Global Self-Hypnosis

"Sounds all really scary - how should this happen, these dead people? Do we have to be so pessimistic?"


Thus spake one of my Stumbling friends* after a recent comment I made regarding the prospects for the imminent collapse of Capitalism.

Many of us might welcome such a collapse. Larken Rose, for example, makes an entirely reasonable case for "ignoring the debt out of existence". We The People (he argues) should simply refuse to accept the "National Debt" burden being placed on us to in order to keep the global financial system from disintegrating. Ethically, I can't argue with him.

Pragmatically, however, I have to point out that the economic catastrophe which would follow our success in rejecting the bailout would trigger an even more catastrophic population crash and, along the way, the total collapse of what passes for our civilisation. Bill Deagle may yet be vindicated.

How so? Well consider what will happen if/when the Dollar falls.

Not only would the American economy instantly implode (probably triggering a Civil War but that would be almost trivial in the global context) but it will drag down every major creditor economy with it. Overnight, the Balance sheets of China, Russia, Japan and the Oil Nations who are funding the US Debt and economy would evaporate.

Without the Dollar as a Reserve Currency, the world would first attempt to find another currency - like the Euro - to fill the breach, but although the Euro region is almost self sufficient (notably in all major areas except Energy), it does not have the asset balance or sheer volume of currency required to replace the Dollar, largely because no one does - or could. The values now weighed in Dollars are entirely mythical. They bear almost no relation to the "facts on the ground".

In the absence of a global "Reserve Currency", the world would be forced to fall back on the Gold Standard (or something similarly valuable and immutable) and, in a nutshell, in exactly the same way as there aren't enough Euros, there isn't a fraction of the Gold (above ground at least) necessary to replace the Dollar debts that now exist. Hence, the whole World would default on its debts, rendering all credit (and debt) meaningless; and without credit and exchangeable assets, most of the world will be reduced to barter; which will cope with about 10% of the key items we need to trade. For the rest, we'll be generally unable to buy anything from anyone.

In that situation, food distribution will be one of the first things to collapse.

Without a global means of exchange, trade will plummet. And trade keeps most of the human race alive; on an almost literal basis by filling our supermarkets with the food most of us eat but on an equally serious level, it maintains the entire infrastructure of our civilisation.

Yet consider how badly we already cope with food distribution in the world today - with an "efficient" (or at least functional) Capitalist system. You and I and about 2/3 of the human population live in relative security and comfort. A billion or so live on the breadline and over 900 MILLION people are more or less constantly at Starvation level. Think how many more will fall to that level if and when the global economy collapses. We'll be very fortunate if it is less than 50% of the population.

Those who are lucky and live near reasonably self sufficient organic farms or have the ability to start new ones - and can defend them - might survive. The rest of us will have to become scavengers over the ensuing 6-36 months and take pot luck. If that happens, then whichever way you play it, we're inevitably talking about a massive "die-off" of the human species.

Even within the dim recesses of their Authoritarian minds, the current rulers of this planet clearly recognise this threat; not, to be sure, that they'd be too concerned about losing half the population through starvation (some of them would, no doubt, see that as a positive outcome) but they are certainly concerned about the even more probable loss of their own wealth and their grip on power.

THAT is why, in recent weeks, we have seen utterly unprecedented financial "miracles" performed. Consider how, for the past 50 years we've been unable to find couple of billion dollars a year it would take to eliminate malnutrition; or the $5 Billion it would take to stop 1 million poor people a year dying from Malaria; or the $20 Billion it would take to treat Africa's AIDS' victims and so on.

Yet suddenly, out of nowhere, when their own necks are on the line, they've managed to lay their hands on $6 TRILLION dollars in a matter of a few weeks.

I really don't think people quite appreciate the scale of what they've already done and what is still in the pipeline. And I don't think they will realise until the historians put it in context in a couple of decades.

Essentially the money they've "magicked" into global being is all they can do to prevent the bubble bursting. That money literally doesn't exist. Although clearly fraudulent, it is not fraud in the sense of the recently unearthed affairs of the aptly named Mr Madoff (whom we can reasonably expect to be the first - on this scale - of many). Rather the $6 Trillion is an exercise in global self-hypnosis.

The various governments who need the dosh have effectively said to the rest of the world - to whom they already owe more than they can afford to pay back - "lend us the same again and we'll all get out of this mess together". They haven't said - because they don't need to - "or else we all go down the plughole together".

But the creditors don't actually have that much money to lend. Again. Nobody does. So - and here's where the self-hypnosis kicks in - what you will see over the coming months is the Fed (and some of the other collaborating central banks) printing new money (and issuing new "bonds") to give to the existing creditors in exchange for large amounts of the so called "Toxic Debt" those creditors also hold.

The creditors will pretend that they believe the new monopoly money has real value. And the central banks will pretend that the toxic debts also have real value. This actually constitutes a reasonably fair deal. The value of the toy money really is about the same as the toxic debts they'll be exchanged for.

The result will be that vast amounts of new money is made available for the banks to start lending to ordinary businesses and punters like you and me. As a result of which we'll continue buying and selling things and the whole magic roundabout will keep turning.

The key is that every player of the game must pretend that they believe in the rules of the game. They must continue to treat the toy money as though it has real value.

In "Peter Pan" we learn that whenever anyone says "I don't believe in fairies" one of them dies! (when performed in Pantos, this is used as a device to get the kids to "Clap if you believe in fairies" in order to bring Tinkerbell back to life)

That is precisely the state the global economy is in today. If too many people decide "I don't believe in the Dollar" and point out the utter lack of foundations beneath it, the bubble of belief will burst and - like a cartoon character suddenly realising he's stepped off the cliff...

***

The reason, however, that I'm not as pessimistic as the above picture looks is because I believe their strategy might actually work. None of the major players can afford to let the ball hit the ground. So they probably wont. At the same time they are as fully aware of the situation as the commentariat. This is forcing them - however reluctantly - to adopt policies which may allow us to survive.

My fear is not that their self hypnosis won't work - in a sense it's been working like this for the past 50 years so we're only talking about more of the same. It's what this situation will provoke in other areas which frightens me. Deagle thinks that the collapse is what will trigger the next wave of Totalitarianism. I fear that the measures taken to avoid the collapse could produce similar, though not quite so cataclysmic results.

We've already seen a major ramping up of the Police States across the world since 9-11. I fear the next few years will see at least as much again.

One major feature of global politics which has long worked in our favour is the inability of the various elites in different countries to co-operate. The internet, for example, only remains as (relatively) free as it still is because the various nannies, censors and totalitarians cannot agree on a common control agenda and mechanism. The current financial crisis has, however, forced them to co-operate on an unprecedented scale. They may develop a taste for it and begin to get their act together in all sorts of other much more sinister ways.

This will not be good news for We The People, though We The Sheep'll no doubt be delighted.

The Authoritarians are on the march...



*Carina