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Global Economic Collapse In 2012?

Economics / Global Economy Dec 30, 2011 - 07:38 AM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleMORAL AND ECONOMIC DECLINE
This longstanding European genre-material for books, films, plays - and politics - dates from the end of the first world war, with a massive fillip in the 1930s long depression and rise of Stalin and Hitler, and this theme is surely back with a vengeance today. One reason is the decline isn't only economic, it is also moral, social and psychological and the track record for doing anything about it is bad, both in Europe, USA and Asia. The conventional solution, the historical precedent of the 1930s decline was Muddle Through ending with a world war, but thinking that today is unthinkable.

Things can however go fast, when the muddle through economy's train ride to the cliff face reaches its destination. 2012 starts with serious and real menaces that we have reached the cliff face: what was tapering down gently before, now goes into free-fall and nobody knows what to do. Not having real numbers for the economy, with twisted yardsticks and subjected to short-run bizarre attempts to plaster over the cracks - like Europe's permanent saga of sovereign debt bailout talks - makes it all the harder to know the arrival time at the cliff face. Do you expect any politician to admit we are close ?

One harbinger is sombre: both in the US and Europe intellectuals and politicians are talking the talk as their factories shut down: French figures show 900 shut down since 2008 with a loss of 100 000 jobs, and official media lets us all watch the jobless and homeless walking the walk in the soup kitchen lines. In the classic 1930s version they then shuffled on to die in bombed cities and in the trenches.

Muddle Through has only one goal: prevent tomorrow from coming. Keynesian 1930s-type notions of Saving the Economy were exactly that, but his notions were penned long after the breakpoint period of discontinuity which happened then and have always happened in the past. The short word for this is History. Today, it is less than unthinkable to imagine the European banking system could implode, that high street banks with well known names have such fantastic debts they will need bailouts for a decade or more. It might seem incredible that a global currency like the euro could become so flimsy it can dissolve into nothing. For Offshore Europeans, that is Britons the prospect is even more terrifying: when the euro crashes the entire European economic system will fall apart, sweeping away the British economy and destroying the ever-shrinking, ever-devaluing British pounds rolling off the printing press. Economic terror reigns in Europe.

Nowhere in the "advanced democracies" is there simple referendum voting on what the people want. History has happened and will go on happening. Even consumer fanatics and fundamentalists can understand what happened in the past and we need to make big and important changes right now. Not only in the British case but across Europe, one referendum test should be: Do you want to remain in the European Union ? Another is: Do you want all banks to be nationalized ?

To be sure the die is set, at least in Europe. Any election, anywhere, boots out the incumbents and the newcomers say on Day 1 they are continuing the austerity cure, bailing out the banks, and moving towards Federal Big Brother Europe: there is simply no alternative ! More important there is no democracy. In the US the bizarre spectacle is Obama, one of the most unpopular presidents ever, having no serious rivals only a few months from the presidentials. Although it is taking time, the message of impending economic collapse is seeping through, which mightily explains the inertia, lethargy, down-for-the-count political wasteland in the "advanced democracies". Who cares ? The replacement team will be exactly the clowns we booted out. Exactly like the 1930s, down to the details of mainstream media masterfully trying to befuddle and confuse, distract and titillate the crowd in its heroic quest to keep tomorrow from happening.

Surprisingly but predictably, mainstream media steers clear of the best and closest analogy, the model for our own economic collapse. Yet the experience of citizens of the former Soviet Union in the late 1970s and through the last countdown years in the 1980s, before it suddenly melted down, is packed with lessons for Europeans - and Americans - at this time. Nothing says a Soviet-type collapse will not happen to us.

Despite its grim reality, the Soviet Union was founded on optimistic, hopeful, humanistic and morally progressive values. Marx was a humanist, even if he was not an economist, while so many founding economists of so-called Neoliberalism like Jean-Baptiste Say or David Ricardo were the opposite: cynical and misanthropic, and often paranoid. Under the tyrant Stalin, the Soviet Union soon morphed into police state terror and really became an Evil Empire. In the same way the tyrant Hitler, preaching a form of debt-based corporate capitalism and outright racism to whip up crowd hysteria, created his own capitalist-type Evil Empire. One unifying feature was that both empires ran on debt and did not need any extra ideas from Keynes for doing so.

It was only an accident of History - a happy accident - that Hitler and Stalin fought each other.  It was good and natural the two evil dinosaurs should fight to the death: but how did Humanity allow them to grab power, allow that to happen ? These were both supposedly civilized countries with an educated elite. Great writers and painters, thinkers and doers came from Russia and Germany. How could this happen? This was a recurring theme of 1930s intellectuals, and 1950s filmscript and theater writers, briefly renewed with Ronald Reagan's Evil Empire whinings of the 1980s.

For believers in progress any period of clear and outright moral and economic decline is a dispiriting prospect. Emprisoned in their lead-lined hood of Right Think, chanting their "secular myth of progress" these naive and credulous champions of progress can become evil personified when their despair goes critical. They will use all their ingenuity, their animal intelligence to Keep The Party Going. They cannot accept the breakdown of a particular set of human ways of doing things at a stage in History is not the end of the world - only the end of their world, as they know it. Their privileges too. They will foment war, become apocalyptic nihilists and bring down the temple in their last, most evil avatar. This is the danger.

In 2012 the slightest economic stress of the type called "surprising, unusual or unforeseen" can sweep away the entire global economy. Europe would be first to implode quickly bringing down the USA. Both China and India would implode like card castles as their export markets shrank to nothing and their insane real estate bubbles crashed, bringing down their fragile banks. All moneys would be destroyed. A half century or more of so-called economic progress would be swept away.

Geopolitical conflict could cause this, and would certainly result from it. Today's range of geopolitical threats and menaces on offer are big and dangerous. Totally unexpected even at the end of 2010, the Arab revolt is now daily reality, grinding on as its death toll marches ever upward. Similar revolts are likely coming in other countries, not only the Old Rich countries but also in Africa and South America. Challenges to Vladimir Putin's power, whether at the ballot box or anywhere else, was unthinkable even 3 months ago. The possibility that year 2012 will not have an oil crisis probably as serious as 1973-74, resulting in the physical rationing of fuel in oil dependent consumer countries, is shrinking fast despite all discussion of it being kept out of mainstream media or deliberately talked down by official media. World food supplies are tight and exposed to ever rising threats, not only climatic but including geopolitical conflict and civil stress in exporters countries facing ever increasing import demands. Power supply infrastructures and capacities are weak and stretched to the limit in many countries, including the "advanced democracies", scraping through on the hope an unusually warm winter in the northern hemisphere stays that way.

The stress resistance of the global economy has weakened, and weakened as growth goes into faster decline and debts go on rising, as infrastructure and maintenance spending is trimmed to the bone, as depletion and shortage threatens so many basic raw materials. The threshold for economic collapse is falling. Possible or probable pre-emptive action of any kind - for example increasing national oil stocks and food reserves, setting price controls on basic necessities, rationing electricity, imposing tariff barriers in a desperate attempt to limit trade deficits - will itself signal the lowered threshold is recognized, and will in turn lower the threshold.

Switching to how the Soviet Union collapsed, probably the two biggest drivers were debt and political arrogance. In fact both are linked and related: endlessly raising the debt of a country needs at least as much arrogance as despair. Rich and powerful countries are entitled to borrow, even if their riches are a fake and their power can totally collapse in months or weeks. At special times, like a breakpoint in History, this becomes agonizingly clear. The world changes. This is History.

The Soviet war in Afghanistan was at least as insane as the present but ending American and European war in Afghanistan. Both were illegal and useless, both were driven by supreme arrogance, with no possible economic yield or booty. The 1988 Soviet defeat in Afghanistan was a clear signal that the end was nigh for the Soviet Union. It was dying fast. Its economy was in tatters. It could not repay its debt and was not even able to beat "Third World tribesmen" defending their country against foreign aggression as they have done for centuries. This is exactly the model for the Western total defeat in Afghanistan, there is no difference; Western media treats Afghan defenders of their nation with the same racist arrogance as Soviet media, there is no difference.

Technological arrogance of the Soviet Union, at least equal to our own, was hammered by the Chernobyl nuclear disaster just before the Afghan rout. For a full week following the 1986 nuclear disaster, Mikhail Gorbachev was blathering a mixture of outright lies and preposterous claims, pretending the disaster was under control and Soviet atomic energy was safe. It was not. This disaster possibly cost $250 billion, and killed at least 100 000 persons in the dying Soviet Union and right across Europe, leaving a total exclusion zone around the power plant of more than 3000 square kilometres for the next 100 years. This was "safe clean and cheap" nuclear power ! The alternative to high priced oil ! Until the March 2011 Fukushima disaster it was still possible to deny these risks, this reality, it was still possible to make lurid claims for Miraculous Nuclear Power: nuclear disaster only happens in declining Communist regimes, not to us. We are superior but the nuclear menace is known and feared, now.

Soviet politicial arrogance was total. Stalin's pogroms of Chechens, Jews, Armenians, Kazakhs and any minority peoples (even his own nation !) were unequalled in their bestiality - until Hitler went one better. There is no upper limit to the scale when the Empire is in its death throes. We should understand what this says. When it is possible to destroy the Empire, when it is weak and flailing it must be dispatched like a dying but still very dangerous animal and done away with as fast as possible.

Fantasy and folly run together in the endgame. All official media, so-called serious newspapers, state owned and state friendly TV channels, the Muddle Through media is in saturation mode for celebrity sensation, football millionaires telling us How to Save the World, sex and gambling, junk science quirks and fictions, gimmicks and gadgets, inventions for imbeciles. Any things and all things which febrile defenders of The Only Way think will keep the people stupid, gullible and greedy, distracted and dumb, the highest duty of the media. The last duty of Thought Control editors and programme content controllers, who pretend they lie because of "personal conviction".

Meanwhile the jobless lines grow and prices rise. The banks crumble. Mass poverty beckons, even in the so-called rich nations - but no change is possible. We must muddle through, God has decided.

By pure schizophrenia, History itself can be denied - has been denied. Long ago, in the early 1990s, the fake event for fake intellectuals was Fukuyama's "End of History", but this was a harbinger, a signal and outrunner for what was coming. Not long after the Soviet Union collapsed, our own collapse was already sure and certain, but denied by calling it the End of History - by negating the existence of History. Diogenes of Sinope, founder of both the Cynic and the Stoic schools of thought, about 2350 years ago had the right answer to this: deny the negation and negate the denial and you will see the truth. Denying that History is dead enables us to know what comes after the Soviet Union's collapse.

We have all the ingredients to hand: unsafe nuclear power, massive debt, a useless and evil war against Afghanistan, with no relation at all to our real problems or needs. Economic decline, moral decline, and total loss of credibility of our governing elites. Civil war conditions.

This always comes. To be sure, days are lengthening by a few hundred nanoseconds each year and 4 billion years ago, when the Earth was young, a day had less than 10 hours - but tomorrow will come.

More surely, tomorrow has happened but we have denied it, encouraged by our lying and confused media, imprisoned by our greed-based consumer culture, befuddled by the pace of change in a world with a supposedly perfect economy and therefore deemed unable to change. We can perhaps hope or fear that we get a Mayan December 2012, but long before then we will be forced to admit and accept change, and the biggest changes will finally be political and social. Social and political.

The USSR's collapse first produced an anarchic festival of political incoherence. Yeltsin "The Bottle" was the best expression of this, drunkenly signing away Russia's mineral wealth to anybody, braindead to the massive sufferings of the people who in no way wanted a switch from the worst of Communism, to the worst of Capitalism. But that is what they got, and the West got a few years of cheap gas and oil. A precious short-term band aid, to keep the party going a little longer, before invading the Middle East became necessary to assuage our oil greed, to deliver "energy security".

Our start point for historic change in 2012 takes off from the worst of Capitalism. This itself makes it unsure and uncertain what can happen next: Global Governance conspiracy theorists tell us the Soviet-type alternative is the only one, with or without a Eugenic Culling of one third or one half of the world's present 7 billion population as the Club of Madrid's heavyweights like Mikhail Gorbachev might like.

Any nation can vote to eliminate Late Stage Capitalism: the people can decide they do not want economic cancer, and they vote against it. This can be done. When or if any late democracy Decider, or supposed decider has the courage to offer these voting choices to the people they will find out the real will of the people. They are not only greed machines bent on destroying the planet by depleting all its non-renewable resources in a single generation from now, in the next 25 years. They are also able to understand truth and seek a new way, despite the advertising, despite the politics, despite the Feel Good media's attempts to keep them animal right up to the wire - and push them over the cliff face.

The people prefer security to insecurity, cooperation to rivalry and struggle, they want social stability not constant stress and upheaval, they want social housing, education, health and cultural services, they want cities that are not polluted and jammed by cars. They want secure jobs not kleenex jobs. Try asking them by referendum ! The answer is what was called Socialism or even Marxism: this is the problem for the dregs and rabble who supposedly run our society -- but they will find out ! The future is Socialist but maybe the changeover starts Anarchist.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2011 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Parth V
31 Dec 11, 01:56
Future is not socialist its capitalist but Asia driven

I digress from this analysis. The EU crisis clearly proves that socialism is dead and crony capitalism in US is socialism for the elite. Both models will die as capitalism takes root in Asia.

09 Jan 12, 05:53
dependency culture

A very good Article but more could have been said. Presumably there were limitations of space. The dependency culture has crippled initiative. The private sector cannot compete with the financial subsidies paid to the supposedly less advantaged (i.e., in the main, the feckless) by the state, and the state cannot afford to maintain these payments as they come from borrowed money. Taxes will have to rocket to cover the cost of government western style otherwise there will be mass unrest. The Bangladeshi youth in Tower Hamlets protested crime when the weekly allowance for attending school was to be withdrawn: take away our benefits and we will rob you.

The true costs of services such as 'free' education are exposed by the university charges in the UK, now up to 9K a year just for fees, and the cost of private schooling, around 30K a year at a boarding school. Many people could not afford to pay these charges but they reflect the real cost of the services being provided. Yet the state gets poor value for the sums it pays on education with so many 'schooled' illiterates and innumerates. The standards of handwriting were higher in the Victorian era when so few had the benefit of 'modern' education. One could also mention the accompanying moral degradation, the appalling images of Friday night boozing by youth, with drugs and prostitution rampant at every stratum of society. Essentially nothing is wrong these days unless you are caught. Values equal self-interest and are subjective leading to a cadre of people who see others as nothing more than animals to be used, exploited and dumped when done with. How long remains to complete the slide into the cesspit? Like the drunk in denial, society can only begin to recover when it is well and truly in the gutter.

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