WAR AND GOLD

 

War is inflationary.

War costs a lot of money.  War disrupts supply chains.  War uses up vital resources.  War causes interest rates to rise, disrupting global liquidity.

War is great for gold.

The war on drugs for example has costs the US trillions in enforcement, prisons, the destruction of entire populations of drug addicts, and has achieved - what?  Debt.  Nothing but debt.

The entire border crisis is due to the war on drugs.  The Cartels control all the governments of South and Central America.  Everyone there works for the cartels in some capacity.  If you own a shop in Cartagena you pay some protection money to the Cartels.  Your 12 year old son is already working for the Cartles as a runner.  You have a ten year old daughter.  She will have to become a prostitute for the cartels in a couple of years.  Unless you try to get to the US.

It is impossible to stop the supply of drugs.  It is a demand driven probolem.  The demand in the US for drugs is infinite and insatiable.  It can not be legistlated.  All you can do is make drugs legal and tax them.  That would put the Cartels out of business and stop the flow of immigrants out of Cartel dominated territory.  But nobody is really interested in solving that problem.  The problem is what gives power to politicians.  And the force of the money behind the problem is so great that nobody has the will to stand up to it.  Except with empty rhetoric. 

And now we have two new wars that have exploded onto the world stage.  The war between the China/Russia and the Western Countries, currently centered in Ukraine.  And the War in the Middle East between Iran and its proxies and the United Sates and its proxies, currently  centered between Israel and Gaza.

If you're not personally affected by any of these wars you probably don't care much about any of them.  The war on drugs currently affects more US citizens because of the resulting border crisis.

But the other two wars in their own ways are equally as unsolvable as the war on drugs.  Because nobody is really interested in solving them.  They are far more useful to the current power structures as wars.  This is because the global economy has reached a point of instability that war is a useful distraction for those in power.

Putin, for example is far more popular in his depressed economy waging a war in Ukraine, than he was before the war.

Zhi, is suffering from the same economic malaise in China.  How long before Taiwan becomes a useful distraction?

Europe is in recession (Netherlands, Germany, Greece, Ireland are in statistical recessions while France, Italy and Spain have only the slightest statistical growth.).

The economics of the Middle East is dominated by a staggering skew of wealth with 99 percent of all assets in the hands of a few families who control the oil production.

Africa is a mess.

South and Central America are dominated by the Drug Cartels.

And the United States, while by far the strongest economy, is suffering from a skew of wealth due to a 50 year regime of financial repression (negative real rates) which has concentrated 90 percents of the assets in the hands of the top ten percent of the population.

So what's new and  different?

Deglobalization.

For the last 40 years globalization has hidden the inflationary effects all of the other global problems stemming from inequality of wealth.  Globalization provided cheap inputs of labor and materials.  Gobalization has provided a great incentive for avoiding hot wars.  Because every country was profiting from the disinflationary force.

Now that has reversed.  And the incentive structure for War has resversed.  War is good for those in charge of unpopular governments, and flagging economies.  Just look at Netenyahu in Israel.  Without war he would be in jail.  With war he is in charge.  Obviously he was drawn into the war by the brutal thugs of Hamas.  But what incentive does he have to end it?  Just as one might ask what incentive does Hamas have to end it?

The people of Israel and Gaza have great incentive to work through to a peaceful solution.  Their leaders - not so much.  Not at all.  This is the tragedy.  It is perpetual war that keeps brutal leaders supported by small but powerfully united bases in power.  They need enemies.  Enemies within and without.  And they retain power by reigning in a perpetual state of war, disaster and dread.

Criminals have risen to the top of governements all over the world.  Putin in Russia, Netanyahu in Israel, the Hamas thugs in Gaza, the murdering mullahs in Iran, the Cartels control all of the South and Central American governments.  Convicted criminals are currently running for election in Pakistan, India, France and the United States and several African nations.  It is a peculiarity of our age.  

What better to keep them in power than war?  This may sound flippant.  But the age old question: CUI BONO - who benfits - is the most revealing question to ask.  I'm not the first to notice:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

—Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter,”  

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