I don’t think everyone has yet caught the significance of Russia announcing they are putting a floor under the price of gold.  But, to be clear, Russia just broke the paper gold suppression scheme.

On Friday the Bank of Russia announced:

RUB5000 to the gram at an exchange rate of 100 RUB/USD implies a $1550 per ounce gold price.

For a few days previous to this announcement, which they knew was coming, The West was running around with multiple bits of legislation to try and keep the Russians from selling their gold.

The G7 think the sanctions are hitting so hard that Putin will be forced to sell his gold to evade sanctions to pay for things.  They are literally running a script in their heads that is not actually playing out in the real world.

But, whatever, Neocons never met an ugly stick that they didn’t want to use to beat someone over the head with.  Too bad all they’re doing is hitting a rubber tire.

Boing!

Because here’s the gig, Russia won’t be selling any gold. They’re buying it.

These are supposed to be the architects of the global monetary system and you would think they are the ones that understand it the best.  But, clearly they do not.

What they think they understand is that they still control the flow of commodities around the world through price suppression schemes on the CRIMEX, LBMA and ICE.

They do not.

Ultimately, ‘outside money’ trumps ‘inside money.’  

Austrians, like myself, have always understood that eventually Inside Money [money that exists within the financial system] fails because it is ultimately nothing more than a Ponzi Scheme built on top of Outside Money — money that exists outside the financial system, like commodities and bitcoin.

Money, It’s a Hit!

Let’s start with the basics. Why do we create money? To act as a way to mitigate the time risk between selling what we have and buying what we want. So we sell our labor today to buy gasoline, printer paper or blow jobs tomorrow. In the meantime we hold money.

It is a way to turn thought and personal application of energy and time into a token which can procure for us real goods in the real world.

With that in mind, now think about the current financial system where all inside money is created by first selling a debt instrument to someone willing to hold it for a vig.

Back to the ruble and gold. Because once I lay out the new incentive structure it will be clear as to why the G7 has no friends in this fight anymore.

Davos’ power rests on the ability to create credit and sell it at a positive interest carry to commodity producers.  Since base commodity production in any kind of efficient market should be a very low margin enterprise, think 1-4% real annual return, selling them debt to extract oil or gold out of the ground at higher rates than that ultimately sucks all the profit out of the venture.

Free markets when allowed to function properly grind out profit through competitive arbitrage. It is both brutal and the spark of new innovations and efficiencies.

It is the desire for higher profits over baseline that does this.

In base commodities that is difficult, at best, to do. Why? Because they aren’t anything more than a second order good. First order would be the ore or timber harvested. Second order would be the ingot or lumber produced. The higher order the good, the more specialized it is and the higher opportunity for profit through product differentiation on something other than price emerges.

That’s most difficult to do in improving resource extraction because, it follows, most of the major gains in efficiency occurred in the past when the economy was less specialized.

Confusion Over ‘The System’

If the banks are on both sides of the trade setting the price of money, then they ultimately control who wins and who loses while this goes on. And let’s not mince words, it’s them. The profit rolls up to those that produce the highest order goods with the most complex supply chains.

The banks plough the profits from getting interest on the original debt into the very companies producing the higher order goods needed to ensure the lower order goods produce no wealth through the grinding out of profit via arbitrage throughout the supply chain.

Don’t believe me? Ask cattle farmers.

In this respect the current financing of these industries is nothing more than a virtualized version of the colonial economic model of the 15th through 19th centuries.

Instead of using physical men to subjugate the locals through superior weaponry and bribes to get them to extract the mineral wealth which the colonialists take back home, today we use the post-WWII institutions to run that same system through debt issuance for capex and the interest payments (in this case pure economic rent – unearned wealth).

The producer countries of all the mineral wealth in the world are nothing but debt slaves to the money masters in Brussels, City of London and New York.  That’s the gig.

Since we’ve reached the point of debt saturation where no more debt can be issued to extract mineral wealth and have the markets believe it could ever be paid back at these real yields, the system has to be reset.

The whole Great Reset is a way to crash the existing system but leave the same colonialists in power legally.

It’s not really more complicated than that.

When you understand that dynamic now you can understand why Russia, in particular, is the vanguard of the Global South’s desire to change the System of the World.

It is also the one country that has the commodity production power to expose the vulnerabilities of this System.

That’s Nice… #GotRubles?

And that’s where pegging the ruble to gold comes in.

The Bank of Russia is now a buyer of gold at 5000 rubles to the gram, or 155,500 rubles to the troy ounce.  At a Friday March 25th closing price of RUB96.62 vs. the USD that implies a gold price of $1610 per ounce.

The ruble is now freely strengthening versus the US dollar.

Now, that is not that remarkable on its own.

As I explained on Twitter that day:

• 1: At $1550 per ounce the first order effect here is that is implies a RUB/USD rate of around 75. Incentivizing those holding RUB to continue and those needing them to bid up the price from current levels.
• 2: This creates a positive incentive loop to bring the ruble back to pre-war levels.  Then after that market effects take over as ruble demand becomes structural, based on Russia’s trade balance.
• 3: Once that happens and the RUB/USD falls below 75, then the USD price of gold rises structurally draining the paper gold markets and collapsing the financial system based on leveraged/hypothecated gold.  Now we’re into the arb. phase @Lukegromen postulated w/ 1000bbls/oz.

So, this scheme incentivizes Russians to hold savings in rubles, because the ruble is undervalued.  It also incentivizes foreign traders to hold rubles because the ruble is undervalued relative to an overvalued open gold price.

Clearly currency speculators in Moscow, Shanghai, Singapore, Mumbai and Hong Kong are having a field day with this.

Coupled with Putin demanding ‘unfriendly countries’ paying for their Russian imports with either gold or the ruble, the natural choice is for them to buy rubles until such time as the price of gold and the ruble are in sync on international markets.

The howls of pain from the G-7 and Germany in particular are equal parts pathetic and hilarious as they complain that Putin is in ‘breach of contract’ for demanding a different payment currency for gas other than the euros stipulated in the contract.

Earlier Monday German Economy Minister Robert Habeck said from Berlin that the Kremlin demand for natural gas contracts to be paid in rubles is a “one-sided and clear breach of contracts” – saying the contracts must be honored under prior conditions, according to Bloomberg. “That means that a payment in rubles is not acceptable and we urge the relevant companies not to comply with Putin’s demand,” Habeck said. “Putin’s effort to drive a wedge between us is obvious but you can see that we won’t allow ourselves to be divided and the answer from the G-7 is clear: the contracts will be honored.”

The Kremlin’s quick shooting down of the German economy minister’s comments and the G-7’s stance on the ruble came Monday via a Russian lawmaker to state-run RIA Novosti: “Russian lawmaker Abramov says G7’s refusal to pay in Russian roubles for gas will definitely lead to a halt in supplies.”

Pissed off Russians certainly have a way with words, as a writer, I appreciate this greatly. According to TASS:

Moscow is handling the details of its gas delivery plans to unfriendly countries for payment in rubles, but it won’t engage in charity if Europe refuses to pay in the Russian currency, Kremlin Spokesman Dmitry Peskov told reporters on Monday.

…The Kremlin spokesman remained tight-lipped on what measures Russia might take if Europe refused to pay for gas in rubles, noting that these “issues should be sorted out as they develop.” “But we will definitely not supply gas for free, that’s for sure. It is hardly possible and reasonable to engage in charity in our situation,” he emphasized.

Do you hear that Davos? That’s the sound of the ticking clock.

The Trade’s the Thing…

The reason why this current scheme is already working is that Russia runs a positive trade balance mostly in base commodity exports. Davos doesn’t want them making any money selling those commodities to the world and will continue to put sanctions on to get people to not use rubles.

They are however fighting the invisible hand of Adam Smith’s market. The demand for the ruble will rise above the pre-war exchange rate of around 75:1 vs. the USD.

The price point for gold/ruble implies that exchange rate. Russia will revisit this at the end of Q2.  This also implies they expect the ruble/dollar rate to fall to 75 by the end of Q2, if not earlier.

After that if the ruble strengthens beyond that they can adjust the gold buying price.

If the ruble/dollar rate dips below their pegged price, buyers are getting oil at a discount when paying in gold. That will force the CRIMEX and LBMA into a supply shortage situation or they will have to end the expansion of paper gold versus real gold and allow real price discovery to the upside.

If the sanctions are successful in scaring everyone into not using rubles gold Russian commodities then the exchange rate will stay stubbornly above 75 and the boycotting world will lose competitive advantage versus those willing to brave the US’s ire by getting Russian commodities on the cheap.

As I talked about in previous articles, this sets up the opportunity to end the suppression of the price of gold through rehypothecation of physical gold in the paper markets which is the basis for the entire financial colonization system I described above.

FYI, this same scenario is going to play out in Bitcoin now that Russia has said ‘friendly countries’ can pay for imports with Bitcoin.  Has anyone noticed the current rally in the World’s Most Hated Cryptocurrency?

We now have a full gold/bitcoin/ruble (and soon Yuan) interconversion system that completely and utterly cuts out Davos and destroys their colonial debt model while also taking away their power to crash economies through hot money in and out flows.

Because the next step in all of this is for Russia to close their capital account and nationalizing the Bank of Russia making the only source of international rubles be the Russian government.

Internally, the ruble will be de facto backed by gold and can circulate freely.

The War Without End, Ended

The war is over folks.  Russia, China and the rest of the Global South have already won. As Luke Gromen replied to me., “in the end there’s nothing they can do about it.”

What scares me is the last thing I tweeted out in that thread:

“Other than widen the war on the ground.  That’s the part that scares me.”

And that’s exactly what I expect to happen next, sadly.  Biden is in Brussels saying the quiet parts out loud talking with the 82nd Airborne about going into Ukraine and calling for regime change in Moscow.

These people still believe their own bullshit to the point where they think this becomes a war the Russians can’t win.

Putin let the world down easy with this announcement.  He could have walked right in and said 8000 rubles to the gram or $2575/oz and that would have broken the markets Friday going into the weekend, by selling his oil and gas at a steep discount.

He waited until after OpEx last Friday and the Fed’s interest rate hike plan was announced.

Timing matters guys.

But, by doing this he has very subtly also supported the Fed and it’s plan to withdraw dollars from Europe, because this will keep the price of gold in check for a little while and keeping the ECB from offsetting spiking Eurobond yields with higher gold reserves on its balance sheet.

Putin on the left arm, Powell on the right and Lagarde is about to get pulled apart at the seams if Davos doesn’t play ball and give up.

The problem there is the unquenchable arrogance of these European elites who simply do not believe they could be bested by the “colonies” in the US and the “dirty slavs” in Russia.  I’ve told you for years now that it is their inherent racism that drives their actions.

So, do not be surprised if they empower the neocons in the UK and US to escalate from here. The signs are piling up that the Pentagon and the White House are at odds over the planned escalations. The State and Treasury Depts. are nests of vipers having usurped Congress to wage war without declaring it.

I can only hope that serious and adult people within the Pentagon will finally end this nonsense before we wind up in a war no one wants except a bunch of inbred Eurotrash well past their ‘use-by’ date.

I always say that spooks start civil wars but militaries end them. Let’s hope that we never get to the point of needing any other military than the Russians’ to end this war.

In the meantime, the message is clear, #GotGoldorRubles?

tomluongo.me

By Joe LAURIA

The United States is setting up China as a second target of its intense economic war against Russia in what could have cataclysmic effects on the world economy, including the West.

The U.S. could not impose the most stringent sanctions on Moscow without the Russian invasion of Ukraine, and now the U.S. is trying to link China to the war.

Washington’s move to frame Beijing emerged Monday when unnamed U.S. officials told its allies that Russia had asked China for military aid in Ukraine. Reuters reported: “The message, sent in a diplomatic cable and delivered in person by intelligence officials, also said China was expected to deny those plans, according to the official, who spoke on condition of anonymity.”  China indeed denied it.

Importantly, Reuters added: “The U.S. government offered no public evidence to back its assertions of China’s willingness to provide such aid to Russia.”

On that same day Jake Sullivan, the U.S. national security adviser, led a delegation to Rome to meet with Yang Jiechi, a member of the Chinese politburo. After the meeting, an unnamed senior U.S. official in Rome told reporters: “We have deep concerns about China’s alignment with Russia at this time, and the national security adviser was direct about those concerns and the potential implications and consequences of certain actions.”

The next day NATO Secretary-General Jen Stoltenberg remarked:

“China should join the rest of the world condemning strongly the brutal invasion of Ukraine by Russia. So China has an obligation as a member of the U.N. Security Council to actually support and uphold international law. And the Russian invasion of Ukraine is a blatant violation of international law so we call on [China] to clearly condemn the invasion and of course not support Russia. And we are closely monitoring any signs of support from China to Russia.”

The English-language, government-owned, Chinese newspaper Global Times accused Stoltenberg of trying to accuse China of being an “accomplice” with Russia in Ukraine and dismissed NATO as a “puppet” of the United States.

After these statements it seemed clear the U.S. was trying to lay the groundwork for a truly reckless idea: to tie China to the war so it could sanction it perhaps along the lines of what the West has already laid on Russia.

Then on Thursday U.S. Secretary of State Antony Blinken spelled it out: “We believe China in particular has a responsibility to use its influence with President Putin and to defend the international rules and principles that it professes to support. Instead, it appears that China is moving in the opposite direction by refusing to condemn this aggression, while seeking to portray itself as a neutral arbiter.” He added: “We will not hesitate to impose costs.”

In retrospect, evidence that the U.S. is trying to open a second front in its economic war first surfaced just before Russia intervened in Ukraine’s civil war, when Blinken implored China to stop Russia from invading. It was portrayed in Western media as a desperate last chance at peace from a concerned United States.

Of course China rebuffed Blinken. It seemed like a ridiculous gambit at the time. But in hindsight it may well have been the first U.S. step in constructing a case for sanctions against China. It allows Washington to say China was given every opportunity to try to stop the invasion and failed to do so and therefore was somehow complicit.

Biden Threatens Xi

President Xi during his summit with Biden on Friday. (Chinese FM)

All this was preparation for President Joe Biden’s video-call on Friday with Chinese President Xi Jinping, in which Biden warned Chinese President Xi Jinping not to help Russia’s war effort in Ukraine or there would be “consequences” to pay.

Biden “detailed the implications and consequences” if Beijing were to give “material support to Russia” in the war, the White House said in a readout. While the White House didn’t spell out what those consequences would be, it said Biden went into detail about the severe sanctions the U.S. had imposed on Russia, including on its central bank and a number of imports, including oil. In other words, he read China the riot act. Biden was in essence threatening Xi with similar sanctions if China helped Russia.

Xi, however, warned Biden that the U.S. sanctions on Russia could trigger a worldwide economic crisis, apparently implying that the crisis would be far worse if the sanctions were extended to China.  Commodities prices, especially in energy and food, have already soared.

China is the world’s second largest economy and its biggest exporter. The U.S. imported $506 billion in Chinese goods in 2021, according to the U.S. Census Department, an amount that would be extremely difficult for the US to replace. China also owns $1.05 trillion in Treasury securities, the second most after Japan. It could not be easily cut off from the Western financial system as Russia has been.

Before the summit on Friday, Global Times wrote in an editorial: “The close relationship between China and Russia has been a thorn in the US’ side, especially against the backdrop of the ongoing Ukraine crisis. With the simmering of the situation, it couldn’t be any clearer that Washington is eager to exploit the Russia-Ukraine conflict to drive a wedge between Beijing and Moscow.”

The U.S. recognizes that its economic war against Russia could well fail because of the close and expanding economic and financial ties between Moscow and Beijing. But it is too late for the United States.

Since the invasion, China is buying more oil and other commodities from Russia, Beijing has allowed Russia to use its Union Pay banking system, replaced Russia’s use of SWIFT with China’s Interbank System (CIPS), and China and the Eurasia Economic Union (EAEU), which Russia is a part of, are designing a new monetary and financial system that would bypass the U.S. dollar, threatening it as the world’s reserve currency.

Can you help me fight your friend so that I can concentrate on fighting you later?

— CGTN LIU Xin ?? (@LiuXininBeijing) March 19, 2022

The Global Times added:  “It’s the US that should put out the fire it lit in Ukraine. Ridiculously, it is demanding Beijing to do this job at the cost of damaging China-Russia relations. This is unreasonable and insidious.”

Russia has committed only a fraction of its military capacity to Ukraine. Other than replacing ordnance, it’s not clear what military aid Russia would need from China.

Substitute War and Economic Catastrophe

The U.S. already has sanctions on China, as it had earlier on Russia. However, if the United States is seriously planning similar types of sanctions on Beijing that it has leveled on Moscow — against its major banks, against the central bank, removing it from SWIFT and cutting off key exports — the impact on the world economy — including on Europe and the United States — could be catastrophic.

The U.S. national security strategy for several years has been aimed at both Russia and China. Knowing it must avoid a direct military confrontation against either, given the potential consequences, the U.S. is turning to economic warfare to ultimately attempt to bring down both governments through popular uprisings. Washington wants to replace them with Western-friendly leaders who would open up their economies to Western exploitation — just like Boris Yeltsin did in the 1990s.

The United States is acting as though the whole world is the West and that this is the China of 30 years ago. In its bull-headed effort to impose its unilateral rule on the world, while its domestic social problems mount, the U.S. has not only driven Russia and China closer together than ever, but it has now brought in India, much of Latin America, Africa and the Middle East, (all of whom have refused to sanction Russia and continues to trade with it), into a new bloc with economic power that exceeds the West.

The U.S. has turned the majority of the world’s population against it. And it is now threatening to blow up the world economy. Cutting off trade and finance to Russia has already boomeranged on Western countries, driving up prices, especially at the pump. Instead of prompting a popular uprising in Russia as a result of its sanctions, Russian President Vladimir Putin’s popularity has actually risen since the invasion.

Adding China as a target of its economic war could drive the populations of the U.S. and Europe against their own governments instead.

consortiumnews.com

Are geopolitical analysts in the west seriously delusional enough to believe that Russia and China can be undermined?

It was only one month ago that the world found itself trapped on a fast track to nuclear war between NATO powers and Russia over tensions that had been brought to a boil in Ukraine. Of course, it wasn’t only a Nazi-ridden Ukraine that was being used as a trigger for a major showdown, as evidence of Belarus regime change and even assassination attempts became publicized and MI6-Bellingcat antics were justifying new waves of anti-Russian sanctions across the trans Atlantic community. These antics even led to the expulsion of Russian diplomats from the Czech Republic, media psyops attempting to lay blame on the Kremlin for cyber attacks on American pipelines. Additionally, a zero-tolerance policy towards the completion of the Nord Stream 2 Pipeline appeared to be a non-negotiable red line for Washington up until recently. No matter where you looked, the spectre of nuclear war abounded for all to see and only companies specializing in the sale of bomb shelters were content with the direction of world events.

And then something changed.

Perhaps it had something to do with the fact that certain power brokers among the Great Resetting crowd of the west realized that a smoldering earth of radioactive decay was not one they wished to rule over (or under) and that Russia had no intention of backing down in the game of nuclear chicken then being played.

Perhaps it had something to do with the fact that Russia’s advanced hypersonic nuclear missile delivery systems were not a part of the game theory-based computer models which war game scenario planners had designed to justify the full spectrum dominance encirclement of Russia for the past 20 years. While a “limited nuclear war” sounded like an acceptable risk decades ago, and among the “least-worst” possible outcomes designed into computer models until recently, the next generation technologies unveiled by Russia have demonstrated to the saner among the Dr. Strangeloves of NATO that this path would not bear the fruit they once hoped.

A New Calculus Emerges

It appears, from direct statements made by President Biden and Jan Psaki over the past week, that Washington’s decision to pull back from the precipice of nuclear oblivion on the Ukraine front was premised on a new strategic equation that rests on two wildly foolish assumptions:

• The belief that the foundations of the Russian-Chinese alliance contains fatal fissures which can be exploited by savvy diplomatic maneuvering and

• The belief that Russia somehow really desires to be popular and rejoin the “cool kids” of the G7 leading the international liberal order

For these two assumptions to shape the calculus of western logicians playing on a “great game” whose rules they don’t understand yet still wish to dominate, it is assumed that Russia, who shares a 2600 mile border with China, must certainly feel “squeezed” by the great dragon’s supposed plans for global dominance.

While obviously a display of extreme projection from within the inferiority complex-ridden minds of western game masters, it is thus assumed that Russia may yet be swayed into joining a real power block capable of countering China’s imperial Belt and Road Initiative.

For some, this may seem difficult to believe considering Russia and China’s continued re-commitments to work together in defense of the multipolar alliance and their common understanding of the joint unipolar threats that have been striving relentlessly to carve them up from within and from without for decades. Yet demonstrating the delusional calculus now at play, Biden stated on June 16:

“Russia is in a very very difficult spot right now. They are being squeezed by China. They want to desperately remain a major power. They desperately want to be relevant.”

Apparently ending the age of post-9/11 regime change since entering Syria in 2015 and annihilating ISIS, while extending S400 defense systems across the world and merging the EEU with China’s BRI are not enough to qualify Russia as a “major power” in Biden’s mind, let alone being “relevant” in the age of U.S. hegemony.

But Biden took it even further stating:

“Russia doesn’t want to be known as the upper Volta with nuclear weapons’. It matters. And I found it matters to almost every world leader-no matter where they’re from- how they’re perceived, their standing in the world. It matters to them.”

To understand the thinking behind this second statement, it must be understood that a fundamental belief among all behaviorists (of which Biden is no exception being ruled by teams of them and being little more than a synthetic shell himself of impulses devoid of any actual substance himself), is that one of the fundamental drives of all soulless/blank-slates is the desire to be popular. Being popular and adapting to the force of popular opinions works in all anarchist mobs, school yards and especially politics (which is seen as the ultimate game of popularity for any substance-free rhetorician). The force of popular opinion will thus cause anyone to modify their beliefs, opinions, and behavior in conformity to whatever “norms” shape their environment. While one would think it obvious that Putin was not the sort of individual to fall prey to this shallow definition of “practical” human nature, Biden and his handlers appear to think otherwise.

White House spokeswoman Jan Psaki amplified this view saying:

“I think the president’s view is that Russia is on the outside of the global community in many respects… what the president is offering is a bridge back. And so, certainly he believes its in their interests to take him up on the offer.”

So while the outcome of the Putin-Biden meeting resulted in some inarguably positive steps towards the creation of mechanisms to avoid blowing up the world, re-activating START, committing to solid rules of engagement in the Arctic and other Russian border regions in post-Soviet space (at least those are the hopes conveyed by those attending the meeting), China has become the new primary target of western ire.

Where Russia is defined as one among many authoritarian regimes capable of abrasive disturbances but ultimately controllable in the long run, the Chinese have been labelled a much greater threat to western unipolar hegemony as a force playing a long game with the economic capacity, power and will to bring an entirely new security, financial architecture online founded upon principles of multipolarity, long term real economic growth and cooperation for all participants.

Why Russia would feel “squeezed” by this fact is an absurdity beyond belief.

After all, China is not the one who has lit fires across Russia’s underbelly, promoted a decade of shock therapy, Balkanization, NATO expansion, funded color revolutionary tactics, or corralled the world community to impose sanctions onto her.

The fact is that Russia and China enjoy a vastly increasing rate of trade now topping $100 billion annually (compared to the mere $20 billion of US-Russian trade), are both de-dollarizing at accelerating speeds, while working on a common strategic philosophical concept of self-interest and economic value unseen anywhere among the technocratic Hobbesian bubbleheads of the west are facts that unite both great nations in a solid unassailable partnership that keeps oligarchs up at night.

In his NBC Interview with Keir Simmons before meeting Biden, Putin said of the Russian-Chinese relationships: “Can I be completely honest? We can see attempts at destroying the relationship between Russia and China. We can see that those attempts are being made in practical policies. And your questions, too, have to do with it… We (China and Russia) are neighboring countries. One does not choose one’s neighbors. We are pleased with the unprecedentedly high level of our relationship as it has evolved over the last few decades, and we cherish it, just like our Chinese friends cherish it, which we can see.”

Long Term Sino-Russian Strategies

For anyone still ignorant of the sorts of long term strategies that unite Russia and China (and a growing array of nations jumping on board this multi-polar life raft), a few examples can be found in the BRI’s Arctic extensions into the Polar Silk Road, the visionary Russian-Chinese space programs now unfolding vectored on a jointly constructed lunar base, space mining and breakthroughs in nuclear power (including fusion energy) with a focus on exporting this invaluable technology to all nations hungry for real development.

By “real development”, I don’t mean the sort of green boondoggle outlined in the “Clean Green Initiative” or Build Back Better for the World (B3W) programs showcased with delusional pride at the G7 which profess to put China in its place by extending private credit to windmill and solar panel farms across the world. It is a demonstrable fact that these forms of low quality energy not only cripple any nations’ capacity to sustain heavy industry and capital intensive infrastructure, but also pull those foolish enough to join such a green initiative into a piranha tank of debt slavery, decarbonization mandates enforceable by trans-national mechanisms and of course, depopulation.

The question remains: Can Putin use the behaviorist assumptions prevalent among the western elite to humanity’s advantage in order to buy time, complete the Nord Stream 2, and consolidate some important anti-nuclear war mechanisms in order to lower the tension of war sufficiently to navigate through the stormy waters ahead or is it already too late? The answer to those questions will be shaped in some measure by the actions of patriots among the west who wish to have a future. This wish means understanding and acting towards the sorts of policy reforms that put nation states above the power of private finance, human life above computer models and cooperation with the Greater Eurasian Partnership above the interests of sociopathic oligarchs.

The author can be reached at matthewehret.substack.com

And so, finally, the cat is out of the bag. Decades of mystery over whether western states genuinely believed in their own human rights doctrine imposed on the developed world are exposed as folly. Or at least for the new, shiny post-Brexit Britain, anxious to climb a few notches on the world’s economic stage.

Remarkably, in a leaked video, which the UK foreign office claim has been ‘edited’, Britain’s foreign minister has admitted that human rights will no longer be an issue which stops the UK investing heavily in countries which in the past it scorned for being below par. Translated, this means, the UK will do all it can to beef up its trade, in particular, with China. There are other countries also, which this new rationale will affect, positively – Iran, Turkey, Saudi Arabia, Egypt being the obvious contenders – with probably no real change in relations with Russia which Joe Biden has already indicated has to be the new bogeyman for those wishing to benefit from special relations with the U.S. And Britain certainly wants that, at least, with a new trade deal expected soon to be agreed by Sleepy Joe’s administration.

But is this move anything new, in real terms? Or is it part of a new world order that all western powers have, in reality, signed up to regardless? Certainly the EU itself struggles to identify any credible human rights doctrine as quite apart from showing shocking inconsistency with countries that it turns a blind eye with to those that it obsesses over on a daily basis, it doesn’t seem to be able to enforce or implement any policy. Except of course with its own idiotic sanctions in places like Syria, which few care to remember, was about to sign an association agreement with the EU in 2008, before relations went distinctly cold again after a UN report linked Assad to the assassination of Rafiq Hariri in Lebanon in 2005.

Britain’s move is all about the money. In the same week as the bombshell video was splashed by the UK press of the foreign minister saying that Britain really couldn’t afford not to be part of the tiger economies which have poor human rights records, it was also revealed by the fringe press that the same government department plans to axe funding to scores of anti-corruption schemes around the world. Those two actions alone debunk once and for all that the UK is faintly interested in regimes’ torture treatments of political dissidents, illegal detention, rape or even plain old-fashioned murder of political advisories around the world as long as there’s good business to be done by Britain.

But in fact, it’s nothing new even for the UK, let alone the West, even though the wet Washington Post still dedicates column inches to Joe Biden’s plan to use human rights as a central theme to building a new set of relations in the Middle East. Both the former and latter are pure BS.

Human rights was never genuinely a precondition to the West having relations with backward countries dotted around the world. The emphasis was always on trade. And for those countries which didn’t have much to trade, you don’t need to look too closely to see how much gravitas was placed on improving human rights.

With China it’s different. The West is stuck in a straight jacket which it can’t really wriggle out of, without truly causing self harm. China owns so much U.S. treasury bonds and is able to easily devalue its own country when it wants that this alone is enough to cause serious problems for the U.S. economy. Then add to the mix that since Covid, the Chinese economy just goes from strength to strength and is set to clean up on even more arms deals around the world as more and more countries realise that buying U.S. arms comes with so many strings attached that for many, the price is too high.

The dilemma for the West to back off from China but them lose out on it being a growth market for western goods and investment is over. Britain’s sober decision to overlook human rights concerns and trade up is one which will ultimately be replicated by the U.S. and the EU as Biden’s camp is already realising that America needs to be with China rather than against it, on so many levels, least of all security in the South China Sea.

But this will take some time, and so, one could argue that the UK is way ahead on China.

For the moment, in the coming days, there will be some airing of grievances as the U.S. balances its priorities to articulate to Beijing where it is unhappy, while also trying to convince China’s leaders that it genuinely wants better relations than the all-time low which the Biden administration inherited from the Trump years.

“China is using coercion and aggression to systematically erode autonomy in Hong Kong, undercut democracy in Taiwan, abuse human rights in Xinjiang and Tibet, and assert maritime claims in the South China Sea that violate international law,” Secretary of State Anthony Blinken said at the start of a meeting with South Korean Foreign Minister Chung Eui-yong recently.

All, it would seem, still based on human rights as a weapon or tool to diplomatic gain. No such nonsense coming out of the UK foreign office press machine. The difference, one supposes, is that the U.S. is allowed the luxury of sounding off and feeding handout packages of fake news to its shoddy cabal of foreign correspondents while Britain’s media stopped writing up all that guff so long ago, that America is left alone on narrative, if not the action which it would like to take. British diplomacy is, like British media, at such an all-time low, that Ambassadors now working around the world have almost no significance to world events anyway. It’s got so bad, that they usually have to entirely fabricate events and important talking points with the help of an assistant and a smartphone. Britain has got real about what matters though, at least. It really is all about the money.

As Trump scurried from the White House this week, labelled as the worst president in the history of the United States, he leaves a legacy of shattered promises and policy failures. His farewell speech contained the usual trumpet-blowing about vastly over-rated non-achievements, from creating the greatest economy the world has ever seen, to obliterating Islamic State, from not starting any new wars, to confronting China.

The fact is that while the United States has floundered under Trump, China has emerged ever-stronger. That was not how it was supposed to go. When Donald Trump won the White House in 2016, he bragged about how he would reverse China’s rise as a global economic power to claw back benefit for the US. Accusing China of “raping” America, the Republican president vowed to bring manufacturing jobs back – and make Beijing pay for it.

“We imposed historic and monumental tariffs on Chin,” declared Trump this week as if this was an outstanding achievement of his presidency.

Turns out, however, China’s trade balance with the United States is the same yawning gap in Beijing’s favor as when before Trump took office.

Overall, China’s economic growth has rebounded at the end of last year in spite of the global pandemic and severe lockdowns. In the final quarter of 2020, China’s economy grew by 6.5 per cent which is a rate comparable to the annualized figures for 2018 and 2019. Meanwhile, decrepit Uncle Sam seems hardly able to get out of his sickbed.

The spectacular economic performance was driven by record Chinese exports – an overall global surplus of $535 billion, the second highest since 2015. Of that surplus, trade with the US contributed $317 billion, which was reportedly 7 per cent higher than in 2019.

Recall it was Trump who was the belligerent in the trade war with China. He claimed back in 2018 that “trade wars were good and easy to win”. The former real estate magnate and self-proclaimed business genius was going to teach China a lesson.

Trump imposed over $300 billion in tariffs on Chinese imports in a gambit that was supposed to reverse chronic US trade deficits and to force American manufacturing companies to bail out of China and set up shop in the US rust-belt states.

What happened didn’t go to plan, at all. China continued to export at much the same volume and it was American consumers and companies that ended up paying higher levies on imports. It was Americans who paid the cost of Trump’s trade war through higher consumer prices.

And the rust-belt stayed rusty. American manufacturers continued to operate from China despite Trump’s admonitions to return.

It is estimated that the tariffs imposed by the Trump administration on China cost Americans 245,000 jobs lost to higher prices and loss of exports. That’s because with global supply chains, US manufacturers imported Chinese parts at higher cost which was passed on to their export prices resulting in loss of market share. Far from reinvigorating the US economy, Trump ended up making it substantially worse. He leaves office with the highest American trade deficit recorded in 14 years.

What “business-genius” Trump did “achieve” was to make China a much stronger economic power as the United States continues to wane and wither.

Trump’s self-defeating belligerence towards China was aided and abetted by his pig-headed Secretary of State Mike Pompeo. With provocative arms sales to Taiwan in a flagrant attempt to undermine China’s sovereignty, along with ramped up sanctions based on allegations of violations against Hong Kong protesters and Uighur Muslims in Xinjiang province, and military tensions in the South China Sea, the Trump regime has set the stage for more dangerous confrontation under the new administration of Democrat President Joe Biden.

Biden’s incoming administration picks have already signaled they will continue the confrontational policy towards China as charted by Trump. That may change, however, with realities biting.

What the American political class fail to understand is that China’s and Asia’s rising economic power is unstoppable. Demographics and better economic planning are ensuring that, as Chinese President Xi has remarked, time is on China’s side, whereas the American empire is crumbling. The contrasting impact and management of the coronavirus pandemic provide clear illustration of the divergence.

Another clear illustration is how Trump launched a trade war he thought he would demolish China with. Like many other Americans, Trump is so full of hubris and ignorance of modern historical realties he couldn’t see how wrong he would be. The dragon ate the eagle and spat it out.

It’s not clear if Biden and his incoming administration will have the insight or will to abandon American hegemonic hubris towards China (and Russia for that matter). It’s not as if China (or Russia) is demanding an American surrender. All that is required is for the United States to stop treating the rest of the world with its anachronistic Cold War mentality, and to engage with others in mutual partnership, or as China repeatedly urges, in “win-win” solutions. Trump’s abject failure is proof of how the US needs to find a new paradigm of economic and foreign policy.

Red Lines host Anya Parampil speaks with Beijing-based journalist Ian Goodrum about the recent signing of the Regional Comprehensive Economic Partnership in Asia.

thegrayzone.com

Except, most notably, the US and Britain which seem to consider that concession in negotiations is in some fashion weak and inescapably detrimental to their national interests. The UK is estranging itself, quite voluntarily, and even enthusiastically from its best trading partner, the European Union, in a fit of immature nationalistic pride which wasn’t called ‘Make Britain Great Again’, as it might well have been, but “Take Back Control”, which was much the same thing in its absurdity. The British government, in this pandemic time of financial crisis in which it refused to provide midday meals to poor children, is embarking on vastly expensive expansion of its navy in order, as its prime minister declared, to “restore Britain’s position as the foremost naval power in Europe”, which isn’t going to contribute in the slightest way to economic advancement.

The United States has distanced itself from several major trading partners, dissolving ties that had existed for many years and disadvantaging countless commercial enterprises for tiny localised economic gain. Washington’s obsession with imposing economic sanctions has resulted in destruction of trade between sanctioned countries and former commercial partners who have nothing whatever to do with the dispute, and led to increase in distrust of a formerly reliable ally.

In wider terms, the Federation of German Industries noted in an analysis that “with his ‘America First’ policy, U.S. President Donald Trump is increasingly undermining international trade law. And that comes with huge costs not only for its trading partners but also for the United States itself.” But Trump does not care what costs there are, in commercial and diplomatic terms, providing his supporters are given the impression of an ascendant United States. President-elect Biden is far from being equally ultra-nationalistic, but nonetheless can be expected to trade warily. Confrontation is attractive, and it remains to be seen what he will do when presented with circumstances in which it may seem easier and domestically more appealing to thump the table rather than talk across it.

In other parts of the world, trade is assuming greater importance in forging closer relations in addition to economically benefitting those taking part. It was reported by China’s Global Times, for example (although in no mainstream western media), that on 17 November “at the seventh meeting of the China-Russia Investment Cooperation Committee co-chaired by Chinese Vice Premier Han Zheng and Russian First Deputy Prime Minister Andrei Belousov… China and Russia… reviewed their investment cooperation progress and agreed to make efforts to overcome the impact of COVID-19 pandemic and facilitate the resumption of work and production in bilateral investment cooperation to yield more practical achievements.” In other words, progress, albeit modest, is being made in Sino-Russia economic cooperation, and it can be expected that this will extend in due course, much to the vexation of Washington which has a bipartisan political approach only to confrontational opportunities.

The anti-Russia blight that descended on Trump Washington can be expected to continue and even increase in intensity. As the U.S. continues to interfere in the internal affairs of countless countries, reports of the Senate’s bipartisan anti-Russia declaration included observations such as that from Republican Senator Gardner who believes that “Putin’s Russia is an outlaw regime that is hell-bent on undermining international law and destroying the U.S.-led liberal global order,” which would be amusing were it not apparent that he really believes it. And Democratic Senator Cardin chimed in to declare that “at least one branch of government fully understands the need to further protect our country and our allies from a Kremlin that shows no sign of abiding by or respecting international norms.”

There is not a whiff of compromise (or common sense) there, or across the Congress as a whole, and it looks as if there is no possibility of any in the future. The US has cast Russia aside as a trading partner, and Biden is bound fast to the anti-Russia bandwagon. It is probable he will willingly go with the flow in Washington as a whole, in which the Congress, the Pentagon and the arms industry seek to intensify the military build-up round Russia’s borders.

The same holds for U.S. policy on China, against which there is a bipartisan approach in favour of military confrontation rather than trade cooperation.

In November, according to the BBC, “fifteen Asia-Pacific countries formed the world’s largest trading bloc.” They were the ten members of ASEAN, the Association of South East Asian Nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — together with South Korea, China, Japan, Australia and New Zealand. This is a mighty coalition, known as the Regional Comprehensive Economic Partnership (RCEP), and it didn’t happen overnight.

China’s Premier Li noted that “Under the current global circumstances, the fact the RCEP has been signed after eight years of negotiations brings a ray of light and hope amid the clouds,” and it is hoped the partnership will expand in due course, especially as “members of the RCEP make up nearly a third of the world’s population and account for 29% of global gross domestic product. The new free trade bloc will be bigger than both the US-Mexico-Canada Agreement and the European Union.” Prosperity looms for participating nations, and it is coming about because of peaceful compromise and negotiation rather than aggressive hostility — and it was ironic that on the day of agreement there was an example of further military provocation by Washington.

It was reported that on 17 November, “two US B-1B Lancer bombers… entered China’s air defence identification zone over the East China Sea. The US regularly conducts surveillance flights in the region using military spy planes. Sending B-1B bombers close to China’s coast is likely a show of force meant to send a message to Beijing.” Of course it was. And it could hardly be more ironic that the gauntlet of challenge was thrown down at the very moment China was demonstrating to the nations of the region that it was most actively seeking trade cooperation. Two days later the U.S. Army officially opened its new “forward headquarters” in Poland, “to provide more support to an expanding Army mission in Europe.”

Trump Washington is intent on expanding its military bootprint around the world, specifically against Russia and China. And Biden is likely to continue the policy of hostility. Forget trade: the name of the game is Confrontation.

Pompeo refused to abide by conventionally courteous diplomatic practice in referring to “the government” of China, preferring, like Trump, to talk about “the Chinese Communist Party” when berating and insulting the Beijing administration. While this is immature and feeble, it is also ironically diverting, because it demonstrates the ever-present double standards of the present Washington establishment. In one attack, he claimed that “the Chinese Communist Party wants the same thing in every place. They want to control and dominate” which was somewhat at variance with his publicly expressed sentiments concerning a nearby country which also has a communist government.

Pompeo’s anti-China swing round Asia included talks in India, Sri Lanka, the Maldives and Indonesia, and he ended his trip on 30 October by visiting Vietnam where he declared that “We have enormous respect for the Vietnamese people and your country’s sovereignty.”

It appears he has not read his own Department’s illuminating ‘Report on Human Rights Practices’ in Vietnam, which observes that “The Socialist Republic of Vietnam is an authoritarian state ruled by a single party, the Communist Party of Vietnam” which in 2019 caused concern because “Significant human rights issues included unlawful or arbitrary killings by the government; forced disappearance; torture by government agents; arbitrary arrests and detentions by the government; political prisoners; significant problems with the independence of the judiciary; arbitrary or unlawful interference with privacy; the worst forms of restrictions on free expression, the press, and the internet, including arbitrary arrest and prosecution of government critics . . .” and so on.

This is but one instance of Washington’s double standards and pervasive hypocrisy. If a foreign country is supportive of Trumpian foreign policy and knuckles under in terms of trade, then the Trump establishment ignores human rights violations and many other contraventions of decency (witness, for example, official reaction to the murder of the reporter Jamal Kashoggi by orders of the ruler of Saudi Arabia), in order to further its own interests, which are in the main commercially-based. There are, however, other countries with pristine records in human rights and general governance that ally themselves with the U.S. in pursuit of what they mistakenly imagine is furtherance of freedom.

One country that is disconcertingly supportive of whatever policies are favoured in Washington is Australia, which is making a most serious mistake in seeking ever closer alignment at the expense of its relations with China.

While Pompeo was on his trip in Asia, preparations were in their final stages for the annual anti-China major naval exercise Malabar, nominally sponsored by India and involving its warships and combat aircraft along with those of the United States, Japan and Australia. It began on 3 November and Voice of America observed that “India’s decision to include Australia for the annual drills comes in the wake of a push by Washington for deeper security collaboration in the ‘Quad,’ the informal group that includes the United States, Japan, Australia and India as a counter to China. Australia returns to the exercises after 13 years, when its participation triggered strident Chinese objections. But this time the Malabar exercises will endure as all four participants seek a long-term counterbalancing strategy to China, according to analysts.”

Australia’s embrace of the U.S. is not new, but its current alignment with Washington and others is taken by Beijing as being specifically against China and it is doubtful if it was a coincidence, as noted by the independent analysts of STRATFOR, that “beginning November 6 Chinese authorities will halt all imports of a range of Australian agricultural and mineral exports, dramatically expanding an earlier coal ban.”

The economic effects of Australia’s recent and entirely unnecessary confrontational stance are going to be massive and will not only adversely affect its financial sector as a whole, but will destroy the livelihoods of countless workers. On November 2, the South China Morning Post recorded that “China has banned imports of Australian timber from Queensland and suspended barley imports from a second grain exporter, while Chinese importers are also bracing for a possible new round of bans on copper ore and copper concentrate as well as sugar this week in the latest trade escalations between Beijing and Canberra. The new bans occurred over the weekend as clearance of Australian rock lobster shipments was also delayed in Shanghai due to increased import inspections.”

Collapse of the lobster market, alone, will be catastrophic as it is worth U.S.$ 527 million a year, a modest amount in U.S. terms, but a major item in Australia’s national budget. Further, its lobster fishers will disappear and the fishery ports will be stricken with unemployment.

On 28 October the UK’s Guardian commented that “while it is difficult to quantify the cost of the trade war, research by the Perth U.S.-Asia Centre at the University of Western Australia shows the total value of exports to China from the seven industries affected by declared and undeclared sanctions was $47.7 billion last year.” To an economy the size of Australia’s, this is potentially disastrous, but it seems that the government in Canberra is determined to continue confronting China, no matter the cost to its citizens.

In spite of the combination of U.S. pressure and domestic political intransigence, Australia could have followed the example of Sri Lanka whose Prime Minister Gotabaya Rajapaksa made it clear that zealots such as Pompeo would not be successful in attempts to pressure his country to align with the anti-China league and tweeted that “Sir Lanka will always maintain a neutral stand in foreign policy and will not get entangled in struggles between power blocs.”

The U.S. campaign against China gathered momentum on 6 November when the Commander of the Pacific Air Force, General Kenneth Wilsbach, publicly announced that the U.S. armed forces must be prepared to engage in conflict with China. He insulted the Chinese government by stating that it engaged in “maligned and coercive activity that’s frequently not in accordance with international law” and declared that “We’ve got to challenge and compete with them in accordance with the national strategy, but we also have to be ready in the event we get called to go fight tonight.” There was a time when senior military officers in democracies were forbidden to engage in public comment on international affairs, for obvious and sensible reasons, but it now appears that these people are being encouraged to threaten foreign governments and stoke up tension.

The stage is being set for further confrontation, and Washington is wilfully ignoring China’s determination to continue its own policies. The possibility of conflict is increasing.

Since the world was taken off the gold reserve system way back in 1971, a new age of “post-industrialism” was unleashed onto a globalized world. Humanity was given a new type of system which presumed that both our nature and the cause of value itself were located in the act of consuming. The old idea that our nature was creative, and that our wealth was tied to producing, was assumed to be an obsolete thing of the past… a relic of a dirty old industrial age.

Under the new post-1971 operating system, we were told that the world would now be divided among producers and consumers.

The “have-not producers” would provide the cheap labor which first world consumers would increasingly rely on for the creation of goods they used to make for themselves. “First world” nations were told that according to the new post-industrial rules of de-regulation and market economics, that they should export their heavy industry, machine tools and other productive sectors abroad as they transitioned into “white collar” post-industrial consumer societies. The longer this outsourcing of industries went on, the less western nations found themselves capable of sustaining their own citizenries, building their own infrastructure or determining their own economic destinies.

In place of full spectrum economies that once saw over 40% of North America’s labor force employed in manufacturing, a new addiction to “buying cheap stuff” began, and a “service economies” took over like a cancer.

To make matters worse, the many newly independent nations struggling to liberate themselves from colonialism were told that they would have to abandon their dreams of development since those goals would render the formula of a producer-consumer stratified society impossible to create. Those leaders resisting this edict would face assassination or CIA overthrow. Those leaders who adapted to the new rules would become peons of the new age of “Economic Hitmen”.

As the great president William McKinley had observed long ago (1), nations who develop full spectrum economies also have higher quality, educated citizens using advanced technology which causes more costly goods… meaning no dollar stores and no sweat shops.

The Case of China: Producer for the World

When Henry Kissinger negotiated the opening up of China in the 1970s, the intention was much less benevolent than the story projected.

By the time Deng Xiaoping announced the “opening up” of China in 1978, Kissinger had already managed the economic paradigm shift of 1971, the artificial “oil shock therapy” of 1973 and authored his 1974 NSSM 200 Report which transformed U.S. Foreign Policy from a pro-development orientation towards a new policy of depopulation targeting the poor nations of the global south under the logic that the resources under their soil were the lawful possession of the USA.

Kissinger, and the hives of Trilateral Commission/CFR operatives to which he was beholden never looked on China as a true ally, but merely as a zone of abundant cheap labor which would feed cheap goods to the now post-industrial west under their new dystopic producer-consumer world order. It was in that same year that Kissinger’s fellow Trilateral Commission cohort Paul Volcker announced a “controlled disintegration of western society” which was begun in full with the Federal Reserve’s interest rate hikes to 20% that ensured a vast destruction of small and medium businesses across the board.

Believing China (then still largely an impoverished third world country) to be desperate enough to accept money and short-term salvation after years of trauma induced by the Cultural Revolution. Under Kissinger’s logic, China would receive just enough money to sustain a static existence but would never be able to stand on its own two feet.

Unbeknownst to Kissinger, China’s leaders under the direction of Zhou Enlai, and his disciple Deng Xiaoping had a much longer-term strategic perspective than their western partners imagined.

Deng Xiaoping and Zhou Enlai in 1962

While receiving much needed revenue from foreign exports, China began to slowly create the foundations for a genuine renaissance which would be made possible by slowly learning the skills, leapfrogging technologies and acquiring means of production which the west had once pioneered. Zhou Enlai had first enunciated this visionary program as early as 1963 under his Four Modernizations mandate (Industrial, agricultural, national defense and science and technology) and then restated this program in January 1976 weeks before his death.

This program manifested itself in the July 6, 1978 State Council Forum on the “Principles to Guide the Four Modernizations” informed by the findings of international exploratory missions conducted by economist Gu Mu’s delegations around various advanced world economies (Japan, Hong Kong, Western Europe). The findings of Gu Mu’s reports laid out the concrete pathways for full spectrum economic sovereignty with a focus on cultivating the cognitive creative powers of a new generation of scientists that would drive the non linear breakthroughs needed for China to ultimately break free of the rules of closed-system economics which technocrats like Kissinger wished the world adhere to.

Deng Xiaoping broke from the radical Marxism prevalent among the intelligentsia by redefining “labor” from purely material constraints and elevating the concept rightfully to the higher domain of mind saying:

“We should select several thousand of our most qualified personnel within the scientific and technological establishment and create conditions that will allow them to devote their undivided attention to research. Those who have financial difficulties should be given allowances and subsidies… we must create within the party an atmosphere of respect for knowledge and respect for trained personnel. The erroneous attitude of not respecting intellectuals must be opposed. All work. Be it mental or manual, is labor.”

Over the course of the coming decades, China learned, and like any student, copied, reverse engineered and reconstructed western techniques as it slowly generated capacities that ultimately allowed them press on the limits of human knowledge outpacing all western models.

Scientific and technological progress became the driving force of its entire economy and by 1986, the “863 Project for Research and Development” was announced which focused on areas of space, lasers, energy, biotechnology, new materials, automation and information technology. This project became the driver for creative innovation guided by the National Science Foundation and was upgraded to the 973 Basic Research Program in 2009 to: “1) support multidisciplinary and fundamental research of relevance to national development; 2) Promote frontline basic research; 3) Support the cultivation of scientific talent capable of original research; and 4) Build high-quality interdisciplinary research centers.”

Although China is often accused of intellectual theft, the reality is that it has begun to clearly outpace western nations becoming a pioneer on every level of science and technology. China now registers more patents than the USA, has become the cutting edge leader of high speed rail engineering with over 30 000 km, bridge building, tunneling, as well as water management, quantum computing, AI, 5G telecommunications, and even space science becoming the first nation to ever land on the far side of the moon with an intent to mine Helium 3 and develop permanent bases on the Moon in the coming decade.

All of these cutting edge fields of science and engineering are being organized by the ever-growing Belt and Road Initiative which has taken on global proportions and integrated itself into a deep alliance with Russia, Iran and over 135 nations who have signed onto the BRI Framework stretching from Latin America, Africa, the Middle East, Central Asia, Asia, and Europe.

This is the system which the USA and other western nations could have joined on multiple occasions, but which has instead been targeted as a global threat to western hegemony. According to the logic of those western utopians who refuse to let go of their old outdated 1971 script for a new world order, China’s New Silk Road must be subverted at all costs since it is very well understood that it would become the basis for a new world system as the old globalized paradigm comes crashing down faster than the Hindenburg.

So what can be done?

Amidst this anti-China war policy has emerged another policy which began as a “Trade War” and escalated to a potential “decoupling” of the USA from China under President Trump.

This decoupling would involve cutting off reliance on using China as a cheap labor exporter, and even industrial production source as well. Obviously, friendship and collaboration between the USA and China is vitally important for the long-term survival of civilization, but is this decoupling an intrinsically bad thing in the short term?

Maybe not.

If the USA is to survive the oncoming collapse and break free of its apocalyptic war agenda, then certain realities WILL have to occur. These realities include (but are not limited to):

1) Regaining its lost industrial potential, with an emphasis on the machine tool sector which the west once enjoyed as a world leader

2) Regaining the lost scientific and technological capacities which the USA once had when it still valued productive thinking under the days of JFK and NASA

3) Regaining a grasp of education which values productive citizens over consumer subjects

4) Regaining control over national credit under federal banking, dirigisme and other long-term investment practices that rely on regulating Wall Street speculation and other unproductive forms of banking.

How might these vital capacities be regained?

For one thing, protectionism will be necessary. China has used protectionist measures to a great effect, and every nation has the right, if not the duty, to apply protective tariffs in the defense of their economic sovereignty in order to ensure that it is more profitable to purchase locally than abroad. In fact, it was only by employing protective tariffs in the pre-Globalized past that the USA (or any other nation for that matter) built up their industrial capacities in the first place while these capacities were always lost whenever free trade, de-regulation policies were imposed.

Parity Pricing is vital if the USA is to rebuild the small and medium agro-industrial enterprises that once generated the vitality of society decades ago. Parity pricing was a common practice among western governments between 1945-1970 which imposed certain constraints on price variability of certain goods to ensure that prices never dropped so low that the manufacturers could afford to stay in business or rise so high that consumers cannot afford to buy said goods. Today’s agricultural crisis in the USA could only be reversed were such policies implemented quickly (2).

National banking is another vital pre-condition to a recovery. Under the period of 1791-1836, during the 1862-1869 greenback system, or during FDR’s 1933-45 use of the Reconstruction Finance Corporation, national credit was generated by acts of purchasing bonds via the Treasury and emitting loans directly to companies which would be mandated to carry out the jobs needed to build great infrastructure megaprojects (Erie Canal, transcontinental railway, or Tennessee Valley authority). Similar practices have been revived under China’s state banking system today which provides the majority of the loans to companies building the New Silk Road either in China itself or abroad.

While detractors call these sorts of policies “trade war” or “offenses to the laws of the World Trade Organization”, as I laid out in a 2018 lecture, they are exactly what is needed for any sort of recovery to occur.

Before the USA could ever possibly work as a reliable partner on the Belt and Road Initiative or any nation of the emerging multipolar alliance, it must learn to stand once again on its own two feet.

This transitionary process may have painful aspects to it, much like a drug addict trying to wean themselves off of heroine, but if the intent is genuine, and the means lawful, then it is certainly possible, even at this late date.

As the USA weans itself off of its addiction to China’s cheap goods, China will be better prepared to produce ever more high quality goods on a “fair trade basis” for markets which are also committed to full spectrum economic goals whether in Asia, Africa, or beyond.

Everything hinges on the upcoming U.S. elections

President Trump has outlined a series of measures that reflect a pro-industrial orientation which the mainstream media has worked very hard to cover up.

Over his first term, Trump not only rejected the precepts of laissez faire economics by cancelling the anti-China Trans Pacific Partnership (TPP) but renegotiated the nation-killing NAFTA giving nation states of North America the right to intervene into their economic destinies for the first time since 1994. He also broke with a 50 year anti-space tradition by giving full backing to a renewal of the space program with the Artemis Program and outlined a global cooperative space platform with the Artemis Accords. Just as JFK’s Apollo program generated over $10 for ever $1 invested in non-linear ways, so too will the current goal of creating a permanent lunar base and launch pad to Mars generate similar effects as new discoveries and inventions with immense industrial applications will come online. This was renewed in a GOP policy tweet of Oct. 23:

Trump has also called for a national re-industrialization program designed to bring back vital heavy industries to rust belt dead zones of America that have fallen into dark age conditions over the past 4 decades and in his current platform has called for a continental high speed rail system. For the Arctic, Trump has given federal endorsement to the Alaska-Canada railway which itself brings the long-overdue Bering Strait rail tunnel endorsed by both Russia and China ever closer to reality. This policy represents a total break from the Pentagon’s Arctic war policy also active in Alaska.

On economic diplomacy, Trump has broken from the anti-growth program launched by Obama’s technocrats by ending the moratorium on nuclear power investments by green lighting the International Development Finance Corporation’s investment into 2500 mW of nuclear energy for South Africa and another nuclear plant for Poland (which currently relies on 70% coal power and wants 9 GW of nuclear by 2040). This change in policy brings the USA into harmony with the modus operandi of both Russia and China who are the only other nations seriously investing in nuclear power within their own nations or Africa.

Similarly, Trump has won the ire of many regime changers by defunding CIA-front democracy movements like NED in Hong Kong, Ukraine and Belarus while introducing economic win-win diplomacy in helping to resolve the Serbia-Kosovo crisis via investments into rail, roads and infrastructure. This approach also complements the restoration of a non-interventionist defense strategy that began with Trump’s collaboration with Russia in Syria and continues with his withdrawal of troops from Afghanistan, Iraq and Syria over recent months.

In every category economic, military, diplomatic, space and beyond, two obvious paradigms are clashing represented by two opposing Americas.

If Trump is able to maintain control of the presidency over the coming weeks and months of storms (don’t fool yourself. It is unlikely that the results of the election will be finalized in November or even December) then there is a chance that the USA may find the moral fitness to survive by regenerating its lost industrial base and changing its behaviour in conformity with natural law.

Should this be done, then the USA will be able to re-acquire its claim of “independence” for the first time in decades. With that independence, will come the slow reconstruction of its decrepit infrastructure, intellectual and cultural decay and achieve the basis for a full spectrum sovereign economy. This hoped-for USA would be a very different creature from the one the world has known since the murder of JFK in 1963 and this would be a nation that could be trusted to act in its own true self interest as a partner to other like minded nations working for their own true self interests under the umbrella of international projects that benefit all participants.

The author can be reached at matt.ehret@tutamail.com

Notes

(1) Promoting the McKinley tariff, the martyred President said: “They say ‘everything would be so cheap,’ if we only had free trade. Well, everything would be cheap and everybody would be cheap. I do not prize the word `cheap.’ It is not a word of hope; it is not a word of comfort; it is not a word of cheer; it is not a word of inspiration! It is the badge of poverty; it is the signal of distress; and there is not a man in the audience, not a white-haired man, who, if he will let his memory go back, will not recall, then when things were the cheapest, men were the poorest…. Cheap? Why, cheap merchandise means cheap men, and cheap men mean a cheap country; and that is not the kind of Government our fathers founded, and it is not the kind their sons mean to maintain. If you want cheap things, go where you can get them…. We want labor to be well paid.”
(2) Time Magazine recently stated that the USA “lost 100,000 farms between 2011 and 2018; 12,000 of those between 2017 and 2018 alone.”

On the days when he is not celebrating his friendship and trade deals with China’s president Xi Jinping, Donald Trump has sought to hype China as the United States’ major enemy in the world. This has meant not only absurd allegations about the pandemic (top Trump economic adviser Peter Navarro has claimed that China deliberately sent infected people to the U.S. to spread the virus and damage the U.S. economy), but also sanctions, tariffs, and hints of military confrontations. While much of this silliness will go away if Donald Trump is defeated, the idea that the United States is involved in an intense global rivalry with China has gained serious credence among elite types. This is both wrong and dangerous.

First, just to clear the deck of some obvious points, China is not a democracy and it does not respect human rights. Critics of the government face serious risks of persecution and imprisonment. It has engaged in large-scale abuses against minority populations in Tibet and the Uygur population in Xinjang. It also is reversing commitments it made to respect the autonomy of Hong Kong.

Saying that we should not be engaging in a Cold War with China does not imply approval of these actions. It is simply a recognition of two facts.

First, many of the people who are most vigorous in touting abuses in China seem just fine with serious abuses in U.S. allies. Saudi Arabia, a close U.S. ally, tolerates no open dissent and has an explicit policy of treating women as second-class citizens. It recently had a U.S. resident suffocated and torn to pieces in its Turkish embassy. The U.S. government gave open support to a coup in Bolivia and raised no objection to the repression that followed, most of which was directed against its indigenous population.

There is no shortage of places around the world where the United States has tolerated or even actively supported human rights abuses. It is simply not plausible that Donald Trump or most other politicians are genuinely concerned about human rights when they make complaints against China. They are pursuing an agenda of hostility against China for other reasons.

The other point is that it is not clear how those who push this agenda hope that their hostile actions will improve the human rights situation in China. If we assume, for the moment, that the human rights critics don’t intend to go to war to overthrow China’s current government, and then install a regime that will respect human rights, we should ask how we think a stance of growing hostility to China will improve the prospects for the people who we hope to help?

China is not some small country that is dependent on the economic and political support of the United States. It has almost 1.4 billion people. It also has an economy that is larger than ours. As a result of its extraordinary growth over the last four decades, its economy is almost one third larger than the U.S. economy.

While we can impose tariffs, investment bans, and other measures, the impact on China’s economy will be limited. In fact, the Trump tariffs have had relatively little impact on China to date, as almost all of their cost has been borne by people in the United States. (The link shows that the prices that China gets for the goods it sells to the United States have barely changed over the last year. If China was paying for tariff, the price of the goods they sell would fall by almost the amount of the tariff.)

It is worth noting that it is possible that we could have done more to influence China’s political system back in 2000, when we made the decision to admit the country into the WTO. At that time, China’s economy was a bit more than one-third the size of the U.S. economy. However, back then the political leadership in the United States, including President Bill Clinton and most leading Republicans in Congress, was adamantly opposed to demanding any conditions on human or labor rights in exchange for China’s admission to the WTO.

Ironically, many of these same people are now pushing the line about needing to take a stand against China. Oh well, no one expects politicians or leading intellectual figures to be consistent.

The New Cold Warriors

There are many different groups that we are likely to see pushing the New Cold War against China. At the top of the list are the people who stand most directly to benefit from an arms race: the people who sell arms. The military contractors, their lobbyists, and the intellectuals they support in think tanks and universities can be expected to push the need to have ever greater levels of military spending to protect against China.

Some have already talked about spending China’s economy into the ground, as we ostensibly did in the first Cold War with the Soviet Union. There is a simple problem with this plan, apart from its enormous potential human and environmental costs. While the Soviet economy was roughly half the size of the U.S. economy at the peak of its power, the Chinese economy will be close to twice the size of the U.S. economy by the end of the decade. Spending China into the ground might be a rather difficult task.

There are also the Henry Kissinger wannabes. These are the people who want the United States to be the world’s big superpower so that they can play grand chess games with other countries around the world. Many of the people deciding U.S. foreign policy fit this bill.

But beyond those who directly benefit from a hostile rivalry with China, there are also many less obvious economic interests who will be cheering on the battle. At the top of this list are the people who benefit from stronger protections for “our” intellectual property that China is ostensibly trying to steal.

It is important to step back from the standard reporting on this issue to understand what is going on here. Unlike property in land or buildings, intellectual property is not inherently exclusive. While two people can’t sit in the same spot at the same time, an infinite number of people can listen to the same song, see the same movie, and use the same software at the same time. The ability to exclude people is created by the government as a way to allow creative workers and innovators to profit from their work.

While patent and copyright monopolies are one way to finance innovation and creative work, they are not the only way, and there are good reasons for thinking they are not the best way. I have written extensively on alternative mechanisms (see Rigged chapter 5 [it’s free] and here). Patent and copyright monopolies create enormous distortions in the market, they are equivalent to tariffs of many thousand percent. They are a recipe for dishonesty and corruption, such as drug companies lying about the addictiveness of the new generation of opioids.

Patents and copyrights also lead to an enormous amount of upward redistribution. People like Bill Gates can get incredibly rich from the patents and copyrights that the government gives them on software. We will spend over $500 billion this year on prescription drugs that would almost certainly cost us less than $100 billion. The difference of $400 billion is more than five times the annual food stamp budget.

When economists and other policy types say that technology is causing inequality, they actually mean that government-granted patent and copyrights are causing inequality. The people who are getting rich off various new technologies are doing so because the government designed the system so that they will get rich. We could design it differently. A different design can mean much less money going to the beneficiaries of patent and copyright monopolies and much more going to the rest of us.

As China economy surges past the U.S. economy, with many of its key sectors equal to, or even superior to, their U.S. counterparts, it would be a great time to redesign mechanisms for innovation. We can design systems that are based on open research and sharing of results rather than secreting off innovations to ensure that a small clique has large benefits. This would be a huge benefit to the vast majority of people in the United States, China, and the rest of the world. But the beneficiaries of the current system don’t want to see their incomes threatened. They prefer to have the rest of us fight for them, under the illusion that “our” intellectual property is at stake.

The development of a coronavirus vaccine provides a great example of the problem. If we approached the issue with the idea of helping people, both in the United States and the rest of the world, we would be making all findings fully public as quickly as possible. We would have any successful vaccines available to all as generics, as soon as they are developed. This means that any manufacturer anywhere in the world could produce as much as their facilities will allow, without paying a penny to the innovators. This would allow for the development of a vaccine as quickly as possible and for its quick distribution throughout the world. (It would still be necessary to have some assistance for the poorest countries, for whom the cost of even a generic vaccine would be a substantial burden.)

Of course, we do have to pay the innovators for their work and that is exactly what we are doing. Except we are both doing it upfront, with direct payments, and then doing it again at the back end with patent monopolies. Moderna will walk away with close to a billion government dollars in upfront payments for its efforts, even if it never produces a usable vaccine. It stands to make even more by taking advantage of its patent monopoly on the vaccine. Several of its top executives have already made tens of millions of dollars selling stock that has become hugely more valuable as a result of taxpayers’ largesse.

While the U.S. government pursued the profit-maximizing path for Moderna, it looks like it is coming at the expense of the health, and possibly lives, of hundreds of thousands of people in the United States. At the moment, it seems that China is ahead of the United States in the development process. This could mean that we will have access to a vaccine perhaps a month or two later, or even more, because we chose the path of competitive patent monopoly rather than cooperation.

If our infection rate remains at 40,000 a day and our death rate at 1,000 a day, a two-month delay means almost a quarter million additional infection and more than 60,000 additional deaths. That’s a high price to pay for furthering the patent system. (People die in poor countries all the time because of patent monopolies, but it is unusual to see this sort of toll in the United States.)

If we had gone the alternative route, we would have had to try to enlist China’s government in a commitment to open-source research. We would also want other wealthy countries, like France and Germany, to share in the cost. Obviously, there would be issues that would be fought over in negotiations, but it is hard to believe that the U.S. government could not push through some sort of deal.

After all, this would benefit everyone. Also, in the face of the pandemic, no deal has to be perfect. We just need to establish some general principles. If the U.S. spent $200 million too much or too little, who cares? We almost certainly gave more money than that to well-connected companies in the pandemic bailouts.

It is also worth briefly ridiculing the idea that the U.S. lacks power in this sort of negotiation. We get other countries to go along with Donald Trump’s temper tantrums all the time, like his sanctions against Iran after he pulled out of the nuclear pact. Surely, we could get buy in from other countries on something that will actually benefit them.

This discussion of the development of a coronavirus vaccine is a bit of digression, but it should make the point that the people of the United States do not in general have an interest in pressing China or anyone else to respect the patent and copyright monopolies of U.S. corporations. We have an interest in negotiating the sharing of research costs and this may be done in a way that is far less costly to our economy and far less generous to the top one percent, or ten percent, than is currently the case.

Other Issues in Trade

If we recognize that the yelping over China not respecting patent and copyright monopolies is largely the concern of the wealthy, and not the typical person, there are still other trade issues that should be on the table. China has deliberately kept down the value of its currency, in order to makes its goods and services more competitive internationally. It also directly subsidizes many industries to further their advantage.

This was a huge issue before the Great Recession, it is less so today. The reason it was a huge issue before the Great Recession is that back then, manufacturing provided a large number of good-paying jobs to people with less education. This is less of an issue today, because many of these jobs have been lost to imports, largely from China.

We lost more than 3.5 million manufacturing jobs, more than 20 percent of the total, between December of 1999 and December of 2007, the start of the Great Recession. We lost another 2 million in the Great Recession. While roughly half of these Great Recession losses had come back before the pandemic hit, the jobs that came back paid much less than the jobs we lost. In 1999, the average hourly wage of a production worker in manufacturing was about 2 percent higher than for the private sector as whole, by 2019 it was about 6.0 percent lower.

Higher benefits for manufacturing workers likely mean that total compensation is still higher but the gap in pay is not large. A new hire in an auto parts factory may be doing no better than a new hire in an Amazon fulfillment center.

This is largely attributable to the loss of union jobs in manufacturing. Even as we have added more than 1 million manufacturing jobs since 2010, the number of union members in the industry has fallen by almost 120,000, more than 8 percent. As a result, the jobs that we have been adding, for the most part, have not been good jobs.

The reason for this digression is to make the point that it does not matter as much as it used to that China is effectively subsidizing its exports. We no longer have many good-paying jobs at risk. We still should be pressing China not to prop up the dollar against its currency, and not to provide subsidies to favored industries, but the stakes for U.S. workers are far less than they were fifteen or twenty years ago.

The U.S. -China Confrontation: A Battle for Elites, not Ordinary People

To sum up, most of us have little at stake in the big battle of the super-powers, except that it is taking place. It would be great if the human rights situation in China improved, but there is little reason to believe that many of the politicians complaining about abuses really care, or have any serious plan to bring them to an end.

The vast majority of workers have no stake in the battle to protect U.S. patents and copyrights. In fact, these policies are major factors in the increase in inequality over the last four decades. We certainly have an interest in agreements under which China, the U.S., and other countries share in the cost of open-source research, but our politicians and the interest groups they represent are not looking at all in this direction.

Finally, the labor market would be better off if China did not subsidize its exports with an under-valued currency and other mechanisms, but this matters much less today than it did two decades ago. Most of the good-paying jobs in manufacturing have been lost and there is little reason to believe they will come back in the absence of major structural changes, most importantly, higher unionization rates.

The U.S.-China confrontation is a game for the elites. The rest of us would be best-served by sitting this one out.

Dean Baker’s Beat the Press blog via counterpunch.org