Israel, Iran & War

Forget the Eurozone — this is surely the scariest news of the year.

From the Daily Mail:

  • Fears mount that Iran could be ‘nuclear ready’ in a matter of months
  • UN intelligence suggests Iran was helped by foreign experts – including rogue Russian scientist
  • Russia foreign minister says any military action would be a ‘serious mistake’
  • Condoleezza Rice: ‘We must do everything we can to bring Iran down’
  • Mahmoud Ahmadinejad remains defiant
Russia and China have expressed growing concern about a mooted American military strike against Iran over its alleged nuclear programme.The UN last week warned it had ‘compelling evidence’ to suggest Iran is secretly building an arsenal of nuclear warheads.

The UN’s International Atomic Energy Agency (IAEA) is this week due to publish a damning report on the findings fuelling fears Iran could be ‘nuclear ready’ within months.


Sticking my neck out a little, if a rampant communist dictatorship like the Soviet Union can have nuclear weapons for over forty years without nuclear apocalypse (not to mention ethnocracies like Pakistan and Israel) then I can’t see what the problem is with Iran having them. Surely a last ditch strike on a pre-nuclear Iran would confirm the scary post-Qaddafi reality that dictatorships, autocracies and theocracies are not safe from Western liberal interventionism until they have gained a nuclear arsenal?

More concerningly, a Western attack on a nation at the heart of Eurasia — and a friend to the other Eurasian autocracies, particularly Russia and China — is surely a message that America and Israel will do everything in their power to maintain the petrodollar status quo, something that rising powers like Russia and China find distasteful and disrespectful.

But the emerging reality of a multi-polar world will do nothing to stop the hawks from clawing and shrieking against the reality of change.

From Haaretz:

Former Secretary of State Condoleezza Rice has said she is sure the Israelis will defend themselves against the Iranians if they were to reach nuclear capabilities.

“I don’t have any doubt that the Israelis will defend themselves if the Iranians look as if they really are about to cross that nuclear threshold,” Rice told Newsmax in a TV interview.

I — on the other hand — have no doubt that the era of American-Israeli-British primacy is drawing to an end. The global system of floating fiat currencies is being gutted by years of competitive debasement. The international financial system is a house of cards, swaying in the breeze. Western industry has been gutted, and shipped to the East. Western capital is exported away to the East via humungous Western trade deficits. Western labour markets rot, beleaguered by high unemployment, evaporating skills, and huge inequality between the rich and poor. Western discontent is rising. Most dangerously, the West remains highly dependent on foreign oil — a supply that a new war, or some other black swan might disrupt — wreaking havoc.

So, as I wrote last month:

Sadly, we know how that aphorism from Winston Churchill goes: that Americans will do the right thing — after they’ve tried everything else.

Which is why I’m coming to believe that the military-Keynesian establishment might try and kill every bird with one stone — a new regional war in Eurasia, probably involving Syria, Iran and Israel. Let’s look at what that might accomplish:

  1. Create a new post-9/11-style hard-to-question patriotism — “There’s a war on — we all need to rally together around the flag — the complainers and protestors must hate America”
  2. Put America back to work — in weapons factories, and on the front lines.
  3. Give the economy a large Keynesian injection — through war spending.
  4. Take out Iran, a powerful enemy of America — and send a threatening message to other uppity Eurasian autocracies like Russia and China.
  5. Curtail civil liberties & censor the internet — “There’s a war on — we all need to rally together around the flag — and those who don’t must be working to undermine America”
John Maynard Keynes noted that in the long run, we’re all dead. I hope that in the short run, we’ll all still be alive.
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Bi(polar)flation

Headline inflation statistics are mostly meaningless junk. They capture lots of statistical oddity, and much less economic reality. Clueless economists today often flap around trying to make the case that low headline inflation proves (beyond a shadow of a doubt) that present-day money-printing exercises are not excessive. Of course, that’s another argument for another article.

The point is that markets (and prices) are not determined so much by the supply of, and demand for money, but by the supply of and demand for goods and services. This means that money-printing exercises to address inflation or deflation are usually pretty futile in addressing the wants and needs of a society, and therefore pricing phenomena. As I have shown in the past, hyperinflation is triggered by the unavailability of goods and services, not the over-availability of money. The money printing usually starts post-hoc, because society and governments have lost control of everything else, and money printing is a swift and easy last resort.

Western nations have experienced peculiar pricing phenomena in the last ten years.

From the BBC:

These figures are for the UK, but other Western nations have experienced a similar predicament. Essentially, goods and services whose supply has increased as a result of increased East Asian productivity, cheap labour, and economies of scale (clothes, consumer electronics, etc) have dropped in price, whereas goods and services whose supply has remained relatively static (particularly energy, and products connected to energy) have risen in price. Of course there are also oddities such as transport insurance in the graph above; every market has fundamentals of its own, and quirks like government intervention into the manner in which a service is delivered can drastically shift prices in services.

What the focus on money supply (i.e. the notion that pumping QE money at money-lenders so they can lend more will somehow fix the economy) really demonstrates is the powerlessness of Western governments (especially America) to control the supply of energy, and save Western industries from being undercut by cheaper East Asian competition. It is (quite literally) throwing money at a problem, hoping that someone will innovate or strategise the West out of its present debt-fuelled malaise.

Of course, eventually, the soaring price of energy will make alternative energy generation (solar, etc) more economically viable than hydrocarbons. Eventually, food costs will be rebalanced by new and more efficient food production sources (subsidies distort markets and prevent them from compensating as quickly as the market desires, but that’s another story). But eventually (as John Maynard Keynes put it) we are all dead.

Western governments should have invested heavily in better energy and food infrastructure a long time ago, to keep the costs down for consumers. No need to raise taxes; simply divert the vast quantities of money that go to needless foreign wars to food and fuel security.

All the while, monetary authorities print and print to cancel out the deflationary effects of mass-Chinese production, while costs on energy and food continue to squeeze Western consumers, particularly the elderly and disabled who live on fixed incomes. Commentators spew worthless rubbish about monetary solutions, when really the problem is food and fuel infrastructure and availability.

And much of this is brushed under the rug, because headline inflation rates are low-to-moderate. Of course, you can’t brush reality under the rug. Eventually even those with jobs have so little disposable income that they get furious, and do something about their predicament. It looks like that process has already begun.

Understanding Biflation

If I were to rewrite the economics textbooks the first idea that I would throw into the dustbin is the idea of a standardised rate of inflation. Why? Because in every economy, different money, coming from different individuals and different strata of society chase different products, causing every price over time to inflate or deflate at a unique level, and every consumer and producer — depending on their wants and needs — to experience a separate and unique rate of inflation of deflation.

When an economist like Paul Krugman suggests that the Fed needs to print more money to raise inflation because inflation has fallen to “historic lows” — he is referring to the totalised rate of inflation for urban consumers, or CPI-U:

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Why is London Burning?

London, I’ve lived there for over five years. I have travelled extensively in the city, by the river, in the suburbs, walked the streets, got drunk, thrown up, passed out, hooked up, laughed, cried, and so on. What is there to say about London today that these pictures cannot say?

Here’s the Daily Telegraph writing in February:

Unemployment jumped by 44,000 in the final three months of 2010 to just under 2.5 million, meaning that 7.9 per cent of workers were out of a job. But the youth unemployment rate hit 20.5 per cent, following a 66,000 increase to 965,000, the highest figures since records began in 1992.

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