Finance is the global operating system, and as such, those who sit at the top of the financial food chain can tweak geopolitics in many ways, in order to gain the outcomes they want through manipulation. Over time, as financialisation of everything in the west has taken off post the 1971 effective default in America (when Nixon closed the gold window), the ability of financial oligarchs to manipulate the system has increased enormously. So has the use of ponzi dynamics, meaning the introduction of destabilising positive feedback loops, even in critical subsystems of the economy where an approximation of stability is crucial. Finance subordinates sectors of the economy to the dynamics best suited for wealth extraction favouring the already wealthy.
Retail banks create fiat currency from thin air every time they make a loan, but they don’t create the interest they require for the loans to be repaid. The recipient must then invest in a productive asset or pass the debt on to someone else. People become collateralised debt obligations, and companies build equity in order to collateralise more borrowing. A debt-based ponzi scheme is born. The endgame is to dump the debt on the government in a taxpayer bailout.
Governments are no longer in charge. They’re simply the mangerial class, prostituting themselves to the various lobby groups, while needing to sell a narrative for their actions to the public, which still thinks voting makes a difference. Actual democracy was lost a long time ago. Now governments are the ultimate repository of debt, leading to asset stripping of the eventually bankrupt country. War typically follows, as cover for the necessary financial reset.
The transfer of hegemomic power follows a pattern, as I wrote many years ago. A centre rises, by extracting resources from its periphery and concentrating them at the new centre. Over time, the now rich centre outsources the actual work to its near periohery, while continuing to extract from its far periphery. The near periphery gains technology transfer, a work ethic, and a manufacturing base, while the centre becomes more decadent and lazy. Eventually, the centre collapses, a new centre arises in the former near periphery, and the pattern repeats, as I documented here, beginning arbitrarily with the Spanish empire and proceeding to the transfer from the US to China, as is now already underway:
America is the empire in decline, having allowed financialisation to hollow out its real economy, and financial oligarchs to rise to such a position of power that they now dictate all policy towards their own profit, and no longer even bother to hide their dominance over, and contempt for, the rest of the popualtion. They believe their power to be sufficient that they no longer need to care what the rest of us think. Their problem is the rest of the world. As empires fall, they typically enter Thucycidies Trap, where the hubris they experience from dominating their domestic population translates into a sense that the empire should be eternal and all-encompassing. In other words, it must suppress rising rivals, but the resulting conflict typically ends the over-extended empire instead.
The average interest on the $40 trillion of US is about 3.3%, but growth is expected to fall well short of that, and when the rate of growth is below the rate of interest on the debt, it becomes an exploding debt scenario. That leads to the unwinding of the debt cycle, which will result in an economic depression and major demand destruction. The Trump regime has been attempting to force the Fed to lower rates, so the debt could be rolled over at a rate below the rate of growth, but that has failed. Now that prices will inevitably rise due to the oil supply shock, and also the impact of shortages of other essential resources, interest rates will be raised rather than lowered. Rising prices are not inflation in and of themselves, but they’re the symptom of an increase in the money supply relative to available goods and services combined with a major collapse in available goods and services. The overall effect of the eventual debt collapse will be deflationary, as the majority of the money supply is credit, and the value of credit will collapse when the promises made can obviously no longer be kept. Demand destruction is deflationary.
in an attempt to stave off the crisis of severe undercollateralisation of existing debt, the Epstein class which runs the system will attempt to improve the collateral situation through converting illiquid assets to liquid through tokenisation, and also extracting and controlling all assets currently in the hands of ordinary people. This is the digital financial system they’re attempting to impose through the Bank for International Settlements (BIS) and the World Economic Forum (WEF), and it amounts to a slavery system, with total surveillance and control of all spending at the level of the individual. This requires digital ID as an entry point, which must be resisted by individuals who wish to remain independent. This will, however, be made very difficult, as the oligarchs will try to make digital ID a necessary condition for participation in society.
In the meantime, prices for essentials will rise, as will interest rates on outstanding debt held by companies and individuals, and also property and other taxes, as well as the cost if insurance. At the same time, unemplyment will be rising sharply, and wages for the still employed are likely to be cut. This is a perfect storm in financial terms, amounting to a financial seizure and a crash of the operating system. A major liquidity crunch is inevitable. The Greatest Depression is coming, and it will be far worse than the depression of the 1930s. Money from the Gulf countries via the petrodollar and private credit, the eurodollar market, and the Japanese carry trade are all under threat, and these are the factors that had been supporting the debt of the US empire. The destruction will encompass the IPO market (ChatGPT cannot IPO at high energy prices), the bond market, the private credit market, the fungible market for oil, the enegy market in general, and eventually the stock market.
The ongoing war will accelerate the collapse. The empire (a combination of the US, Israel, and western vassal states) has drastically underestimated the capabilities of its declared enemy.
The empire had thought a short war could crush Iran and allow it to commandeer Iran’s resources, but this has not happened. Iran had been preparing for this war for decades, with an enormous arsenal of drones and missiles, plus submarines, torpedos, and other unconventional weaponry, most of which is so far underground that it cannot be destroyed. It has no need of a conventional navy or airforce, so the elimination of those limited capacities has not diminished its ability to both defend and attack. Both the repressive Gulf monarchies and the apartheid state of Israel are in the process of being destroyed as a result. This could lead to the use of nuclear weapons by the empire, but even this is unlikely to take Iran down, as the military capacities would remain, and the population and economy are not highly concentrated. We’re likely looking at the rise of Persia as a major regional power.
The empire had been looking at profiting from rebuilding a ruined country, while also profiting from its stolen resources and using them as collateral for debt expansion, but that will not now be happening. Instead the world is fracturing into power blocks, with the empire set on its path to decline while energy-sovereign countries such as Iran and Russia do far better. In the US private ownership of resources means profits will continue to benefit only the few, while in countries with public ownership, the country as a whole can benefit. Existing global supply chains will be irrevocably broken, although regional ones will eventually re-emerge. Energy will continue to be scarce and expensive for the foreseeable future, and this will drastically alter the level of socioeconomic complextity that can be maintained. Ultimately, this means the digital gulag will fail, so an attempt at totalitarian control will likely give way to anarchy. The Build Back Better programme, which was intended to operate from the top down, will now need to be implemented from the bottom up, with considerable local variation to account for highly variable local circumstances. Building what cohension is possible at the local level, beginning right now, is the best way forward for those of us at the bottom of the financial food chain.
