The 'End Of Dreams' And The Saving Of Appearances

Authord by Alastair Crooke via The Automatic Earth blog,

Robert Kagan first called attention to the fact that America would need to awake from its ‘dream’ a decade ago in End of Dreams: The Return of History, and would have to manage the rise of ‘other’ powers, (some greater than others), with adroitness, if it were to avoid a bad road-crash as emerging competitors clashed with the waning dominant power.  

This meant that the US no longer would be able to assert its will everywhere, and on everything – and would have to give ground – especially to China and Russia.  “There’s going to have to be some very painful horse trading”, historian Sir Max Hastings suggests, adding that its pain will be none the less traumatic, since – like Germany after WW1 – America, does not feel itself defeated: Quite the converse, it sees itself having emerged from the Cold War wholly vindicated: in terms of its societal, governmental and capitalist models.

The American-shaped globalist order, in which three American generations have been steeped, had seemed so naturally to flow out from the Cold War, that the onset of world ‘order’ dissolution seems – shockingly, for many – to have struck out of the blue – as it were – with Brexit, and the election of Mr Trump. 

Commentators speak of America needing to be wary of the Thucydides’ Trap (when the then aspiring power, Athens, threatened the primacy of the established hegemon, Sparta, leading to war). But ‘the trap’ today is not simply just about who’s rising ‘up’, and who’s heading ‘down’, in the great-power stakes – for, as Josh Feinman, chief economist for Deutsche Bank, last year  warned, the problem is not just great power competition. But rather: “We’ve seen this movie before. The first great globalization wave, in the half-century or so before World War I, sparked a populist backlash too, and ultimately came crashing down in the cataclysms of 1914 to 1945.”  In short, the two world wars were not just about Germany challenging British hegemony, but were also about globalization ‘backlash’ too – something that is often overlooked. 

In other words, in the wake of WW2, America has been backing itself into the corner of an ‘American-shaped’ (imposed), second wave ‘globalisation’, and that is the major risk posed today (as much as rising China), with ‘populism’ again markedly on the up. And ‘second wave globalisation’ is again yielding predictable political volatility (i.e. in ‘unexpected’ election results).  However, as Max Hastings  suggests, (quoting former UK politician Michael Howard), “we must recognize that the élites, of which he [Howard] himself freely admits to having been a part, have failed to sustain the consent of electorates for this [Euro-centralisation and for globalisation]. This ignoring the need to sustain the consent of the electorate, bears a considerable responsibility for getting us into this mess”.

Further, as Andrew Bracevich underlines globalism has its distinct social ‘flipside’:

“[A] war [has been waged] on (genuine) culture: Under whatever guise, liberal-market globalism is hostile to tradition, community, established norms, and the very idea of a common culture – all of which impinge [adversely] upon the operation of the market, or claims of radical individual autonomy”.

The Thucydides’ Trap for America, rather, as Professor Lears of Rutgers writes, then, is not just the rising of Russia and China, but that of Americans being backed into the corner of not recognizing “that ‘they’ [the liberal globalists] are no longer defending either liberalism or democracy; [these] forms of élite rule – that provoke [such] popular anger – are merely the husk of liberal democracy: The once-vital discourse of liberal democracy has been hollowed out, and transformed into a language of managerial technique … Within this discourse, freedom has been reduced to market behaviour; citizenship to voting; and, efficiency for the public good to efficiency for profit. The rich civic culture that gave rise to popular American politics in the past—unions, churches, local party organizations—has been largely replaced, in both parties, by élites who have benefited from the ‘technocratic turn’”.

“As long as prosperity continued to increase as it has since 1945, western electorates were willing to give élites a very considerable measure of discretion about what they did, [whether in creating the EU], or whatever it might be. They were willing to acquiesce. Now, prosperity is being squeezed, wages are stagnant, and for many people unlikely to rise much in real terms.   It is going to be much more difficult to sustain the consent of Western electorates for purposes which the élites might consider as [somehow] ‘enlightened and unselfish’”. (Hastings again – with emphasis added).

And here lies the real ‘trap’: it is not that “prosperity is being squeezed” as per Hastings, but that the economy has rather, been divaricated into the ‘squeezed 60%’ and the asset-holding, and enriched 40% (as Ray Dalio describes it). Last month Dalio, the billionaire founder of top hedge fund, Bridgewater Associates, posted a new article, “The Two Economies: The Top 40% and the Bottom 60%”.  He believes it is a serious mistake to think you can analyze or understand “the” economy because we now have two of them. The wealth and income levels are so skewed between top and bottom that “average” indicators no longer reflect the average person’s experience or living conditions. Dalio explains with this chart:

The red line is the share of US wealth owned by the bottom 90% of the population, and the green line is the share held by the top 0.1%. Right now they are about the same, but notice the trend. The wealthiest 0.1% has been increasing its share of wealth since the 1980s, while the bottom 90% has been losing ground. But it would be a mistake to understand this phenomenon – ‘populism’ as it is labelled in Dalio’s chart – or, the push to recover national culture and sovereignty – as simply a gripe about inequity. It has become since 2009 much more than that: it has become a matter of survival for a major segment of the American and European population (especially, as it coincides with a pensions crisis, which will leave many impoverished in their old age): 

“Prior to 2009, debt was able to support a rising standard of living…”, Raúl Ilargi Meijer says, “but less than a decade later, [personal debt], can’t even maintain the status quo. That’s what you call a breaking point.” (Alastair: Or, even, a precursor to civil violence?)

 

“To put that in numbers, there’s a current shortfall of $18,176 between the standard of living and real disposable incomes. In other words, no matter how much people are borrowing, their standard of living is in decline. 

 

“Something else we can glean from the graphs is that after the Great Financial Crisis of 2008-9, the economy never recovered. The S&P may have, and the banks are back to profitable ways and big bonuses, but that has nothing to do with real Americans in their own real economy. 2009 was a turning point, and the crisis never looked back”.

And Max Hastings’ point is that with austerity gone, early popular acquiescence has turned to anger against the élites – for having so taken them for granted in their utopian globalist projects.

Now the wider point: what we have here is the intersection of geo-politics with geo-finance. Both are now wholly contingent on the ‘saving of appearances’.  One co-constitutes the other.  One is the saving of appearance that America is not losing ‘respect’, or being disdained in the international arena, as it attenuates its global commitments (that is the Thucydides ‘syndrome’), and two, saving the appearance that ‘recovery’ and ‘prosperity for all’, are continuing to unfold nicely in the economy (the world converging globally to western values ‘syndrome’). 

Both these aspects to the dissolution of today’s western ‘modernity’ are intertwined, and co-constituting, and therefore likely to march in tandem – at least for now:  western ‘prosperity’ underwrites the global order, and the global order underwrites American ‘prosperity’.  The American and European élites therefore find themselves painted into a globalised ‘rules-based order’ corner, geo-politically, just as the Central Bankers have been backed into their QE, low or negative interest rate corner – from which there is no easy escape, either. 

The term ‘globalisation’ has been used to paint a landscape that is both inevitable, and beneficent: “free trade floats all boats; everywhere” is the meme. Devotees of globalisation however, never examine rigorously whether David Ricardo’s comparative advantage theory still holds good in the contemporary world (Nobel prize winner Joseph Stiglitz, however, being a notable exception). There just has been no point in asking the fundamentally political (as opposed to technical) question: Has the resulting off-shoring of supply lines, truly been in our interest – politically, as well as financially?  And has the concomitant – globalist disembedding of humans from national culture, community and sovereignty, and the rise of the apolitical, neo-liberal, chameleon-identity ‘Self’, been in the general political and societal interest, too?

It may be objected that Trump is not a globalist.  Whilst it is true that he does not favour America shouldering the claims of a world order; he – himself – protests loudly that he is a globalist – but it is just that he is a hard-nosed, New York businessman, type of globalist: that’s all.  Globalisation (in the neo-liberal mode), remains as a western totem, rightly, or not, according to political taste.

Where now? In the domestic field, the Central Banks’ easy ‘group think’ on QE, low or negative interest-rates, and ballooning public and private debt, has been pursued now for so long and so extensively, that it has both given us Dalio’s Two Economies, and no way back.   It has become a vicious circle: as high debt, to GDP ratios, low-interest zombification of entities and shrinking personal disposable income in the 60%, have depressed growth. Yet, paradoxically, never has the need for more of the same – QE, low or negative interest rates, or even ‘helicopter’ income – been so widely extolled — and, at the very moment when their drawbacks have become so widely identified, even by central bankers, themselves.

So here we are: there is a messy, and bitter, divorce taking place in our societies between the 60% and the 40% ‘tribes’. Asset valuations indeed have never been higher. Yet growth by contrast, has, on average, been ratcheting down, decade by decade – and for some, the situation has become truly existential (those for whom even additional debt cannot sustain their non-discretionary outgoings).

Where do we go from here?  A continuation of the existing financial paradigm is what everyone believes; what everyone expects (wants) – and is what we likely will get.  It might even be deepened a little, in the wake of a market hiccough (S&P down by more than 2%).  And in the case of a financial black swan, we may witness the system literally ‘hosed down’ with newly created ‘money’.  But essentially, the business and trade cycle will continue to be heavily repressed – volatility slammed down – and the S&P be the metric of national well-being.

Not only do the markets ‘believe it’, President Trump needs it: geo-politically he likes to do his style of negotiating from a position of strength (and not from one of economic crisis); and internally, he is at ‘war’ with the Establishment.  With the S&P touching records daily, he is immune from taunts of incompetence (regardless of whether not the highs have anything to do with the President).  His base likes it too: their meagre retirement portfolios at least are rising in value. And in any event, it is not surprising if Trump is a low interest, plentiful liquidity, expanding balance sheet, man globally:  It is how he made his billions, personally.

Of course, the flip side to continuing the ‘easing’ paradigm is the ongoing hidden transfer of wealth from general taxpayers (the 60%) to the 40%: more populism; more unexpected election outcomes in Europe; more fake-ness; quicker dissolution of the glue holding society together; more political process, less outcome; less ability to address the needs of collective purpose, etcetera — rising rancour and push-back, in a word. This is the implication.

In parallel, the saving of appearance in geo-politics seems to require its slamming down of volatility too (and in the EU, not least – i.e. Catalonia).  People want to believe it (in American power); important sectors of the economy want it, (need it): the appearance of America’s global standing must be preserved.  Repressing North Korea, ‘slamming down’ Iran can save appearances (America is strong), but the flip-side is the increased danger of war – whether inadvertently triggered, or by the US cornering itself into it.  Actually, ebbing power is something that you smell: false bravura only heightens the odour of weakness.

So, continuance of the paradigms (financial and geopolitical), and the continuance of ‘populist push-back’ (i.e. volatility) seem set. Is Josh Feinman of Deutsche Bank then right when he says: “We’ve seen this movie before. The first great globalization wave, in the half-century or so before World War I, [it] sparked a populist backlash too, and ultimately came crashing down in the cataclysms of 1914 to 1945.” Is a financial crisis inevitable – ultimately?  Is war – a confrontation with either Russia, China or N. Korea – unavoidable?

Who can say, for sure?  But the repeating of history is not inevitable.  Financial re-set at some point, has become inevitable, it would appear. It has taken time for the old meme to fade, and weaken its hold sufficiently. Hemingway famously said about bankruptcy (his), that it starts only very slowly, but ends lightningly fast.  The political impulse for a change in the social and cultural paradigm however does seem to be unfolding at an accelerating pace. ‘Populism’ and ‘unexpected’ election results are acting as its accelerant. And the intellectual context for a seismic economic policy shift, is in place too:  monetary policy is seen to be bust, and the economic ‘models’ have been seen to be plain wrong. TINA (there is no alternative) is wobbling on her pedestal, and seems poised to topple over.

Of course there are alternatives.  But will they arrive in time?  Perhaps the existing paradigms are destined to endure a while yet … ’til Hemingway’s observation about bankruptcy sliding unstoppably fast towards the end is further proven as a truism?  In the meantime: we wait; shackled by inertia, and backed into a corner.

Comments

38BWD22 shovelhead Sat, 11/25/2017 - 19:47 Permalink

  Our dream has not ended in Peru for our company.  After a difficult 2016 and 2017, things may be looking up for us.  Because of the nature of our business, we hope to be somewhat protected from a BAD 2018 in the US and world economies, but we will see.We do have some interesting new bearings for sale.  Pictured is a pallet load of our great selling piece "38BWD22".   Just in case anyone has wondered what that meant.  *Click* on that image for a better view.:)"Recently Arrived Interesting Bearings"https://goo.gl/mkC9Sq 

In reply to by shovelhead

MonetaryApostate 38BWD22 Sat, 11/25/2017 - 20:07 Permalink

Hyper QE will only end with the result of hyper inflation, yes the dream is over globally as they collapse cash & move towards cashless, but it will truly be out of the cash pot & into the digital frying pan.Don't miss paying your mega expensive internet & electric bill or you can just kiss your life goodbye, that's what cashless means.Moreover, the QE will become invisible & unknown.

In reply to by 38BWD22

Son of Loki MonetaryApostate Sat, 11/25/2017 - 20:20 Permalink

Globalization by Bill Clinton, Bush and Obama killed the USA.China's middle class is now much richer in money and in spirit then the American middle class.I don't see many Americans going around the world buying up $1 million houses like the Chinese (or Arabs, or Russians), do you?To make matters worse, the DOJ and Congress barely get upset knowing Hillary [illegally] handed 20% of our strategic energy reserves (uranuim) to Russia for a $145 million bribe, while Rosenstein, Obama and Meuller looked the other way [or took some of that loot for themselves?] 

In reply to by MonetaryApostate

Stuck on Zero Laughing.Man Sat, 11/25/2017 - 22:38 Permalink

Can we get rid of that misnomer contradiction "free trade."  Trade has never been "free."  The natural order of things is to screw the other guy in trade and it reaches its peak contradcition when governments and politics get involved. Just think:              "free trade," "free love," "free meal," "free pass." ...  NOT!

In reply to by Laughing.Man

Xena fobe Son of Loki Sat, 11/25/2017 - 23:00 Permalink

And it's.not getting any better under Trump.  Yes he got China to reduce tariffs on some items.  But increasing trade with them is not going in the right direction.  Trump is a globalist too. And even friendlier to multinational corporations thsn Hillary would have been.We will all end up competing on wages with third world workers.  Which was by design. 

In reply to by Son of Loki

38BWD22 MonetaryApostate Sat, 11/25/2017 - 21:56 Permalink

  For what it's worth, Peru is the No. 6 country of the world in gold production.  Our customers could pay us in gold, our suppliers (Korea, Japan & China) would probably take it in payment as well....Some years ago, I heard a "genuine rumor" (for what THAT'S worth) that there are MASSIVE S. Africa style deposits up there in the Andes.  Chinese exploration companies are crawling all over the Peruvian Andes.

In reply to by MonetaryApostate

38BWD22 Xena fobe Sat, 11/25/2017 - 23:31 Permalink

  An excellent question.And the answer is, they don't benefit much, because of corruption, bad spending priorities, incompetence, POLLUTION, corruption, and general sleaze.Did I mention corruption? The Odebrecht Scandal has embroiled at least the last three Peruvian presidents.  (To be fair, almost all of S. America and, apparently even MIAMI: the Dolphin Expressway reconstruction, $$$). 

In reply to by Xena fobe

Cloud9.5 38BWD22 Sun, 11/26/2017 - 07:58 Permalink

It’s been tried a couple of times by the Germans and at least one time by the French.  The invaders were exhausted by the people, the vastness and the weather.  In the end, the invader’s armies slouched back home to collapsed political systems.  The only way to invade Russia is the same way Latin America is invading the U.S.  a few hundred thousand families at a time.

In reply to by 38BWD22

qdone Sat, 11/25/2017 - 18:42 Permalink

david cassidy's daughter purportedly said her father's last words were "so much time wasted" . hummm, seems david cassidy and 'murica have much in common.

shovelhead Sat, 11/25/2017 - 18:43 Permalink

So the upshot is that we don't mind getting fucked as long as we get a 4 star dinner out of the deal, but not so much for a moldy peanut butter sandwich tossed out of a passing limo.And the rest of the world feels the same.What a surprise.

Endgame Napoleon jal Sat, 11/25/2017 - 22:25 Permalink

According to Forbes, only 31% of Americans have even $1,000 in savings.

Whooo hooo, the stock market has gone up for elites who not only often have two, high, salaried incomes per household. Some of them also have a lot of investment income from trusts and so forth. Most of them still choose to take two of the scarce, good jobs out of the economy, rather than risking money to create jobs for their fellow Americans or, at the very least, just taking one job, with the spouse actually raising the children.

The security of the global stock party reduces the incentive to take risks to make money. It is secure because of being undergirded by a cheap, global labor force that ensures low expenses and greater profit.

What Elites in both parties believe in is socialism for some; that is their solution until the robots take over even more jobs.

Republicans claim to oppose socialism. If so, it is only the contributory programs, like SS, that are regarded as socialism, i.e. the programs that we pay into at 7.65% (employees) or 15.30% (the self-employed).

If judged by actions, Republicans like the 100% freebie socialism that rewards womb productivity almost as much as Dems, although maybe not as much as Bernie, the Independent.

We have a Republican president and a Republican congress, and yet, the most outrageous form of welfare — the child tax credit, which is just a lump-sum cash assistance check on top of free rent and groceries — increased this year from a maximum of $6,269 to $6,318.

Pretty soon, that tax-welfare check will constitute the equivalent of [half] the yearly wages in a $9-per-hour job in states with per-capita income between $18,000 — 20,000 per year, like the following: TX, TN, MS, AL, KY, IN, just to make a few. Right now, a childless, single, individual must work 4 months full time to get the equivalent of a max child tax credit in take-home pay.

To give you an idea how unbalanced this socialism-for-some is, when Obama's stimulus went into effect, I was working an exhausting and dangerous job with long hours and a ton of quota pressure, which required multiple licenses. Even though I met the quotas every month, I was paid too little to rent an apartment. My tax cut from Obama’s stimulus amounted to $39 per month. That is less than the difference between the $6,269 child tax credit of 2016 and the newly enlarged, Republican-endorsed child-tax-credit upgrade to $6,318. That mom also gets free rent and food, with monthly cash assistance going to some as well. Obama made sure the child tax credit amount went over $8,000 for people with more than 3 kids during his stimulus, while I got $39 per month in a temporary payroll tax cut.

Republican leadership is almost indistinguishable from Democratic leadership on such issues, with the difference being Republican-supported, womb-productivity tax [breaks] for rich parents, like the estate tax cut, in addition to an increase in the amount of womb-productivity tax welfare for “poor” parents, whether they are citizens or noncitizens, and an expansion of this tax-code welfare check to so-called middle-class parents.

Individuals struggling to cover all bills on one earned-only income be damned.

To make it worse, mommas get all that unearned income by working few hours to stay below the income limit for welfare; they must stay below $1,000 per month in earned income. When I worked at the Department of Human Services, the earned-income limit for welfare was set at below $900 per month.

All of this not only pumps mommas full of unearned income to reward sex and reproduction in greater amounts per birth, it also drives wages down for those who must live on earned-only income by supplying employers with a workforce content to work part time and incentivized to accept low pay.

There is no incentive to work hard anymore unless you have unearned income to cover your major household bills. [That] is why the workforce participation rate is still static.

And the Uniparty does not care.

In reply to by jal

Xena fobe Endgame Napoleon Sat, 11/25/2017 - 23:19 Permalink

I hear you.  Single childless people are in the worst finamcial position of all.  Tough paying rent on one income with no deductions. As for work, it's always been who you know, not what you know.  Gotta accept some of this crap won't change.  We chose to be single and I would still make the same choice.  I am so thankful I have no kids for TPTB to enslave. 

In reply to by Endgame Napoleon

SilvaDolla Endgame Napoleon Sun, 11/26/2017 - 09:07 Permalink

Working hard accomplishes NOTHING anymore. I had my parents sign a permission slip for me to start working as a bag boy when I was 14. When I graduated high-school I went into the cabinetry trade like my father before me.

I’ve worked hard for 24 years and do you know what it got me? A ride on the economic hamster wheel. No matter how hard I worked, how many overtime hours, or how much my hourly wage increased, it couldn’t keep time with rising rent, utilities and food costs.

It used to be that the people who worked hard and created physical, durable goods could live the ‘American Dream’. Now, the ones that actually create products of value are the biggest suckers of all because the money is better in pedaling make beLIEve, pencil-pushing or just existing on tax-payer funded entitlement programs.

Working hard is for Fucking suckers. That’s why many don’t bother.

In reply to by Endgame Napoleon

Archive_file Sat, 11/25/2017 - 19:48 Permalink

Liberals are useless.

They are the type of people whose first reaction in any situation is to see what's in it for them.

If they can get something out of it (no matter how heinous) they'll try to justify it to the underclass.

I don't even listen them or their mouthpieces.

Posa Sat, 11/25/2017 - 19:49 Permalink

It's likely the US will be squeezed out of Asia and The ME. Lil' Kim is sitting pretty and enjoys the backing of China as long as he doesn't shoot first.Putin - Iran- Hizbolllah have defeated the US- Israel- Gulf Monarchies - ISIS/ jihadi terror armies and has no more cards to play. The EU is being torn to shreds and useless; while the East bloc is drifting towards the Russia- China Axis.The asset bubbles in the West have to pop --it's inevitable--- although the Central Banks may try to buy up inflated markets with fiat money... hard to see how that succeeds for long... on the other hand the Chinese are a centralized, mercantile economy and can probably outlast the thgeir own and the Western crises... the Chinese OBOR initiative is far more appealing than the US- Israeli Overlords non-stop genocidal rampages since WWII and are rejected by the rest of the world. Domestically, One would hope that the US Predator Class can be dethroned and the US set on the path to growth and development again... but it's not likely... the post- War Pox Americana has effectively destroyed any Kennedy-like figures who can restore economic vitality again (and I don't mean figures from the Ayn Rand- Libertarian market fundamentalists) ...  So in the US we're screwed. Hard to see a happy ending here. 

Arrest Hillary Sun, 11/26/2017 - 06:02 Permalink

You never hear these socialist nerds predicting .... the Cuban model is going to collapse .... or .... "How Find Poverty 90 Miles From The Biggest Market On Earth !" .... by Raul Castro ?

Manipuflation Sun, 11/26/2017 - 06:03 Permalink

It is fun with the neighbors sometimes and especiallly when they are drunk and one of them knows how to do custom work on a Harley,  It was his 54th birthday but she had to go to bed.  No one really needed her anyway,  We had to go look at the Harleys.  Not ride them, just look.  It's eye porn for males.  And YES, these are S-K wrenches.  The real ones.It was cool.  Now he knows that I am not lying. 

Hkan Sun, 11/26/2017 - 08:03 Permalink

Life in the jungle strongest meanest preditors survives and pass on their genes.  Liberal humanists wont survive competition. Unless.Ability combining democracy human values equality and fighting bloody war against Preditors for survival.Possible since its not in our genes? Future will tell.