the Nationalist side were Catholics, the ultra-conservative Carlist movement, and the quasi-fascist Falange. Spain had teetered since the early 19th century between absolute monarchy, constitutional monarchy and two spells of Republican rule. It had expanded to rule a massive global empire during the previous centuries that fell apart following the Napoleonic Wars as its colonies decided to seek independence. The Spanish Civil War would be a clash between two attitudes of how best to take Spain forward - toward a revolutionary Marxist model as in the USSR or to an authoritarian traditionalist one.
In the United States the January 6 Capitol Riot is generally seen as a potential milestone on the way to open civil war between the right and left. In Spain such an event had occured in 1932 when monarchist general José Sanjurjo (pronounced San-HOOR-HO for us gringos) mounted an attempted coup to overthrow the Republican government, starting in Seville and ending in failure in Madrid. While much more organized and premeditated than the Jan. 6 riot, the "Sanjurjada" failed not because of public support for the government, but rather the exaggerated self-confidence and lack of strategic planning of Sanjurjo and his co-conspirators. Most of the military at that point stayed loyal to the government, but within four years would join with the Nationalists as the civil war broke out. There are few American parallels to such a coup attempt, though in 1934 retired Marine Gen. Smedley Butler accused major American business titans of trying to recruit him to lead one. It has never been determined whether his accusation had any merit. Under former Pres. Trump there was plenty of evidence that the defense and intelligence establishments were undermining his authority. Some of the major names in the Rolodex of anti-Trump officials from the impeachment and other episodes were senior officials from both: Alexander Vindman (US Army and Nat. Sec. Council), Eric Ciaramella (CIA), James Comey, Peter Sztrok and Lisa Page (FBI), and many more were serving members of the security hierarchy that used their professional positions to pursue policy goals. They all together constitute an unelected class that can shift public policy without accountability.
Today the Biden Administration can depend on the loyalty and compliance of the US military under Gen. Mark Milley and Sec. of Defense Lloyd Austin, at least for now. The key to preventing a civil war or coup for Biden is to keep the defense and intelligence establishment happy. At the top levels of the US military the most careerist officials continue to comply with the Administration's agenda which includes diversity, equity and inclusion goals. However as one looks at the next generation they have a great deal of stress ahead. The Afghanistan pullout of 2021 tarnished the reputation of the military in ways that hadn't been seen since the Fall of Saigon. A Senate Foreign Relations Committee minority (GOP) report found that the Administration could not even come up with a consensus figure for how many Americans were left behind in Afghanistan (p. 24). As the services become more ideologically driven and enforce vaccine mandates that are unpopular among core constituencies where military service is usually seen as a viable career option, it is no surprise that enlistment is down. A June report from NBC News found that all of the branches are experiencing record low recruitment levels, with the Air Force not having seen so few recruits since 1999 and 1979. This crisis of personnel levels in the armed services was noticed today by former New York Mayor Michael Bloomberg, a 2020 presidential candidate and standard bearer of the big business wing of the Democratic Party.
If these trends continue long term where states have ever wider political differences and the military's internal cohesion begins to break down, the likelihood of a real civil war is increasingly likely no matter which party is in power. The stationing of National Guard troops in Washington, DC around Capitol Hill after January 6 until May 2021 was a foreshadowing that the military is no longer the apolitical haven for those seeking to serve their country.
Amber waves of ruins
I continue to hope that there's an off-ramp that the US can take in order to avoid any of the terrible outcomes that are unfolding right now, and it is possible that an economic crisis could pre-empt a civil war. I have a family, community and career to worry about -- there’s no reason that I should hope for disaster. But I’m a realist. The people that continue to hold on to the illusion that the US has plenty of altitude before the floodwaters hit are unwilling to face reality. Those of us that grew up in the thriving, successful West that exited the Cold War in the 1990s -- and more specifically in the US -- have been lulled into thinking that we can only go forward on this journey. America contributed a lot of social and technological innovations to the world, but a lot of what has been gained can be lost easily. Twenty-two years ago would you have believed that the 9-11 attacks could happen? Did you think that in 2016 Britain would opt to ditch the European Union or Donald Trump would be elected? This great nation built itself into a world power, and unfortunately I think it is spending and poisoning itself into rapid decline, and many allies of ours will be shocked when they can no longer call in to Washington and expect a helping hand, or worse yet they receive a reproachful slap in return. In the real world everything happens as normal until it doesn't. Let's just hope that what's ahead can be overcome.
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