Markets (Page 10)

I’d like some help finding a poem, if any of you happen to know it. I read it when I was a teenager, and I forget who it was by — possibly Louise Gluck. Anyway, the poem was about a woman watching two happy young lovers, and wanting to warn them that their love would eventually fade.

It’s hard to avoid a similar kind of maudlin feeling when I visit Taiwan, as I now have every year since 2022. New Year’s Eve in Taipei is something worth seeing — an entire shopping district in the middle of the city gets closed off and flooded with young people, basically becoming a gigantic all-night block party.

At midnight, right in the middle of that party, fireworks shoot off of the city’s towering skyscraper, Taipei 101. It’s the kind of thing safety regulations would never allow in America, and probably not even in Japan. Everyone cheers wildly, and they dance and drink until morning.

As the fireworks exploded and thousands cheered, I was suddenly reminded not just of that poem about the two lovers, but of some bit characters from the Iain M Banks novel “Consider Phlebas.” 

The Players on the Eve of Destruction were gamblers who would travel around the galaxy to places about to undergo an epic catastrophe — a supernova, a war, and so on — and play games right up until the very last moment. I wondered if I was one of them now.

Humanity’s curse is that we can peer into the future. We see a pandemic begin to spread, and we know that in a few weeks it will probably be everywhere. We see banks begin to fail, and we know that in a few months a lot of people will probably be out of a job. When my rabbit has to go to the veterinarian, I’m nervous hours in advance, while he calmly munches hay, oblivious to the onrushing inevitability of unpleasantness.

On New Year’s Eve in Taipei, it’s hard for me not to think about the future that might be coming. It’s hard not to see the streets filled with merrymakers strewn with bodies instead, the shopping malls lying shattered in chunks of rubble, the young people searching in vain for their parents. It’s hard not to look at the towering spectacle of Taipei 101 and imagine it toppled and broken.

It’s hard for me. But it doesn’t seem to be hard for most of the Taiwanese people, who go cheerfully about their partying and their jobs and the quotidian routines of daily life with as little apparent terror as my rabbit munching hay.

Even as the titanic battle fleets of a menacing empire surround their home, even as the empire’s state media bellow threats of war, Taiwanese people stroll through night markets and sip Ruby #18 tea and line up for the latest cat cafe. There is an easy, laid-back tranquility to this culture like nothing I’ve ever seen, not even in Amsterdam or a California beach town.

“It’s like earthquakes,” Taiwan’s Minister of Digital Affairs told me when we met up two years ago. She meant that the Taiwanese had become so used to living under the constant threat of invasion and war over the last seven decades that they had learned not to sweat about it too much. Perhaps that was even true.

If so, I would recommend that Taiwanese people have a little less equanimity and a little more urgency The ability to see into the future is a curse, but it’s also a blessing, as it allows humans to act to be ready for the terrible things ahead. Anxiety is the price of preparedness.

War has returned to our world. For some it never left, of course — if you were in the DRC in the 1990s or Iraq in the 2000s, the fact that life was peaceful in Shanghai or Berlin or Tokyo meant little.

But it would be intellectual dishonesty not to acknowledge the vast difference between typical wars and those involving great powers. No matter what data source you use, any chart of the deaths from war will show the World Wars rearing above the normal pace of death like two grim towers. This chart is 25 years old, but it still hits hard:

War is never completely gone from the human experience, but when the big boys come out to play — or when they collapse — things get kicked up to another level entirely.

When Russia invaded Ukraine in 2022, everyone knew something had changed. The Iraq War had been a harbinger of what was to come — a great power launching a war of choice against a smaller, non-threatening state.

But the Ukraine war was different — Russia wasn’t simply recklessly intervening in a neighboring country but attempting to swallow it entirely. The age when great powers competed only by proxy and by temporary interventions was over, and the age of conquering empires had returned. The Russians themselves have said this openly, and the Chinese realized it as well:

[Xi Jinping] has repeatedly warned Chinese officials that the world is entering an era of upheaval “the likes of which have not been seen for a century.”…

“The old order is swiftly disintegrating, and strongman politics is again ascendant among the world’s great powers,” wrote Mr Zheng of the Chinese University of Hong Kong, Shenzhen. “Countries are brimming with ambition, like tigers eyeing their prey, keen to find every opportunity among the ruins of the old order.”

If you think about this idea from first principles, its fundamental insanity becomes apparent. Spend a few days in Taiwan, and tell me honestly if there is anything wrong with it — some terrible injustice that needs to be corrected with saturation missile strikes and invasion fleets.

You cannot. The people here are happy and wealthy and free. The cities are safe and clean. There is no festering racial or religious or cultural conflict, no seething political anger among the citizenry. Everyone here simply wants things to remain the same.

And yet there is a good chance they may not be granted that wish. High explosives may soon rain down on their homes and their families, and an army of stormtroopers may march in and take all of their freedoms from them.

And if this happens, it will be because of the will of men far away — an emperor on a throne, generals hungry for glory, bored malcontents behind a computer screen. If these peaceful, unthreatening people suffer and die, it will be because those distant men decreed that they should.

Why would you do this? Why would anyone want to launch wars of conquest? The world has progressed beyond the economic need for warfare — China will not become richer by seizing the fabs of TSMC or the tea plantations of Sun Moon Lake. The mostly stable world created in the aftermath of the Cold War was good not just for Taiwan, but for China as well. Why topple it all chasing a dream of empire?

The only possible answer here is that the world is created anew each generation. We still call China by the same name, we still draw it the same on a map, but essentially all of the people who remember the Long March, or the Rape of Nanking, or the Battle of Shanghai are dead and gone.

The hard-won wisdom that they received as inadequate compensation for suffering through those terrible events has vanished into the entropy of history, and their descendants have only war movies and books and half-remembered tales to give them thin, shadowed glimpses.

And so the new people who are now “China” are able to believe that war is a glorious thing instead of a tragic one. They are able to imagine that by coloring Taiwan a different color on a map, their army will redress the wrongs of history, bring dignity to their race, spread the bounties of communist rule, fulfill a nation’s manifest destiny, or whatever other nonsense they tell themselves. They imagine themselves either insulated from the consequences of that violence or purified and ennobled by their efforts to support it.

They do not understand, in the words of William T Sherman, that “war is destruction and nothing else.” Nor do they think very hard about the future of the world their short, glorious conquest of Taiwan would inaugurate — the nuclear proliferation, the arms races, the follow-on wars.

The German and Russian citizens who cheered their armies and threw flowers as they marched to the front in 1914 could not imagine Stalingrad and Dresden 30 years later. We have seen this movie before.

From the supporters of empire, the rejoinder is always: Why resist? Why not simply invite in the armies of the empire next door, take the knee, and submit to being the emperor’s subjects? Wouldn’t a world united under the iron grip of a single dictator be a peaceful one?

Was this not why the Ming Dynasty knew two centuries of peace, and the Qing? Perhaps Xi Jinping’s China and Putin’s Russia are not the most free or pleasant places to live in the world, but isn’t that life preferable to searching for your mother’s corpse in the rubble of your family home?

Isn’t the true tragedy that humans are too obstreperous and obstinate to simply submit to the bringers of order? Won’t we all feel better when the messy business of conquering is over and we can enjoy the order that the conquerors bring? Isn’t every peaceful, rich, happy nation on Earth built on the bones of the defeated — including Taiwan itself?

The answer to this challenge is neither easy nor obvious. But looking at what the new empires of the 21st century have wrought, I think it’s clear that the type of regimes who would shatter the peaceful world of the late 20th are not the type who would follow up a quick conquest with years of peace.

The conquered areas of Ukraine are living nightmares, where the men are press-ganged into wars for further conquest, suspected dissidents are tortured without due process, women are subject to arbitrary rape, and families are plundered at will. Russia itself is marginally less repressive than its conquered territories, but there is a reason why so many people want to leave.

Nor is there any indication that this new Russian empire will forsake its orientation around war and conquest anytime soon — after all, after Ukraine there are still the Baltics, and Moldova, and Poland, and even Germany. Putin was not satisfied with Georgia in 2008, nor with Crimea and the Donbas in 2014, and neither he nor his successors is likely to be satisfied with Ukraine if it falls.

The modern Russian state is oriented around war — the machine will grind on, and forced conscription in each conquered area will be used to fuel the cannon fodder for the next conquest, as it was in the days of the tsars and the khans.

What about China? On one hand, unlike Russia, it’s a productive, manufacturing-oriented state — a repressive place in many ways, but unless you’re a Uighur in Xinjiang, not exactly a nightmare. Hong Kongers have experienced a steady loss of political and cultural freedoms since the city’s peaceful resistance was crushed a few years ago, but people are not yet being sent to the camps or slaughtered in the street.

And yet China is becoming a more repressive place over time, as its power grows. The government is building hundreds of new detention facilities all across the country for the emperor’s political opponents. The civil society that began to flourish in previous decades has been increasingly ground into nothingness.

The bargain in which the state provides economic growth in exchange for rights and freedoms has broken down, and Chinese people are now asked to accept the authoritarianism without the growth.

Discontent may not yet be so apparent that tourists are inundated with expressions of rage, but signs of dissatisfaction are on the rise, and those who can get money out of the country are generally doing it.

If you bend the knee to Earth’s new empires, you are essentially making a bet that these trends will reverse themselves — that the repression is a temporary expedient, a necessary transitory phase while the empires establish order, after which things will get better for your grandchildren.

There are many times and places in history when such a bet would have actually paid off. But the Ukrainians who are resisting Russian conquest have decided that given their history with previous incarnations of that empire, it’s a bad bet this time.

Whether Taiwan will resist or capitulate in the face of overwhelming force remains to be seen, but the other nations in Asia — Japan, Vietnam, Korea, etc — have a long history of refusing to incorporate themselves into Chinese empires.

Until now, the independence of those countries has been guaranteed by the intercession of a more distant great power — the United States. But that once-mighty nation is increasingly not in a condition to resist the Chinese empire — or even the far weaker Russian one.

A decade of roiling social unrest and three decades of increasingly intractable political division have turned the country inward; Americans are too afraid of the enemy next door to worry about a friend six thousand miles away.

And decades of pro-stasis policies — a toxic bargain between progressives who wanted to shackle industry and conservatives who wanted to shackle government — have paralyzed the country’s ability to respond to new challenges and threats.

While China leaps from strength to strength in robotics, drones, shipbuilding, AI, and a thousand other products, America’s progressive intelligentsia view new technologies and the companies that build them with suspicion and distrust. While China dominates global manufacturing, America forces companies to hold a block party before building an EV charger.

And whether the US is even committed to global freedom in the abstract is now an open question. The fabulously wealthy businessmen who have the greatest influence in the new administration openly mock the courageous Ukrainians who stayed and risked death to defend their homes and families from the rape of Russia’s invasion — even though if war ever came to their own doorstep, they would be the first to flee, clutching their Bitcoin to their chests like sacks of gold.

An aging Donald Trump indulges in idle fantasies of staging his own territorial conquests in the Western Hemisphere, LARPing the new fad for imperialism even as his peers practice the real thing overseas.

America, like every other nation, has been created anew as the generations turned. This is not the America of Franklin D Roosevelt, or even the America of Ronald Reagan. My grandparents are dead. Their hard-earned warnings are abstract words fading into memory, and I wonder if the world they won will outlast them by much.

And so across the sea, the old storm clouds gather again. In the seas around Taiwan, an armada assembles. Across the strait, the emperor orders a million kamikaze drones, hundreds of nuclear weapons, a forest of ballistic missiles, and a vast new navy. In Taipei, the sun is out, and people sip their tea, and eat their beef noodle soup, and and try not to think too hard about whether this will be the year the old world finally gives way to new.

This article was first published on Noah Smith’s Noahpinion Substack and is republished with kind permission. Become a Noahopinion subscriber here.

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The returning years are going to be a choppy ride for more reasons than appear in media talk, talk shows and podcasts&nbsp, and injury than the ranters and “experts” picture. &nbsp,

The world’s money are taking a dramatic change. The world has been living on cash ( power, water, land ) and funds for many, many years and that has stopped. &nbsp,

Economists blithely call it” The Great Moderation” and congratulate themselves. Highly skilled in their control, they are innocent of record and other kinds of information necessary to comprehending today’s scenario. &nbsp,

American economists simply instructed their leaders to “max the national credit card,” as was the case once President Nixon cut the economy’s relationship to gold, leaving the only restraint that kept American politicians and the general public moderately accountable.

The United States has since changed from being Earth’s greatest borrower nation to becoming its greatest creditor in two decades, a remarkable transition made possible by the government’s altered outlook on “living on record.” Before the late 1950s, if one wanted to buy something, one saved for it, there was no credit, only “layaway plans” .&nbsp,

Living on cash … done!

The general credit card development by Bank of America in 1958 established a new standard for “living on credit” privately, and this intellectual revolution overturned the old custom in the United States that the state itself had balance its budget. This has been reflected in other countries ‘ mindsets and financing practices. &nbsp,

In short, the world has been running down stores of capital/credit built up over two centuries ( in America ) and of energy/water/land built up everywhere over eons ( fossil fuels, deep aquifers, great forests ). &nbsp,

Not helpful if ( as in the US) public discourse is predominated by ignorant people who reject science and are ignorant of education and who only care about life’s endless sensory pleasures. &nbsp,

As everyone is forced to live on what they can produce ( or steal – think of Russia invading Ukraine ), which some disparagingly refer to as “austerity,” living standards will decline worldwide.

Who will suffer the most in the bitter political conflict that is now coming and going, which is already getting worse most everywhere.

Inflation is one of the many ways that the powerful move purchasing power from the weak and the oppressed upward to those with greater political influence, including themselves. &nbsp,

At the 2022 Jackson Hole Federal Reserve Economic Symposium, US Federal Reserve Chairman Jerome Powell stated that” the burdens of high inflation fall heaviest on those who are least able to bear them.” He made no mention of his desire for this to occur.

By the time the final exam was over, everyone who studied Economics 101 had understood why inflation occurs. The details were forgotten by those who sought other careers. Those who went on to become economists in their careers did not forget, but they are fervently motivated to speak out about uncomfortable truths. &nbsp,

Hence the hand-wringing, the hysterics, the rampaging ignorance in the headlines and in talking head “expert” analyses. &nbsp,

The inflationary truths

Everyone is aware that a rising imbalance between financial claims and real deliverables of goods and services must eventually lead to inflation, whether it be greater or less.

&nbsp, * Claims lacking economic substance will be brought into balance by nominal ( inflation ) or real ( default ) extinction. Slowly or suddenly, or one after another.

&nbsp, * Very many small people, and some big people, absolutely must be ruined almost everywhere. They won’t be happy.

No one is willing to ruin, and political maneuverings forbid a planned rebalancing of claims and deliverables almost everywhere. So those intent on staying in office must, to calm the victims as ruin nears, organize the “it’s terrible, who could have imagined” performance we now see.

&nbsp, * Man has free will so limitless technical “degrees of freedom” exist. No one is sure how or how quickly ruination will occur. &nbsp, Central banks ‘ constantly wrong projections (especially the US Fed’s ) are the stuff of jokes. &nbsp,

( Almost exclusively, the Bank for International Settlements maintains the reliability of its analyses. ) Because of the unstable criticality that any snowflake can bring an avalanche, all forecasts are useless.

The inflation program “works” by purposefully lowering those who are ultimately powerless to resist to increase purchasing power. &nbsp,

If one accepts that passing legislation to pass legislation that shifts the burden of inflation to someone else requires political power, it is obvious from experience and common sense. &nbsp,

Nevertheless, most economists deny the goal to grind down the poor, claiming” that’s too cynical” or denying anyone is” seriously trying to use inflation in an organized way to extract income” ( direct quote from the author’s Harvard classmate– a professional economist ). &nbsp,

They go against the unquestionable moral tenet that the means must be won in order to will the end.

Balking economists, blind commentators

To understand why criticizing economists and the majority of financial commentators are unable to take action or even acknowledge the obvious, one must turn to the science of human behavior. &nbsp,

First, the level of conscious awareness: some cognize this truth but tell themselves ( correctly ),” Complicity in the program of promiscuous money creation to grind down the poor and uplift the rich is a regrettable necessity to keep my job” &nbsp, or” If I don’t keep moving my employer’s product I’ll be fired”.

This is common behavior at all levels of government, media and commerce right up to the highest.

Second, Sigmund Freud’s epiphany teaches us that most human behavior results from hidden mental movements. Among the numerous primary and secondary defense strategies we humans use to prevent mental discomfort, those who reject or avoid the truth use denial, devaluation, and rationalization.

However, those in power must still give up a few financial asset owners despite the fact that they are the most priceless members of the powerful. Every player understands the lifeboat shortage, so it ‘s&nbsp, sauve qui peut.

Rising inflation is not a surprise and not unwelcome. It is the well-understood, deliberate, and well-planned solution to the excessive amount of economic justification created by those in office. Public hand-wringing is only performative.

In November of 2021, the chairman of the educational foundation on whose executive committee the author then sat asked during a finance meeting with the foundation’s Swiss bank advisor,” Is Jerome Powell telling us the truth]about inflation ]” ?&nbsp,

He replied,” I just talked to an old friend about this, who recently retired as a long-time board member of the Federal Reserve Bank of __ _ _ _ __. He said’ No. If he told the truth, there’d be panic. He’d be fired immediately.'” And we can see it now.

Key financial values, presently standard deviations off in most countries, must revert toward their means. When they do, enormous notional wealth that is based on false economic claims will vanish. Life as we’ve known it for a long time will come to an end. Some of the” smart money” knows this. &nbsp,

Think Warren Buffett’s recent portfolio changes, the People’s Bank of China’s gradual shift from US Treasuries to gold bullion and JP Morgan’s January 2021 report” Long Term Capital Markets Assumptions”, which warned of a coming decade of” shocking… negative real return ]s ]” for both stocks and bonds. &nbsp,

Their now-expanding positive correlation disproves generations of fundamental investment dictum. JP Morgan’s “imperative” ( their exact word, elaborated in 130 pages rather than in a single short sentence ): as much as possible, flee financial assets while you can.

Ever since 1971, serious thinkers have planned for the inevitable, whether slow or chaotic. Special Drawing Rights may help to prevent or delay a cataclysm as a result of the threat to international banks of the slow-rising scenario that is currently affecting highly indebted nations. &nbsp,

In order to quickly and chaotically react, American planners in 1977 promulgated the International Emergency Economic Powers Act, which authorized the United States to seize any foreigner’s property and impose the burden of a cataclysm on foreigners. &nbsp,

Using pre-IEEPA mechanisms the United States has twice done this, in 1934 and 1971, and this reset ( note the periodicity ) is actually overdue. Shifting the pain to foreigners is America’s canonical solution, in former Treasury Secretary John Coney’s succinct declaration of this durable American strategy:” It’s our currency, but it’s your problem”.

surviving to the other side

America has carefully planned significant events for numerous victims. Anyone in almost any nation would have planned the same way. We just don’t know the victims ‘ names. &nbsp,

It’s now time for everyone to ask whether he has acted to save himself, his family, his business, his institution. Otherwise, he is still on the victim list.

Resources want to be in producing real estate, productive assets like companies that add value to the economy ( neither Facebook nor crypto, obviously ), precious metals, and possibly some commodities in order to get to the other side of what’s coming in the short and medium terms (5-10 years from now ), but that also requires a lot of knowledge because the demand for raw materials will drop when the crash comes ).

Most “investment” chatter centers on epiphenomena like stock prices and trends, which are frequently disassociated from real value-added processes ( if there is any connection at all ). The analyses that appear in newspaper articles and “investment advice” from so-called experts typically use the word “asset values” as though they represent actual wealth. &nbsp,

The “value” will be known only in the future, as real income is transferred from value-added productive processes to the owners. All we “know” today are the prices, presently but loosely linked to value-added productive processes. &nbsp,

Listeners to this confused thinking will encounter a number of negative outcomes. The Silicon Valley Bank collapse in March 2023 sounded the celestial trumpet.

After co-authoring a timeless analysis of warfare, Jeffrey Race spent 50 years researching and teaching economics, political science, and technology transfer in Asia. He currently oversees a Boston-based electronics design firm. &nbsp,

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