This page has been archived and commenting is disabled.
Here’s Why Hyperinflationist Lira Is Wrong
First, let me say that I’ve long enjoyed reading the rants of over-the-top inflationists like Jim Willie, but also the relatively subdued essays of Gonzalo Lira — even if the latter sometimes comes across as the kind of guy who could wear out a mirror. I feel a comradeship with both because, predictions about the financial endgame aside, I agree with much of what they have said — most particularly about the robust defensive role that bullion seems likely to play no matter what happens. But that is not to say that I agree with all of Lira’s and Jim Willie’s arguments. Some background is in order. My instincts concerning deflation were hard-wired in 1976 after reading C.V. Myers’ The Coming Deflation. The title was premature, as we now know, but the book’s core idea was as timeless and immutable as the Law of Gravity. Myers stated, with elegant simplicity, that “Ultimately, every penny of every debt must be paid — if not by the borrower, then by the lender.” Inflationists and deflationists implicitly agree on this point — we are all ruinists at heart, as our readers will long since have surmised, and we differ only on the question of who, borrower or lender, will take the hit. As Myers made clear, however, someone will have to pay. If you understand this, then you understand why the dreadnought of real estate deflation, for one, will remain with us even if 30 million terminally afflicted homeowners leave their house keys in the mailbox. To repeat: We do not make debt disappear by walking away from it; someone will have to take the hit.
Expanding on that point alone, I could dismiss Lira’s entire argument with a wave of the hand, invoking the killer question that blogger Charles Hugh Smith has asked of overheated inflationists, to wit: Why would the rich and powerful men who control the Federal Reserve, and who would be wiped out by hyperinflation, allow such a thing to happen? The obvious answer is that they wouldn’t. And won’t. I’ve made this point myself many times before and in many ways, sometimes asking rhetorically whether we should expect Joe Sixpack and tens of millions of other underwater homeowners to be able to retire their mortgages using the confetti money that a hyperinflation would produce. Mortgage lenders would be big losers, of course, but so would anyone hoping to ever own a home — or to borrow money, for whatever purpose.
Unbearable Cost of ‘Escaping’ Debt
One of the best places to find the inflation vs. deflation argument deconstructed to a fine science, and to confront the horrific – and, as I am about to argue, unbearable — cost of “escaping” debt via hyperinflation, is the 1993 book The Great Reckoning. Co-authors Jim Davidson and Lord William Rees-Mogg went to great lengths to refract every aspect of the debate. It was this book, and a subsequent dialogue that I had with Jim Davidson, that hardened my deflationist ideas, convincing me – as they likely would many of you, though perhaps not Lira — that a deflationary path would at least be less ruinous than a hyperinflationary one. To be sure, vast amounts of real wealth would be destroyed in either case. But deflation would have the virtue of inflicting pain on debtors more or less in accordance with their sins, bankrupting those who most deserved it. That said, one needn’t drag in moral baggage to explain why the powers that be are extremely unlikely to pursue a hyperinflationary course.
And “pursue” is the correct word here, since, as The Great Reckoning made clear, hyperinflations don’t simply happen; they can only occur following the willful and deliberate decision of a sovereign government to hyperinflate. We need only consider the catastrophic consequences of hyperinflation to understand why such a scheme is so very unlikely to be promoted and effected by the Masters of the Universe. For starters, savers and lenders as a class would be wiped out, since their financial assets would become as worthless as the dollar itself. Bond markets and all other institutional conduits of saving and investment would cease to function in the absence of trust – trust that would take many years for capitalists to earn back. From day one, a darkening economy would subsist on cash transactions, which in turn would bring on the hardest of times, little economic growth, and a drop in the standard of living so steep that it might take a generation to rekindle even a glimmer of the American Dream.
Deflation’s ‘Virtues’
Deflation, on the other hand, would leave the bond and stock markets intact, sparing those with little or no debt from its worst ravages. For those who owe, a tidal wave of bankruptcies would mete out punishment commensurate with each borrower’s sins of profligacy and/or greed. Businesses would be starved for credit, but whatever savings were available would go to the most promising of them. Most advantageously for an economy on-the-mend, it would be many years before capital would be hijacked by the paper-shufflers and feather merchants. In both the public and private sphere, Americans would be forced to live within their means.
I won’t belabor Lira’s arguments where he attempts, not entirely without success, to “slice and dice” my logic when it is at its weakest. But his main criticism — that I have not made a case for deflation, only one against hyperinflation – is disingenuous. For in fact, I have stated the case for deflation thus: Someday very soon, following the precipitous failure of the world’s banks and securities markets, we will all be too broke to push the price of anything sky-high. Hyperinflationists assume we will have vast piles of cash at-the-ready, physical or digital, to exchange for real goods in a panic or along the way to hyperinflation. But will we? Read Lira’s smug hit-job a dozen times and you will find no mention of how that cash will get into our hands, much less into our hands if the banking system should go blotto. He avers only that, well before a collapse, via quantitative easing, the government will “ram” money “into the economy.” As if that hasn’t been tried to death already.
No Middle Way
If you believe that one or the other, deflation or hyperinflation, will eventually do us in, then you may find yourself won over by my argument simply on the evidence I muster against hyperinflation. Read on and judge for yourself. For what it’s worth, Lira’s ruinist essays suggest that we do see eye to eye on one thing – that there is no “middle way” that might allow us to avoid the catastrophic liquidation of a global debt bubble whose notional value has been estimated as high as a quadrillion dollars.
Let me dwell for yet another moment on this idea that Americans could go broke overnight. Lira apparently believes this unlikely, if not impossible, and he could be right. But not very, since it is beyond conjecture that the day-to-day economy would grind to a halt quickly if digital money were thrown into chaos and disrepute for more than a few days. And it’s not as though Americans are so very confident in electronic money’s soundness at this point that the banking system could withstand even a minor crisis. Unfortunately, and as we all know, there are no minor crises any more, especially in the financial realm.
We’ll All Be Broke
So, broke is what most of us will be when the dust settles, and it is perhaps only a matter of the rate at which we go broke that divides inflationist from deflationist. How quickly could the financial system come tumbling down? Last May’s “flash crash” on Wall Street demonstrated that it could occur in a trice. Picture the Morning After the next flash crash, but assume that, this time around, the Plunge Protection Team has been unable to arrest its spread into bond markets and other securities markets around the world. Hardly a stretch, right? But it’s a big stretch to imagine a hyperinflation arising from the smoke and rubble of the creditless world that would result.
Will we have gone broke without having had the chance to pay off our mortgages in snide? I say yes; Lira, for his argument to hold, is obliged to say no. I hope he’s right. Then again, maybe hyperinflation will unfold so slowly that we’ll all have time to trade piles of shrinking dollars for real stuff currently owned by…fools?
Whatever happens, I wouldn’t put much store in Lira’s assurance that even small branch-banks keep scads of cash around. Try to withdraw $25,000 from your own branch if you want to find out the truth. He’ll probably say that the banks, with a nod from Uncle Sam, could refill everyone’s account with digital money overnight. I say, think about that for a moment – about the economically fatal traffic jam this would create instantly in the world of real transactions.
Deflationary Gas-Bag
Lira’s arguments, although certainly not his ungentlemanly, preening condescension, are at their weakest when he attempts to explain how quantitative easing will inject a hyperinflationary sum of dollars into the real economy. He says our bankrupt government will simply spend limitless quantities of funny money into the “wider economy.” If it were that easy, why are home prices still falling after trillions of dollars worth of “stimulus”? And why have wages failed to rise? Granted, fuel and grocery prices have been going up. But how long can that trend continue with incomes stagnating and household discretionary cash plummeting? (That was not a problem in 1922 Weimar, by the way, for reason that I shall explain shortly.) And how many seats will the airlines fill this summer if prices stay above $500? With respect to the inflation of stock-market prices, we’ll let Lira shoot himself in the foot if he wants to argue that Wall Street’s cosmic gas-bag is other than a deflationary juggernaut waiting to implode. Meanwhile, a vastly larger gas-bag in the form of a global derivatives bubble is set to implode with irresistible force. Hundreds of trillions of dollars’ worth of collateral are destined to shrink to the vanishing point. That is the true measure of deflation’s force, and when it starts to snowball again as it did in 2008, no puny multitrillion-dollar monetization by the Fed will even begin to counteract it.
Finally, we cannot let Lira evade the question of how, specifically, the government will “ram” (his word) QE3/QE4/QE5 money into the economy, especially when the state and local governments who in earlier times would have been the most eager and efficient conduits for these sums have begun to refuse them, knowing as they do that each new stimulus dollar will only create more debt for future taxpayers. We’d like to believe that the common sense of Republican and Tea Party governors and legislators alone will suffice to smother any inflation that might otherwise seep into the economy via supercharged outlays of cities, counties and states. In fact, the deflationary opposite is happening as local and state governments expand layoffs and pare budgets to the bone. Which leaves only the private economy to receive a wage stimulus sufficient to catalyze hyperinflation. On that score, just as we’ve asked hyperinflationists to wake us when we can sell our home for a quadrillion dollars, we’ll ask them now to send us a job application when GM is paying assembly-line workers $800 an hour.
When Money Dies
Big employers effectively did so in Germany, allowing weekly wage settlements with then-pervasive trade unions to track hyperinflation almost step-for-step. But you’ll need to read Adam Fergusson’s book about the Weimar hyperinflation, When Money Dies, to understand exactly why the U.S. is legally and practically constrained from duplicating Germany’s dubious feat. If you believe otherwise — believe, as Lira evidently does, that the Fed could somehow put a google of dollars into circulation on demand — then you should be buying real estate hand-over-fist right now. When Money Dies is a great read even for those who’d rather not be disabused of the notion that today’s USA, economically and financially, is not 1921’s Weimar. I particularly recommend a chapter that recounts how the most extreme periods of German hyperinflation occurred while the country’s money-printing presses were idled by strikes. Turns out, some of Weimar’s largest employers had been authorized by the government to print scrip in the event that crates of official money didn’t arrive in time to meet payroll. Imagine what such a policy could do for Detroit! For the whole world!
Rather than argue that this couldn’t happen, we’ll say only that if it did, it would be but a momentary blip in a deflationary collapse in real estate that Lira doesn’t even mention. Just wait till the incipient collapse in commercial property values hits full-bore. This is yet another deflationary juggernaut that the arrogant and pompous Lira has conveniently failed to notice. He will soon, though, and the shock of it may yet distract his attention from an inflation that so far has barely overflowed the lettuce bin.
(Get Rick’s Picks commentary delivered free each day to your inbox.)
»
- advertisements -
Why, so you can summarily ban him in your Godlike self-importance, a la Karl Denninger?
Well, given the elevated levels of haughty arrogance you both display, in spades, as well as the wholesale denial of reality you both engage in, not to mention the disingenuous arguments implicitly supporting those in the status-quo financial and monetary power structures with your absurd fearmongering about the non-existent threat of deflation under a fiat monetary system (something which history has yet to witness even ONCE), I can see where one might confuse Jon Nadler for you, Rick.
This makes no sense to me.
In the modern age, money can be created digitally in an instant and propagated electronically anywhere in microseconds.
Why does Ackerman believe there's some sort of obstacle to the Fed doing this?
I don't get why he has that blindspot either. I have plastic cards that let me buy small and big things, without the need to push wheelbarrows of paper around. It's utterly bizarre to see this glimpse of Rick's mind. He should quit now. Better to say nothing, and be thought a fool, and open your mouth and prove it beyond doubt.
and when you hit your credit limit..and drained your money market acct.. then what? you will be selling your harley for 2k.
I think thats what rick is talking about. The money you will need to buy survival goods will come from the depreciating assets you are forced to sell.
Unless your salary is rising or you have tons of extra cash in you bank account you will most likely need to sell something to cover your increasing monthly bills.- thats what puts the brakes on true hyperinflation -when there is panic selling
no?
... but until you hit your limit, you'll spend what you have on what you need. It takes at least a year to foreclose if you default on your mortgage (if the bank can even prove it owns your mortgage), so if food and gas prices rise faster that wages can keep up, you'll spend your savings, spend to your credit limit, then spend your mortgage $ on food & gas (maybe stop paying the cable bill, phone bill...) eventually you'll hit a wall, but in the meantime, shouldn't the belief that the tangible good has more value to you than your dollars fuel hyperinflation until the money's gone?
Geez, up until now I had avoided using the word "idiot(s)" in this discussion.
They're both right and both wrong. We can have hyperinflation in prices along with deflation of the money supply. There are more factors that are being ignored, namely the destruction of the value of the dollar, which has the same exact effect as having way too many dollars.
Good article Rick. Thank you for presenting the other side of the debate. I still don't know how to completely position myself other than own silver,gold ,beans ,bullets, and band aids. I tend to believe the deflationary side of things simply because the bankers are not gonna let us all have free houses. I presume that the government will tax the shit out of us and confiscate private property to take care of their debts.
If left to their own devices and allowed to proceed, absolutely Yes. When will the wild-cards rise up and take a stand? And for what will they stand for? Interesting times...
again, lots of hot air and no argument. please put the bitch back in its box.
Rick, you are contradicting yourself once again.
You start off saying:
Agreed with your thought process, they wouldn't want to be wiped out. But then you go onto say:
The Federal Reserve is controlled precisely by those debtors. For deflation to truly take place, you would wipe out the shareholders of the Federal Reserve (like what almost happened in 2008). So to answer your first question, the rich and powerful men don't have any other choice.
There are no shareholders in the Federal Reserve -- at least none with an equity stake.
On this point you are incorrect. The Fed pays dividends to its owners, via the regional banks.
Why would the rich and powerful men who control the Federal Reserve, and who would be wiped out by hyperinflation, allow such a thing to happen?
The rich and the powerful do not own paper. They own real assets. Hyperinflation will make them vastly richer and allows them to take control more easily.
Yeah, they own real assets. Like shopping malls and office towers.
Funny reaction, from a paper bug. The real rich are just laughing at you, your addiction to paper and the fact that you think that paper has any value. Wake up, dude.
They also own oil companies, tech companies (some that produce military hardware), and agriculture companies and most of the intellectually property in between. There are finite limits to what the earth and all of it's "assets" are capable of. Economists really need to start putting that into their bullshit equations. Supply chain capabilities are very real under even the most favorable market conditions. Buying power (in many forms) is all that matters. Nature makes no promises regarding anyone's survival. hedge accordingly because everything else is just background noise. Ask yourself one critical question, are you in this game for the long run or not, and then go from there.
... There are finite limits to what the earth and all of it's "assets" are capable of...
The estimated value of the world's equity is $100 Trillion Dollars. Google and you can confirm a number similar to that.
A reasonable long term annual return is 6 - 8 %. Let's say 7% for nice easy figuring.
Total global return per year is $7 Trillion dollars. US deficit is $1.6 Trillion. You see inflation in this scenario? Deficits will rise until they can't be paid. Politics will determine which debts get paid. What are the odds that Obamacare and Social Security get whacked? I would suspect the odds are quite large. Add anything you want to that list. Pick any country you want.
Decreases in the deficit will be deflationary.
I don't see inflation or deflation as these are simply bullshit terms. I see a cost associated with keeping my business going and a cost associated with the survival of my employees and my family. In terms of purchasing power (in any form of asset or fiat you like) this will require even more input going forward, period. Does it really matter what some "academic" fucknut economist calls it? There are, quite simply, more competitors competing for more pieces of that pie.
"Supply chain capabilities are very real under even the most favorable market conditions"
During my chasing college girls days, the going rage was the Japanese "Just-in-time" inventory control.
I wonder how that is going for them now.
Inflation/Stagflation causes disruptions in supply, in turn causing more cost inflation. And, yes, this has been going on for at least the last 3 years.
The premise that the "rich and powerful men who control the Federal Reserve" somehow have 100% control over whether there is hyperinflation is pretty laughable. If they had that level of control we would not be sitting at 20% unemployment (in real terms, not phony gov't numbers) with a deflating real estate market and the rest of the economy at a standstill.
The bankers have painted themselves into a corner, and they are no more able to control what happens next than you or I. Google "law of unintended consequences" for more information.
We have had stagflation for 4 years, and we will have it for another 4 at least. Both of these dudes are wrong. We got the bastard child. Deflating RE, inflating food and energy, a shitty job market that pays nothing, and gobs of debt.
The facts absolutely support the hybrid stagflation...thus making this dudes argument (sans the smart ass) as well as Lira's, moot. http://en.wikipedia.org/wiki/Stagflation
I think you are unaware that Lira predicts falling house prices during hyperinflation. This is because big ticket items naturally go down in price when food is the priority. He experienced this at a young age in Chile. Who will pay cash for a house when they are hungry?
Rick is right. The Fed knows it is easier to combat inflation than deflation. Getting cash into consumers pockets, then convincing them to spend it (assuming they are not buried in debt), and convincing broken or fearful banks to lend - all of this is like pushing on a string. You can't make consumers spend if they have no cash or are saving to prepare for when the bottom falls out. We are in the 1930s all over again. Does anyone remember whether we had inflation or deflation in the 1930s? Do you remember what caused it? Why would we have hyperinflation when wages are going NOWHERE and wage-like benefits (Medicare, Medicaid, Social Security) are DECREASING?
I said before and I'll repeat it: spiking commodity prices are a tax. If gasoline goes to $10 the vast majority of Americans have less cash to buy all the other goods that make up the CPI. Higher taxes are deflationary. The only way we're going to have serious inflation is if we all simultaneously say, "I'm not working for $40 an hour any more; my new rate is $80 an hour because I think the dollar is worthless." That won't happen because we are so cash poor that any plumber who demands $42/hr will lose business to the plumber who is more desperate and is willing to work for $38/hr. How can the dollar be worth LESS if there's a shortage of cash everywhere? The shortage of cash I'm referring to is with regard to the 97% of Americans who are poor because all the cash from the credit bubble has gone to the cleptocrats so they can buy their $30MM mansions in South Hampton.
All this debt we have loaded on ourselves, combined with a lack of new credit to roll the balances over is deflationary. Most Americans are slaves - any cash we would normally have to buy goods and services is going to pay off debt. Any debt we default on will cause more bank implosions and less credit to circulate. The Fed will continue to be the lender of last resort, but look at how the Fed distributes cash: 1.) it buys Treasuries to plug a huge deficit; 2.) it provides emergency facilities to banks (who squirrel it away in reserves) and 3.) it buys other debt securities in an attempt to prop up the mortgage loan market. None of this cash ends up in consumers pockets to buy "things."
One final thought for those of you who point to the ever increasing price of gold. Is it exploding because it is another bubble or is it exploding because we are about to have a violent overthrow of the U.S. government? The fanaticism of gold buyers reminds me of the fanaticism of all those who did not partake in the dot com bubble. You were reviled if you didn't buy eyeballs.com like everyone else. Likewise, 99% of the comments on ZH I see today are religiously bullish with regard to gold. Do you think we're going to have a violent overthrow of the government and the dollar will be replaced with gold and silver coins? Will that make transactions any easier? Are we all supposed to lug around alchemy equipment and scales tha measure in nanograms to make sure we are really receiving pure gold when we transact in your new world? Perhaps that is what you want. I believe metals will continue their ascent in the short run, for purely psychological reasons. But PMs will eventually fall along with commodities.
You are only looking at the money supply instead of prices.
Taxes and energy prices make everything cost more. A collapsing dollar is worth less so everything costs more. That's the only thing that us lowly serfs care about. You can have monetary deflation with price hyperinflation at the same time.
"You can have monetary deflation with price hyperinflation at the same time." - Precisely. The worst of both worlds. This guy is another traditionally trained economist with his head in the sand because he can not think out of the box. Buying power (in many, many forms) is all that matters for any individual or business around the world. You will either have it, or you won't. You will either have your freedom, or you won't. It really is that simple.
Deflationists are often confused by the 30s example. The big difference is that dollars were gold then and yes, deflation took place vs dollars. Deflation vs gold is indeed happening now but not versus the dollar. Because the FRN "dollar" has nothing to do with gold.
Although much of the Feds newly printed "money" has been kept off the streets, the USD is not just a domestic currency -- as holdings of UST paper decline overseas, those dollars buy essential commodities: consumables like food, oil, industrial inputs as well as wealth preserving hard assets bidding up the price. Other countries can simply print their own money and buy USD as well. (China's peg)
So we have domestic deflation, even in FRNs, for local market items like homes and no wage inflation to keep up with the internationally driven essential commodity inflation. That's the stagflationary squeeze and it won't be pretty.
Bastiat
Well stated...
All the fancy words in the world won't change the fact that the inflationary genie is out of the bottle. The money supply is making a sharp upwards cut.
Inflation if they keep printing.
Deflation if they stop.
Jubilee if they forgive all debt.
This crap is how old? 4k years?
4k ?
One can imagine a Babylonian priest changing the standard size of cloth / copper ingot / jar of grain: "Oh that's still one unit of payment. And you, you and you primary acolyte, take them first and exchange them for other stuff as fast as you can."
Or one can imagine a Babylonian priest lending a man 1 bag of grain today in exchange for 3 bags of grain by years end. At some point the ability to produce to grain cannot keep pace with the P+I grain repayments. Then farmers go to war with one another in order to pay their debt. Or they sell their daughters as slaves. Or they start cutting corners (selling GMO grain and other crap). Or they lose everything.
Either way, eventually, the whole thing comes crashing down. It's called usury - and yes - it is that old. Perhaps older.
Very nice.
And then we have the acolytes trading clay tablet IOUs for the farmer's failed harvest...it could go on and on.
Would that be derivatives?
This point about usury really breaks it down to the fundamental issue at hand. Thank you for this.
Excellent continuation and refinement of this debate, Rick, thank you. I agree with above reader, you, Lira & FOFOA are all very intelligent - no need to throw in personal attacks.
I'll strip out any nasty adjectives if you think they do not properly and accurately describe the Lira who wrote the "Slice and Dice" hit-job. It was he who brought a gun, and I who responded with a knife.
A good friend of mine is an economist for an Asian bank. He put it better than anyone imho: (I paraphrase) The dollar is backed by the most powerful military in the history of the world. Anyone who discounts that and claims that the dollar is merely "fiat" is not actually aware of who controls the world's resources.
It would a politically incorrect argument for an American economist to make -- but I should mention that my friend is Korean. And its an argument that bears some thought.
Last I checked, it takes oil to run our military. Since we have very little of our own oil, we must buy it. How we gonna buy oil if dollar worthless?
You'll probably reply with, "Why not just take over oil rich countries to control the oil?"
That will inevitably lead to a worldwide nuclear war, where nobody wins.
We might not have a lot of oil relative to Arabia or Venezuela, or as at least as much as we enjoy using, thus we import, but we have more than enough to run the military and the military industrial complex that supports it, at least those most urgently necessary means of weapon production and logistics. The SPR alone would run a nice world war for years, true it would fuel refineries for only a matter of a few months at today's daily consumption, but in a war rationing plan where only the military and emergency vehicles and mass transport got the fuel it would last for years.
I am not advocating this by the way, just pointing out that oil is no impediment to war. Just as it was not for Hitler who had only a few scraggly fields in Romania to rely upon, at least till the end months when they did run out of fuel for both aviation and the offensive in the Ardennes.
First off, you're casting me as a war monger, and I've said a couple times that I am not making a case for aggression. -- simply pointing out the way things are already.
But to respond directly to your point --
Two comments: We have loads of oil, just no political capacity to access it. We already are actively involved in taking over countries to secure the flow of oil.
The basis for the dollar *is* our geo-strategic control of resources. Don't make a moral case for why that should not be the case. I can make the same argument just as well as you can. I'm simply pointing out the reality of the American military empire (America is a military empire, in case you hadn't noticed) which is the largest in history, and is based entirely on the strategic control of resources.
Not casting you as war monger, just responding to your comment.
Basically what you're saying is that the military is our trump card if TSHTF. You are correct, it is our trump card, its the best we got. But there is a trump card which trumps our trump card...he who sits on the most oil reserves wins.
We don't have sovereign control over most oil in the world. We have not taken over other countries, we have only replaced their gov'ts with slightly less shitty leadership than previous. We don't sell the oil which lies underneath the ground of those countries you refer, we buy it from them. (not very smart on our part, but policitically necessary to avoid WW3 nonetheless.)
If you think we have "loads" of oil, check usgs.gov for proven reserves.
So if we all start dumping dollars, we will see the powerful US military invade in hundreds of countries and banks to prevent the dollar from falling!?
You're not seeing that now?
Agreed, however Rome was in the same position at one time, as was England. The strongest armies in the world are not enough when their monies and economies go south, at least historically speaking. Both took the silver out of the money, and both went into the world power dustbins of history.
One difference between Rome and the U.S. (at least for now) was that Rome was constantly fighting civil wars to determine who the next emperor would be. Pretty much from the death of Commodus until the end of the Western Empire, every time an emperor died the rival generals would fight it out. It's my opinion that over time this constant civil strife was one of the big factors that contributed to the fall of the Roman Empire.
"One difference between Rome and the U.S. (at least for now) was that Rome was constantly fighting civil wars to determine who the next emperor would be."
Don't think there isn't a war going on simply because you can't see the blood. You will eventually and by then it will be too late.
Agreed
Thanks for reminding us of how many people still are trapped in the old paradigm. How's the military thing working out for the U.S.?
How is the military thing working out? Well, the US isn't even remotely close to being challenged by China or Russia. Not by a couple decades.
And if you measure success in terms of global control of resources (which frankly, is the only way to measure success in this equation) then the "military thing" is a success of historic proportions.
What's your 'new' paradigm? A Chinese military threat?
The reality is that the dollar is backed by power and strategic control.
I am not, for the record, making a moral argument defending that truth -- just making a statement of an often overlooked fact: the US is de facto in control of most any assets it needs or wants.
What I meant, of course, was this: how's the future of the empire looking? All empires look inpregnable at their peaks, and for a time afterwards.
Who controls the Caucasus? When we finish pissing off the entire ME and the countries there all go Islamofascist, and Iran aligns formally with China and Russia, what happens to ME then? Do we have any more armies to deploy? Can we crash the domestic economy some more to fill the recruiters' offices with the FPS video game generation? Where will the money come from to support these armies? Traditionally, it's come from debasing the currency. The Fed is the handmaiden of the welfare/warfare state. The jig is up.
http://maps.grida.no/go/graphic/major-oil-pipeline-projects