Endgame - a supplementary view.
Thought I'd approach the "Endgame" question from another angle. How does the following sound as a potential scenario?
1 - What if we are witnessing a great battle between the forces of an "old regime" and a "new regime"? Much like previous socio-economic-historical battles between land-owning aristocracies and the forces of liberalism, or capital and labor. It is not entirely clear to me what the outlines of these two forces are even, and I'm not sure each "force" is not actually a composition of many different separate forces, each of which are more naturally aligned with either the "old regime" or the "new regime".
2 - Forces of "old" and "new" regimes exist in all societies and nations in the world today - be they Islamic, western democracies, Russia, China, Columbia, or whatever. The Bush administration and current Fed policy certainly represent the interests of the "old regime". As does the Iraq war. Though the "new regime" also has a significant stake in the outcome of geopolitical conflicts as well.
3 - The primary geopolitical weapon of the "old regime" is control of the global monetary system through the BIS, central banks, and their proxy financial intermediaries. The primary stakeholders of the "old regime" are large corporations and merchant bankers of the JP Morgan and Citibank variety.
4 - The "new regime" represents those whose "interest" is best served by a decentralization of global power structures. By stronger democratic representation at local and national levels. By sound money and balanced protection for the rights of communities, workers, and capital. The "new regime" will build the economic and social infrastructure for the new global information economy.
5 - The "old regime" has leveraged the current monetary system in the interest of holding onto power, such that its rupture is inevitable. The rupture will be both economic and ultimately political. The rupture will lead to both a collapse in the value of the US$ over time, and to a mad scramble for liquidity. I think there is a strong possibility of a severe economic downturn. How commodities are priced in this environment is unclear to me. Are they priced like the '70s? Or like the '30s? Could be that they are priced like the '70s for Americans, and like the '30s for the Chinese. Dunno.
6 - When the "new regime" begins to consolidate power (when? in 1 year? 2 years? in 5 years?), interest rate normalization will occur. There will be a desire to return to sound money and interest rate normalization. Society globally will get down to the task of working off debt - and attempt to strike a negotiated balance between the interests of debtors or creditors. In this respect, it will surely bear significant resemblance to the early 1930's. Hopefully, the world can resist Fascism. The current Bush government, representing the interests of the "old regime", is significanly a Fascist response to maintaining the power of the old regime. Thankfully, its ambition in the Iraq war has not gone well. It is my sincere hope that his government is not elected in the upcoming elections. I believe Kerry's government would strive to strike a better balance between the interests of the "old" and "new" regimes, but not sure.
7 - This, however, does suggest a somewhat different end game. In the end, the music WILL be faced, one way or another. I don't believe that it is in the interests of most Americans to have the U.S. monetary system destroyed as in the case of Argentina. It is unlikely that the US$ will not have to be significantly depreciated from here, and the average U.S. citizen will suffer a sigificant loss of purchasing power. However, I do not believe the U.S. monetary system will be destroyed.
In other words, an inflection point may be coming after the U.S. elections - when a government that is no longer so intimately tied with the interests of the "old regime" emerges. Many current policies could reverse - in particular, trends in the twin deficits and a normalization of interest rates.
I think it's a possibility anyway, and perhaps a different endgame scenario from the absolute and total destruction of the U.S. monetary system.
Thoughts?
Glenn |
