Nouriel Rubini, Permabear

Economists have predicted 9 of the last 5 recessions.

I actually meant to send this reply to you at the end of last month, in response to your post on the economy. Only it somehow grew in the writing, until it was too long to post as a normal reply, and so late that probably no one would read it. But I thought in the end I’d best send it anyway, because it’s a very, very interesting subject, with much deeper historical roots than is commonly understood.

I think there have been quite a lot of reasons bound up the extraordinary prosperity of the American economy since the war. The problem is they “all” appear to be coming to and end at very much the same time, just when the economy has become most addicted to them.

First of all, cheap energy (and the cheap raw materials which it made possible) is coming to an end (right after a generation of building all those out-of-town suburbs and letting the public transport wither). This is partly because the easiest oil has already been extracted, and no new giant fields have been discovered since the 1960s; and partly because the newly-industrialised countries of Asia are also competing to buy it. High energy costs increase the cost of mining, of transport, of fertilisers, food and all sorts of other things, and will mean less prosperity generally, compared to the previous generation.

Perhaps even more importantly, technological superiority (which meant that the rest of the world would pay large sums of money for European or American goods) is no longer the western monopoly it once was; the old standards of living it used to bring us in the west could never survive in the long term, once a few billion more people had decided they wanted to join the club, from India, China, and Eastern Europe. Across the west, we’re all going to become more like the third world, in more ways than one, I fear.

Also, the United States used to have lots of other advantages, which no longer apply. America came out of WW2 with almost the only unbombed industrial economy, and could therefore sell what it liked to the rest of the world: she had something like half the world’s total production, I think, for a while – and a very good base on which to build further, not to mention the money to buy more talent from abroad.

America also came out of the war with most of the world’s gold reserves, which in those days (when money was ultimately based on gold) was a big enough asset in itself, but she also used this advantage to make an agreement with Britain at Bretton Woods in 1944 (and later with newly-liberated Europe) that from now on all other currencies would ultimately be backed not by gold directly but by dollars. Only the dollar would be directly backed by gold: all other central banks would peg their currencies to the dollar, and keep a dollar reserve (instead of a gold reserve) to defend their own currencies with. You cannot imagine the advantage this brought the United States: it was the “real” prize of victory. It effectively meant that by printing dollars in the post-war years (when no government actually “asked” these foreign dollars to be redeemed by gold) America could buy all sorts of raw materials and manufactured goods in return for something which cost her nothing more than the cost of paper – in effect she was able to surreptitiously tax the whole world – without even “realising” what she was doing. This is one of the reasons why, in spite of the “staggering” cost of WW2, you didn’t have the post-war recession which so many people had been expecting, but a massive boom instead. An original sweetener to the UK was that while the pound would be linked to directly the dollar, the currencies of newly-liberated Europe would in turn be pegged to the pound, and backed by pounds: so that when we devalued the pound in 1947, as well as halving our debts to newly-independent India overnight (and indeed to domestic creditors) we in fact confiscated half the savings of the European central banks – which probably helped in some measure to pay for our new welfare state!

America was the real beneficiary of this system, though. In fact, this very system would give your country the money to build up and maintain her whole worldwide empire of bases, to give foreign aid (starting with the Marshall Plan) and to fight small wars, to win the cold war, to suborn or overthrow disobedient governments, to influence the media on a global basis, without apparent domestic cost, and (I believe) to be able to spend huge sums of money at home (without the need for ruinous or unpopular taxes) in ways that would gradually link congress, the media, and the military industries in a complex web of money and interest that has shaped (and stifled) debate to this day.

The Bretton Woods system didn’t last in its original form, obviously. De Gaulle in France was the first to work out that it was a tax on the rest of the world, and demanded gold for dollars. To begin with America complied. When American gold reserves ran low (with the cost of the Vietnam War) Nixon cut the link to gold altogether, rather than end the war early and rein in his spending, but since other countries “continued” to need to hold dollars (to buy oil, for instance, as America’s Saudi allies would only sell oil in dollars), or needed to keep them in supply because it remained the international trading currency (or else were tied to the US in myriad other ways, and were reluctant to offend her, given the power and levers she had at her disposal) America could “continue” to tax the rest of the world by printing dollars, which would then gradually lose their value, so that other countries would have to buy still more to cover their needs. One could argue that Japan actually paid for a large share of the Reagan prosperity by buying dollars and government debt which then lost half its value in real terms over the decade; and that other Asian countries did the same in the Clinton years. It’s an oversimplification, of course, but it’s not as mad as it sounds: after all, it’s not as if political leaders (whether democratic or not) are investing their “own” money this way, is it? Their jobs give them charge of other “people’s” money, and they’re always gone from power within a few years.

Not every country can play at this game. Nowadays there are “two” kinds of countries: those that have currencies that other people want. And those that have currencies that “no” one wants, outside the country itself where it happens to be compulsory to use it. The first lot of countries have governments that can pay their bills more easily, and buy off domestic opposition by increasing the money supply, since much of their inflation is actually exported abroad (to the foreign holders of pounds or dollars). Domestically they are very stable. When they run up debts, it’s usually in their “own” currency, so inflation actually reduces their indebtedness, and is a tax on foreign creditors.

The second lot of countries are in a far worse state. Since they “need” to hold foreign currency (which always depreciates) but no one dreams of buying “theirs”, they are actually being taxed by the “first” lot of countries, as their foreign currency reserves continually lose value through euro or dollar inflation, and then they need to buy more to replenish them. If the government increases its “own” money supply, this translates into high and immediate domestic inflation, with all the attendant instability, and since the country needs “foreign” currency in order to buy things from abroad (because foreign suppliers won’t take its own paper banknotes in return), this means that a balance of payments deficit can actually bring the economy down – as pretty much happened with Argentina. (America can just print more dollars, and suppliers worldwide still accept them: most other countries can’t). Moreover since these sort of countries usually have to run up debts in a “foreign” currency, for no one will lend to them in their “own” money, domestic inflation doesn’t solve their debt problems at all: rather, it makes them worse. If the government is strict about avoiding inflation, however, then it doesn’t have the money to buy off domestic opposition, and so these sorts of countries are far less stable politically, as well as more vulnerable to outside interference from countries that “do” have tradable money. When “that” happens, and a rich foreign power wants to interfere (or even corporate interests) then in order to stay independent a country may have to slide into some form of dictatorship, so that potential traitors are more afraid of their country’s ruler, than they are tempted by the bribes or threats that come from abroad. It’s generally a horrible choice when that happens, but sometimes there is no middle ground.

Something similar existed back in the gold-based days, between the wars, when money was still theoretically backed by gold, but no longer interchangeable except at government-to-government level. Even in the worst times of depression, countries that had colonial empires which provided raw materials which the rest of the world wanted and needed (like Britain, France, Belgium and Holland in Europe) or countries like the US with its originally plentiful natural resources (and no real enemies to require big military spending) remained stable politically, and the democratic political systems which they had adopted all survived without much trouble. Countries without these advantages (like Germany, the Mediterranean and Eastern Europe) ended up with dictatorships of various sorts – this wasn’t an accident. People have looked for reasons in culture, history, and religion. But the biggest reason was simply money.

What I’m saying is that the second lot of countries should not, I believe, be judged by the quite same standards as the first: their freedom of manoeuvre is very different. Especially we shouldn’t judge them now: after all, we “may” well have to join their number, if things seem to go the way they are now, and then we’ll get the same sort of instability ourselves.

Actually, something like this was even true back in the pre-world-war-one era, when pounds and dollars still “were” gold and silver: countries like Britain that had a lot of gold (and fewer debts) were far more stable politically than the ones that didn’t – the most dangerous time for Britain was the early decades of the 19th century, when the huge problem of Napoleonic War debts had not yet been paid off, and the generation of austerity government that followed the wars to pay off this debt caused sufficient unrest to break the legitimacy of Britain’s Ancien Regime, and it led to a near-revolutionary situation by the 1830s, forcing a parliamentary reform to buy off at least some of the opposition. Balkan countries were always unstable because in their long struggles for independence they had frequent and costly wars, and never had much gold to begin with; while Italy was in a similar boat, because of the cost (and debts) that arose from her own wars of unification, which it was never politically possible to pay off because of her liberal political system: whichever party tried austerity would be bound to lose the next election, or (more likely) fall even sooner. The new united Germany, however, had made the “French” pay the cost of their wars of unification, and got a big war indemnity out of them which enabled the Germans to make the switch from silver to gold. America had one costly (civil) war, but was sufficiently protected by oceans not to need for most of the time the sort of military expenditure which crippled many European countries, and in any case the US had a lot of domestic gold production, not to mention sufficient natural resources not to need much in the way of imports. 19th century Russia was in a less happy state: she had a lot of natural resources, true, but had crippling debts from a series of costly wars, usually not of her own making, (Napoleon, and the Crimea) and above all a very long frontier that required larger armed forces than she could afford, as well as fleets in her different seas, hence she always had a problem buying off domestic peace (and vested interests), which in the long run damaged the regime’s legitimacy far more than all the things which are usually blamed for it; it made ideological terrorism an increasing problem in later years and government actually quite weak (in practice) by western European standards, for all the theory about autocracy: government was mostly a matter of local communities running themselves, with the state doing little more than collecting taxes and enforcing conscription: provincial governors had in practice to act more by bluff and persuasion than anything else. France (with a quarter the population) had more policemen on the government payroll than Russia had civilian state employees of “any” kind, including teachers, let alone state policemen. This actually raises the interesting question of which country was in practice more a police state? The imperial autocracy or the republican democracy? The figures clearly suggest that it was the democracy.

To some extent this problem (of needing money to smooth political workings) remained after the second world war, although a combination of factors (the lingering colonial empires (at first), cheap energy later on as the world moved into the Oil Age, and the West’s technological lead) continued to cushion Europe and the United States, and also (especially for the US) the advantage of being able to export their own currencies in return for real goods: because the rest of the world still “wanted” their currencies, even though they lost most of their value with time. But all these advantages are going away now, aren’t they? The last one still partly applies, but I think it’s now only a matter of time. I suspect it would be already over, except that chancellors and managers of central banks are not looking after their “own” money, but only other people’s money, and so not rocking the boat politically right now is more important to them than long-term value of their nation’s savings. Even so, the Chinese certainly don’t want their dollars to lose value even as they hold them, and so they’re quietly using a lot of them now to buy up as much as they can of Africa, while these dollars still have some value there. I suspect that when an oil producer finally demands gold (or some other commodity) in return for oil, the game will be really and truly up, and the economic repercussions could then be devastating: we might well all sink abruptly to the third world. I suspect that one of the main reasons it hasn’t yet happened is that the Middle Eastern oil-producers are much too afraid of American revenge to consider it (in that sense, the dollar really “is” being held up by perceptions of military power). The question is whether “Russia” might do it first, demand gold for oil, and try and replace the dollar with the more neutral gold as the world’s reserve currency. They probably don’t want to rock the boat either, but they “have” been surreptitiously stockpiling gold, and if provoked further by the encouragement of anti-Russian governments on their periphery, and taking a ring of countries round them into a hostile military alliance, I really think they might. Taking Ukraine into NATO, if it happens, will probably be the step too far which they won’t accept.

One of the biggest problems with democracy (from a more cynical point of view) is that there are too many people to buy off. Not just the voters, but powerful moneyed and vested interests too, that can pull levers to bring down governments and politicians that don’t give them what they want, and who have too many rights and privileges to be very easily threatened. Right now, democracy works best with the first sort of countries I mentioned, the ones with the favoured currencies, who can “afford” to more easily buy them all off. The other sort find it much harder, and are very susceptible to outside pressures from richer countries, including in their elections. It’s very difficult for the second sort of country to make it into the first league, and (unless it is given a lot of help, and, more importantly, no “hindrance”) I’m not sure it can even be done where there is democracy, where in any case, there is an instinctive bias towards the short-term. That’s another problem with the system: a government that practices austerity and takes long-term considerations into account becomes unpopular, and loses power, while its opponents come in and take the credit. It’s the same for a minister or politician making reforms in his department, that only bring results when he’s moved somewhere else. For a nation’s government to take any more long-term view, I suspect one probably “needs” a strong hereditary element in one’s political system – though I know it isn’t fashionable to say this right now, on “either” side of the Atlantic!

It’s true that Japan made its way from the second sort of country to the first in the postwar years, but there were a number of factors that helped. She’d got part of the way there in the prewar era (in terms of technology and education), and, cushioned by the American military umbrella, she didn’t need to waste much money on her armed forces. (Some say that the Japanese had also hung onto a lot of wartime looted gold.) Moreover, the Americans scattered an awful lot of money round east Asia in the Korean and (especially) the Vietnam wars, at a time when it didn’t lose value so fast. These wars were a disaster for the countries actually fought over, but I believe were a major economic boom for countries nearby that managed to stay out of them.

May I suggest a (very depressing) historical theory. ALL civilisations have always depended on some people doing dangerous, dull or back-breaking work for next to nothing (whether or not it was called slavery) so that other people could afford to be civilised. That’s one of the reasons perhaps why civilisations have the seeds of their own decline within them. It seems to be a historical law. But I’ve a strong suspicion that this hasn’t really changed. It’s been partly masked by technology recently, but even more by cheap energy (and cheap transport), which has allowed much greater exploitation of the earth’s resources than used to be the case, and to some extent has transferred the badly-paid work to other parts of the world, whose goods we could then buy cheaply. But as energy and transport get more expensive, and the rest of the world has got more high-tech, this feature of our own society will vanish, and there will have to be more people living under badly-paid conditions within the west itself once more. Countries with a privileged position in the world economy may perhaps live a charmed life for a while, but I don’t see it lasting. I expect to see third world divisions of wealth and poverty (which Europe once had) return once more, and (in the long run) maybe even some form of legalised servitude. (In the illegal economy, such coercion already exists). But that’s me the pessimist talking!

As for the decrease in standards of living, through western countries not being able to pay their way in the world as they used to, to some extent this has already been happening, and although it’s been masked by increased borrowing (and inflation), there’s a limit to how far this will work – hence the approaching crisis. Europe has more leeway than America right now, at least for the moment, since the Euro is comparatively new as a big reserve currency, and a lot of people across the world are now changing dollars for euros, which allows the Europeans to increase the money supply without too much inflation, as a lot of the new euros printed are disappearing abroad. But even here in Europe there are signs that we’re stretching our currencies to their limits, and the amount of inflation actually required to enable us to pay our way in the world seems to be going ever upwards.

I mean the “real” amount of inflation, of course – not the doctored statistics that virtually “every” government produces nowadays, from America to Iran, which always seem to leave out of the calculation a whole lot of goods which are going up in value too fast for comfort; statistics which politicians and media outlets of all stripes accept far too uncritically. If you look at the “official” statistics for inflation, and compare them with how much the things you actually spend money on (like food, books, rent, parking fines) have gone up in price in the last few years, there’s a very big discrepancy now in pretty much every country. Worse still, inflation and economic growth figures are “directly” linked in how they are calculated, so if you fiddle one statistic, you “automatically” rig the other. Since growth rates are actually calculated by taking the increased percentage in the total cost of all the goods and services in the country, and then subtracting the inflation figure, this means that if you find ways of reducing the inflation statistic, you’re “automatically” adding to the official “growth” rate. For example – if (let’s say) the real cost of living is going up by 8% in one particular year, but the official inflation statistics say it’s only 2%, then the difference of 6% works its way into the growth figures too: it means the economy can actually shrink by 3%, when the figures all say it has “grown” by 3%. The scary thing is that something like this has been happening for years now. I think that nearly all western economies (especially the US) have actually been in a quiet recession for some years already, for the reasons I mentioned above (scarcity of resources, and the loss of a high-tech monopoly) but it’s only now that it’s getting sufficiently bad to start appearing in the “official” figures as well.

Actually, the money supply in the UK has been expanded by about 15% a year for several years now, and it’s more in the US. If it hasn’t “all” gone into inflation, I suspect it’s because a lot of pounds and dollars (and euros) have disappeared abroad, passing on our inflation to the third world – for after all, ours are the currencies people still want – and indirectly taxing it in this way. The real economic nightmare scenario for ourselves is if these pounds and dollars ever suddenly returned “home” – if foreigners decided they wanted to save (and trade) in something that didn’t lose value quite so fast. Then we’d be getting third-world-style hyperinflation all at once. Luckily Asian central banks (with their huge hoards of dollars) are still too scared of angering America to sell their dollar reserves and start a panic (besides, for a central bank chief, it’s only other people’s money that’s losing value, not his own), but one of the reasons that the “real” inflation rate’s going up is that even they don’t want to buy any “more” dollars any more, and so the ones being printed now are, by and large, staying at home. And in fact, the Chinese “are” at last quietly selling at least some of their dollars, and using them to buy their way into Africa.

There “are” differences between our situation now, and the depression in the 1930s – although I don’t think one can take much hope from them. My explanation for the 1930s depression is that over the previous decade the banks (cushioned by the fact that they knew the newly-formed federal reserve would protect them, however many risks they took) had lent as much money as they possibly could in the 1920s boom to increase their profits, taken bad risks (gambling that the good times would always go on) and were not going to be able to pay back the depositors, when they demanded their money back in gold. In short, they’d created an artificial boom, until the link to gold brought them up short. As the crisis approached, the Federal Reserve had tried to keep the banks’ investments sound by “prolonging” the boom, by providing more credit. The more money the Fed made available to the banks, the more would have to be paid in the long run, and the problem was that in those days money “was” gold – and there simply wasn’t enough physical gold to pay these debts. Basically, the Fed’s manipulation of the money supply to prolong a boom and the foolish risks undertaken by greedy bankers eager to lend as much as they could, meant that Americans as a whole had lived beyond their means for too long. (In a way, the Europeans had too – they’d been unable to pay the real cost of world war one, and the huge debts accumulated in order to win it, and were forced to partially renege on their debts by devaluing their own currencies against gold: Britain’s attempt to return directly to the gold standard in the late 1920s proved politically impossible to sustain – because ultimately it would have meant paying the “real” cost of World War One, and a degree of austerity government quite impossible in a democracy: much easier to devalue, and hence pay by (effectively) confiscating a portion of the assets of savers and creditors, and defaulting on a part of their debt.)

Anyway, the Americans had overspent, and the American banks had overextended themselves, before the link to gold brought them up short. Roosevelt, of course, blamed the “messenger”, instead of the banks and the Federal Reserve, and bailed out the bankers by confiscating the nation’s gold coinage, in fact “criminalising” the private ownership of gold, and then devaluing the dollar against it: in effect, he’d defaulted on nearly half the government’s debt “and” confiscated almost half the people’s savings at the same time, as well as enormously increasing the potential power of both the central government and (in the long run) of the powerful interests that could lobby it.

I suppose it worked, after a fashion, though it didn’t stop several years of stagnation until the outbreak of war in Europe brought in a flood of foreign money in search of safety. In fact, until the outbreak of World War Two and the resulting flood of gold into the US saved the day, Roosevelt’s America had “missed out” on the recovery that had started in Europe, and her share in the world economy (and relative power) was actually declining. Of course, it was also a system that meant the American government could tap national resources in wartime on a scale that the old system would not have allowed, and meant she could afford to fight World War Two on the scale which she afterwards did, although one has to say that the sheer size of the national debt accumulated in this way during the war would have been disastrous, if it hadn’t been for the grand prize of making the dollar into the world’s currency in the process.

Still, with regard to hanging on to your old-style conservative republic, with strong local businesses tied into the local community, if that had been the priority, it would probably have been “very” much better in the long run, to let the bankers go bust at the start of the 30s (so that future bankers, and depositors, would both be more cautious) and to compel any insolvent banks to divide what assets they “did” have among the depositors. Even if they only got back half of what they’d put in – well, that’s what in practice they got anyway in real terms, once Roosevelt had devalued the dollar. If this had happened, then banking, of course, would be a much smaller and rather more boring business than it is today – banks might even charge you for looking after your money and keeping it safe, instead of paying you interest. On the other hand, your deposits wouldn’t lose value nearly so quickly. In fact, one can argue that charging you for looking after your money is actually (in practice) what banks do anyway, since the interest given (in the UK at least, and I think elsewhere) is actually less than the “real” inflation rate, although naturally more than the “government” one!

Taking a very outside view, don’t you think there is something a bit fraudulent about the very “nature” of banking these days? On the one hand they take your money, and guarantee to give it back to you whenever you ask for it, and guarantee you an income from the interest too. How can they safely do this, unless money either constantly loses its value (which is what happens now) or unless they only lend to very good risks indeed, like the British government was in the 19th century (but even then, banks sometimes failed – and there was always a chance that a major war would damage even Britain’s ability to repay in full, as finally happened in World War One). The only way they can pay for all this (plus their own enormous costs, of paying for their whole organisation) is to lend out their deposits at still higher rates of interest. So they’ve “got” to lend, all the time, regardless of economic climate and risk, or whether it’s wise or not, and when they lend the money out they are “not” guaranteed to get it back – and certainly not at short notice if there’s a panic and depositors want their money back. (Inter-bank lending may help in a crisis, unless it’s a general crisis of confidence in “all” the banks, but even this depends on banks trusting each other, and part of the current problem is that right now they don’t!) My guess is that they can only square the circle because everyone knows that the government (or central banking system) will bail them out in the last resort, because it won’t “let” the banks go bust, and when necessary will always create new money to supply them with the necessary credit – and this of course is inflationary. Bankers (like governments, and debtors) are amongst the biggest beneficiaries of inflation, and it’s why bankers are all in the last resort statists – they “depend” on state protection to cover the risks they would otherwise take with depositors’ money, which is the only way they can make profits.

Actually, looking back over the last hundred years, the whole system whereby commodity money (gold or silver) got gradually replaced by fiat money, printed or otherwise expanded at whim by governments, has had a whole lot of unforeseen cultural effects, though in retrospect I do think they should have been predictable. One such side-effect is a massive increase in the power of the state. If it’s “central” governmental institutions that print the money, then the central government has a lot more power, and has the resources to suborn local institutions and communities in a way that previous governments never dreamed of. A government that “prints” the money or deducts income at source electronically can take far more money in taxes than it ever used to, when it had to extract physical metal from reluctant local communities. Lobbies and pressure groups that can influence the government end up gaining in power as well. It is much easier for such a government to “regulate” and order about local families and communities, instead of being desperate to conciliate them. This is very far-reaching: the difference between a government that uses fiat money and one that uses a commodity like gold, is “far” greater than the difference between an old-style democracy and an old-style monarchy. Also, fiat money is inherently inflationary. (The monetarists argued that it could be made to “mimic” gold, and in theory they might be right, but in practice it’s politically impossible to do it for long, and usually disastrous for a government that tries.) But anyway, inflation basically takes away money from those who save, and gives it to those who borrow; and since those who have easiest access to credit are the biggest chains and organisations, they are the biggest beneficiaries of all: they are now able to borrow money and buy up smaller competitors very easily in a way that never used to be possible, because in real terms inflation will eat away their debts, so they’ll never have to pay back the full amount. So in every trade and industry, big organisations have just grown bigger, and end up with the political clout to rig the markets in their own favour, and to bully local governments, and buy the media. Most of the big new plutocratic fortunes of our own day are actually based on borrowed money, including the media conglomerates. It’s affected ever corner of our lives. It’s the main reason why we now all shop so much in big chains: it’s not because they were ever really more efficient.

Also, this resulting increase in the power of the state has made it matter far more than it used to, which country one lives in, and which side of a border one is, and made national minorities far more determined to be in their “own” state than they used to be.

Worse still, it’s reinforced all the short-term bias of modern democracy. To base a civilisation on penalising people for saving, and rewarding debtors is historically unprecedented, and the cultural consequences have been devastating. It’s been the end of self-restraint as part of the culture, and created the background of old-style conservatism’s destruction. It’s also part of the reason for the sudden ugliness in virtually all building work and architecture done in the last few decades, which really began in the last war (though some utilitarianism began after world war one, there was at least some attempt at decoration), and since the 70s, it’s been a disaster.

Although I regret it, I suppose it was inevitable, albeit not for the reasons commonly used. Quite simply, a country that borrows more (or can confiscate savings by inflating a fiat money system) can spend more money and defeat in war any similar country that spends more carefully. So war is the reason why the change happened. (This goes back a long way: even in the eighteenth century, Britain beat France in war after war by outborrowing her, and then paying the interest on the new debt by the taxes on the profits of the new trade that usually followed victory, until finally French bankruptcy reached the point where her political system fell apart.) Closer to our own days, in the world wars, winning a war was always impossible without raising (and spending) as much money as was practically possible, whatever the long-term results. That is why the First World War (in Europe at least) broke the interchangeability of money and gold for ordinary people, though not at government-to-government level. The second war made the link still more tenuous, as other currencies were now only indirectly linked to gold, through the dollar. And the cost of fighting the “cold” war broke the link with gold altogether, when the dollar defaulted on its promises in 1971. And all this has given us the world we know now, where “everything” is rigged against traditional conservatism.

Once the shifts towards fiat money “had” happened then all the powerful interests decided they liked it very much, of course. There were loads of people that wanted central governments to be able to spend on a scale that was never possible back in the days when every government had to extract precious coinage from (usually very reluctant) local households and communities. The left-wing people wanted the government to have unlimited money for all their socialist projects; the political right wanted it to have the money for a powerful military, and the cold war. The liberals wanted the government to have the resources to be able to encourage (or enforce) the remaking of society in their own image, and to push their ideas on the rest of the world. Lobbyists of all kinds liked the fact that government now had much more “power” to do whatever it was they wanted it to do. The people’s elected representatives found that more money could come their way, under their control. Bankers liked the fact that they could take more risks, as governments could bail them out more easily, by printing more notes or increasing credit. Big chains found that through easy access to borrowing they could now expand as much as they liked, and they did. Big media chains (and their corporate owners) were a big beneficiary too, and bought up many of their smaller rivals on borrowed money – which again, because of inflation, was never paid back in full.

Actually, in small countries, which have to defend their currencies with high (real) interest rates, something of the cultural side-effects of the old pre-war system survived longer, since governments in such countries are forced to try harder to restrict domestic credit, and foreign multinationals are often reluctant to move into a country where their profits are in a minor (and not always easily convertible) currency: they like their profits in dollars and euros. Small independent local shops and businesses were normal in places like Greece, for instance, until the introduction of the Euro saw a sudden expansion of the big chains, and consumers lost their old caution and started to buy more things on credit.

However, there is a wider background to all this. Put simply, in history there have been “two” kinds of states (at least where the economy has been developed enough to have any kind of state at all!) One is a taxation state, where a country has to collect a certain amount of taxes (at least from its core area – usually less from the periphery), and uses part of this to pay for an army and navy (usually as small as it can get away with, because these things are expensive, and badly-paid troops might mutiny). Another part of the revenue (usually as much as to pay the armed forces) would go towards maintaining social cohesion: buying the support of local bigwigs, so that they’d continue to let the taxation system operate, and redistributing enough gold at the centre to encourage the ambitions of the powerful provincials to continue to look to the centre, rather than on making themselves independent locally, or (worse still) seeking a foreign patron. The rest of the revenue would go for emergencies, or else be added to the reserves. (The Byzantine emperors usually liked to have a good couple of years revenue in gold, in their reserves). These sorts of states were very stable. They couldn’t expand very easily, because war was so expensive, and when they “did” lose territory, it might be very hard to regain it. But they were very self-sufficient, and lasted much longer than flashier states of the expanding variety.

The second sort of state is the “pirate” state. This second state can expand much more easily, in fact it “needs” to expand to survive. It can pay for much larger armed forces than its tax base would suggest, but it can all be paid for by rewarding its army from the profits of victory, after taking “over” another country, and, in the old days, rewarding the nobles who form the army with confiscated land in the conquered territory.

The distinction between these two types of state is far more important than what political system they have, whether republican or monarchical. Curiously enough, as a republic, Rome was very much a “pirate” state, with generals borrowing in the markets to finance armies, and paying their debts with the profits of plunder (not just gold and silver – plunder included enslaving people to sell en masse in the markets of Delos and elsewhere). This was the Roman republic. It’s as an “empire” she became a normal internal-taxation state, and lost the ability to expand. (Scary as in many ways Augustus was, he does deserve credit for making the switch – though in the event the Roman state only kept itself financially afloat through this troubled time through proscriptions, mass-confiscations from the richest senators, confiscation of land to settle soldiers on, and finally, seizing the gold reserves of the Ptolemies).

I suppose the Byzantine empire was an archetype of the internal-taxation state, even if taxes there were probably lighter than historians used to think. So was the old Chinese Empire. Most European nations until our own century were much the same, although the expansion of international trade (and colonial opportunities), not to mention the ability to borrow from central banks to fight wars (relying on the profits of victory to pay the interest) meant that maritime powers like Britain were (I’m sad to say) partially pirate states as well, at least for a while. But that certainly meant there was plenty of money here for an explosion of literature and building and the general fruits of civilisation. A bit like (once Athens was taxing half the Greek states) most of the playwrights and sculptors and philosophers were suddenly Athenian. They had the “money” for it.

Mongol Empires, Charlemagne’s empire, too, actually, are a better example of the pirate state. This sort of country can expand quite easily, taking over a neighbouring land and rewarding its own chief men with the spoils, as Charlemagne did – but there’s an immediate financial crisis when it has reached the “limits” of expansion, and then it usually starts to fall apart from within. It’s not easy to switch from one sort of state to the other, without going under in the process. Rome managed it, though, in the early empire – helped by the fact that she had no dangerous enemy at the time: but it proved impossible to retain the old republican oligarchic system in the process.

Anyway, the appalling truth, which explains what’s happened in our own era, is that when Roosevelt managed to make the dollar the world’s currency, and the Federal Reserve began to be able to tax the rest of the world simply by expanding the money supply, what happened is that the whole American economy quietly started to shift from production-and-taxation mode, into “pirate” mode, “without anyone noticing!”

The global consequences have been enormous. It’s enabled American power (and the amount of military spending possible) to expand enormously, beyond what was sensible in the long term. It’s made foreign war seem cost-free to the American public, which in turn has caused a whole string of foreign lobbyists to try to buy American support and intervention in every corner of the world. It’s also made the American economic and political system very unstable in the long term, I suspect, because it’s now “addicted” to getting things cheap. Pirate economies (unlike the old boring taxation ones) tend to collapse, when they can no longer expand, or at least can no longer tap the outside world any more. It’s also gutted American industry and production, because once you could pay for things in paper dollars, it became cheaper to outsource everything possible and buy things from the third world. It’s had a very oligarchic effect on government and big business, since their access to easy credit enabled big organisations to buy up smaller ones on an unprecedented scale; and, finally, it’s been very corrupting, to get something for nothing in this way, for so long. It’s the true background reason for the predicament you’re in today.

And as I said, it’s created a world were “everything” is rigged against traditional conservatism. Currencies that are purely creations of government not only give unprecedented power “to” governments to interfere in all of our lives, but their inherently inflationary nature has created a world that rewards borrowers at the expense of savers. That is historically unprecedented, and an extraordinary thing to build a civilisation on. Should one be surprised that the culture associated with this civilisation should be one of personal self-indulgence, rather than one of self-restraint? That is the world that Roosevelt (and, later, Nixon) gave us.

Ideally, I think all genuine conservatives should want to go back to the old gold-based system, or something like it, to reduce the power of central government, and revive the genuine independence of local communities, including independent and locally owned media outlets. I don’t see how it could easily “happen”, though, even if everyone saw the need. We’re addicted to high government spending to maintain social cohesion now. Historically, even in Ancien Regimes, a large portion of taxation revenue always went into buying off powerful interests, encouraging them to look to the central government in a mixture of hope and fear and to fulfil their ambitions, buying the support in this way of prominent people who already “had” local influence, to use that influence to support the state, and holding a country together that way. Even the Roman and Byzantine empires worked that way in practice, and although the central government then took a far smaller share of the national cake than many historians have believed (and was consequently less interfering), and although the gold-based system was more stable than its later equivalents, still, whenever a financial crisis (perhaps caused by war, or a usurpation and break in legitimacy) meant that there was less money for “cohesion subsidies”, then there was always a period of instability, and often territory was lost. Going back to gold after an inflation-based system requires massive government restraint (and political weakness, while spending is cut), self-restraint on the part of society, and on the part of the powerful vested interests, and it also requires that the government actually acquire in advance a huge resource of gold or something similar to “use” or introduce as the currency.

Historically, there aren’t many parallels. The Chinese went through all this once, in several stages, and through several dynasties. Strings of “copper” cash (not gold or silver) were their original currency, but it was too heavy to carry around in bulk, so paper “promises” to pay a certain amount of copper in so many years began to be used as money instead. Even this was inflationary, as it expanded the money supply, but it was very convenient for a cash-strapped government, and they ended with outright paper money (as the Chinese state, uniquely in those days, actually had the power to require people to accept it), since the temptation was “always” to print a bit more. Attempts to criminalise the possession of rival commodities and precious metals were much less successful, though. In the end I believe the social instability caused by this inflation forced the Ming government to bring back the use of silver as a parallel currency to pay key servants and officials with – a bit like a third world country paying certain key soldiers or officials in dollars. But it took a while to build up the sort of store they needed to bring such a currency into general use, and the change was not complete before a massive peasant rebellion (which nearly succeeded), the collapse of the Ming state and conquest by the northern Manchu, who went on to form their own dynasty, and stuck with silver to the end. Ironically, as the last major country to stick with silver, China lost out in a major way in the 19th century, since when the rest of the world’s countries switched the basis of their currencies from silver to gold in the course of the 19th century, the price of silver dropped against gold, but all Chinese reserves were in silver. (England, of course, made a huge profit – quite apart from the gold mines later found in her empire – by being the “first” major nation to make the switch from silver to gold.)

There aren’t many other parallels I can think of, at least where the government actually survived. In the Roman Empire, Constantine the Great managed to stabilise a gold-based currency after some generations of inflationary currency debasements (a far bigger achievement than many people realise) but he could only do it through confiscating the treasures of the pagan temples, which gave him a reserve to pay his soldiers with.

There are some straws in the wind, though. It’s interesting that the Maliki government in Iraq’s deals with the oil companies involve not being paid for oil in (depreciating) dollars, but in “refined” oil instead – a form of barter, isn’t it? When a third world currency is weak, they have traditionally used first world currencies to pay people they really needed to. If “our” currencies ever became as weak (and I think that the dollar will be the first to go that way, because public and corporate indebtedness is too much to ever pay back without wiping out most of the debts through massive inflation) I wonder what commodity it is that people will use to pay those they really need to – or as a hedge against inflation.

I really have gone on, haven’t I? I didn’t really mean to, but it’s all linked together, and it “is” hard to explain one thing without another. And it’s hard to try and condense all these suggestions into a single post.

I think there’s just one more observation I’d like to make.

Over the last couple of centuries, the world has moved from what I had better call a wind-and-cannon age, into a coal age, then an oil age, and finally into what is going to be a post-oil age. Taking a very long view, these have each had some distinctive features.

In the sail-and-cannon age, there were limits to how much revenue a normal continental agricultural country could raise, especially with a view to fighting wars and paying for the armies it needed. In thinly populated eastern Europe, where land was more plentiful than people and rents would normally have been low, even a limited early modern state could only be paid for with serfdom tying the labourers to the land. The real money to pay for powerful states and armies (and to pay for even more expensive navies) came from the profits of intercontinental trade, or rather, from being able to tax such trade – and only a few countries could do this. The biggest sources of this sort of wealth were silver exports from the new world, slaves exported from Africa, luxury goods like Chinese porcelain, tobacco, cotton, sugar and tea, and various other commodities for which Europe had a near addiction. This trade could only be protected by a fleet (and the colonies and trading posts could only be acquired by a fleet) so the only countries that could tap this wealth were those which had very big fleets.

However, sail-and-cannon navies (and merchant fleets as well) could not easily be put together from local resources. Not only did it take time and resources to train experienced sailors, but one could be blockaded by an established naval power whenever a war came round, and all one’s efforts and expense would be for nothing. Worse still, all the products an old-style fleet would need – timber, hemp, tar etc – couldn’t usually be obtained locally, but only from distant places like the Baltic and North America, and an enemy with a “more” powerful fleet could easily blockade your access to them. In other words, it was extremely difficult for an outside power to break into the charmed circle of maritime powers, and once excluded was very hard to get back in. The only late arrival was Russia, which had access to the necessary products locally, but her long land borders, comparatively small population at the time, and her need for a huge land army meant that in practice a commitment to a very large fleet could never be sustained for long: besides, she had several near-landlocked seas, all of which could be blockaded against her, and could not easily send sailing ships from one such sea to another if she needed reinforcements in another arena. Above all, there simply wasn’t the money to spare from her “real” needs: this sort of game was much more practical for islands like Britain, which didn’t “need” a huge standing army, and, in fact, would pay her allies to fight for her when she needed them. The Habsburg Empire routinely needed British subsidies to fight – the only way she could hope to keep military parity with a semi-maritime power like France. 18th century Spain kept herself in the big league by increasing use of Mexican silver. At the end of the Napoleonic Wars, Britain ended up the winner in this game, with a powerful enough navy to deny “any” rival access to the sea – and the money and resources to invest in all sorts of early industrial development. And no sooner had Britain achieved this (with a pre-industrial economy, no less) when the world changed about us in the 1840s, and we entered the coal-and-steel age!

The coal-and-steel age was quite different strategically. An awful lot of countries could find coal and iron within their own borders – and these could be used for trains and engines and ironclad battleships. For the first time, all the key components for a modern economy could be obtained locally: not just the components to build a big army, but to build a big navy as well, and an established maritime power couldn’t block them any more. During this era there was a window of opportunity for new powers (like Germany and Japan) to make their way into the league of big players, and compete militarily against the older ones.

However, without colonial possessions, and without a more powerful fleet than Britain’s, their day in the sun would be temporary, because the world was about to change again.

The oil age was already beginning to dawn at the time of World War One – and Germany’s enemies all had direct access to oil supplies, but Germany and her allies didn’t. Russia had her own oil, and was a French ally. Britain had sewn up the Persian Gulf. Germany “did” have an arrangement with Turkey, which still controlled Iraq and much of Arabia, but communications were not secure, since Britain had a more powerful fleet that dominated the seas in between. There was a land connection to Turkey, and a pipeline might one day have been possible, but in 1912 the Balkan states finally broke free of the Ottoman Empire, and the land route was filled with Russian allies. The tide was turning against Germany, not just because of the modernisation (and population growth) of late Imperial Russia, but because the oil age was dawning too. Another decade, and no war against Germany’s current collection of rivals would have been winnable for her. I think this is one of the main reasons why Germany opted to give Austria free rein to subdue Serbia in 1914, risking an all-out European war, for which, the last couple of years, they had been quietly preparing.

I suppose on Germany’s part, the main mistake was Bismark’s in 1878, when, forced to choose at last between them, he picked Austria over Russia as a long-term ally, which meant siding with Turkey against the Balkan Christians. If he hadn’t, Germany’s flank would have been secure, and so would oil supplies from the east. No one predicted the economics of the oil age as early as this, of course, but the first Kaiser instinctively knew that Bismark’s decision here was a mistake, destroying more than a century of very good relations with Russia, and observed that he felt like a traitor.

But there were other factors involved in Bismark’s decision. The Austrian state was run by German-speakers, which made them a more acceptable ally to the newly united Germany. In the decades before world war one, first liberal and then socialist sentiment was growing (especially in countries that couldn’t buy off discontent by taxing the world in some fashion, had debts and interest payments to make, or that needed to spend all available cash in keeping up militarily). At the same time, the old allegiances of throne and church were weakening as a hold on the population in every European country – although more dangerously in those countries that were weaker financially, and unable to buy off opposition by milking the rest of the world in some fashion. The authorities in every nation, seeing that church and monarchy were no longer enough in themselves to provide legitimacy, looked around for a rival political ideology with mass-appeal which they could use, to combat socialism and win elections with, and nationalism seemed the most convenient. This was easiest for strong countries to do (like Britain and Germany) who were powerful enough militarily to get away with this sort of posturing: it worked less well among weaker countries, that couldn’t afford to stir up their populations against their neighbours, when they were likely to lose a war with them. It also couldn’t work so easily among “multinational” nations, where national sentiment would be divisive, rather than a rallying point. Russia did partly move in that direction, but was late in doing so (and had too many national minorities to be unaware of the dangers) and so she preferred to rely far more on the weakening hold of church and monarchy, since all alternative ideological cements had very big practical problems: there wasn’t the money to make elections work quite the way they did in England, and the state itself was much more fragile. This was less corrupting spiritually than the outright appeal to nationalism for social cohesion was (and Russia continued to produce saints of a different order), but the downside was that there was no new popular ideology that had the mass-appeal to fight the spread of socialism with, and (admittedly, strained by the cost of war) Russia was ultimately the country that “did” go under to left-wing revolution. The Habsburg empire, on the other hand, ruled an empire so ethnically divided that an outright nationalist ideology would have been suicidal, and although favouring some groups at the expense of others did win the loyalty of “some” of her peoples, like the Hungarians, it alienated several others, most especially the Serbs. So increasingly the Habsburg monarchy was compelled to rely, as a unifying force for the empire, not on setting her people against rival nations, but on turning them against rival “religions”, and on encouraging all the latent Roman Catholic hostility to Orthodoxy. This is the true reason why the xenophobia which later took nationalist form in Germany took a religious one in the western Balkans, and why the world war two genocides took a racial form with the Germans, but a religious one with the Croats.

But going back to the idea that the “oil age” was dawning, when the first world war happened, I think one can safely say that another reason for the first world war was that the balance of power was changing, and that is “always” productive of wars. (That’s another reason for worrying about the present. The Soviet Union’s fall created new wars, and America’s decline will do the same.) But right before the first world war, the balance of power “was” changing, and “not” in Germany’s favour. Not only was Russia’s modernisation making her increasingly strong (and self-sufficient, unlike today’s China) but looking to the long-term, a “coal age power” like Germany only had a window of opportunity to secure her position and supplies, before the world changed around her, and she went back to being a minor power – and if her rulers were then “unable” to satisfy the nationalist sentiment they’d encouraged (as a protection against socialism) they’d end up with both nationalists “and” socialists against them, and probably end up with revolution themselves. (In fact, in the closing stages of world war one, Germany “did” end up with mutiny and revolution, but unlike in Russia, the new socialist republics were near enough to the western front to be destroyed by the allied armies.)

Actually, both world wars were more about oil than is commonly supposed. Russia’s oil reserves were a major war aim for Germany in World War Two, and the Dutch East Indies’ for Japan, as coal-and-iron-age powers attempted to secure the resources they wished to control in the new era. Certainly, the Second World War was “decided” by who had the oil. The chief reason for the defeat of the Axis powers was that they had only a miniscule fraction of the world’s oil refining capacity: all the rest was in the hands of their enemies.

To some extent the oil age has proved similar to the sail-and-cannon age, in terms of geopolitics at least. For most countries, oil usually has to come from abroad (along with several other resources) and a big naval power like Britain once was, and America is now, can use a blockade to deny access to a minor power, and cripple their economy, and their ability to fight. Transport is much cheaper, and the world is much more interconnected, and all sorts of products and materials have to come from abroad – basically across the sea, because land transport is much more expensive. This is the long-term strategic weakness of China and India: they have a shortage of raw materials (especially oil) which has to come from the Middle East, across oceans controlled by American fleets, and since neither has the capability of starting a ruinously expensive arms race here, this is likely to remain the case (unless of course America “does” go bankrupt, and “can’t” maintain its global presence). It’s possible, though, that this vulnerability of China and India could also be reduced if more oil and gas pipelines are built from Russia and Central Asia, and if Siberian resources are developed further – which is probably one of the reasons why the US is so interested in Afghanistan and central Asia. (Actually, my own suspicion regarding Afghanistan – and I may be wrong here – is that there are “two” aims, energy geopolitics and denying a base to Al Qaeda’s Taliban allies, and these have interfered with each other, which is partly why they have both gone wrong.) It’s also one of the reasons for thinking that even if Iran’s nuclear program were stalled for ever, the American government would “still” want regime change there: in an energy competition with Russia over how Asia is supplied, which camp Iran is in will matter.

But this is still the politics of the oil age, or, should I put it, the “late” oil age. I wonder what the world will look like when it is finally over – assuming we avoid a major war or some such other catastrophe, which is by no means certain. Nuclear power remains, of course, but would the strategic realities begin to resemble those of the coal-and-iron era, when local powers could make it into the big league, at least within their own region? Only this time round it wouldn’t just be true of Europe, but of other continents as well?

American bankruptcy, though… I think it “is” a possibility, because the global empire which was originally made possible by what I call the Roosevelt system of politics and government (and that’s basically the system you’re living in now) can’t be maintained as it is by purely American resources, and the world won’t submit to being taxed for ever, even indirectly. Either you’ll have to draw back (the most prudent course) or move towards “overt” threats to tax the world and demand cheap resources (which is fraught with danger, hard to defend and likely to fail disastrously) or else go bankrupt: the likely way “this” would happen is a “third world” solution to fiscal imbalances: domestic hyperinflation; if the dollar was collapsing (with foreigners selling en masse) and the government still printing them hand over fist in order to pay its day-to-day bills. Basically, if eventual hyperinflation and escalating dollar costs mean the military couldn’t be supplied with essentials and carrier fleets could not afford fuel, one can in fact imagine a sort of Soviet Union scenario. A modest retrenchment could still prevent this, or at least put it off, but I don’t think that’s likely to happen: it would draw the ire of too many vested interests, if their rice-bowls were withdrawn: the lobbies, the military contractors who basically (since Roosevelt) have had most of congress on their payroll… The chief problem is quite simply that there are too many powerful interests heavily invested in the American Empire, whatever its cost – and as for the danger, Americans take for granted their position in the world, without understanding its historical basis; they won’t believe it’s possible, until it’s already happened.

If it “does” happen, and the dollar becomes worthless, a whole lot of developments of the last generation – the outsourcing or gutting of American industry, and even suburb creation, with the corresponding rise in transport costs and fuel consumption – will turn out to have been disastrous. For a while, the economic situation could well look bad even by third world standards, and (without the money to smooth them) so will social and political tensions. And this will be happening in a country that has most of the world’s weaponry, and with a population that will undoubtedly be very, very angry – the reaction to 9/11 might well be as “nothing” to this. And that’s just as bad for the rest of the world as it is for America. The real question (if this happens) is who will the people blame? Who will they be angry “at?” Against whom will this anger be directed? How would the country’s rulers act, if faced with a crisis of “these” proportions? It’s all quite terrifying. Or will the people be too desperate to make ends meet to have the “luxury” of being angry? One of the more unreal things about the coming American election is the way all the candidates seem to behave as if it’s just going to be business as usual!

That was quite well done, Alexander.

Alexander's enormous dissertation is an example of what should be called "blog-jacking": using the comment box in someone else's blog as a platform for publishing huge entries which really should be delegated to a blog of its own.

But I think I can summarize its substance far more briefly: the American Empire is finished for reasons A, B, C, ... X, Y, and Z (all of which are too tedious to elaborate upon here).

Re: Alexander

Lucky we didn't tell him about the dirty *knife*.

Before I Diderot, even the top one, of his Encyclopédie (I assume subscriptions and compact "workingmen's editions" are available, after the Eleventh Edition of the Britannica from 1910), I enlisted another Pythonate usage, in submitting it to an Alexander-the-Great-alyzer - and made the mistake of forgetting to stock the printer generating the report resulting with single sheets in place of accordionate, dual-margin-perforated paper, for which strangling by tsunami I blame not our imperial commenter, but myself...

It's not going to be wars far-foreign that do for us. They're going to be expensive, true, but they won't break the bank.

It's going to be maintaining the DOMESTIC Empire that breaks this society. For the last century or so, the government in Washington has been endeavoring to keep the social peace through redistribution of the wealth on an historically unprecedented scale. The modern-day Welfare/Warfare Regime had its start, after all, in a reaction to the seemingly unnatural concentrations of wealth of the Rockefeller/Gould/Morgan-types. In order to prevent what they saw as an incipient working-class revolution, the politically powerful of the time (Wilson, the Roosevelts, etc.) and those who controlled the large bodies of corporate wealth began to enact programs to essentially buy off the working class. In the 30s, this produced the so-called "New Deal". In the 50s, the corporate Lords attempted to co-opt the bigger industrial unions. In the 60s, we got the "Great Society" programs.
During the Reagan 80s, the old programs (particularly SocSec and Medicare) began a new round of expansion. Now the political and corporate aristocracy is trying to keep the lid on by another round of expansion of those same programs, with a few modifications (the prescription-drug benefit, Obama's proposal for State-run healthcare).

The difficulty lies in the burden imposed on the productive classes; the petty bourgeoisie/small-businessholders and the working segments of society are being suffocated by the high taxes they have to pay for the support of the non-productive, particularly the retiree and "minority" beneficiary class. The productive members of society have responded by channeling money and efforts away from reproducing themselves in order to ensure immediate economic survival, as well as "compensating" themselves through material consumerism. As a society, we're not eating our "seed corn" so much as we are diverting it to today's non-producing classes. If one wants to get Marxist about it, the bourgeoisie has been reduced to a proletariat, and a rather lumpen one at that.

The only solution I see is to get rid of the burdens imposed on the productive by the non-productive. This may well require a radical change of regime (both political AND social) and the elimination, one way or another, of the unproductive classes and the burden they impose. The domestic Empire has to go, and the currently-productive generations (Xers and Millennials together) have to be the people that kill it. A new bourgeoisie---in the old sense of self-reliant families controlling their own spending and governing themselves---must be brought into existence. The alternative is slow (and in a few years, not-so-slow) economic strangulation by the State/Corporate elites.

That having been said, can I interest anyone in a little "Logan's Run" ? Or perhaps you'd like a little Soylent Green with your coffee ? Interesting times, mes amis, interesting times are coming.......

In the Chinese sense.

Your servant,

Lord Karth

I've just returned from Google Docs [rubs needle welt on bicep], where I submitted Alexander's post to a word count. For comparison, keep in mind that of the dozens of essay-reviews from The New York Review of Books (which some confuse with The New York Times Book Review) I've word-counted over the last few months, the longest ran about 9000 words.

Here's The Encyclopædia Alexandria:

Counts
Words: 11149
Characters (no spaces): 53860
Characters (with spaces): 64993
Paragraphs: 59
Sentences: 322
Pages (approximate): 8

Readability
Average sentences per paragraph: 5.46
Average words per sentence: 34.62
Average characters per word: 4.83
Average words per page: 1393.63
Flesch Reading Ease: [?] 41.68
Flesch-Kincaid Grade Level: [?] 16.00
Automated Readability Index: [?] 19.00

In the best of cases after such Bambino fence-swinging, commenters who love the rest of us not rag-soaked in midnight oil not wisely but too well, make like a Czech Permabear and hibernate till the next Prague Spring.

In the worst of cases - well, as the wing-lamed Tiny Tom cried so adorably in Dickens' unpublished holiday classic, A Thanksgiving Peril, as the hardfaced farmer approached with musket and ax:

"God help us, everyone."

Did you notice that Prof. Rubini spoke without notes? He has this all in his head. I am impressed and (although I already subscribe to his news letter) I will pay more attention to him in the future.