The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

[thriftyandboringinohio]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Great! I only ask as a fan and junkie, hungry for the next installment. Please keep up the good work.

+1

[don]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Meanwhile, in ZIRP-landia, we get reports like this one . . .

RBS 'drove small businesses to the wall' for financial gain

http://bcove.me/aplqpdmk

[lektrode]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

The next article has of course been in progress for some time and I greatly appreciate everyone's patience. Admittedly the Chairman role on the TruTouch board has proved a major distraction but I expect that this will shortly be rectified. It is hard work but also a great joy to write and develop new ideas of value for the iTulip community. These next weeks will be especially productive, I think.

AND WE APPRECIATE IT BIG GUY!!!

and hope you/yours have a great thanksgiving holiday too.

[don]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

It would appear that perhaps that whats the BRICS are up to with their massive physical gold purchases, & the set up of physical gold exchanges 1st in CHina & now in Russia - they seem to understand what less than 1% of Wall Street does: If you break the COMEX by forcing it to become a cash settlement market, you break the dollar.

If you do that, you can re-allocate oil consumption away from Americans towards your own people...

Bloomberg claims today (see hyperbole below) that London's gold vaults are practically empty, sold to China. As EJ is instructing us, the price of gold is tied to oil. When the dollar is no longer good as gold for oil, will China by default crash the dollar? Increasingly the US military is the good as gold for oil weapon of choice out of the US toolbox. How does China trump that card? Remember what has already happened to now-gone regimes' China oil contracts. China's ability to project military force is extremely limited. As close as the Daioyu/Senkaku islands are to China there's no guarantee they could maintain air superiority. The Middle East, Africa and South America are a long way from China's coastline.

Bloomberg Industry’s Kenneth Hoffman shockingly reveals that London’s gold vaults are “virtually empty“:
“You could go into a vault in London a couple of years ago. The vaults were packed to the rafters with gold, and the gold would trade from me to you to somebody else. You can walk into those vaults today and they are virtually empty. All that gold (26 million ounces) has been transferred from London and has gone to Switzerland where it has been recast to higher grade formats and shipped off to Hong Kong and then to China never to return.”

[coolhand]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Bloomberg claims today (see hyperbole below) that London's gold vaults are practically empty, sold to China. As EJ is instructing us, the price of gold is tied to oil. When the dollar is no longer good as gold for oil, will China by default crash the dollar? Increasingly the US military is the good as gold for oil weapon of choice out of the US toolbox. How does China trump that card? Remember what has already happened to now-gone regimes' China oil contracts. China's ability to project military force is extremely limited. As close as the Daioyu/Senkaku islands are to China there's no guarantee they could maintain air superiority. The Middle East, Africa and South America are a long way from China's coastline.

Don-

Let's talk through that scenario & see how that would play out for the US.

1. The USD is no longer GAGFO, so the US attacks someone with their military, using your point, someone with a strategic relationship with China.

2. China calls Russia. Russia announces effective immediately, they will no longer take dollars for their oil, only gold valued at $50,000/oz. Iran & Venezuela quickly follow suit.

3. While this is still a minority of global oil production, it is enough of a quorum to reset the global price of oil & supplant the USD as the global oil currency with gold.

4. Imports of oil into the US come to a halt. All the US can consume only what it produces. Canada & Mexico both chip in what they can, but it comes out that China has existing contracts for big %'s of both nations oil & not only is China willing to pay the new "gold price" for their oil, China is threatening both Canada & Mexico with a 100% shut down of rare earth supplies (China supplies 95% of the world's rare earths) & a 100% shutdown of exported goods that fill both nation's stores.

5. As a result, US oil supplies fall from 15m b/d to a little over 8m b/d in less than a week's time. Gasoline goes to $10/gallon in the US and 1970s oil lines break out. Except in 2013, the US runs a JIT inventory system for the entire economy, powered by trucks, not trains. Food stores empty in hours. Medicine supplies run out in days. Old and sick patients with chronic diseases begin dying slow deaths by the end of 2 weeks.

6. The US gov't rations gasoline to only the US military, emergency workers & farmers. The US economy begins to shut down...GDP falls at a 20% annual clip. The bond market sees this and begins to sell off as it realizes the record levels of debt were taken under expectations of full supplies of cheap oil that no longer exist...interest rates hit 15% and the US enters a hyper inflationary death spiral - home values crash, bank stocks collapse, US Federal interest expense represents 80-90% of Federal tax collections at 15%...

7. China shuts down 100% of rare earth shipments to the US & its allies...computer & military hardware production stops...cell phone/comms infrastructure begins developing gaps within a month.

8. Within 1 month, US oil production begins to fall rapidly as workers can't get to the remote locations where oil is produced or as they stop coming because they have to take care of their families that are starving and dying for lack of supplies caused by the breakdown of the JIT consumer & medicine economy.

9. Washington is now faced with a choice - continue trying to wage war with a starving populace or deploy nuclear weapons knowing that Chinese nuke subs are likely undetected off the coasts of your major cities or seek peace terms.

The US military is not a tool we can use in this case i fear. My suspicion is that some version of the above was realized one way or another by Washington which would explain why we backed down v. Russia & China in Syria...the 1st time the US military has backed down since the Berlin Wall fell...

[Chris Coles]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

You have to add another aspect; assuming the above scenario is correct; this is one time when the US cannot use its military force for the very simple reason; this is not an action started as a military exercise; it is purely an economic exercise. The US has been using these tactics for decades for their own advantage, always arguing that there were acting under the rules of a free market.

Hoisted on ones own Petard comes to mind.

[don]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

You have to add another aspect; assuming the above scenario is correct; this is one time when the US cannot use its military force for the very simple reason; this is not an action started as a military exercise; it is purely an economic exercise. The US has been using these tactics for decades for their own advantage, always arguing that there were acting under the rules of a free market.

Hoisted on ones own Petard comes to mind.

Historically the dominant oligarch champions free trade (see British Empire). When that dominance appears to slip . . . .

I would add that most military actions ultimately have an economic motivation (see regime change).

[Woodsman]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Hoisted on ones own Petard comes to mind.

Friends, the "Petard" scenario has a wonderful sense of cosmic justice to it.

I don't expect that it has much of a chance coming to pass as outlined here. And if we civilians can devise this scenario off the top of our heads, then it's all but certain that the Command and General Staff boys have too and wargamed this scenario multiple times. The various potential moves, counter moves and outcomes have likely been explored. Hell, there might even be a "OPLAN Petard" sitting in a drawer somewhere in the Pentagon.

The set of circumstances outlined would very likely be interpreted as an "existential threat" very early in the chain of events and I have zero confidence that cooler heads will prevail. The Chiefs of Staff - unable to envision a world without hegemonic US power as anything but a total defeat - would recommend the president use every weapon in the arsenal to assure our position.

Recall the actions of the Chiefs during the Cuban Missile Crisis as they are relevant and instructive.

“These brass hats have one great advantage,” the president said. “If we … do what they want us to do, none of us will be around later to tell them that they were wrong.”

http://theamericanscholar.org/ministry-of-talent/

Perhaps somewhere in our political zoo exists some person with the moral courage and statesmanship to resist the generals, but I doubt it. It would be war to the hilt.

[lektrode]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

....
.....

Recall the actions of the Chiefs during the Cuban Missile Crisis as they are relevant and instructive.

Perhaps somewhere in our political zoo exists some person with the moral courage and statesmanship to resist the generals, but I doubt it. It would be war to the hilt.

not that i'm any expert on these matters, but my .02 is that was a hugely different time/place - JFK was a _real_ war-experienced POTUS - theres been NONE like him since - it was also a time when US/Allied victory in WW2 was still firmly in control of world affairs - when we could still spend enemies into the dirt.

my guess - should the 'unthinkable' happen during the current occupants watch - we're in DEEP S__T

and still not sure, woody - with all due respect for that vast treasure trove of knowledge of yours (seriously)
- why every sitch comes down to a comparison with the 1960's ?

its like folks fond remembrance the 50's - the last 'good ole days' for my (our?) parents generation (mine: dad 1920, mom 1936 both gone - just like the 1960's)

just wondren....

[Woodsman]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

and still not sure, woody - with all due respect for that vast treasure trove of knowledge of yours (seriously)
- why every sitch comes down to a comparison with the 1960's ?

Fair enough. I'm a one trick pony, I understand. You could say it's my hammer so of course everything looks just like a nail. You have to make the call on that one.

Take it as nothing more than my opinion because in the end it is. I don't have perfect knowledge and they are still releasing documents. Thus my POV is worth about as much as the fellow two bar stools down from me. I spent a fair amount of time reading, writing and teaching this stuff in a younger life. That's why you find yourself enduring it here, lek. If your eyes start to glaze over every time you hear me revving up, imagine what the poor souls in Woodsman's household must endure.

But fond remembrance for the good old days? Oh, hell yes. And the 70s.

If you're interested, I think these guys have a pretty good handle on what JFK and the Chiefs thought of each other's intellectual and moral capabilities. I think the Caribbean Crisis is relevant here for a number of reasons. If I had to pick one, well since we're talking about the potential reactions of US leadership in the face of a perceived existential threat and nukes are in consideration, the Cuban Missile Crisis is about the best real world example we'll ever have of that (god willing and knock on wood).

[Polish_Silver]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Historically the dominant oligarch champions free trade (see British Empire). When that dominance appears to slip . . . .

I would add that most military actions ultimately have an economic motivation (see regime change).

Don't agree with that. The "dominant" country forces others to import stuff they don't want and uses military force to restrict trade . Tons of examples: corn laws, Opium wars, British mercantilism during the 18th century.
(Both Smith and Johnson blamed the crown for the american revolution)

[jpatter666]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Don't agree with that. The "dominant" country forces others to import stuff they don't want and uses military force to restrict trade . Tons of examples: corn laws, Opium wars, British mercantilism during the 18th century.
(Both Smith and Johnson blamed the crown for the american revolution)

Maybe free trade but on the dominant power's terms (i.e. you must use British ships)

http://en.wikipedia.org/wiki/Navigation_Acts

[don]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Don-

Let's talk through that scenario & see how that would play out for the US.

1. The USD is no longer GAGFO, so the US attacks someone with their military, using your point, someone with a strategic relationship with China.

2. China calls Russia. Russia announces effective immediately, they will no longer take dollars for their oil, only gold valued at $50,000/oz. Iran & Venezuela quickly follow suit.

3. While this is still a minority of global oil production, it is enough of a quorum to reset the global price of oil & supplant the USD as the global oil currency with gold.

4. Imports of oil into the US come to a halt. All the US can consume only what it produces. Canada & Mexico both chip in what they can, but it comes out that China has existing contracts for big %'s of both nations oil & not only is China willing to pay the new "gold price" for their oil, China is threatening both Canada & Mexico with a 100% shut down of rare earth supplies (China supplies 95% of the world's rare earths) & a 100% shutdown of exported goods that fill both nation's stores.

5. As a result, US oil supplies fall from 15m b/d to a little over 8m b/d in less than a week's time. Gasoline goes to $10/gallon in the US and 1970s oil lines break out. Except in 2013, the US runs a JIT inventory system for the entire economy, powered by trucks, not trains. Food stores empty in hours. Medicine supplies run out in days. Old and sick patients with chronic diseases begin dying slow deaths by the end of 2 weeks.

6. The US gov't rations gasoline to only the US military, emergency workers & farmers. The US economy begins to shut down...GDP falls at a 20% annual clip. The bond market sees this and begins to sell off as it realizes the record levels of debt were taken under expectations of full supplies of cheap oil that no longer exist...interest rates hit 15% and the US enters a hyper inflationary death spiral - home values crash, bank stocks collapse, US Federal interest expense represents 80-90% of Federal tax collections at 15%...

7. China shuts down 100% of rare earth shipments to the US & its allies...computer & military hardware production stops...cell phone/comms infrastructure begins developing gaps within a month.

8. Within 1 month, US oil production begins to fall rapidly as workers can't get to the remote locations where oil is produced or as they stop coming because they have to take care of their families that are starving and dying for lack of supplies caused by the breakdown of the JIT consumer & medicine economy.

9. Washington is now faced with a choice - continue trying to wage war with a starving populace or deploy nuclear weapons knowing that Chinese nuke subs are likely undetected off the coasts of your major cities or seek peace terms.

The US military is not a tool we can use in this case i fear. My suspicion is that some version of the above was realized one way or another by Washington which would explain why we backed down v. Russia & China in Syria...the 1st time the US military has backed down since the Berlin Wall fell...

Was Harrison Ford in this movie

Seriously, I'm not sure where your premise lies. Do you feel the ongoing gargantuan buildup and maintenance of the US military is in no way to hold on to the reserve currency status of the dollar? Intimidation of the larger powers, military intervention in the lesser states. That's the track record. Is it heavy handed at times? Sure. Are there times risks out run rewards? Syria seemed to be the case, at least at that moment in time.

US economic supremacy was once built on being the world's productive economy juggernaut. Now what we're seeing is the neoliberal strategy of maintaining dominance without the production trump cards. So far it's sort of working.

[lektrode]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Was Harrison Ford in this movie
...........
....
US economic supremacy was once built on being the world's productive economy juggernaut. Now what we're seeing is the neoliberal strategy of maintaining dominance without the production trump cards. So far it's sort of working.

+1

[lektrode]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Fair enough. I'm a one trick pony, I understand.

well.. fair enough, guess i am as well - so...

You could say it's my hammer so of course everything looks just like a nail. You have to make the call on that one.

Take it as nothing more than my opinion because in the end it is. I don't have perfect knowledge and they are still releasing documents. Thus my POV is worth about as much as the fellow two bar stools down from me.

dunno about anybody else, woody - but its worth more than that - since you back it up more than most - so (I) gotta respect that.

I spent a fair amount of time reading, writing and teaching this stuff in a younger life. That's why you find yourself enduring it here, lek. If your eyes start to glaze over every time you hear me revving up, imagine what the poor souls in Woodsman's household must endure.

never happens, woods - yer stuff fascinates me - bet you kept your charges awake better n most, too

But fond remembrance for the good old days? Oh, hell yes. And the 70s.

my heydays were from 77-82, the peak of my skibum 'career' - altho i guess the/my daze from the late 90's thru 2008 werent all that bad either - but 2009 on has been a DISASTER (and _still_ hoping for some change i can believe in over the next 10 - but figger that wont begin to happen til _after_ 2016 - IF we/The US can make it that long...)

If you're interested, I think these guys have a pretty good handle on what JFK and the Chiefs thought of each other's intellectual and moral capabilities. I think the Caribbean Crisis is relevant here for a number of reasons. If I had to pick one, well since we're talking about the potential reactions of US leadership in the face of a perceived existential threat and nukes are in consideration, the Cuban Missile Crisis is about the best real world example we'll ever have of that (god willing and knock on wood).

thats just my point - i dont think they are in consideration - not by US 'leadership'

my guess JFK and his jointchiefs would've wet themselves ROTFL(their)AO at whats happened since 20jan2009

and methinks Ike's would've cried.

my other point?

best as eye can tell by whats been happnin (since 09) is that we mights well just close most if not all of the overseas .mil bases - cept for the strategic air/sub bases - and BRING ALL THE TROOPS HOME.

since The US no longer has the will (balls) to USE the awesome power that TRILLIONS AND TRILLIONS have been spent (mostly wasted) on developing it - and events since 09 - in particular - have proven it.

esp when the farce of - SYRIAOUSLY ?? - the recent exploits in the mideast are concerned

then we have the other JFK - the same one that was FOR the wars - both nam and iraq - until he threw his medals at the whitehouse while partyin with jane&co - and now he's all gung-ho again ? - what - he dont really think he can beat ole hilary, now do he?

;)