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National Security: -
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Elihu » Thu Jul 03, 2014 1:08 pm wrote:chime in if you know
National Security: -National Security is hereby defined by some London geezer as
"The complex of generally-peer-agreed values, external forces and actual or potential resources which act in favour of the 'consensual wants' of the nexus of interlocking board members of the 147 super-connected global corporations - and said complex is continually updated in light of real-time changes in said values, forces, resources and corporations."
.........For the historically minded, it is noteworthy that specie is flowing from West to East just as it did in ancient times and in the Middle Ages before the industrial revolution. Before the industrial revolution, the west traded silver and gold for oriental commodities. With the industrial revolution, things changed. European manufactures changed the face of world trade, with not a little help from the technologically superior weaponry that came with industrialisation. This is what enabled the fantastic accumulation of wealth that formed the basis for modern western society. Today the West, or more specifically America, is trading its treasure for manufactures from the East. Industry without arms is an invitation to looting. Arms without industry is just a precursor to barbarism. No empire has lasted long without both. And it is easy to see in today’s situation the logic of war.
War trumps peace
Those who believe in the natural evolution of economic nature from industrialisation to a post industrial service economy are just describing the development of an idle rentier economy living off the work of others. Since others with any means will not indefinitely acquiesce to such an arrangement, force is necessary to make sure that they do. The economics of the means of coercion, that is to say modern industrial warfare, are such that the expense of modern weaponry has made the unit cost of arming the state too high to afford. It isn’t just simple greed that drives arms exports, as so many on the left seem to think, but the need to achieve longer production runs in order to reduce the unit costs of armaments production to a more affordable level.
The Logic of War
Source: http://www.d-n-i.net
The United States has chosen, for better or far more likely for worse, to subordinate the civilian economy to its military sector. It is often argued that the spin offs from military research, development and production are a net benefit to the civilian economy, but this is as transparently false in America as it was in the Soviet Union. It is a sad commentary on politics that hardly ten years after the collapse of the Soviet Union the supposed victor, America, has a prison population that rivals Stalin’s. Just as ironically, American strategic thinkers have based their long-term objectives on technological (read computer and information technology) superiority. Yet the fact is that much if not most of that supply chain is outside the United States in Asia. In fact, it is within a few square miles of Taiwan, and in easy missile range of the mainland or North Korea. The logic of globalisation thus means that America’s military frontier is not the West Coast of the United States but the east coast of Asia and the central Asian borders of the world’s excess oil reserves of the Persian Gulf.
When one considers the current Middle East crisis against this backdrop, the divisions on the UN Security Council are much easier to understand. It is also clear that the potential for escalation is very great. It is difficult to imagine the American government deciding to back down, for the simple reason that its long-term choices in that eventuality are the most difficult to take, depending as they do on a fundamental change in priorities. Far better, you can hear the Neo-cons whisper (or more in character, shout) to strike now and get control of the oil before Europe consolidates, before Russia recovers, and before China and Taiwan reunite.
Thinking about all this it is tempting to remember Lenin’s comment to the effect that given enough rope, the capitalists would hang themselves. For my part, I wonder why our leaders have lost the hope that Keynes sparked in the 30s, and have opted instead for the concentration camps.
The Ghost Of Adam Smith
or why the perps of 911 are hiding in plain site
By Chris Sanders
May 24, 2004
© 2003-5. Sanders Research Associates. All rights reserved.
FROM: http://www.sandersresearch.com/Sanders/ ... NewsID=642
Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes which naturally introduce subordination gradually grow up with the growth of that valuable property.
- Adam Smith (1976) An Inquiry into the Nature and Causes of the Wealth of Nations, Volume 2, Book V, Oxford, Clarendon Press, ISBN 0-19-828184-6, p. 710
A stressed network organised around a few crucial nodes is liable to collapse. What if you saw the collapse coming? Might you not try to improve your position in light of your knowledge? Might you not even try to ensure that the timing of the collapse was to your advantage even if not to the advantage of others?
*********
Wall Street: does she or doesn’t she?
In a few short weeks Wall Street has changed its mind again. In March the Street thought that the Fed would not raise interest rates this year. Today money market forward rates are pricing two hundred basis points of tightening within a year and three hundred by the end of 2005. Bond market yields have risen to reflect these expectations, but not nearly enough if they are indeed right about where Fed funds are headed. Technical analysts are excited because bond yields have surged above their longer term averages. Currency markets have bought dollars on the assumption that higher interest rates and stronger growth in the US are good reasons to sell yen and euros. Stocks on the other hand have fallen as that market worries about the impact of higher interest rates on corporate profits. And commodities other than oil have fallen on the prospect of tighter money and a slower world economy.
This change of mind has apparently been driven by the improvement in the US employment outlook. Wage and salary accruals by American corporations have been climbing for a year, but are still being outpaced by corporate profits. Absent a collapse in demand, it is plain that the job outlook has improved. The long jobless recovery is finally producing results for the work force, at least for the non-manufacturing work force.
Manufacturing employment[i] stopped falling for the first time in nearly four years in February. A paltry 37,000 jobs have been created since. The lack of job creation in manufacturing is pertinent because it will only be by making things with high value added and selling them abroad that the US will be able to stabilise its massive trade deficit. The trade deficit in goods was a mind-boggling $57 billion in March, representing an annual rate of $687 billion. The ratio of exports to imports has fallen steadily for the last forty years, from 1.2 times imports to a mere 70%. As we have observed in other articles, the trade deficit and dependence on foreign finance have become systematic and structural, begging the question: can the US external account be stabilised at all?
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To globalise today means to specialise
It has become almost as fashionable to discuss and accept globalisation as it has become to change one’s economic forecasts to fit short term market price action. One problem that this raises is that globalisation does not mean the same thing to all people. In its most generic sense globalisation has been with us at least since the 17th century. But what it means today is not simply interconnectedness, but rather a particular type of interconnectedness in which the areas that we define as nation-states become more specialised economically, more hierarchical politically and dis-intermediated by networks of internationally connected interest groups.
So today we see the US becoming specialised in finance and war, China in manufacturing, India in services, and so on. The US political economy is becoming more hierarchical as a consequence with a widening gap in incomes and wealth and collapsing constitutional government. And a variety of networks have evolved with a stake in globalisation and with interests shared internationally with similar networks. One of these is what we call the International Security Complex.
Viewed from this perspective, American deindustrialisation is the result of a sort of economic specialisation, in which high value added production is moved offshore while the onshore (American) economy concentrates in low economic value-added but high political value-added finance and “security.” This is not generally justified or analysed as such; it is rather excused on the basis that the US economy is better than others at “innovation” and “ideas.” One can measure the impact of this on the US by counting the number of lost manufacturing jobs, looking at the proportion of GDP devoted to national security and finance, noting the huge role of government in venture capital, education, research and development, and observing the balance sheet consequences. These can be summed up in a debt to GDP ratio of over 330% and a net foreign debt of 33% of GDP.
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In the specialised, globalised world, what is national security?
This sort of “specialisation” violates the most basic assumptions underlying the concept of national security because it exports strategically vital portions of the national supply and manufacturing chain. One of the best examples of this is the fact that virtually all of the world’s semiconductor manufacturing is conducted in one industrial park on the island of Taiwan. From a national point of view this is a grave risk to American security that extends the American security frontier unnecessarily to Asia. From an International Security Complex point of view it is a perfectly rational and even desirable situation since the relationship between the military establishments of the two countries is probably closer even than that between the two militaries and their respective diplomatic establishments. The example par excellence is the relationship between the US and Japan, where the post war development of the Japanese economy owed a much to the opening of American markets and the symbiotic relationship that was built between the ruling elites in both countries.[ii]
Specialisation on this scale depends on the completely free circulation of capital and goods unchecked. There is nothing particularly new about this. Indeed, the world economy before the First World War was arguably freer than it is today. But today’s global economy is more specialised, and is becoming more so. For example, American firms increasingly contract out production to factories that may actually be located in several countries, with raw materials and parts being moved between them. What used to be the company warehouse is a container. What appears superficially to be a very flexible system is in fact very vulnerable to outside disruption and attack, because corporations organised in this way no longer maintain internally the inventories, personnel, and operating systems that would allow them to cope with a disruption to the supply chain. What applies to the corporation applies to the nation as well.
The nation is dead. Long live the network!
One way to make the point more clear is to approach it in terms of a network. A global system based on nations that internalise as much as possible of the production process is closer to a distributed network with many powerful nodes and hence more resilient to outside shocks. However, evolving globalisation is an excellent example of a system conforming to a power law distribution in which only a few nodes are really powerful. Indeed, the system seems to tend towards a system in which only one node has real power. The problem is that such a system is stable until something disrupts the centre causing it to become highly unstable and vulnerable to complete collapse.[iii]
This has enormous implications for investors. The models that most of them (at least the ones that are not insiders) are using are based on explicit or implicit risk calculations that assume a distributed and hence more stable world. As the world transitions towards a less distributed topology, characteristics that used to limit systemic risk are lost.
Consider the evolution of pension fund management. Originally pension funds adopted relative performance benchmarks as opposed to absolute return objectives because of the demonstrable fact that most fund managers could not beat market indices. This logic was always in our view a bit of a red herring because a benchmark is just another portfolio and an arbitrary one at that. But once most pension funds moved to benchmarking performance, the entire industry gravitated toward the same portfolio. This inevitably reduced the diversification benefits inherent in stock diversification in the first place with the result that the benchmark became the security. The S&P 500 is now the stock. This has happened to one degree or another in every market that the pensions are invested in, since anyone who wants to bid for their business has to adopt their methodology. This inbuilt bias has a powerful leavening effect on market practice. Recognising this, the pension funds have cast their nets wider and wider for non-correlated style and performance, with the ultimate effect that every area that they move into eventually loses that attraction. The end result is the same. Diversification benefits are attenuated and risk rises.
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The rich are getting richer
There are parallels in the political system, and for related causes. Rising risk means rising volatility, and rising volatility has an interesting by product: the rich get richer and the poor get poorer. The dynamic behind this is various and compelling. To begin with, it is only the rich that can exploit the significant market mispricing that greater volatility brings because they are the only ones with the cash to take advantage of it or sufficient assets to secure the credit lines necessary to short the markets. At the same time, the finance sector which intermediates the flow of cash and securities has emerged from each business cycle since the Second World War bigger than the last. We have noted in other articles the extraordinary degree to which even the industrial sector owes its profitability to finance. If you doubt this, think of GE Capital, GMAC, Boeing aircraft leasing and so on. Taken together, it represents more than a quarter of GDP. But even this understates the size of the sector. Given that the Fed is a private monopoly owned by the sector it supervises, monetary policy is necessarily biased towards financial goals as opposed to production goals.
It is therefore no wonder that labour is viewed solely as a factor of production the money cost of which must be minimised. The benefits and risk-reducing characteristics of community equity, a stable work force, quality output and so on take second seat in a system that values earnings per share more highly and where industrial output is chiefly valuable as collateral for a leasing or insurance transaction rather than for dependability and longevity. Place becomes unimportant, and it matters not where the collateral is produced as long as it is produced cheaply.[iv] The self-reinforcing and self-organising aspects of the system are evident and have resulted in a natural bias to politics, where the disinterest displayed by finance to workers is mimicked by the disdain with which the politicians view the voters, since it is less votes than money that makes possible the acquisition of the valuable franchises that are represented by seats in Parliament or Congress. How else is one to understand the purchase of a mayoralty in New York by a billionaire whose fortune came from the marketing of a mediocre market information system or a Senator’s seat by an executive from Goldman Sachs? This is not an electoral system so much as a system for marketing tax farms to the highest bidder.
911
Indeed, wherever one looks, one finds systems that are increasingly dominated by fewer and fewer major nodes. The consequence of the failure of one or more of those nodes would be a massive increase in volatility. It is no wonder that Wall Street economists don’t know which end is up; they are trying to do the impossible, predicting short term outcomes against a backdrop of massive uncertainty and a vested interest in the status quo.
The truth of the matter is that “globalisation” has brought us to a point where almost any event could initiate a cascade of consequences beyond the control of even the legendary Greenspan and the Exchange Stabilisation Fund. 911 may well have been that event. Economically, it wrecked the attempts that were underway at the time to investigate and control the rampant fraud and abuse that had resulted in the collapse of the government’s accounting and financial control systems and it has resulted in a runaway spending spree and balance of payments catastrophe. Politically, it wrecked any serious attempt to negotiate a viable compromise in the Middle East. Militarily it has exposed grave weakness at the heart of the American war machine. Morally, its consequences have revealed the absence of any ethical foundation to the so-called New World Order and the absence of a framework of law to order it.
About the only thing that doesn’t seem widely exposed is exactly who was responsible for 911 itself.[v] But the answer to that question is hiding in plain sight. When a few more people see it, we expect the cascade to begin in earnest. Revolutions have started from much less.
Chris Sanders
csanders@sandersresearch.com
FOOTNOTES:
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