The historian, Arnold Toynbee, noted that the Universal State, the empire which politically unifies all the contending nations in the final phase of a civilisation, may bring peace and stability but it also produces monstrosities. We are familiar with some of the monstrosities the Roman Empire produced in the form of the mad Caesars Nero, Caligula, Commodus and Maximinus Thrax. Other monstrosities from Rome included the incredibly cruel and brutal punishments handed out to political opponents. Falling on your own sword was certainly a wise move if you happened to be a nobleman watching a contingent of soldiers coming to steal the gold from your estate.
We all live under the Universal State of the Faustian civilisation which is being run out of Washington D.C. and so it’s not that much of a surprise to see the arrival of various monstrosities in our time. The GFC and the corona debacle have to rate right up there with the best of the bunch. The current enormous influx of illegal immigrants into the US is perhaps the latest example in terms of the sheer scale of the operation and also the baffling politics of the matter. The polls that I’ve seen indicate that there is large majority support from the voters of both major parties to put an end to it and you would think that a democracy could at least pretend to care about the wishes of the voters. Instead, the two main parties are apparently stitching up a bill that would essentially legalise the whole business.
In order to understand what’s going on you have to first understand that the US is running an empire but it’s a very unusual kind of empire. Some historians have called it an Informal Empire. Other phrases that work would be an Occult Empire, an Esoteric Empire or an Unconscious Empire. I’ve preferred to use the latter term since another baffling aspect of the whole business is that a majority of Americans are not even aware that their government is running an empire even while the government blatantly pursues the interests of the empire over the will of the people. That is, of course, exactly what is behind the border shenanigans. It’s about the interests of the empire.
None of what is happening now is an accident. In fact, the economist, John Maynard Keynes, pretty much predicted the current situation back in the years immediately after WW2 when the terms of US empire were being worked out. The US empire is built on the back of the US dollar’s reserve currency status. What many people don’t realise is that the nature of the system is very unusual, even unprecedented. That’s why even the technocrats at the Federal Reserve admit that we are currently in a big experiment.
Prior to the current fiat currency experiment, trade was conducted in either gold or silver or paper that was tied back to gold or silver. Most people will have heard of the Opium Wars. The Opium Wars were partly triggered by the fact that the British East India Company was struggling to gets its hands on enough bullion to buy tea from China. Since the Company had access to the enormous poppy fields of the subcontinent and surrounding area, opium was one way to facilitate trade with China. The underlying problem, however, was lack of gold with which to transact.
The advent of paper currencies tied to gold did much to alleviate this problem. In the 19th century, the British Pound was probably the main currency for trade but there were plenty of other currencies in circulation and most countries would have traded in many different currencies. For the most part, trade continued to grow and it did benefit the nations who engaged in it. The reason is because the currency earned from trade could be used domestically for investment and consumption. Australia is a good example. We were “built on the sheep’s back”. We traded wool and used the money to invest domestically.
The other nice thing about that system was that it was self-correcting. If the convertibility of a currency into gold was called into question, for example if there were too many Pounds circulating relative gold holdings, traders moved away from that currency and drove down demand. Moreover, the Bank of England and other banks had to ensure confidence in the currency was maintained which they did by adjusting interest rates to bring things back to balance.
It was the absence of this balancing that Keynes saw as the problem with the agreements made at Bretton Woods and which would become even more pronounced with the closing of the gold window in 1971.
Let’s take an example. Australia sells wool to Britain in the 19th century. Somebody makes a profit. What are they going to do with it? Chances are, they will either spend or invest it locally since foreign investment is difficult and comes with its own costs. The profits from trade benefitted the nation.
Let’s take a similar situation today but in a developing country. You sell something to the international market and you make a profit. What are you going to do with the money? You could invest it in your own country. But, now, there are a variety of financial instruments available to you in the US and other western nations that will give you a guaranteed return. So, you’ll take those guaranteed returns over the more risky investment in your own country. What this means is that the profits from trade are no longer invested locally but go off overseas looking for a better and lower risk return.
This leads to the situation that Keynes predicted where there are now permanent imbalances in the system. The US deficit of $34 trillion dollars is the surest evidence for that. In addition, there are nations who have based their economy on permanent trade surpluses. Japan and Germany are two prime examples. Brazil and China have jumped on board in the last couple of decades.
There are a number of side effects of this imbalanced system. Firstly, domestic demand in the nations that run surpluses is permanently curtailed. I have some personal experience of this since about five years ago I was offered a job in Germany. They asked me for my salary expectations and I told them what I was currently earning here in Australia. It was about 1/3rd more than the equivalent job in Germany. Now, the absolute cost of living in Germany is lower and so it may be that my standard of living in Germany would have been similar to what I have in Australia. But, in absolute terms, I would have taken a pay cut. That’s the problem for Germans, Japanese and especially for Chinese.
The problem for Americans and other western countries is that by allowing other nations to run trade surpluses they put their own manufacturers out of business and that means the loss of working class jobs, something which has now become a major political issue. Perhaps more important is the fact that the system massively increases the power of bankers and billionaires vis a vis the rest of society. Those bankers and billionaires then buy off the political class thereby permanently tilting the table in their favour. This also explains all the various nonsensical and fake “social movements” of the past decade or more. They are all funded by monied interests to distract the attention of the public. (In fairness, some of it is just the fever dreams of billionaires with too much time and money on their hands).
There’s another side effect, though, and this brings us back to the border crisis. Why are there so many people from all around the world clamouring to get into the United States and Europe? The answer is yet again related to the systemic imbalances that the post-war system creates. We are told that developing nations have corruption problems and that is certainly true. But a big part of that corruption stems from the fact that the elites in those nations are incentivised to take their capital and invest it not in their own country but in the financial instruments provided by the United States and other western nations.
Thus, developing nations not only suffer the demand suppression, they also no longer invest in productive enterprises at home. The money gets sucked out of the local economy creating the exact conditions in which corruption takes over as locals are left to try and screw whatever they can get out of the system. Then, the investment money which does flow comes not from locals but from overseas banks serving their own interests and not those of the local population.
Meanwhile, the elites from those countries jet off on overseas holidays, keep permanent apartments in the fashionable districts of western cities, send their kids to Harvard and Yale and generally live it up at the expense of their countrymen.
This is all related to a larger problem in the post war years where the West actively supported various dictators in the Middle East and other countries. The reason? It’s easier to do business with a dictator who will do all the dirty work to keep his own population in line. China has taken that dynamic to a whole new level with the social credit scores and other dystopian measures that are designed to keep Chinese citizens from getting any ideas about wielding economic or political power.
The result of all of this is to create an enormous number of people who see no hope living in their country and will take any chance to flee it. Apparently, there are quite a large number of Chinese among the illegal immigrants crossing the US border these days. Perhaps they are spies for the CCP. Perhaps they just want to get the hell out of China.
In the meantime, the US has also created cultural conditions internally where to do any job other than a professional office job is somehow to be seen as a failure. Alongside the gutting of the manufacturing sector, this leads to huge numbers of people dissociating from society in drug addiction, porn, computer games and all the rest. These are the people who could be doing important manual labour jobs like harvesting vegetables, working in abattoirs and all the other things that actually put food on the table. Instead, those workers need to be imported which is exactly what is behind the push to give all these illegal immigrants work visas.
There is one final side effect worth pointing out. The whole system relies on western financial markets being completely open, transparent and reliable. Foreigners are actually buying real assets in western nations, thing like real estate, agriculture, stocks, bonds etc. That is why we are now seeing massive asset bubbles. Even the US is now catching up to Canada and Australia for what is another monstrosity in the making; probably history’s greatest real estate bubble.
The reason why all this has been getting so much worse in recent decades is because the neoliberal agenda of the 80s and 90s pushed the whole dynamic into overdrive. In fairness, it seems the US discovered how far it could push things more by accident than design (although it is possible there were some smart cookies behind the scenes who knew exactly what they were doing). Thus, China has entered the system on a very similar footing to Germany and Japan. The allowance of China into the international system has been like pouring fuel on the fire. To make it work, western nations dismantled their manufacturing sectors and privatised everything that wasn’t nailed down to increase the amount of assets available to soak up foreign capital.
As for real estate, well, see for yourself.
Keynes was right. We now have permanent, asymmetric growth and permanent asymmetric growth is almost the literal definition of the word monstrosity.
But, of course, all of this is a feature and not a bug. Even if the methods have been discovered by accident, all the decisions made have been in the same direction and with the same goal in mind: to maximise the power that the United States and its proxies wield through control of the financial system.
Increasingly, that power is now being turned against the citizens of western nations. I’m sure there must be some iron rule of politics that how you run your foreign policy eventually becomes how you run your domestic politics. The elites of the western nations have become just like the elites of the foreign countries who they have championed: happy to throw their own citizens under the bus to perpetuate their own power.
How much longer any of this can go on for is anybody’s guess. The monstrosities seem to be multiplying exponentially and they are lining up one after the other like an old-fashioned freakshow. Which is why our society increasingly resembles a circus.