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Re: <nettime> history lesson
keith {AT} thememorybank.co.uk on Sun, 21 Jan 2007 23:41:50 +0100 (CET)


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Re: <nettime> history lesson


Brian,

I don't want to be a tease by holding out on the scenario I think is unfolding
now. But equally I can't demonstrate the validaity of my arguments in this
milieu or indeed ever. I sometimes think I would be better off writing a
fictional blog to air some of this stuff as it breaks.

Basically the Bush regime had the option of defending the dollar or monetizing
the debt. The former would require interest rate hikes which would certainly
kill off the housing bubble that is the thread holding up both the US and UK
economies and precipitate a crash with immediate and visible domestic
consequences. So they opted for playing Texas hold 'em against the rest of the
capitalist world, using the world unit of account for chips. Since March the
Fed has stopped publishing M3 data, the measure of how many dollars are in
circulation, but from the end of 2005 it was clear that they were printing
dollars as if there were no tomorrow and continue to do so. The bet is that
their creditors will protect their dollar holdings rather than offload them.
But, even if they do, the results will be disastrous for everyone. The euro
will go through the roof making European goods too dear to sell. Japan will
sink into the ocean and China will dissolve into civil war. 

According to the last guesstimate I saw, Japan owns 60% of US Treasury paper,
China 20%, the Gulf 10% and the Brits (!) 5%. The American banks have reduced
their holdings to about 1%. It is possible that some of the UK holdings are a
front for the Fed buying its own paper at key moments. The wolrd economy would
enter a deflation much worse than the 1930s, but propsects for the US would be
better than for most of the rest. The dollar would be devalued making exports
easier when the markets recover, the housing price collapse would be disguised
on paper, inflation works for debtors and against savers, but the biggest
debtors are the American people and their government. It is true that savings
would be wiped out and real property prices (including shares) would fall
heavily. But how could the world economy start again except with the US
restored to its position as only engine? The alternative was to sit quietly
while global economic power shifted inexorably to China, India, Brazil and
Russia.

Armageddon in the Middle East grows out of the scenario I gave linking now to
1973. It is the only way the US can hold on to oil supplies, at least in
Cheney's game plan. Maybe they will always lose a guerilla war, but there are
other kinds of wars... As for the japanese, they know that a dollar failure
will kill them first. They have no option other than to hold onto all that
Treasury paper and cross their fingers.

I know it all sounds rather feverish and it is in the nature of the most
salient facts to be inaccessible to researchers.  That's why I have
contemplated updating Dickens serialized novels in a blog format. In The Great
Transformation, Polanyi points out that the others never realised the Nazis
were aiming to destroy the existing international system as their strategy for
winning the whole pot in the end. Since they themselves had so much at stake in
the status quo, it never occurred to them that Hitler was prepared to break up
the zhole show. How much more difficult is it for others to imagine why the US
government would be prepared to smash a world political economy of which it is
the acknowledged leader. But they are, because they know, left to its own
devices, power in the world economy is inexorably slipping away.

This scenario is not a prophecy. The timing and extent of any decisive move are
unknowable in advance. It just makes more sense to me of what appears to be
going on. And I feel safer outlining its historical antecednets than
second-guessing the present.

Cheers,

Keith

Original Message:
-----------------
From: Brian Holmes brian.holmes {AT} wanadoo.fr
Date: Sun, 21 Jan 2007 19:19:41 +0100
To: keith {AT} thememorybank.co.uk, nettime {AT} bbs.thing.net
Subject: Re: <nettime> history lesson

Keith Hart wrote:

> I have left out the camouflage provided by Armageddon in the Middle East 
> for the economic upheavals unleashed by the current devaluation of the 
> dollar in the face of a cumulative transfer of economic power from West 
> to East. 

Keith this is all tremendously clear and useful (few things in there I 
knew nothing about!) and particularly some expansion on this last point 
would be great. On the one hand, we know that the capitalist labor force 
has practically doubled since 1989 (well, your text makes it clear 
that's an exaggeration, since part of the former communist bloc was 
already working for the west, but still it's an enormous new labor 
pool), we know that there's tons of fixed capital investment going on to 
 <...>


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