Nation State or International Integration

 

The election this fall is not about Islamic State, al-Qaeda, Taliban, or other security. It will not be about most of the items the media is talking about. What it is about is the economy, jobs, employment, wages, and everything about the economy but not in the obvious ways being discussed. Where will this next Presidency balance? The main item is which way does it benefit the United States most, continuing internationalism or returning to nationalism.

 

The media and most politicians are pushing this global economy, global integration, global cooperation, global solutions while hiding a dirty little secret, they are selling global as the solution while having the United States and the advanced nations pay for everything while equalizing the global playing field, whatever that means. We had a debate last night and we heard more of the same. Clinton claimed more globalism and taxes on the rich and Trump tried and may have meant to sound like Reagan. What they were not telling the people is that Clinton was using the same internationalism where the world matters more than the United States so in order to equalize the world the United States and the advanced world has to bleed to allow the rest of the world to catch up and then all will be well and how wonderful the world can be. Trump is actually claiming that every nation take their own and put them first and attempt to allow the nations who are leading the world to continue to be the leaders and then assist other nations in making gains and follow and give them access to advances as they are able to implement these advances. So, which way will work best. That depends on which nations one decides should be permitted to advance their own interests than to share with the world.

 

Internationalism is wonderful if your country is on the receiving end and not so wonderful if you are being bled to bring the other nations up to their level. The problem with that are many of these nations that are presumably being given advances in order to raise them to the same level are led by dictators who are enriching themselves and not making their nations any closer to the advanced world as that does not directly benefit them. What these dictators are not being intelligent about is that had they advanced their nation they would have enriched themselves in the process. They are not even thinking nationally rather than internationally. Internationally is a recipe for disaster as it inhibits the leaders from leading and demands that the least efficient be granted the largess while the leaders are placed in financial straight-jackets. Internationalists place a stop sign where all nations must park their own business and park their nation by the side of the highway and wait for the rest of the world to reach an equal position. The problem is that many of these nations, which they are waiting for to reach the same point, are themselves broken and not gaining and will never catch up as they are not even making any effort to reach the next level. Internationalism believes that making all nations equal will solve the world’s problems and inequalities, despite it not ever bringing the rest of the nations to first world status.

 

 

World Map with Borders Deemphasized

 

Nationalism is the opposite view which allows each nation to advance at their own rate and still demands that the first world assist the developing nation but does not demand they try to make equal those nations so dysfunctional that they are the closest thing to an economic black hole as can be found. Nationalism rewards each nation for their efforts and allows each nation to gain at their own speed. Allowing the leaders to lead gives other nations a target and proven path they can emulate but without national gain by the wealthiest nations to blaze the trail for the others to follow. The basis for nationalism is it allows each nation to set their own monetary policies and is against unifying monetary policies as such a system is flawed and destroys the lesser productive nations which has been proven by the European Union Euro which has benefited Germany while leaving Greece behind. Nationalism allows each country to do the best for their own people and society. That does not mean that nations which are developing should not be aided and it is in the interest of the most advanced nations to assist those nations who are developing and making the right choices and allowing them to benefit from the experiences of those nations who have traveled those roads before them. But those nations which are completely dysfunctional cannot be assisted as long as their governance is broken and until the nation decides to change their dysfunctions there is no reason to throw good money after bad.

 

Internationalism is a wonderful, feel-good policy filled of kind words and low on actual results. Internationalism demands that all nations be made to give according to their ability and the funds are granted to countries according to their needs. Internationalism demands open borders allowing free immigration with no limits or criminal and other background checks or other limits or restrictions. The policies sound as if they will allow all nations equal opportunities in word while defining this policy as bringing all nations up to the same level and making things fair for all nations. The truth is that this is accomplished by tearing down the greater nations while benefitting some of the least deserving nations who are corrupt criminal enterprises more than they are actual functional nations. Rewarding the worst while impeding the best prevents progress and will constantly restrict progress and the discoveries of new technologies and new systems which would result in assisting those nations seeking a better future to implement the proven methods. To get an idea on the difficulties caused by internationalism there is a perfect example which we can observe, the European Union. How has that equal currency been working for over half of Europe who are not Germany or Britain but are Greece, Spain, Italy and even France and many of the former Warsaw Nations. The common currency has taken the small differences of economic production where the agrarian economies which work on a different production level having to survive with the same policies of the industrial and other highly developed nations.

 

World Map and Relative Wealth of Nations

 

Permitting each nation to perform at their highest level and to their full potential will set target paths for other nation to follow along the proven road set by the highest performing nations. Progress is the fuel that raises all nations in turn. Progress provides the test paths and allows developing nations to benefit from their more advanced nations but only when they decide to advance. No nation could be forced to grow their economy and advance their national infrastructure and when a nation refuses to advance itself then forcing the rest of the world to wait for such a nation to reach an equative level is ridiculous and counterproductive. Internationalism is wonderful idea if it could function as promised. Nationalism is the dirty sounding word which is accused of being selfish because it benefits the wealthy nations and prevents developing nations from ever reaching the top level. The obvious fault is that accusation is completely false. If nationalism prevented up and coming nations from ever becoming the top nations were true then China would have ruled the world, Spain would be a leading nation, Greece would be the top nation in Europe, Egypt would be the most advanced nation in construction and engineering, Persia would still control East-West trade routes, Portugal would be a great power with colonies throughout the world, and the Hittites would be the great power in the norther worlds of Europe through to Turkey. Top nations change and have changed throughout the history of the world while nationalism was the rule of the world. Internationalism has caused massive stagnation as the world as a whole is not permitted to advance because the leading nations are held back presumably for the benefit of the lesser nations. This will always be a supported philosophy as there will always be more developing and undeveloped nations than leading nations as only a few nations will be in the top ten percent, which is why it is referred to as the top ten percent. Internationalism has been working so well over the past twenty to thirty years since 1979 while the rest of history was pathetic and without economic advancement advances by all nations and we are still using salt as a currency, aren’t we? The progress from salt as money to salt as something on almost every dinner table was a result from nationalism, not internationalism.

 

Compare the two with eyes open and the preferable form, open competition or controlled advancement, the choice could provide opportunity or a slow decadence and eventual decimation. Internationalism is welfare on an international scale much in the form of the Soviet Union and the initial Plymouth Rock Colony which would have starved if not for the Native Americans who grew and hunted for surplus for the winter and had sufficient to teach and feed the Pilgrims. After that experience of all get all they need, while most gave nothing in effort, they introduced a new program where each family kept a percentage of what they grew and the remainder was shared, the amounts of food skyrocketed. That is the balance which nationalism can produce, the most advanced achieve at their highest level and those developing nations learn from those leaders and in time some will replace them as they eventually falter. That is the secret of effort based economies, the people or nations at the top changes with time when another makes decisions which make them even more profitable as the other sinks under likely bureaucratic waste. You decide.

 

Beyond the Cusp

 

United States Potentially About to Fall

 

The United States is precariously balancing between solvency and being revealed as bankrupt. The United States has mortgaged thousands of acres of virgin lands which hold resources above and below the ground. The resources include but are not limited to coal, uranium, lumber, wheat, grazing lands and potential oil deposits or precious metals etc. There are other questions which are relegated to conspiracy theorists and fear mongers but the fact that China has been purchasing gold and could be said to be hoarding gold for quite some time as the gold buying by China in a graph from 2012 displaying the situation in raw numbers as shown below.

 

 

China Gold Purchases of 2012

 

 

The graph in and of itself is a solid display of a potentially damaging effect on the balance of gold holdings but in all honesty we need to make a confession; the number in metric tons is used as an alarmist shock figure which is a form of deception as taken as a percentage of the total holdings of all nations and one immediately realizes the minor difference eight-hundred-thirty-five metric tons is but three and a third percent of the over well over twenty-five-thousand metric tons owned by all the nations of the world. Perhaps a listing of the top ten nations in gold holdings according to the International Monetary Fund’s records will make a difference and put everything into perspective. Below is a list of the top ten national gold holdings listed below.

 

1) United States   with gold holdings of   8,133.5 metric tons
2) Germany          with gold holdings of   3,391.3 metric tons
3) Italy               with gold holdings of   2,451.8 metric tons
4) France            with gold holdings of   2,435.4metric tons
5) China              with gold holdings of   1,054.1 metric tons
6) Switzerland      with gold holdings of   1,040.1 metric tons
7) Russia             with gold holdings of     937.8 metric tons
8) Japan              with gold holdings of     765.2 metric tons
9) Netherlands      with gold holdings of     937.8 metric tons
10) India             with gold holdings of     557.7 metric tons

 

As can be note, 835 metric tons are a mere drop in the bucket providing these are the sole gold acquisitions made by China. There are claims that China has, as well as bringing in the amounts of gold in the graph through Hong Kong, has also established a surreptitious route through the gold markets in Shanghai and that they have acquired an additional 7,000 metric tons through this untraceable route over the past half a decade making China the largest gold reserve on the planet, providing these claims are valid and not just the ravings of conspiracy mongers living in some basement, likely their own basement, but basement all the same (we are located in a basement free apartment, so we can be trusted, well, that along with our track record of opinions over the past half a decade plus). The main problem with the seven thousand metric tons theory would be that such purchases would exceed the amount of gold available for purchase each year. The only way that China could have amassed that seven thousand metric tons would be if a state holding, or a number of state holdings, were to be being liquidated or transferred to China as payment of debts but being done under the radar through gold merchants in Shanghai, but even then one would expect the trade of such amounts would raise some suspicions and keeping them under wraps would be the best kept secret since the hiding of the Ark of the Covenant, itself constitutes a good amount of gold and things far more valuable than mere gold. That would beg the question as to who might be selling gold in such quantities.

 

This aside, China is on a definite path to acquire as much gold as they are able to buy and mine in efforts to improve its position and possibly having delusions that they could one day exceed the gold holdings of the United States, providing that China has not already cashed in their bank notes and other United States debt holdings, demanding payment in gold and routed this through trusted merchants in Shanghai who are actually Chinese government employees, high level Chinese government employees holding really cushy positions living the life in Shanghai. There was an increase in the interest rates charged by the lenders to top line banks by one-fourth-of-one-percent which some are claiming is a sign that the all but free money supplies are about to be tightened over the next year or so. While this very well may be in the plans, it is not what this tightening was about.

 

 

 

 

We can expect the Federal Reserve to hike the rates again this coming spring by as much as one-half-of-one-percent which will send panic waves through a fair number of investors and exactly the opposite through the other bulk of investors as there are going to be arguments that this is the end of expansion of the stock market and a slowing of business as lending will have become tighter and more expensive. Wrong again. These maneuvers are all being manipulated for political reasons and have absolutely nothing to do with the economy as that picture has not changed. After raising the interest rates the Federal Reserve will drop them announcing a reversal of policy claiming there was a misreading of economic indicators and it has become obvious that tightening the money supply is unwarranted and thus the return to the lower rate or an even lower rate. This announcement will be made about mid-September and will unleash a flurry of activity as stocks will soar, jobs will magically appear, most to deal with the holiday seasonal employment jump plus the coming available jobs held by students over their summer breaks. These replacement workers will demand a slightly higher rate of pay than did the summer employees working for near or at minimum wages. This will show a marked improvement in the jobs rate, lowering unemployment and even bringing some who had been dropped from the employment picture may return making the numbers all around look far better going into the fall campaign season. The improved picture will be claimed by President Obama as validation of his handling of the economy and his approach to growing jobs through government investment in the economy, also known as corporate welfare and crony capitalism. This will also make the Democratic candidates claims that theirs is the correct path to a bright future appear less Pollyannish and the claims that the tightening of the belt on government spending is actually necessary. This has been the path the Federal Reserve has taken ever since President Clinton needed a jobs, finances, and general boost in order to gain reelection and is now being extended when there is no President seeking reelections, more specifically a Democrat President seeking reelection, and the hope is to provide the best possible scenario for the election of another Democrat and keeping the republican Party out of the White House.

 

I can hear the skeptics already writing their comments screaming for us to quit with all of the conspiracy craziness and return to planet Earth. The problem is this has gone from crazed theory to actual reality as the economic health of the Western world depends on there never coming to fruition the exploding of the debt bubble. What the Western world, especially Europe and almost as deeply indebted United States, are facing is a huge and unpayable debt which has gotten to the point that there are no longer any credible sources of funding. This has caused these governments to do something which is euphemistically called Quantitative Easing which is where a loop is invented where one party loans funds they do not presently have to the government and then buy that money from the government in order to repay their debt but instead the monies are instead invested by distributing it to banks to lean and thus stimulate the economy. This might have functioned far more efficiently if the Federal Reserve had not already lowered the interest rates to where any corporate venture could be financed almost fee free thus there was no demand for these funds and the banks saw no upside to lending the funds anyways. Thus these funds which have come from a series of Quantitative Easings have basically sat in the larger banks vaults collecting electronic dust as these funds exist solely in the computers which run the economic system. This is known as stagnation of funds and means that the cash has no velocity, simply put the cash is not flowing through the system and thus has had absolutely no effect on the system which is good for keeping inflation low as had these funds been forced into the system then prices would have risen commensurate to the amount of increase is available monies for purchasing of goods and services.

 

So, when will these funds enter the system and what will be their effects? Well, they will come into play when the interest rates rise sufficiently that it becomes advantageous to the banks holding these funds to let them flow into the lending market. The situation will come about most likely when the prime interest rate set by the Federal Reserve reaches around four-and-a-half to five-percent which will mean rates of anywhere from six percent on up depending on one’s credit rating, the amount borrowed and whether the loan is backed by hard goods as in a mortgage or many business loans or if it is unbacked as are investment loans and purchases. There is a side problem which does not often figure into your or my daily life, and that is the Federal Debt which has about exceeded five-trillion dollars for the United States and a similar level in Europe which will only grow worse as more countries end up like Greece where the money flows in but nothing ever comes back including payments on these debts, they have become economic black holes where they take in but even small change cannot escape their borders. Once the IMF along with the Federal Reserve increase the interest rate it will effect an enormous upward jump in the short term interest rates which nations and the European Union all use to finance their debts and this will mean a jump in the interest payments, the minimum payment required for solvency.

 

The current rate is around one-half-of-one-percent for the best rates nations to probably two-percent for the riskiest of nations say Greece. Should the rate on these loans increase as expected for each level of increase in the prime rate, then the best rated nations could be looking at four or even five-percent and the worst risk nations clearing ten percent. Imagine if the United States, as a prime example, faced a change in their interest rates. Currently they receive a generously low rate, let us say one percent to make the numbers easy. Should the rate increase to one-and-one-fourth the United States would see their interest payment on their debt increase accordingly by one-quarter-of-one-percent, something easily handled. But what if the rate increased to around five-percent? Currently the United States uses approximately fifteen percent of their budget to pay their interest on the debt. Should that increase five-fold they would be spending seventy-five-percent of their budget on paying interest on their debt and thus they would reach the point of no return as this could not be sustained and still pay the salaries of the Federal Employees nor could they pay for the vast majority of programs and the military would be necessarily decimated to such an extent as to being unable to even be capable of protecting the mainland from attack. This would be the end of the United State and along with them the world economy as Europe would crash and the only way out for the world would be a total reset. The other definition for a total reset is a world war at whatever level of destruction required allowing for a complete restarting of all economies and the cancellations of all debts. The individual nations would then be dependent on their gold reserves to demand their seating as viable powers in this new world and this may be behind China, Russia, India and Brazil all buying gold and other precious metal and gems at a dizzying rate. Perhaps they know something the rest of us would be wise to note and understand.

 

Beyond the Cusp

 

Greek Debt, the ‘No’ Vote, and the European Union

 

The first domino has fallen and Greece has laid down their challenge to the European Union (EU) basically asking if the European body will respect them the morning after the vote to thumb their noses at the demands made on the Greek government and its people demanding that they be further bailed out for free. The Greek people have chosen to support their government in firmly demanding they be granted support from the rest of the EU, European Central Bank (ECB) and International Monetary Fund (IMF) for restructuring the repayment schedule and not be so strict and mean demanding that the Greek government act what they define as responsibly using the restrictive austerity measures forcing the struggling nation to tighten its fiscal belt and stop the generous expenditures giving literally free tickets to the people and retired workers and other items standing directly in opposition of the demands for austerity measures for the struggling nation to be imposed by the EU, IMF and the ECB to prevent the very default on Greek debt which occurred late last week. The Greek default on their debt payment made them the first EU member to fail to meet their financial obligations slapping them in the face and throwing down their gauntlet. Now all that remains is a seemingly simple vote for the members of the EU on whether to hold the Greek government to impose strict terms in order to meet the financial demands of those attempting to collect on their ‘loans’ made with demanding Greece now act in good faith and honor the terms imposed on them and the restructure of the Greek governments debts such that they would be capable to repay those debts. The crisis was brought to a head with the Greek failure to meet the $1.7 billion payment to the International Monetary Fund as part of a previous set of further loans and restructuring made to avoid a similar crisis last year. Now an apparent ‘No’ vote is a direct challenge for all that entails.

 

The Greek people have now, with their ‘No’ vote, rejected the imposition of the austerity measures demanded of Greece by those holding the notes of indebtedness from the Greek government. This is forcing a crisis which has very few options and will now test the EU and whether its single currency policies are functional or inherently flawed. This threat to the EU single currency system was set into motion the second that there was not any central monetary planning unifying the disparate desires and quirks of the independent nations. Without such a system, the Euro was bound to produce just such a financial disaster leaving only the question as to which nation would be the first to fall off the fiscal cliff, the first to dare to tread beyond the cusp of financial responsibility. The predictions of an eventual default had raised its ugly face before threatening the very foundations of the Euro system and posing the exact challenge being faced today with the Greek rejection of the financial restraints being foisted upon them by the centralized powers within the EU. I suppose that Greece was as likely a candidate as any to be the first to face the imposition of external financial limits or simply defaulting thus threatening the stability of the Euro shared currency system. What are the questions needing to be answered and the actions available to be decided defining the path forward?

 

The questions are simple ones that get down to the basis of the Euro and through that to the entire EU. The writing is on the wall for anybody with the nerves to read the warnings telling the tale that there would be a day where a people made comfortable by the very structures put in place as a universal safety net designed to care for those unable to afford the necessities of life due to unemployment or other difficulties eventually making living off the government’s various programs sufficiently comfortable that work becomes an option and not a necessity. With such a system in place it becomes not only possible, but in some cases preferable to live a simple life permitting government to foot the bill. Eventually such a life would become far more attractive living large off the government than working and living not all that much differently and people would realize that not working was as much an option, and a far more enticing option, and simply choose to live an easy life seeking other means by which to have the government pay for more and more until there is no more and they start borrowing. This works for a while and the government stimulates the economy with infusions of money and the Ponzi scheme becomes the way of governing always staying one step from ahead of defaulting on loans. Finally there is a downturn of the economy and a country with finances so fragile becomes a nation unable to recover sufficiently to pay its debts. A nation unable to repay its debts is recognized immediately to be a threat to the entire system so this government cannot be permitted to collapse and start anew and is instead propped up by the wealthier governments and international bankers whose sources of income have always been shady and now are becoming downright unsustainable.

 

Soon another country teeters at the edge and begins to go down the exact same path as the previous, only more rapidly, then another and another until it becomes the crisis that is so large it can no longer be ignored or swept under the rug and propped up under auspices that this next new solution, austerity being the latest, will save the system, a system so broken that saving it is well past any possibility. The eventual default was set in motion at the very outset as was predicted by British Prime Minister the Lady Margaret Thatcher when she wisely refused to allow Britain to become dependent on the Euro and instead reached a balancing point that her merchants and industries would accept Euros as payment but that such payments must always be transferred into the Pound Sterling on the British ledgers and thus met by the EU. The Lady Thatcher once stated it referring to exactly this problem when during an interview with Thames Television’s This Week on Feb 5, 1976 she was quoted as saying, “I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.” This is exactly where Greece now finds itself and where Spain, Portugal, Italy and soon potentially others find themselves all in different points on that slippery slope, it is simply further along and at a steeper point that Greece finds itself, the point where other people’s money has run out and they have become reluctant to continue providing, period, or have they. There is one option where Greece is freely given yet another infusion of monies and the marry-go-round will continue. The debt will be restructured except this time there will be no set repayment process set up but instead a demand that Greece show its good faith of intent to eventually repay the debt once profitable times return, and those providing the crutch will continue to pour good money after bad with no false expectations of ever being repaid. Greece will have become that poor wretched relative who nobody ever speaks about but find themselves constantly meeting their bills for them. This eventually leads to the next crisis, what happens when most of the family of EU nations becomes Greece?

 

The EU cannot financially choose to continue supporting Greece but not because it would be a strain on them financially, it would hardly be noticed as such is how small a percentage of the total EU financial institutions that Greece requires even if it were to totally fail and every Greek citizen were receiving government livable wages. The problem is one of precedence. Once the EU sets the precedent financially holding Greece’s hand and paying its way then the path is set for other nations to demand similar treatment should they fall upon hard times. Should one look far enough down the road and it is not difficult to paint the picture they will envision, an EU that half its nations survive and are carried by the other half, and the wealth produced by the providing half is completely consumed supporting the rest. The entirety of the EU production and profits are consumed by the other nonproductive half. That is not a system that will survive even the slightest of difficulties and that will spell the end of the EU right behind the end of the Euro. But is the other option going to end any differently?

 

Imagine if the EU forgives the parts of the Greek debts it is able and forces Greece to return to their own currency yet remain in the European Union, where will that lead? Again it becomes a matter of precedent as now any nation which is approaching insolvency will demand the same generous exit strategy gaining a partial bailout which does not need be repaid and a return to their native currency without any penalty. There will come a point where the EU will no longer be the panacea promised and instead will become a small block of successful and wealthy nations having paid the exit fee for the remaining nations who now use their own currency and benefit from EU membership solely when conducting trade within the EU. This will have greater effects outside the EU as the EU will set their exchange rates for the Euro against their own national currencies until they are determined to be financially readmitted to the Euro club once again. There will always be the possibility that these less productive and less affluent nations will find their stride economically and be capable of rejoining the Euro based nations but most would be relegated to using their own national currency. The real problem will strike when even those nations which had been marginally able to keep astride the powerhouse economies of the likes of Germany will now constitute the least wealthy of nations still using the Euro and there may come during a time of economic stress where they too may be forced to return to their own currency or an even more frightening scenario would be the most productive nations decide to be like Britain, namely accepting the Euro in payment for trade deals or from tourists but operating using their own national currency as they would realize that would benefit them in deals outside of the EU and they also would no longer be pressed into supporting the economically weaker nations.

 

Any path taken would necessarily result in the end of the Euro and the stresses from the nations all returning to their own national currency eventually dissolving the EU as it would no longer serve any purpose beyond setting unified trade agreements through the Euro. Anyway one might slice this rotting cake that started with the Greek default; the result is the same, the unraveling of the EU starting with the demise of the Euro. The Euro might continue on much as Roman coins and the Spanish Pieces of Eight hung around well after their issuing nation no longer held the sway and influence they had in their prime. The question then comes as to what Europe may look like down the road without the EU as a calming inclusiveness that it once provided largely through the sharing of a common currency. Would this signal the return to the epidemic of conflicts, much as was the way of things throughout history? What will happen when the EU dissolves and there is no European unified front and each nation is now unleashed to trade completely without any concerns or other brotherly obligations. The initial return to cutthroat trade practices with each nation set against its neighbor may, over time, exacerbate old rivalries leading to skirmishes and even on to open warfare? Violence is only one part of the problems as there may be demands for reparations from the nations which had debt forgiven under a moment of weakness and magnanimity more forced by the EU than entered into with willingness and a smile. The failure of the Greek economy to sustain any kind of parity with the major economic powers within the EU will necessarily result in the end of the Euro as a trans-European unified currency, also as Lady Thatcher had predicted in her actions to forestall and eventually put to rest any hope that Britain would fully resign control over her own currency. This will prove to be the death of the Euro, the necessity for every nation to control its own currency unless they would willingly surrender their fiscal and economic planning to a central budgetary committee appointed and solely answerable to the EU and acting independently of the member nations forcing upon each their assignments for production and receipt of funds from Brussels. Nationalism or completely collective socialism, which would Europe choose. Britain would never enter such a trap, but could the entirety of the rest of the EU nations join such a group and actually make it work, that’s a tall order for any organization. Nope, could never happen, not in a million years. The other question that would remain to be seen is how the death of the EU would affect the relations out of Europe with the remainder of the world. These are interesting times, and they appear to be getting ‘curiouser and curiouser.’

 

Beyond the Cusp