What’s Wrong with Our Monetary System and How to Fix It

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

[Guest post by Adrian Kuzminski]

Something’s profoundly wrong with our global financial system. Pope Francis is only the latest to raise the alarm:

“Human beings and nature must not be at the service of money. Let us say no to an economy of exclusion and inequality, where money rules, rather than service. That economy kills. That economy excludes. That economy destroys Mother Earth.”

What the Pope calls “an economy of exclusion and inequality, where money rules” is widely evident. What is not so clear is how we got into this situation, and what to do about it.

Most people take our monetary system for granted, and are shocked to learn that the government doesn’t issue our money. Almost all of it is created by loans made “out of thin air” as bookkeeping entries by private banks. For this sleight-of-hand, they charge interest, making a tidy profit for doing essentially nothing. The currency printed by the government – coins and bills – is a negligible amount by comparison.

The idea of giving private banks a monopoly over money creation goes back to seventeenth century England. The British government, in a Faustian bargain, agreed to allow a group of private bankers to assume the national debt as collateral for the issuance of loans, confident that the state would be able to service the debt on the backs of taxpayers.

And so it has been ever since. Alexander Hamilton much admired this scheme, which he called “the English system,” and he and his successors were finally able to establish it in the United States, and subsequently most of the world.

But money is too important to be left to the bankers. There is no good reason to give any private group a lucrative monopoly over the creation of money; money creation should be the public service most people mistakenly believe it to be. Further, privatized money creation allows a few large banks and financial institutions not only to profit by simply making bookkeeping entries, but to direct overall investment in the economy to their corporate cronies, not the public at large.

Ordinary people can get the financing they need only on burdensome if not ruinous terms, leaving them as debt peons weighed down by mortgages, student loans, auto loans, credit card balances, etc. The interest payments extracted from these loans feed the private investment machine of Wall Street finance, represented by the ultimate creditor class: the notorious “one percenters.”

There are two main critics of our privatized financial system: goldbugs and public banking advocates. The goldbugs would return us to a gold standard, making gold our currency. The problem is that it would become almost impossible to borrow money since the amount of gold which could be put into circulation is relatively miniscule and inelastic. They is no way easily to expand the supply of gold in the world Continue reading

Financial Nonsense Overload

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

“Those whom the gods wish to destroy they first make mad” goes a quote wrongly attributed to Euripides. It seems to describe the current state of affairs with regard to the unfolding Greek imbroglio. It is a Greek tragedy all right: we have the various Eurocrats—elected, unelected, and soon-to-be-unelected—stumbling about the stage spewing forth fanciful nonsense, and we have the choir of the Greek electorate loudly announcing to the world what fanciful nonsense this is by means of a referendum.

As most of you probably know, Greece is saddled with more debt than it can possibly hope to ever repay. Documents recently released by the International Monetary Fund conceded this point. A lot of this bad debt was incurred in order to pay back German and French banks for previous bad debt. The debt was bad to begin with, because it was made based on very faulty projections of Greece’s potential for economic growth. The lenders behaved irresponsibly in offering the loans in the first place, and they deserve to lose their money.

However, Greece’s creditors refuse to consider declaring all of this bad debt null and void—not because of anything having to do with Greece, which is small enough to be forgiven much of its bad debt without causing major damage, but because of Spain, Italy and others, which, if similarly forgiven, would blow up the finances of the entire European Union. Thus, it is rather obvious that Greece is being punished to keep other countries in line. Collective punishment of a country—in the form of extracting payments for onerous debt incurred under false pretenses—is bad enough; but collective punishment of one country to have it serve as a warning to others is beyond the pale.

Add to this a double-helping of double standards. The IMF won’t lend to Greece because it requires some assurance of repayment; but it will continue to lend to the Ukraine, which is in default and collapsing rapidly, without any such assurances because, you see, the decision is a political one. The European Central Bank no longer accepts Greek bonds as collateral because, you see, it considers them to be junk; but it will continue to suck in all sorts of other financial garbage and use it to spew forth Euros without comment, keeping other European countries on financial life support simply because they aren’t Greece. The German government insists on Greek repayment, considering this stance to be highly moral, ignoring the fact that Germany is the defaultiest country in all of Europe. If Germany were not repeatedly forgiven its debt it would be much poorer, and in much worse shape, than Greece. Continue reading

The Care and Feeding of a Financial Black Hole

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

A while ago I had the pleasure of hearing Sergey Glazyev—economist, politician, member of the Academy of Sciences, adviser to Pres. Putin—say something that very much confirmed my own thinking. He said that anyone who knows mathematics can see that the United States is on the verge of collapse because its debt has gone exponential. These aren’t words that an American or a European politician can utter in public, and perhaps not even whisper to their significant other while lying in bed, because the American eavesdroppers might overhear them, and then the politician in question would get the Dominique Strauss-Kahn treatment (whose illustrious career ended when on a visit to the US he was falsely accused of rape and arrested). And so no European (never mind American) politician can state the obvious, no matter how obvious it is.

The Russians have that pretty well figured out by now. Yes, maintaining a dialogue and cordial directions with the Europeans is important. But it is well understood that the Europeans are just a bunch of American puppets with no will or decision-making authority of their own, so why not talk to the Americans directly? Alas, the Americans too are puppets. The American officials and politicians are definitely puppets, controlled by corporate lobbyists and shady oligarchs. But here’s a shocker: these are also puppets—controlled by the simple imperatives of profitability and wealth preservation, respectively. In fact, it’s puppets all the way down. And what’s at the bottom is a giant, ever-expanding, financial black hole.

Do you like your black hole? If you aren’t sure you like it, then let me ask you some other questions: Do you like the fact that your credit cards still work, or that you can still keep money in the bank and even get cash out of an ATM machine, or that you are either receiving or hope to eventually receive a pension? Do you like the fact that you can get useful things—food, gas, airline tickets—for mere pieces of paper with pictures of dead white men on them? Do you like the fact that you have internet access, that the lights are on, and that there is water on tap? Well, if you like these things, then you must also like the financial black hole, because that’s what’s making all of these things possible in spite of your country being bankrupt. Perhaps it’s a love-hate relationship: you love being able to pretend that everything is still OK even though you know it isn’t, and you wish to enjoy a bit more of the business-as-usual before it all goes to hell, be it for a few more days or another year or two; but you hate the fact that eventually the black hole will suck you in, after which point things will definitely… suck.

In the United States, so far the black hole has been sucking in individual families (although it does sometimes suck in entire cities, like Detroit, Michigan, or Bakersfield, California, or Camden, New Jersey). With the help of the fraudulent mortgage racket, it sucks in houses, and spits them out again encumbered with bad debt. With the help of the medical industry, it sucks in sick people and spits them out again, bankrupt. With the help of the higher education racket, it sucks in hopeful young people, and spits them out as graduates, with worthless degrees and saddled with mountainous student debt. With the help of the military-industrial complex, it sucks in just about anything and spits out corpses, invalids, environmental damage, terrorists and global instability. And so on.

But the black hole can also suck in entire countries. Right now it’s busy trying to suck in Greece, but it’s having a hard time with it, because Greece is, of all things, a democracy. This has the black hole’s puppets in quite a state at the moment, and starting to clamor for “regime change” in Greece, so that Greece can be made to capitulate before the black hole gets hungry.

The way the black hole sucks in entire countries is as follows. If the black hole doesn’t have enough to suck in for a period of time, it gets hungry and makes the financial markets go into free-fall. The financial instruments of countries that happen to be farther away from the black hole—out on the periphery—fall faster. In search of a “safe haven,” money floods out of these countries and into the “core” countries that are clustered tightly around the black hole—the US, Germany, Japan and a few others. The black hole gobbles up this money, but is then hungry for more. But since the periphery countries are now financially too weak to resist, they can easily be turned into black hole fodder. This is done by saddling the country with a foreign debt it can never repay, then forcing it to keep making payments against this debt by making it a condition for maintaining a financial lifeline—keeping the banks open, the ATMs stocked, the lights on and so on. To be able to make the payments, the country is forced to dismantle its society and economy through the imposition of austerity, to privatize everything in sight turning it into collateral for more loans, and to surrender its sovereignty to some transnational organizations, such as the IMF and the ECB, which are directly involved in the care and feeding of the black hole. Continue reading

Pop goes the Bubble

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Running a fundraiser (which, by the way, has been a great success—thank you all very much!) has prompted me to think about money more deeply than I normally do. I am no financial expert, and I certainly can’t give you investment advice, but when I figure something out for myself, it makes me want to share my insights. I know that many people see national finances as an impenetrable fog of numbers and acronyms, which they feel is best left up to financial specialists to interpret for them. But try to see national finances as a henhouse, yourself as a hen, and financial specialists as foxes. Perhaps you should pay a little bit of attention—perhaps a bit more than one would expect from a chicken?

By now many people, even the ones who don’t continuously watch the financial markets, have probably heard that the stock market in the US is in a bubble. Indeed, the price to earnings ratio of stocks is once again scaling the heights previously achieved just twice before: once right before the Black Tuesday event that augured in the Great Depression, and again right around Y2K, when the dot-com bubble burst. On Black Tuesday it was at 30; now it’s at 27.22. Just another 10% is all we need to bring on the next Great Depression! Come on, Americans, you can do it!

These nosebleed-worthy heights are being scaled with an extremely shaky economic environment as a backdrop. If you compensate for the distortions introduced by the US government’s dodgy methodology for measuring inflation, it turns out that the US economy hasn’t grown at all so far this century, but has been shrinking to the tune of 2% a year.

And if you ignore the laughable way the US government computes the unemployment rate, it turns out that the real unemployment rate has grown from 10% at the beginning of the century to around 23% today.

So how can an ever-shrinking economy with a continuously rising unemployment rate be producing ever-higher stock valuations?

Simple! The stock prices are being driven up by the actions of the Federal Reserve. Since the great financial crisis of 2007, when the entire financial system almost collapsed, the Federal Reserve, through its Quantitative Easing (QE), has been making funds available at minimal cost to a set of financial institutions deemed “too big to fail.” (What that means is that they cannot be allowed to fail, because that would almost bring down the entire financial system again, but must be artificially propped up no matter what.) This financial life support has dramatically driven up the Fed’s balance sheet, which now stands at $4.5 trillion (it was less than $1 trillion before the great financial crisis of 2007). Continue reading

No, you can’t go back to the USSR!

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

One of the fake stories kept alive by certain American politicians, with the help of western media, is that Vladimir Putin (who, they vacuously claim, is a dictator and a tyrant) wants to reconstitute the USSR, with the annexation of Crimea as the first step.

Instead of listening to their gossip, let’s lay out the facts.

The USSR was officially dissolved on December 26, 1991 by declaration №142-H of the Supreme Soviet. It acknowledged the independence of the 15 Soviet republics, and in the place of the USSR created a Commonwealth of Independent States, which hasn’t amounted to much.

In the west, there was much rejoicing, and everyone assumed that in the east everyone was rejoicing as well. Well, that’s a funny thing, actually, because a union-wide referendum held on March 17, 1991, produced a stunning result: with over 80% turnout, of the 185,647,355 people who voted 113,512,812 voted to preserve the USSR. That’s 77.85%—not exactly a slim majority. Their wishes were disregarded.

Was this public sentiment temporary, borne of fear in the face of uncertainty? And if it were to persist, it would surely be a purely Russian thing, because the populations of all these other Independent States, having tasted freedom, would never consider rejoining Russia. Well, that’s another funny thing: in September of 2011, fully two decades after the referendum, Ukrainian sociologists found out that 30% of the people there wished for a return to a Soviet-style planned economy (stunningly, 17% of these were young people with no experience of life in the USSR) and only 22% wished for some sort of European-style democracy. The wish for a return to Soviet-style central planning is telling: it shows just how miserable a failure the Ukraine’s experiment with instituting a western-style market economy had become. But, again, their wishes were disregarded.

This would seem to indicate that Putin’s presumptuously postulated project of reconstituting the USSR would have plenty of popular support, would it not? What he said on the subject, when asked directly (in December of 2010) is this: “He who doesn’t regret the collapse of the USSR doesn’t have a heart; he who wants to see it reborn doesn’t have a brain.” Last I checked, Putin does have a brain; ergo, no USSR 2.0 is forthcoming.

Interestingly, he went on to say a few more words on the subject. He said that the USSR had a competitive advantage as a unified market and a free trade zone. This one element of the USSR is now embodied in the Customs Union, of which Russia, Belarus, Kazakhstan and several smaller countries are members, and it appears to be a success.

The Ukraine—with over 40 million inhabitants, a major piece—refused to join while continuing to trade mostly with Customs Union members. This strategy has turned out to be, to put it mildly, disadvantageous, with Ukrainian economy now in rapid collapse, having declined over 17% in just the first quarter of this year. Thus, while the theory of competitive advantage may or may not be valid, the converse competitive disadvantage of *not* joining the Customs Union is there for all to see.

* * *

To be sure, many aspects of the old USSR have been happily consigned to oblivion. Among them:

• The communist ideology: the Communist Party no longer has a monopoly on power.
• The bloc mentality: the Warsaw Pact evaporated, leaving NATO behind as the one hand clapping. The new system is a multipolar one.
• Central planning: replaced with a market economy
• Economic isolationism: replaced with an export-driven economy based on trade agreements with numerous nations around the world
• Authoritarian governance: replaced with authoritative governance, in which leaders derive their authority from their popularity, which is based on their performance in office, whereas previously the General Secretary of the CPSU was a bit like the Pope—infallible by definition.

These are all positive changes, and very few people regret that they have occurred, or wish for a return to status quo ante.

There are many other aspects of the old USSR which have been degraded, sometimes severely, but nevertheless remain in place. Among them are public health and public education.

The USSR had a system of socialized medicine that excelled at some things and was mediocre in others. The shift to privatized medicine has been a success in some ways, but is very hard on those who cannot afford the care or the medications. The educational system is still very good at all levels, but here too there has been significant degradation, bemoaned by many observers.

The USSR invested heavily in science and culture, and much has been lost during the difficult years of the 1990s—something that many people regret very much. The USSR led the world in basic scientific research, probing into matters that did not have any commercial applications, simply because they were scientifically interesting and led to publishable results. The US led the world in product design, something that Soviet engineers were happy to simply copy much of the time, to save time and effort. Since they were not attempting to export into the western consumer market, a slight lag in time to market was of no consequence to them.

On the other hand, Americans have always had trouble wrapping their heads around the idea of financing scientific research that had absolutely no conceivable commercial applications. In addition, the anti-intellectualism prevalent in American culture caused a proliferation of other sorts of “scientists”: political scientists, social scientists, food scientists… a certificate in “janitorial science” wouldn’t be too much of a stretch. Continue reading

America’s Achilles’ Heel

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Last Saturday, a massive Victory Parade was held in Moscow commemorating the 70-year anniversary of the surrender of Nazi Germany to the Red Army and the erection of the Soviet flag atop the Reichstag in Berlin. There were a few unusual aspects to this parade, which I would like to point out, because they conflict with the western official propaganda narrative. First, it wasn’t just Russian troops that marched in the parade: the troops of 10 other nations took part in it, including the Chinese honor guard and a contingent of Grenadiers from India. Dignitaries from these nations were present in the stands, and the Chinese President Xi Jinping and his wife were seated next to President Vladimir Putin, who, in his speech at the start of the parade, warned against attempts to create a unipolar world—sharp words aimed squarely at the United States and its western allies. Second, a look at the military hardware that rolled through Red Square or flew over it would indicate that, short of an outright nuclear mutual self-annihilation, there isn’t much that the US military could throw at Russia that Russia couldn’t neutralize.

It would appear that American attempts to isolate Russia have resulted in the exact opposite: if 10 nations, among them the world’s largest economy, comprising some 3 billion people, are willing to set aside their differences and stand shoulder to shoulder with the Russians to counter American attempts at global dominance, then clearly the American plan isn’t going to work at all. Western media focused on the fact that western leaders declined to attend the celebration, either in a fit of pique or because so ordered by the Obama administration, but this only highlights their combined irrelevance, be it in defeating Hitler, or in commemorating his defeat 70 years later. Nevertheless, in his speech Putin specifically thanked the French, the British and the Americans for their contribution to the war effort. I am sorry that he left out the Belgians, who had been so helpful at Dunkirk.

One small detail about the parade is nevertheless stunning: Defense Minister Sergei Shoigu, a Tuvan Buddhist and one of the most respected Russian leaders, who presided over the Emergencies Ministry prior to becoming the Defense Minister, did something none of his predecessors ever did: at the beginning of the ceremony, he made the sign of the cross, in the Russian Orthodox manner. This simple gesture transformed the parade from a display of military pomp to a sacred ritual. Then followed the slow march with two flags side by side: the Russian flag, and the Soviet flag that flew on top of the Reichstag in Berlin on Victory Day 70 years ago. The march was accompanied by a popular World War II song? Its title? “The Sacred War.” The message is clear: the Russian military, and the Russian people, have put themselves in God’s hands, to do God’s work, to once again sacrifice themselves to save the world from the ravages of an evil empire.

If you try to dismiss any of this as Russian state propaganda, then here is something else you should be aware of. Did you hear of the spontaneously organized procession in which, after the official parade, half a million people marched through Moscow with portraits of their relatives who died in World War II? The event was called “The Eternal Regiment” (Бессмертный полк). Similar processions took place in many cities throughout Russia, and the total number of participants is estimated at around 4 million. Western press either panned it or billed it as an attempt by Putin to whip up anti-western sentiment. Now that sort of “press coverage,” my fellow space travelers, is pure propaganda! No, it was an enthusiastic, spontaneous outpouring of genuine public sentiment. If you think about it just a tiny bit, nothing on this scale could be contrived artificially, and the thought that millions of people would prostitute their dead for propaganda purposes is, frankly, both cynical and insulting. Continue reading

The Limits of Propaganda

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

As Paul Craig Roberts has recently reported, the US government is in the process of launching an all-out war on truth. Those who express views contrary to the party line out of Washington will be labeled a threat. Eventually they may find themselves carted to one of the concentration camps which Halliberton (Dick Cheney’s old company) has constructed for $385 million. But that may take a while. In the meantime, we can expect lots of other, less dramatic developments. Indeed, some of these are already happening. Here they are, listed in order of severity.

1. Self-censorship. Those who have previously tried to get the truth out no matter what become more reticent and prone to equivocation when reporting on “hot” issues.

2. Topic-avoidance. They start avoiding certain “hot” issues that they feel are most likely to get them into trouble.

3. Response to harassment. A few incidents of mild official harassment cause certain blogs to start watering down their content, or pulling down content in response to harassment.

4. Blacklisting. The officials start censoring content on a case-by-case basis, blocking or shutting down certain internet sites that they consider seditious.

5. Blocking communications. The officials start dealing with the “hard cases” of uncooperative individuals who remain, shutting down their communications by disabling their cell phones, shutting down internet access, and by imposing travel restrictions so that the “hard cases” are forced to remain in places where they can be watched.

6. Detention. Those found to be truly uncooperative, who try to circumvent the restrictions, are rounded up and shipped off to the above-mentioned camps.

This may seem like a dire prognosis, but actually I just want to present a relatively complete list of public measures for your consideration. Yes, there will be a few “hard cases” who will insist on getting right in the face of Washington officialdom in futile hopes of somehow affecting the political process or winning over a few of their compatriots. But at some point such individuals become indistinguishable from people with mental problems. That is because if you live in the US, actually know how the political system there operates, and still think that the US is a democracy, then you DO have a mental problem. You can’t have it both ways: either you buy into the official propaganda, or you don’t.

Also, it bears pointing out that the vast majority of people in the US are quite happy listening to Washington’s propaganda, be it from Fox or NPR, don’t consider it propaganda, and have been conditioned to consider anyone who attempts to tell them the truth to be tin hat-wearing conspiracy theorist nut case. And that means that tin hat-wearing conspiracy theorist nut cases have a role to play. They are important to have, in the same way that a village idiot is important to have, so that children can learn what idiocy looks and sounds like. So, why bother sending them to a concentration camp?

And so it seems likely that the village idiots… ahem, truth-tellers will remain free-range for the time being, unless they really lose it and start tilting at windmills. But then that becomes a bona fide mental health issue.

Unless, of course, full-on war hysteria breaks out. In that case, while the external goons are busy pretending to be “not winning, not losing” but somehow “keeping America safe” in yet another wretched part of the world, the internal goons have to be kept busy. Rounding up undesirables would give them something to do. Continue reading

Notes from a Funeral

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Today I received the following report from Club Orlov’s special Kiev correspondent, Yu Shan:

Yesterday I was at a funeral. The crowd was well over 500, much more than I originally thought would be possible. It was a deeply emotional event. The man to whom everyone bid farewell was Oles’ Buzina, a writer, historian, free thinker, wacky conversationalist, warm friend, a man who identified deeply with both the complex yet incomplete Ukrainian culture and with the multifaceted entity of eastern Slavic Orthodox Russian civilization, a man who would not take sides easily, and would adhere to his lone stand even when death threats started to arrive at his doorstep on a weekly basis.

The event was all over the Russian language news. But there was precisely zero coverage of it in the English-language news. He was murdered at 1:25, Thursday, April 16. There were two masked men waiting for him in front of his house. Five shots were fired, and that was that. It was the third such hit in a span of four days.

At the funeral there were a few reporters from Russia who came specifically for this event. They were polite and talkative. But I noticed something which to me seemed off: yesterday was a profoundly emotional time for all the Kiev residents who made the decision to attend the funeral, and many people were crying openly in the cold wind, for several hours, and not just old women. However, some of the questions asked by the Russian reporters, and some of the things they said, had a mild undertone of Schadenfreude: “Oh, look at you poor Ukrainians, what have you all brought upon yourselves? Now do you see how wrong you were? Do you see where you end up without Russia?”

But of those present—every decrepit old man or woman, every young, unfashionably dressed girl or threadbare-looking young man—all were the kind of Ukrainians who throughout this year of madness have kept in their hearts an earnest, warm feeling towards Russia! They have clung to the idea of seeing themselves as a part of a great singular civilization, as citizens of the once-proud Soviet Union. They don’t need Russian condescension!

After this one year, it has become plain that there can be no Ukraine without support from Russia. But it is also true that there can never be a genuine resurrection of Russian Civilization without a resurrection of the Ukraine. It is not a matter of territory; the ties are psychological, emotional and historical. How many among the contemporary Russian public actually appreciate this point? A regular Russian guy sympathizes with Donbass, supports Putin, and despises the USA. But does he consider the Ukrainians to be good-for-nothing losers—possibly including his own brothers who happen to live there?

And that isn’t at all helpful. The combination of clueless American warmongering and disingenuous offers of “integration” from the EU have turned the Ukraine into a disaster area and its population of 40 million into paupers. The nightmarish regime in Kiev, whose brainwashed adherents go around defacing World War II monuments while idolizing and deifying Nazi war criminals, will be finished soon enough, but once it is gone there will be more bloodshed in this deeply self-conflicted society.

The Ukrainian identity and national brand are tarnished beyond all hope. After a prolonged and painful process of de-westernization and de-Nazification, all that will be left of it will be a memory of failure which few will recall willingly or pass on to their children. But to make healing possible, to allow this year (or two or three) of Ukrainian madness to be consigned to oblivion, something else must take its place. And that something can be just one thing: a compassionate, inclusive, supportive, pluralistic Russian identity.

License to Kill

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

The story is the same every time: some nation, due to a confluence of lucky circumstances, becomes powerful—much more powerful than the rest—and, for a time, is dominant. But the lucky circumstances, which often amount to no more than a few advantageous quirks of geology, be it Welsh coal or West Texas oil, in due course come to an end. In the meantime, the erstwhile superpower becomes corrupted by its own power.

As the endgame approaches, those still nominally in charge of the collapsing empire resort to all sorts of desperate measures—all except one: they will refuse to ever consider the fact that their imperial superpower is at an end, and that they should change their ways accordingly. George Orwell once offered an excellent explanation for this phenomenon: as the imperial end-game approaches, it becomes a matter of imperial self-preservation to breed a special-purpose ruling class—one that is incapable of understanding that the end-game is approaching. Because, you see, if they had an inkling of what’s going on, they wouldn’t take their jobs seriously enough to keep the game going for as long as possible.

The approaching imperial collapse can be seen in the ever worsening results the empire gets for its imperial efforts. After World War II, the US was able to do a respectable job helping to rebuild Germany, along with the rest of western Europe. Japan also did rather well under US tutelage, as did South Korea after the end of fighting on the Korean peninsula. With Vietnam, Laos and Cambodia, all of which were badly damaged by the US, the results were significantly worse: Vietnam was an outright defeat, Cambodia lived through a period of genocide, while amazingly resilient Laos—the most heavily bombed country on the planet—recovered on its own.

The first Gulf War went even more badly: fearful of undertaking a ground offensive in Iraq, the US stopped short of its regular practice of toppling the government and installing a puppet regime there, and left it in limbo for a decade. When the US did eventually invade, it succeeded—after killing countless civilians and destroying much of the infrastructure—in leaving behind a dismembered corpse of a country.

Similar results have been achieved in other places where the US saw it fit to get involved: Somalia, Libya and, most recently, Yemen. Let’s not even mention Afghanistan, since all empires have failed to achieve good results there. So the trend is unmistakable: whereas at its height the empire destroyed in order to rebuild the world in its own image, as it nears its end it destroys simply for the sake of destruction, leaving piles of corpses and smoldering ruins in its wake. Continue reading

Financial Feudalism

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Once upon a time—and a fairly long time it was—most of the thickly settled parts of the world had something called feudalism. It was a way of organizing society hierarchically. Typically, at the very top there was a sovereign (king, prince, emperor, pharaoh, along with some high priests). Below the sovereign were several ranks of noblemen, with hereditary titles. Below the noblemen were commoners, who likewise inherited their stations in life, be it by being bound to a piece of land upon which they toiled, or by being granted the right to engage in a certain type of production or trade, in case of craftsmen and merchants. Everybody was locked into position through permanent relationships of allegiance, tribute and customary duties: tribute and customary duties flowed up through the ranks, while favors, privileges and protection flowed down.

It was a remarkably resilient, self-perpetuating system, based largely on the use of land and other renewable resources, all ultimately powered by sunlight. Wealth was primarily derived from land and the various uses of land. Here is a simplified org chart showing the pecking order of a medieval society.

Feudalism was essentially a steady-state system. Population pressures were relieved primarily through emigration, war, pestilence and, failing all of the above, periodic famine. Wars of conquest sometimes opened up temporary new venues for economic growth, but since land and sunlight are finite, this amounted to a zero-sum game.

But all of that changed when feudalism was replaced with capitalism. What made the change possible was the exploitation of nonrenewable resources, the most important of which was energy from burning fossilized hydrocarbons: first peat and coal, then oil and natural gas. Suddenly, productive capacity was decoupled from the availability of land and sunlight, and could be ramped up almost, but not quite, ad infinitum, simply by burning more hydrocarbons. Energy use, industry and population all started going up exponentially. A new system of economic relations was brought into being, based on money that could be generated at will, in the form of debt, which could be repaid with interest using the products of ever-increasing future production. Compared with the previous, steady-state system, the change amounted to a new assumption: that the future will always be bigger and richer—rich enough to afford to pay back both principal and interest. Continue reading

The Rage of the Cultural Elites

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

A certain unhappy incident happened to my aunt in the summer of 1966. The Cultural Revolution—a political movement initiated by Mao Zedong—was beginning to engulf the country. That same year many American college students were protesting against the Vietnam War and Leonid Brezhnev was keeping his seat warm as the General Secretary of CPSU, having replaced the somewhat volatile Nikita Khrushchev two years earlier. My aunt was then a freshman studying literature at Fudan University in Shanghai.

It so happened that my aunt, then a sensitive and somewhat dreamy young woman, had stubbornly and haplessly clung to certain musical tastes which at that time in China came to be regarded as politically incorrect, being said, in the trendy ideological jargon of that time, to reflect “decadent bourgeois revisionist aesthetics.” To wit, my aunt had kept in her record collection a rendition of “The Urals Mountain-Ash” (Уральская Рябинушка), a Russian folk song in which a young girl meets two nice boys under a mountain-ash tree and must choose between them, performed by the National Choir of the Ukrainian Soviet Socialist Republic. It was an old-style LP spinning at 78 RPM. It had a red emblem in the middle emblazoned with “CCCP.”

One of my aunt’s roommates, who probably had always resented her for one reason or another, found out about it and reported her to the authorities. For this rather serious infraction, student members of the Red Guard made my aunt publicly smash her beloved record, then kneel upon the fragments and recite an apology to Chairman Mao while fellow-students threw trash at her face shouting “Down with Soviet revisionists!” This generation of Chinese young people, who once donned Red Guard uniforms, beat people up around the country and smashed various cultural artifacts, is now mostly living on government pensions or earning meagre profits from home businesses, but some have prospered and can be found among the upper crust of contemporary China’s business, cultural, and political elites.

This episode came to my mind when in the summer of 2014 I came upon video clips of Ukrainian student activists storming university classrooms in mid-lecture and ordering everyone to stand up and sing the Ukrainian national anthem, then forcing the professor to apologize for the lecture not being adequately patriotic. There were also ghastly spectacles of “Enemies of the People” (guilty only of having served under the overthrown president Yanukovich) being paraded around in trash bins. In Ukrainian schools, children were made to jump up and down, and told that “Whoever doesn’t jump is a Moscal” (a derogatory term for “Russian”).

Add to this the destruction of public monuments to World War II and the ridiculous rewriting of history (turns out that, during World War II, Germany liberated Ukraine, but then Russia invaded and occupied Germany!) and a complete picture emerges: the Ukrainian Maidan movement is one of a species of “cultural revolution.” The new, fashionable term being thrown around is “civilizational pivot,” but it and the old “cultural revolution” can be understood as approximate synonyms, sharing the need for frenzied spectacles of mass humiliation and destruction. Continue reading