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https://www.oftwominds.com/blogmar21/global-endgame3-21.html

The Global Financial End-Game

For those seeking a summary, here is the global financial endgame in fourteen points:

1. In the initial "boost phase" of credit expansion, credit-based capital ( i.e. debt-money) pours into expanding production and increasing productivity: new production facilities are built, new machine and software tools are purchased, etc. These investments greatly boost production of goods and services and are thus initially highly profitable.

2. As credit continues to expand, competitors can easily borrow the capital needed to push into every profitable sector. Expanding production leads to overcapacity, falling profit margins and stagnant wages across the entire economy.

Resources (oil, copper, etc.) may command higher prices, raising the input costs of production and the price the consumer pays. These higher prices are negative in that they reduce disposable income while creating no added value.

3. As investing in material production yields diminishing returns, capital flows into financial speculation, i.e. financialization, which generates profits from rapidly expanding credit and leverage that is backed by either phantom collateral or claims against risky counterparties or future productivity.

In other words, financialization is untethered from the real economy of producing goods and services.

4. Initially, financialization generates enormous profits as credit and leverage are extended first to the creditworthy borrowers and then to marginal borrowers.

5. The rapid expansion of credit and leverage far outpace the expansion of productive assets. Fast-expanding debt-money (i.e. borrowed money) must chase a limited pool of productive assets/income streams, inflating asset bubbles.

6. These asset bubbles create phantom collateral which is then leveraged into even greater credit expansion. The housing bubble and home-equity extraction are prime examples of theis dynamic.

7. The speculative credit-based bubble implodes, revealing the collateral as phantom and removing the foundation of future borrowing. Borrowers' assets vanish but their debt remains to be paid.

8. Since financialization extended credit to marginal borrowers (households, enterprises, governments), much of the outstanding debt is impaired: it cannot and will not be paid back. That leaves the lenders and their enabling Central Banks/States three choices:

A. The debt must be paid with vastly depreciated currency to preserve the appearance that it has been paid back.

B. The debt must be refinanced to preserve the illusion that it can and will be paid back at some later date.

C. The debt must be renounced, written down or written off and any remaining collateral liquidated.

9. Since wages have long been stagnant and the bubble-era debt must still be serviced, there is little non-speculative surplus income to drive more consumption.

10. In a desperate attempt to rekindle another cycle of credit/collateral expansion, Central Banks lower the yield on cash capital (savings) to near-zero and unleash wave after wave of essentially "free money" credit into the banking sector.

11. Since wages remain stagnant and creditworthy borrowers are scarce, banks have few places to make safe loans. The lower-risk strategy is to use the central bank funds to speculate in "risk-on" assets such as stocks, corporate bonds and real estate.

12. In a low-growth economy burdened with overcapacity in virtually every sector, all this debt-money is once again chasing a limited pool of productive assets/income streams.

13. This drives returns to near-zero while at the same time increasing the risk that the resulting asset bubbles will once again implode.

14. As a result, total credit owed remain high even as wages remain stagnant, along with the rest of the real economy. Credit growth falls, along with the velocity of money, as the central bank-issued credit (and the gains from the latest central-bank inflated asset bubbles) pools up in investment banks, hedge funds and corporations.

The net result: an over-indebted, overcapacity global economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral.

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http://www.informationclearinghouse.info/56394.htm

US' Futile Containment of China

America's global power depends on a strategy of "containment" towards China. Containment is just a euphemism for aggression, hostility and confrontation. And such a strategy is bound to fail.
State planners in Washington seem to think that a Cold War policy towards China will deliver the same kind of victory that America claimed against the Soviet Union.

A recent set-piece article published by the influential Atlantic Council argued for "containment" of China which would subordinate and eventually bring about regime change in Beijing. The objective is to make the United States the sole global hegemonic power with no other competitor.

The problem with such thinking is that applying Cold War strategy is futile in today's world. Containment of the Soviet Union may have succeeded for the Americans because during that era the world was largely a bipolar division of power. Also, the Soviet Union was a relatively closed entity in terms of economic relations with the rest of the world.

Today, the world is wholly different. Instead of a bipolar configuration, there is the reality of a multipolar world. The global economy is much more integrated and China – set to become the largest national economy – is a key exporter, importer, investor and market.

The previous Trump administration launched a trade war against China three years ago in an attempt to bully China into submission. But that policy failed. Trump only ended up hurting American producers and consumers which reflects the reality of how the American economy – like much of the world – is dependent on China. Trump's trade war was tantamount to cutting your nose off to spite your face. It was a folly of arrogance and no intelligence.

The new Biden administration is equally obsessed with trying to contain China, which shows how presidents in the US come and go but the deep state planners and imperial policy remain.

Biden may have dropped Trump's trade war rhetoric and tactics, but as the Atlantic Council article cited above indicates, Washington is still pursuing the objective of damaging and weakening China to furnish a government in Beijing that is subordinate to American global power ambitions.

American corporate capitalism depends on acquiring global dominance. Partnership, cooperation and multilateralism are anathema to the workings of US capital. This is why the American planners must defeat China and any other perceived rival. 

But the reality of a multipolar world and integrated global economy makes the American Cold War strategy obsolete.

Unlike Trump's "America First" doctrine, Biden and the Democrats have a softer, seemingly more amenable approach to Western allies. Biden talks about "engaging" with allies and revamping the transatlantic alliance.

However, this new "engagement" is all about Washington trying to enlist Western allies in a hostile camp towards China so as to better achieve American objectives.

At both the G7 summit and Munich Security Conference earlier this month, Biden repeatedly flagged up China and Russia as adversaries and threats for the Western "allies".

The trouble for Biden and his deep state handlers is that Western allies cannot afford to accommodate his policy of isolating China and Russia. It is detrimental to their own self-interests.

As the Global Times commented this week: The vitality of the Chinese economy is unstoppable… For the world, detaching from the Chinese market is becoming more and more inconceivable than detaching from the US market".

China is now the biggest trading partner for the European Union, having surpassed the United States. China is a key market for Germany's export-led economy and Germany is the de facto leader of the EU. Russia is also essential for supplying Germany and Europe with affordable secure energy.

There is no way that Washington's attempts to polarise the world as it did with the Soviet Union will succeed. It is futile. The multipolar world that China and Russia often speak of is a reality, which means partnership and cooperation between nations is the only viable way forward.

American power is like a lumbering dinosaur living in a world whose political and economic environment has been transformed. It's a beast whose modus operandi has expired and no longer applicable.

There is of course the danger of military confrontation prompted by a desperate waning American power facing extinction. But fortunately, China and Russia are formidable military powers which America cannot realistically conceive of attacking. (How damnable that such a contingency could even be contemplated, but that’s the nefarious nature of American power for you).

Which leaves us with this consideration. If US power-play against China (and Russia) is futile and war is inconceivable, what will become of America?

If it wants to avoid internal collapse – a process of decay already underway – American society and its capitalist economy must in some way be radically transformed into a more democratic, egalitarian and drastically less militarist economy. Can the American people mobilise for this challenge