Authored by Brandon Smith via Alt-Market.us

Ever since the days of Herbert Hoover and the official start of the Great Depression the concept of trade tariffs has been readily demonized across most of academia and among the majority of modern economic ideologies. It is actually one area where globalists and free market economists tend to align (though each group has very different reasons).

Proponents of Adam Smith’s free market philosophy or Ludwig Von Mises and his Austrian school are Just as likely to be opposed to Donald Trump’s tariff plans as any globalist from the halls of Davos.

First and foremost we have to make it clear what tariffs are: Tariffs are taxes on international companies importing goods from other nations. These taxes are designed to force companies to import from countries outside of the tariff list or produce goods domestically. The primary targets of tariffs are actually corporations. The secondary targets are countries on the tariff list.

Austrian economists in their opposition to tariffs operate on the assumption that large corporations are “free market” entities. They also assume that globalism is a product of free markets.

Adam Smith might have witnessed the corruption of mercantalism, but he had no inkling of the monstrosity of modern globalism and how it would ultimately pervert the free market ideal. The same goes for Mises. Their support for global trade was contingent on the idea that government interference is always the root problem, the fly in the ointment.

They did not take into account the blurring of lines between corporations, governments and NGOs – They did not consider the corporate shadow government of Davos and the manipulation of markets in the name of “free trade”. They couldn’t have even fathomed the creation of organizations like the IMF, World Bank, the BIS, etc. at the time they came up with their economic theories.

After the Bretton Woods conference Mises would go on to question the motives of the new “global order” and the trade agreements being put in place. He would also oppose at least some aspects of globalism before his death, leaving Austrians to debate the merits of “good globalism” vs “bad globalism”.

The reality is that there is no “good globalism”. It doesn’t exist because the entities dictating global trade collude rather than compete. They are not actually interested in free markets, they are interested in global monopoly. And corporations are the key to this monopoly.

Adam Smith criticized the idea “joint stock companies” (corporations), but there are a lot of Austrians and Anarcho-capitalists that defend international companies as if they are an inherent evolution of free market progress. This is simply not so. Global corporations (and central banks) are pure socialist constructs chartered by governments and given special protection. Their immunity to constitutional restrictions serves government interests and government legal chicanery serves corporate interests.

This is the opposite of free markets. I’ll say it again – Under the current conditions, global conglomerates are NOT free market organizations. They destroy free markets by using government partnerships to erase competition.

The covid event and the rise of woke propaganda in the US are perfect examples of the collusion between companies and governments to institute social engineering and erase free economic participation. Anyone not suspicious of these entities after everything that happened is beyond help at this point.

These corporations also act as wealth siphons; sucking up consumer cash in one country only to deposit it in other countries instead of cycling that wealth (after their cut) back into the economy they rely on for sales. In other words, global corporations act as a kind of wealth redistribution machine that takes money and jobs from Americans and spreads them around the world to the detriment of the American public.

As the middlemen of this wealth redistribution scheme, companies generate vast profits while people on both sides of the exchange get very little in return. Mexico might seem like it benefits from the NAFTA trade imbalances, but this is a mistake – The Mexican people and their standard of living enjoy minimal benefits; the companies that use them for labor get the advantage, along with some government officials on the take.

In turn, US GDP and our supposed national wealth continues to rise due to global corporations. But the majority of that wealth increase is not going to Americans, it’s going to the .0001% of elites. The longer globalism carries on the wider the wealth gap becomes. This is an undeniable fact and I think people on the left and the right mostly agree on this issue, but nobody wants to make the hard decisions and do something about it.

Leftists think bigger government and more regulation is the answer. Conservatives think smaller government and less regulation is the answer. Conservatives are closer to the mark, but neither solution confronts the core problem of collusion between governments and conglomerates.

Keep in mind, the US operated on tariffs for hundreds of years. The “T-word” did not become a bad word until the creation of corporations, the Federal Reserve system and the income tax.

So, I stand with my Austrian School economist friends on most things, but when they cry foul on Trump’s tariffs I have to remind them that the situation is not as simple as “government interference bad”. The current system is long overdue for a course correction and fiscal Libertarianism is not going to provide it. They think they’re defending free markets, but they’re not.

Another key problem of globalism is forced interdependency. If each nation is producing an ample supply of their own necessary resources, they have resilient domestic job creation, and they decide to trade excess goods with each other then global markets make sense. But, what happens then when each nation is pressured though trade agreements to rely on every other nation for the basic economic needs of their populace?

Then we must reexamine the value of globalism in general.

International economic interdependency is a form of slavery, especially when corporations and NGO middlemen are involved. Only resource redundancy and localism foster true free markets and individual liberty. Tariffs can help to energize local production and trade and make communities more self reliant. That said, there’s going to be a cost.

The comparisons made between Donald Trump and Herbert Hoover are rampant and have been since 2016. I warned during Trump’s first term that accelerating fiscal decline and growing stagflation could be dropped in his lap and blamed on conservative policies. That is to say, anti-globalism would be blamed for the financial destruction caused by globalists. I continue to believe that this agenda is still in play.

Hoover was blamed for exacerbating the Great Depression in 1930 with his Smoot-Hawley tariffs. In truth, the Great Depression spread because of a series of policy decisions by major banks and rate hikes by the Federal Reserve (Former Fed Chairman Ben Bernanke admitted to this openly in 2002). At the time it didn’t matter who caused it – Hoover was president and so he was the scapegoat.

The same situation could happen for Trump if he’s not careful, and all conservatives will be blamed by extension. It’s important to remember that US production has been hollowed out by decades of government interference supporting globalization, along with unchallenged corporate power. Reining in corporations with tariffs is not going to be enough, there must also be incentives to reverse the damage done by decades of government corruption.

I can’t think of any other way to rebuild America’s production base fast enough to counter the price increases that will inevitably come with tariffs. Defeating inflation would require an unprecedented national effort to bring back manufacturing specifically for necessities. Tariffs by themselves are not going to make this happen.

We need mass goods, energy and housing NOW, not several years from now. Otherwise, in the long run tariffs will only make the situation worse. Libertarians are right to warn of negative effects on American consumers, but the solution is not to let corporations do whatever they please and for globalism to continue unchallenged. The solution is to break globalism and return to a domestically independent model.

Finally, there’s the issue of the dollar and its world reserve status. After Bretton Woods the great unspoken arrangement was that America would act as the military pillar of the western world (and apparently the consumer cash cow of the world). In exchange, the US would enjoy the advantages of having the world reserve currency.

What advantages? Namely, the dollar could be printed well beyond any other currency for decades without suffering the immediate effects of hyperinflation because most of those dollars would be held overseas. The breakup of NATO and a trade war might trigger the end of this arrangement. Meaning, all those dollars held in foreign banks could come flooding back into the US and cause egregious inflation.

Reserve status has long been the Achilles Heel of the US and it must end eventually. Just take note that globalists have been preparing for this shift since at least 2008 with the SDR basket and CBDCs. This past week the EU announced they will be distributing retail CBDCs by the end of this year. They know what’s coming. A trade war will not only require the Trump Administration to facilitate increased domestic production, but also facilitate a new commodity backed currency system to protect against the fall of the dollar.

In the meantime, individual citizens and communities are going to have to prepare as globalism breaks down. This means local production of goods, retailers seeking out local suppliers, people trading goods and services through barter networks, etc. State leaders should also consider introducing commodity backed scrip to offset any potential damage to the dollar. They should also open up more natural resources to improve local industry.

There’s a lot to do, and not much time to do it.

by Pepe Escobar, via ZeroHedge

When President Xi Jinping hosted a recent – rare – meeting with an array of Chinese tech superstars, including a “rehabilitated” Jack Ma, Alibaba’s founder, he urged them to “show their talent”, code for going for broke in the tech war with the U.S.

It was no wonder that young Liang Wenfeng, founder of AI sensation DeepSeek, was among the guests.

DeepSeek threw not only Silicon Valley but the whole somewhat paranoid U.S. national security ecosystem completely off balance. Yet Beijing’s emphasis is not subversion, but a sound drive towards building an AI system totally independent from U.S. monopolistic pressure and Nvidia products. Alibaba, Huawei and Tencent will likely align their infrastructure with DeepSeek.

This process is perfectly synchronized with the Made in China 2025 project, which has already propelled China to the leadership position in several sectors – from electric vehicles, batteries and solar panels to smart grids and advanced manufacturing. The final breakthroughs will be on top semiconductors and aerospace.

It’s now common knowledge that DeepSeek’s development was not a product of Silicon Valley labs showered with billions of dollars of research funds. Liang Wenfeng himself revealed it: “I won’t lie, our AI was created on the basis of Soviet developments – the OGAS system of Academician Glushkov.”

The wonders of History: a Soviet marvel auctioned off for a pittance, $15,000 in 1995 possibly because it was considered worthless, is now the backbone of China’s new digital revolution.

Physics heavyweight Quantum Bird, formerly with the CERN in Geneva, is adamant: “The Americans lost the plot. It’s all about models employing less computing power and less data. Nvidia high-performance GPUs costing $40,000 consume too much energy. Then there’s financial speculation. Raspberry Pi [a small single-board computer], the size of a credit card and with a simple processor, costing $50 for students, they may run DeepSeek, consuming less energy than a cellphone.”

And that’s just the beginning, Quantum Bird adds: “When Russia and China come up with their first lithographic machine… It was Silicon Valley that pushed the world to this.”

Russia-China scientists have already accelerated scientific computing on conventional Nvidia graphics cards by 800 times, creating a new algorithm using reverse engineering.

That was pulled off by a joint group of scientists from MSU-PPI University in Shenzhen (MSU-BIT University), established in 2014 by Lomonosov Moscow State University and Beijing Polytechnic Institute.

In parallel, researchers using Made in China GPUs have already boosted 10 times their performance over U.S. supercomputers relying on Nvidia hardware. U.S. tech sanctions? Who cares?

Counterpunching Sanctionmania

Chinese scientists are not intimidated by any challenges. On hardware, production of advanced GPUs like the A100 and H100 is a foreign monopoly. On software, Nvidia has restricted its CUDA software ecosystem from running on third-party hardware; that’s a serious problem for those working on independent algorithms.

These may not be insurmountable problems when a rolling wave of Chinese scientists is coming back home to China mostly from the U.S..

Take Tsinghua University chip superstar Sun Nan. Tsinghua’s social media recently revealed that Sun Nan came back in 2020 after many years in the U.S. to “train chip professionals for China and solving the manufacturing problems of mid- and high-end chip technology”.

The key sectors, once again, are semiconductors and quantum computing. Nothing Trump 2.0 will throw at China in terms of “tech containment” will alter the Chinese drive.

Sun Nan and his team have already come up with high-performance circuit design tech they integrated into more than 50 chips used in the Chinese power grid, high-speed rail, industrial measurement and control, instrumentation and electric vehicles.

Countering the American drive to derail China’s development in AI and chipmaking equipment, interconnected Sun Tzu maneuvers paint the picture of a Chinese transformation of current supply chains, fomenting a tech crisis in the West itself. That is a key reason for Trump’s obsession with Greenland and Ukraine’s rare earth potential.

Sanctionmania has been going on since 2017, when Trump started to impose a 60% tariff on Chinese imports. The Cadaver in the White House administration then slapped a 100% tax on Chinese EVs, and dozens of export controls on China, via coercion of its own “allies” such as Holland’s ASML and South Korea’s Hynix and Samsung.

Trump 2.0 will come up with a renewed charge of the heavy brigade quite soon.

By 2018, China was entirely dependent on Western tech. That was a time when telecom towers came from Ericsson, GPUs and chips for neural networks from Nvidia, and cars from the European giants.

Now it’s a completely different ball game: a blowback game.

Huawei leads in global telecom equipment. BYD is the world’s top producer of electric vehicles – ahead of Tesla since last year. Huawei is ahead of Google in smartphone processor shipments, also since last year. Xiaomi will launch its own smartphone processor this year.

Huawei’s Ascend 910B chip is already just 5% behind Nvidia’s AI products – and 70% cheaper. Huawei is vertically integrated with its own chip design and manufacturing supply chain – offering mobile operating systems (Harmony OS NEXT), electric vehicles, streaming services, and autonomous driving.

How to “directly benefit society”

Apart from DeepSeek, ByteDance, Baidu, Alibaba, and 01.ai have all developed their own sophisticated LLM models.

China not only already leads in industrial AI applications from robotics and drones to autonomous driving; it is also metastasizing its industrial, technological and economic breakthroughs into military power.

Example: the recently launched world’s first 6th generation fighter prototypes – not only one but two, simultaneously; the world’s first drone-carrier; the first hypersonic stealth unmanned airplanes for strike and reconnaissance; the first stealth unmanned warship; and the most powerful long-range air defence systems.

China is advancing at breakneck speed in directed energy weapons, military 5G, atomic timing, and space warfare systems.

As highlighted here, “China’s nuclear fusion device Experimental Advanced Superconducting Tokamak (EAST), Physics World wrote, ‘produced a steady-state high-confinement plasma for 1,066 seconds, breaking EAST’s previous 2023 record of 403 seconds’. This last development is an advance for the potential of a fusion power plant, a promise of almost limitless clean energy without significant radioactive waste.”

China trades mostly with the Global South: more than 50% of total. Trade with the U.S. is less than 3% of its GDP – as of last year.

This is a about China’s Digital Silk Road progress across Eurasia Economic Union (EAEU) member states.

Here we see how China is shaping the EAEU geostrategically, positioning itself at the heart of high-tech and innovation in Eurasia, promoting advanced tech cooperation with Russia, Belarus, Kazakhstan and Kyrgyzstan. China’s tech companies all but conquered the EAEU high technology markets.

The mantra uniting all of the above is of course detailed planning. That includes for instance the “East data, West computing” drive, which aims to transfer data-intensive computing to western China to reduce energy strain in the east.

The absolute key battleground in the tech war ahead will of course be the Global South. China is relentlessly leveraging its notorious manufacturing dominance and massive financial backing to offer an alternative ecosystem in semiconductors and AI.

In sharp contrast, the Americans under Trump 2.0 predictably will coerce their allies/vassals to reinforce their own tech ecosystem. Total divergence in supply chains and tech standards is all but inevitable.

This July 2024 interview with Liang Wenfeng, originally published in China by An Yong, remains essential to understand what’s behind the Chinese drive to totally redefine the rules of tech innovation.

Liang Wenfeng is adamant: “We’re done following. It’s time to lead.” He sees competition in crystal clear terms: “I focus on whether something can elevate social efficiency (italics mine) and whether we can increase our strength in the value chain (…) It’s an honor (italics mine) to give back.”

As Chinese scholar Quan Le has noted, Liang Wenfeng’s

“intention of enhancing personal and collective creativity, thus directly benefitting the society, is not at all on the same epistemological level” of a “mindless consumerism society”. It’s about the common good, not about a Wall Street killing.

All’s set for a do-or-die U.S.-China tech duel ahead. No one really knows what a bombast-driven Trump 2.0 administration will come up with. There will always be an undercurrent of economic pragmatism, but that will be constantly offset by an ideological and strategic Iron Wall dividing both parties.

Meanwhile, China will keep betting on a stream of young innovators and entrepreneurs in business tech to somewhat bridge the divide. The Empire of Chaos will not take the competition lightly. The Middle Kingdom is unfazed – and ready to rock’n roll.

by Mike Whitney via Unz Review
Excerpt

The future of humanity is being decided as we speak. And it is not being decided on a battlefield in Eastern Europe, or the Middle East or the Taiwan Strait, but in the data centers and research facilities where technology experts create “the physical and virtual infrastructure to power the next generation of Artificial Intelligence.” This is a full-blown, scorched-earth free-for-all that has already racked up a number of casualties though you wouldn’t know it from reading the headlines which typically ignore recent ‘cataclysmic’ developments. But when President Trump announced the launching of a $500 billion AI infrastructure project (Stargate) on Tuesday just hours after China had released its DeepSeek R1—which “outperforms its rivals in advanced coding, math, and general knowledge capabilities”—it became painfully obvious that the battle for the future ‘is on’ in a big way. And this is not a battle that either side can afford to lose. Here’s how technology expert Adam Button summed it up:

Imagine we’re back in 2017 and the iPhone X was just released. It was selling $999 and Apple was crushing sales and building a wide moat around its ecosystem.

Now imagine, just days later, another company introduced a phone and platform that was equal in every way if not better and the price was just $30.

That’s what unfolded in the AI space today. China’s DeepSeek released an opensource model that works on par with OpenAI’s latest models but costs a tiny fraction to operate.Moreover, you can even download it and run it free (or the cost of your electricity) for yourself.

The product is a huge leap in terms of scaling and efficiency and may upend expectations of how much power and compute will be needed to manage the AI revolution. It also comes just hours before Trump is expected to unveil a $100 billion investment in US datacenters. The model shows there are different ways to train foundational AI models that offer up the same results with much less cost. It also opens up far more applications for AI that would have been too expensive to run previously, which should broaden the applications in the real economy. China’s DeepSeek may have just upended the economics of AI, forex live

Imagine the panic that is spreading across western tech capitals right now. AI was supposed to be the fast-track to absolute societal control and oligarchic rule into the next millennia, but now those pesky Chinese have overturned the applecart leaving western elites with a problem they might not be able to fix. (See—Unchecked AI will lead us to a police state, edri ) They expected that their microchip sanctions would sabotage China’s AI efforts for at least a decade-or-so but, instead, China has come roaring back with a system that has left the tech giants gasping for air.

Of course, China’s eye-popping strides in technological development are nothing new as editor Ron Unz pointed out in a recent article where he noted that “between 2003 and 2007, the US led in 60 of the 64 technologies.” Whereas, as of 2022, “China led in 52 of the 64 technologies.” That’s not a competition; that’s a beat-down in a parking lot. Here’s Unz:

China now leads the world in many of the most important future technologies. The success of its commercial companies in telecommunications (Huawei, Zongxin), EV (BYD, Geely, Great Wall, etc.), battery (CATL, BYD) and Photovoltaics (Tongwei Solar, JA, Aiko, etc.) are directly built on such R&D prowess.

Similarly, the Chinese military’s modernization is built on the massive technological development of the country’s scientific community and its industrial base…. With its lead in science and technology research, China is positioned to outcompete the US in both economic and military arenas in the coming years…. American Pravda: China vs. America, Ron Unz, Unz Review

None of this should come as a surprise, although the timing of DeepSeek’s release (preempting Trump’s Stargate announcement) shows that the Chinese don’t mind throwing a wrench in Washington’s global strategy if it serves their regional interests, which it undoubtedly does. Here’s a bit more background from an article by Benj Edwards at Ars Technica:

On Monday, Chinese AI lab DeepSeek released its new R1 model family under an open MIT license, with its largest version containing 671 billion parameters. The company claims the model performs at levels comparable to OpenAI’s o1 simulated reasoning (SR) model on several math and coding benchmarks….

The releases immediately caught the attention of the AI community because most existing open-weights models—have lagged behind proprietary models like OpenAI’s o1 in so-called reasoning benchmarks. …

The R1 model works differently from typical large language models ….They attempt to simulate a human-like chain of thought as the model works through a solution to the query. This class of what one might call “simulated reasoning” models, or SR models for short, emerged when OpenAI debuted its o1 model family in September 2024. …

DeepSeek reports that R1 outperformed OpenAI’s o1 on several benchmarks and tests, including AIME (a mathematical reasoning test), MATH-500 (a collection of word problems), and SWE-bench Verified (a programming assessment tool)….

TechCrunch reports that three Chinese labs—DeepSeek, Alibaba, and Moonshot AI’s Kimi—have now released models they say match OpenAI’s o1’s capabilities, with DeepSeek first previewing R1 in November. Cutting-edge Chinese “reasoning” model rivals OpenAI o1—and it’s free to download, ars technica

This is a very big deal. The United States intends to dominate the world in this critical technology and yet the upstart Chinese have not only produced a system that is every bit as good as America’s best, but have made it more affordable, more accessible and more transparent. What’s not to like?

(Creepy Larry Ellison predicts “citizens will be on their best behavior” with an AI police-state surveillance system.)

Authored by Patrick Barron via The Mises Institute,

The US government is aghast that there is a new grouping of nations that seeks to form an alternative to the US trade bloc and trade settlement system that uses the dollar. These nations have been driven to this extreme, time-consuming, and difficult project by clueless US leaders who have imposed sanctions on Russian assets (literally stealing them) and have denied Russia and other nations from using the SWIFT messaging system for trade settlement.

In this way, the US hopes to preserve the dollar’s premier status as the world’s reserve currency and its world leadership based upon the dollar and its military might.

I have a better, cheaper, and more peaceful way to accomplish these US goals (i.e., remove every incentive to leave). It’s as simple as that. At a minimum that means preserving the purchasing power of the dollar and ending the policy of confiscating the assets of other nations, even those with whom the US has serious disputes.

In other words, end coercion and begin real world leadership based on trust and fair dealing.

This will be a tall task, because what nation today would believe in America’s honesty, integrity, and commitment to international law? Nevertheless, it is the only way that the American-led West can find its place in a new world.

There is a new world coming and the US must be a part of it if it wishes to prosper well into the future and not just through the current election cycle.

Here’s a short list of actions that the US should consider adopting:

1. Return all stolen assets to Russia and other nations.
2. End blackballing Russia and other nations from using the SWIFT trade messaging system.
3. Turn the ownership and running of SWIFT to neutral hands, perhaps the Swiss or some combination of nations that cannot be sanctioned by America.
4. Stop inflating the dollar, which of course is the main cause of its loss of purchasing power, in order to balance an out-of-control budget.
5. Return all gold held in American vaults (the New York Fed/Fort Knox) to its rightful owners as quickly as possible.
6. Place the dollar on a true gold standard by shipping American gold to neutral hands where it can be exchanged on demand for dollars. In other words, make the dollar “as good as gold.” (This is the most difficult and contentious action, but it is the only way that the world will accept dollars in the future when there is an alternative through membership in BRICS.)

American attempts to preserve its leadership status in the world will fail unless it enacts reforms such as these, which really are nothing more than behaving in a legal and honorable way.

What American would not desire this? But who will believe that America will honor its commitments for the long term?

That is why the SWIFT messaging system and its gold reserve must be placed in neutral hands abroad.

We have destroyed our reputation and this is the price we must pay.

Otherwise, we will watch one former ally after another slip away to join BRICS, which is certain to adopt protective measures for its participants so that no one nation, no matter how large and powerful, can game the system for its own unearned advantage.

Real leadership is bestowed upon leaders by willing followers, not taken or preserved at the point of a gun.

by John Helmer, Moscow
@bears_with

No government can survive when it fails to control the cost in blood on the battlefield and the cost of potatoes, butter and bread on the home front. The combination at the same time is politically lethal.

US President Lyndon Johnson learned this between 1965 and 1968, when the rate of domestic inflation was quadrupling and the Killed in Action (KIA) numbers in the Vietnam War jumped ninefold. On March 31, 1968, Johnson announced he was withdrawing from the presidential election later that year.*

President Vladimir Putin has managed the KIA half of the lethal equation by fighting a limited expeditionary campaign in the Ukraine, restricting the General Staff’s resources, plans, targets and operations; attacking with standoff, mostly airborne weapons; shifting the casualty burden of ground fighting to socially marginal groups; and keeping the majority of voters out of the line of fire. His success is in high and stable voter support.

For the time being, the president has escaped public blame for the inflationary surge in food prices over 2024. According to one report, beets were up by 71%; potatoes by 65.4%; eggs by 48.5%; garlic by 41%; salt by 27%; vegetable oil by 24%; butter by 22%. According to the AB Centre calculation, the price of potatoes jumped 65.2%; olive oil, 35.5%; butter, 35.2%; garlic, 24.7%; beets, 22.7%.

The state statistics agency Rosstat claims that the overall, official inflation rate for the country was 8.6% for 2024, while retail food price inflation, according to Rosstat was 9.5%. No one believes this, according to consumer polling and expert analyses. Consumer anticipation and expert forecasts are for the surge in food prices to continue this year at rates, depending on the food item, of between 50% and 100%.

Sergei Glazyev, a well-known public economist, presidential candidate in 2004, and a senior official of the Eurasian Economic Commission, is blunt on his attack. “Rising prices are hitting everyone’s pockets and making everyone poorer. Both citizens and businesses. Only banks are swollen with money.

“The Bank of Russia’s policy is driving the economy into a stagflationary trap, in which falling production, devaluation of the ruble and rising inflation are mutually reinforcing: an increase in the key rate [21%] compresses production lending, which leads to lower volumes and higher production costs, the technical level and production efficiency decline, the competitiveness of the economy decreases, which is offset by the devaluation of the ruble. That then causes a new surge of inflation, which the Bank of Russia is trying to pay off with another increase in the key rate. After ten years of ineffectual targeting of inflation, it is clear that the continuation of this insane policy has no prospects.” https://t.me/glazieview/6705

Mikhail Delyagin, deputy chairman of the State Duma Committee on Economic Policy, is just as scathing. He says the official rate of inflation for 2024 was not 8.5%, as the government insists, but closer to 19%; he warns it may reach 29% this year. The Central Bank interest rate of 21% is to blame: “this, in my opinion, is more destructive than the use of tactical nuclear weapons. But there is some good news. If tactical nuclear weapons are suddenly used against us, it will certainly be a severe shock and many people will die, but for the economy as a whole it will not be a greater shock than the policy of Elvira Sakhipzadovna Nabiullina. And [Finance Minister] Anton Germanovich Siluanov, who should also not be forgotten.”

“However, as we know, at the December 20 [2024] meeting, the Central Bank did not raise the key rate to 23 percent once again, as many, including me, expected. This is probably a good signal, because by raising the key rate in conditions of a shortage of money supply, the Bank of Russia thereby accelerates inflation. So far, Elvira Sakhipzadovna has refused to further accelerate inflation, but there is no guarantee that she will not return to this practice at the beginning of next year.”

So serious has been the failure of Central Bank Governor Nabiullina to halt inflation, and so widespread is public suspicion of her competence and intentions, on January 13 the Central Bank issued a public release denying that Nabiullina is planning a freeze on Russian individual savings by blocking withdrawals from bank accounts. “It is quite obvious that in any market economy, of which bank lending is an integral part, such a step is unthinkable,” the Central Bank has announced on Telegram. “Firstly, it will immediately undermine confidence in the banking system and put an end to lending to the economy. Secondly, freezing deposits will not help reduce inflation. People will rush to invest money not in deposits, but in goods and real estate with the corresponding sad consequences for rising prices.”

National polling of public attitudes towards leading officials has never identified Nabiullina positively. In open-ended questioning of those whom voters trust, Nabiullina’s name has not come up. Instead, she appears fifteenth on the countrywide list of officials and politicians who are distrusted – she ranks equal to the Kremlin spokesman, Dmitry Peskov; State Duma Speaker Vyacheslav Volodin, and the Mayor of Moscow, Sergei Sobyanin.

No critic of the domestic inflation and Central Bank policy mentions President Putin. He is understood, however, to be Nabiullina’s protector against her domestic critics. In the past month, however, he has been pressed to qualify this.

At his press conference on December 19, the day before the Central Bank met to decide whether to raise the interest rate to 23%, Putin said: “Only yesterday, while preparing for today’s event, I talked to the Central Bank Governor, and Elvira Nabiullina told me that the inflation rate has already reached about 9.2–9.3 percent year-to-date. That said, salaries have increased by 9 percent, and I am talking about an increase in real terms, minus inflation. In addition, disposable incomes have also increased. So, the overall situation is stable and, let me reiterate, solid.”

The Kremlin record claims there has been no official meeting between Putin and Nabiullina since September 2019.

At his December press conference, Putin acknowledged “there are certain challenges with inflation and with the economy heating up. Therefore, the Government and the Central Bank have been seeking to ensure a soft landing.” Asked by a reporter what the interest rate decision would be, Putin added: “she does not tell me what the rate will be. Perhaps she does not know this yet, because they discuss it at the board meeting, their Komsomol cell, and make the final decision in the course of the discussion. I hope that it will be balanced and will meet today’s requirements.”

“Balance” is Putin’s term for satisfying each of his oligarch, military, and voter constituencies at the same time as they contradict and oppose each other.

For timely release of data on Russian inflation with accurate analysis, follow the Sovereign Economy Telegram platform:

Source: https://t.me/suverenka/12754

Source: https://t.me/suverenka/12974
The top chart illustrates runaway food price inflation which the Central Bank has been unable to control. The bottom chart shows the impact of the Central Bank’s key interest rate depressing new credit for all categories of borrowing except car loans.

The gap between the government’s inflation target and the year-end outcome is obvious. So too is the gap between the impact of the Central Bank’s 21% interest rate and food price inflation which is not responding to credit controls. The vigorous domestic debate on what and who is to blame, and what is to be done, has not been suppressed.

President Donald Trump tried to exploit this by announcing this week: “Russia is kinda in big trouble. You take a look at their economy, you take a look at their inflation in Russia. I got along with [Putin] great, I would hope he wants to make a deal.”

Nabiullina (right) has blamed the rise of Russian incomes for stimulating demand faster than producers can supply their products. Her critics, including liberal market think tanks like the Gaidar Institute, point out that the food price explosion is responsible for about 40% of the rising inflation rate. For that reason, the Gaidarites acknowledge that consumer inflation is at least 40% impervious to the measures of the Central Bank because the latter aim at reducing credit-fuelled demand, when food is purchased from salary, not on credit from banks.

According to the data reported by RANEPA, a government economic policy think tank, “after utility tariffs were indexed by 9.9% in July, their contribution to annual inflation began to exceed the contribution of non-food products. Although if we consider the situation as a whole for 2024, the weight of non–food products in the consumer basket is still higher (34%) than services, about 28%. But both fall short of eating.”

Nabiullina was opposed to the Special Military Operation (SVO) from the beginning. Reportedly, she tried to resign in protest in March 2022 as the deadline for her retirement or reappointment approached. Putin then “balanced” her third-term reappointment with restrictions on the General Staff’s operations in the Ukraine.

Since 2022 Nabiullina and her supporters have blamed the war for the demand push on prices. This has turned the domestic policy debate on inflation into a fight over defence spending and the objectives of the war. In this fight, US warfighters in Washington view Nabiullina as a useful advocate of the end-of-war terms which Trump is proposing to Putin – she is one of the reasons for Washington’s confidence Trump will succeed.

Source: https://www.chathamhouse.org/

A paper published on January 10 by Chatham House, the British warfighter, advises Trump to exploit the Nabiullina opportunity. “The consequence of such high interest rates is that the economy will slow, perhaps very sharply. Putin therefore faces an acute dilemma: to back the central bank’s effort to keep inflation low at the risk of a recession; or to keep the economy on fire and let inflation rip. It is this dilemma that gives leverage to the incoming Trump administration. By acting to restrict Russia’s access to foreign exchange, the US can heap more pressure on the rouble and make Putin’s choice a more painful one.”

At the State Duma, Nabiullina’s line that the war is the cause of inflation is repudiated by Delyagin. “The share of residents with incomes of 150-200 thousand rubles increased by only 1.1%, and with earnings over Rb200,000, by no more than 0.5%. At the same time, to the contrary, the number of the group which receives Rb100,000-Rb150,000 monthly decreased by 1.8%. At the same time, the majority of our compatriots — 66% of them — earn up to 40,000 rubles a month.”

“Generally speaking, people who participate in the Special Military Operation, as we are told, receive more than 150,000 rubles a month. With a small caveat. They use this money to buy the necessary equipment for themselves — let’s say it’s politically correct. In some cases, at least… In other words, many of them have significantly increased their expenses. Therefore, the increase in welfare in their case may not be so noticeable. These words are confirmed by many soldiers who are on the line of contact today: ‘We mainly buy generators, gasoline, tools, building materials, uniforms (it doesn’t always) happen — we burned out in position, literally and figuratively; we buy more food, cigarettes; we discount for battery needs every month. There are no canteens at the front, we get canned food and each squad cooks for itself…They probably tell you beautiful things on TV, but there’s not much that’s beautiful here,’ says one of the combat commanders.”

In Delyagin’s analysis, “in general, at least two-thirds of the country’s population does not have significant savings, and therefore they are completely defenceless against any negative development. And, of course, there will be more and more of them in the conditions of military operations. 5% of Russians are poor: they don’t even have enough money for food…16% is enough for food…even buying clothes is a problem. 40% have money for food and clothes, but face difficulties when buying durable goods. Both of these categories live in poverty: its level is 56%. Such data come from two years ago. And it seems that they are most likely still relevant. If the situation hasn’t worsened.”

A month ago, Delyagin escalated his attack on Nabiullina. “It is impossible to slow down the car by stepping on the gas. Similarly, it is impossible to stop inflation by actions which only accelerate it. Nabiullina herself admits that inflation is caused by non-monetary reasons which have nothing to do with the key interest rate. And raising the key interest rate to combat inflation today is the same as giving one person a pill to make another person’s headache go away. She herself admits the absurdity of her policy.”

“One of the government agencies has reported that a reduction in inflation to [the Central Bank target of] 4% was possible with a key rate of 52%. But then, then, of course, they denied all that. But this fully characterizes the Central Bank’s policy…it’s clearly about slowing down the economy, not inflation. The fact is that an increase in the interest rate in conditions of a shortage of money accelerates inflation, rather than slows it down. When the rate rises, inflation accelerates, which is statistically well confirmed. It is very difficult to slow down the car by accelerating it at the same time.”

“In order to really limit the growth of inflation, it is necessary to ensure the growth of business activity so that goods are produced in Russia, and not in China. To do this, we need to lower the interest rate by making credit available, as well as limit financial speculation.”

Left: Mikhail Delyagin; right, Sergei Glazyev.

Glazyev, who led and lost the fight to replace Nabiullina at the Central Bank in March 2022, has retained his post as the minister-level commissioner for integration and macronomies at the Eurasian Economic Commission. That too is a Putin appointment; it keeps Glazyev out of direct involvement in Russian economic policymaking.

Notwithstanding, Glazyev continues in speeches, papers, and social media appearances to target Nabiullina and exploit Putin’s worry at the rise of voter hostility. There have been multiple failures of state regulation and not only at the Central Bank, Glazyev has argued. Accordingly, he advocates much more state action than he knows Putin is willing to accept. Full mobilization of the war economy, in fact.

“The main factors of inflation,” Glazyev has written, “ranking them by their contribution, are:
1. Cost inflation due to faster growth of transport and energy tariffs (the area of responsibility of the Federal Antimonopoly Service of the Russian Federation) amounts to at least 60% of the growth in the consumer price index (CPI). Thus, the increase in the cost of freight transportation in 2022-2024 is more than 20% per year, the increase in the cost of fuel and electricity exceeds 12% per annum.
2. The devaluation of the ruble in 2024 is responsible for 30% of the CPI growth, as technological and consumer imports account for up to 40% of the turnover. It is estimated that a 10 ruble depreciation to the dollar leads to a 2% increase in inflation.
3. An increase in the key rate of the Central Bank of the Russian Federation by 1% leads to an increase in cost inflation (forced price and tariff increases) by 0.24%, reducing demand-side inflation by only 0.2%, that is, the net effect of a further increase in the key rate is negative. The increase in the rate from 7.5% to 21% led to an additional increase in prices of at least 0.6%.
The contribution of the consolidated budget deficit, which is within the generally accepted norm, is much less than these three factors.”

FIVE-YEAR TRAJECTORY OF THE CENTRAL BANK’S KEY INTEREST RATE, 2020-25

Source: https://tradingeconomics.com/russia/interest-rate

Glazyev’s analysis of the causes of rouble devaluation accuse Nabiullina of encouraging currency speculation and the drain of Russian capital offshore. “The main factors of devaluation (ranking by contribution):
1. The refusal of the Central Bank of the Russian Federation to protect the stability of the ruble, prescribed by Article 75 of the Constitution of the Russian Federation. The Bank of Russia has placed the ruble’s exchange rate in the hands of speculators, both our banks and Western players (Forex market). The manipulative nature of trading is proved by the difference between the Forex and interbank market rates, which reached 6 rubles (5%) on November 27, 2024.
The contribution of this factor is 60%.
2. Export of private capital (absence of currency control), first of all, reduction of external corporate debt (by $200 billion over three years). Reduction of the standard for the mandatory sale of foreign currency earnings. The contribution of the factor is 30%.
3. Valuing the savings of businesses and the public. The contribution of the factor is 10%.”

FIVE-YEAR TRAJECTORY OF THE ROUBLE-USD EXCHANGE RATE, 2020-25

Source: https://tradingeconomics.com/russia/currency

Glazyev and Delyagin both advocate the state takeover of commercial banking by a new scheme of regulation and state bank operations: “To get out of the stagflationary trap, it is necessary to stabilize the ruble exchange rate and deploy targeted lending channels for the manufacturing sector, as well as suppress non-monetary causes of inflation by immediately taking the following measures:
1. Fix the currency position of commercial banks by blocking their speculative game against the ruble.
2. Restore the mandatory rule for 80% sale of foreign exchange earnings by exporters.
3. Cancel insurance of foreign currency deposits by the Deposit Insurance Agency, switching from the population’s demand for foreign currency to its sale.
4. Stop quoting the dollar and the euro by the Bank of Russia and the Moscow Stock Exchange, nationalize it, cracking down on speculative hype and manipulation of the ruble exchange rate.
5. To introduce a direct quotation of the ruble to the yuan and the currencies of other major partners, and to set the limits of fluctuations in the ruble exchange rate by the decision of the Central Bank. Create a distributed foreign exchange reserve in quoted currencies.
6. Resume the currency and credit swap between the central banks of Russia and China, and agree on the same with India.
7. Complete the transition to national currencies in foreign trade.
8. Include a special instrument for refinancing banks in order to lend exports at a rate of no more than 5%.
9. Block the channels of capital outflow for non-trading operations, including capital withdrawal in the interest of non-residents from unfriendly countries in accordance with the decrees of the President of Russia on the protection of the country’s financial system.
10. Fill the NWF [National Wealth Fund] with gold and other inflation-proof assets.”

“The launch of a refinancing mechanism for the manufacturing sector requires:
1. Deployment of special bank refinancing tools for lending purposes: investments provided for by national projects and state programs; expenses incurred by enterprises in order to fulfill government orders; expenses of the Russian Government for the purchase of goods of domestic production in the State Reserve; working capital of enterprises for the purchase of domestic equipment; leasing of machinery and equipment of domestic production; mortgages and housing construction; investments in the creation of import-substituting industries; investments in deepening the processing of raw materials; investments in infrastructure development;
investments under the SPIC and other investment agreements with the participation of the state;
innovative projects; investments in the creation of new technological industries; state development institutions.”

“The rate for final borrowers on these refinancing instruments should not exceed 2%, and for banks – from 0.5% to 1.5% – the administration by banks should apply the intended use of loans. Participating banks should be fully responsible for the targeted use of allocated loans and monitor their spending by borrowers.
2. The introduction of the digital ruble for foreign trade and credit transactions, including those carried out through the above-mentioned special refinancing instruments in order to automatically monitor the targeted use of loans.
3. Termination of the Central Bank’s deposit operations and issuance of bonds, which suck money out of the economy and cut off bank credit from the manufacturing sector.”

The Communist Party (KPRF), which currently holds most of the opposition seats (57) in the State Duma, has been more reluctant than Delyagin and Glazyev to attack Nabiullina directly, and also less capable of producing for voters an alternative plan for state action to cover the entire economy. Compared to the non-communist opposition, the KPRF is more timorous as nationalizers and state planners. In November, for example, Sergei Obukhov called for state price regulation for “essential products, such as bread, milk, sugar, and baby food.”

Left, source: https://kprf.ru/activity/prices/230255.html ;
right, KPRF deputy Dr Sergei Obukhov. He is Deputy Chairman of the State Duma Committee on the Development of Civil Society, and Secretary of the Central Committee of the KPRF.

Obukhov has echoed Delyagin and Glazyev in attacking monopoly manipulation of the retail prices for foodstuffs, but he has directed his remedy at urging the government to intensify the efforts of the Federal Antimonopoly Service (FAS) to combat cartel pricing.

“A gentleman’s agreement has been concluded with the heads of the retail chains not to raise retail prices for bread too much. It would seem that the problem has been solved? Unfortunately not…Based on the same answer, it follows, literally, that ‘… the food retail markets are generally competitive with a large number of participants.’ In other words, in order not to be defeated in a tough competition, companies which have concluded such ‘gentlemen’s agreements’ can break them at any time. This is the macroeconomic landscape we currently have. Everything is more or less fine in it, except for inflation, which is a catastrophic situation.”

“Why the president considers the fight against inflation a priority and why he gave the regulator full carte blanche is understandable,” Obukhov says. “We don’t want to end up like in Turkey. Recall that after an unsuccessful experiment with low rates and high inflation, they have been keeping the rate at 50% for almost a year and have so far only been able to reduce inflation from 70% to 50% in annual terms. So Turkey still has a long period of extremely tough PrEP ahead of it.”

“It is also appropriate to recall the price that had to be paid for stopping inflation in the United States in the early 1980s. Inflation there was comparable to ours in terms of level, but it lasted longer, so high inflation expectations managed to gain a foothold (this has not happened in our country yet, but it is about to happen if inflation is not stopped soon)… It is clear that we certainly do not need to bring our inflation to the state of the USA in the 1970s or of modern Turkey: we do not want a 50% rate for years or a recession with 10% unemployment. The longer the decisive fight against inflation is delayed, the more costly it will be. But it’s not just that. Right now, the president has other reasons for resolutely fighting inflation, including political ones.”

“After all, in the near future – in the autumn of 2026 – we will have elections to the State Duma, and with such inflation, it will be very problematic for the ruling party to successfully participate in these elections. People feel inflation in their refrigerator, and economic growth figures, even if they are very impressive, are still a feature from the TV. No slowdown in economic growth or even a recession will worry the population if it is not accompanied by mass unemployment, but this certainly does not threaten us in the foreseeable future. So the authorities may well go to the polls with a high key rate and low economic growth rates, but not with such inflation as it is now. After all, in the end the refrigerator always wins over the TV in shaping public opinion.”

[*] The lead image is a cartoon by John Fischetti in the Chicago Daily News, September 9, 1969. Richard Nixon had won the election of November 1968, but a year into his term he was facing the same lethal combination as President Johnson the year before of mounting war casualties and rising consumer inflation.

More trouble ahead. China is the next target.

In 2002, there were 3.6 million villages. In 2012, the number had dropped to 2.7 million, according to China’s Ministry of Civil Affairs.

That is a 25% drop in the number of villages in just 10 years. The future of an average Chinese village is decidedly dim!

Outflows of cash from China’s finance markets reaches $45.7 billion in the prior month. This is mostly due to Westerners bailing on Chinese bonds due to low rates.

Currently it is taking 6 units of China debt for each unit of China’s GDP growth. 

US federal debt tops $36 trillion

The US national debt has surpassed the $36 trillion mark, with figures from usdebtclock. org indicating that every man, woman and child in America now owe more than $106,600, while taxpayers owe the equivalent of over $272,800.

The data shows that the federal debt to GDP ratio now stands at 122.85% – up from 55.36% in the year 2000, and 34.71% in 1980.

Accounting for state, local, student loan, credit card and personal debt, US debt is estimated to total over $102.63 trillion – nearly matching the $105.4 trillion value of the entire global economy in 2023.

by Thomas DiLorenzo of The Mises Institute. This article is a version of a speech delivered at the 2024 Mises Institute Supporters Summit.

“Most economists are political apologists masquerading as economists,” wrote Doug Casey in one of his columns.

“They prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for power.”

Moreover, wrote Casey, “The field of economics has been turned into the handmaiden of government in order to give a scientific justification for things the government wants to do.”

This of course is not a new development. Ludwig von Mises was calling the universities of his day “nurseries of socialism” but, thankfully, there is always a remnant of students who resist the statist brainwashing. The above quote about concocted “scientific” justifications for interventionism and socialism, by the way, sounds like a precise definition of Keynes’s General Theory.

Casey’s sound advice is that to be a good citizen one needs to “become your own economist.” Don’t rely on the state’s mouthpieces in the “media” or even academe for your economic knowledge. Educate yourself to some degree; it doesn’t take a university degree. Indeed, everything we do at the Mises Institute is geared toward helping anyone anywhere to become their own economist (preferably Austrian School and not Keynesian or Post Keynesian!) and avoid being bamboozled by the state and its court historian economists.

Mises never joined the American Economic Association, the association of academic economists founded in the 1880s. The association’s founding document provides a clue as to why. “The state is an educational and ethical agency whose positive aid is an indispensable condition of human progress,” the document purred. “The doctrine of laissez faire,” on the other hand, “is unsafe in politics and unsound in morals,” said the statist moral scolds who founded the American Economic Association.

There are exceptions, the Austrian School economists being the most prominent, but the majority of academic economists view themselves as advisors or potential advisors to the state. They are Rothbard’s “court historians” with degrees in economics instead of history. The role that they serve is the same as all “intellectuals” in our almost 100 percent state-funded universities. As Rothbard put it: “The majority [of the electorate] must be persuaded by ideology that their government is good, wise, and at least inevitable. Promoting this ideology . . . is the vital task of the ‘intellectuals.’” In return, the “intellectuals” are given government jobs, grants, placement at prestigious universities, book deals, and myriad other political payoffs. (Mises wrote that history, law, and economics are the disciplines most widely used to bamboozle the public about the supposedly good, wise, and inevitable state).

Take the Fed – please (as Rodney Dangerfield would say). Economist Larry White published a journal article several years ago that revealed that about 75 percent of all articles published in academic economic journals on the subject of monetary policy are published by economists who are in some way associated with the Fed. As Milton Friedman once said, “If you want a career as a monetary economist it is best not to criticize the major employer in your field.” And so they do not.

If there is ever any criticism it is always constructive criticism about how to supposedly become even better at central planning. Most Americans are rationally ignorant of the Fed, and what little they do know about it is overwhelmingly shaped by the Fed’s “court historians,” especially the ones who teach economics at colleges and universities. The Austrian economists (but not all of them) are the only ones to challenge the existence of the Fed and call for its abolition.

In addition to being the federal government’s legalized counterfeiting arm, the Fed is also another appendage of the government’s massive propaganda apparatus. The laughingly labeled “independent” Fed’s research, according to economist Emre Kuvvet writing in The Independent Review, increasingly focuses on “climate change, gender, race, and inequality” – the “woke” political agenda of the Democrat party. The one true statement that Joe Biden made as president was “It’s not Milton Friedman’s Fed anymore.”

The New York Fed has always been considered to be the most powerful and influential of all the Fed branches. Its homepage defines its mission as a “desire to root out the intolerable inequities and injustice grounded in systemic racism . . . steadfast in our commitment to work for a more equitable economy and society.” A clearer definition of socialism would be hard to find.

Kuvvet found that of all the employees of the Fed’s Board of Governors there are 97 Democrats and 2 Republicans.

“Leadership positions” on the Board consist of 45 Democrats and 1 Republican. As I said, it’s just another D.C. government propaganda mill.

Some Examples of the Empire of Economic Lies

A typical introductory economics textbook devotes most space to endless stories of “market failure” (free-rider problems, externalities, monopoly and oligopoly, monopolistic competition, asymmetric information, and on and on), and almost nothing about entrepreneurship, the cornerstone of capitalism.

It wasn’t always like that. When the first federal antitrust law was passed in 1890 (the Sherman Antitrust Act) the entire economics profession, which was very small at the time, opposed then new law as being inherently incompatible with competition, as Jack High and I proved by quoting all of them in a July 1988 Economic Inquiry article. They all viewed competition like the Austrian economists always have – as a dynamic, rivalrous process of discovery and entrepreneurship, and thought that antitrust law could only disrupt that process and distort markets.

By the 1930s a new and more “scientific-sounding” theory of “perfect” competition had been invented, which asserted that competitive perfection required all homogenous products and prices in an industry, perfect information in the minds of buyers and sellers, costless entry into and exit from industry, an “many” firms, whatever that might mean.

For the next half century and more, economists would spin thousands o tall tales about how the real world fell short of this “perfection,” defined as market failure, and prescribed regulation, control, nationalization, or regimentation by presumably wise and, well, perfect politicians and bureaucrats. UCLA economist Harold Demsetz labeled this dishonest method of analysis “the Nirvana fallacy”: Comparing the real world to an unachievable never never land of Nirvana. As F.A. Hayek once described it, “In perfect competition there is no competition.” That is, there could not be product differentiation, price cutting, advertising, research and development, the rise to the top of a few superior-performing firms in an industry – all the ingredients of genuine competition.

Generations of students have also been taught that in the late nineteenth and early twentieth centuries large-scale production of electricity, water supply, telephone services and other similar products was producing “natural” (i.e., free market) monopolies. Governments then stepped in and legally mandated public utility monopolies, supposedly to be regulated “in the public interest.” I proved this to be yet another falsehood in my paper, “They Myth of Natural Monopoly.” There was vigorous competition in all these industries. They were monopolized by the state, not the free market, with loot-sharing agreements whereby state and local governments would share in the monopoly profits created by their government-mandated monopolies.

Then there’s the Big Lie of the Sherman Antitrust Act which was supposedly needed because of “rampant monopolization” in the 1880s as the industrial revolution proceeded in America. In an article in The International Review of Law and Economics I showed that the industries being accused of monopolization at the time were by far the most competitive, dynamic, price-cutting, innovative, and production-expanding industries in America. The purpose of the Sherman Act was to stifle competition, not to “protect” it.

One of the most ridiculous things taught to generations of economics students was that because of the free-rider problem the U.S. would be spending far too little on “national defense.” “Efficiency” requires coercive taxation. There are economists who have defended Pentagon corruption and fraud on the basis that it expands defense spending, which is supposedly hindered by that nasty free rider problem. Who on earth would define Pentagon spending as “efficient”? !

It was only in the past ten years that the “mainstream” of the economics profession finally discovered that the massive interventions of the New Deal actually made the Great Depression more severe and longer lasting, something the Austrian economists have said all along. This Big Revelation was made in an article in the prestigious Journal of Political Economy by Professor Lee Ohanian of UCLA, an editor of the American Economic Review at the time. Better late than never.

Nobel prizes in economics have been awarded for many theories of “market failure” that subsequent research proved to be bogus. Janet Yellen’s husband, George Akerloff, was a co-recipient of the award for a paper that, in 1970, predicted that the used car market would soon disappear because of “asymmetric information” between buyers and sellers. He apparently never heard of thirty-day warranties that allow car buyers to determine whether or not they had been sold a “lemon.”

David Card was awarded a Nobel prize for a paper claiming that minimum wage laws do not cause unemployment that was called “deeply flawed” by a National Bureau of Economic Research redo of his study. There are many similar episodes.

Economics students are taught that the root cause of pollution is profit seeking, which ignores the fact that the worst pollution in all the world over the past century, by far, was in the socialist countries of the world in the twentieth century that prohibited private profit seeking. A corollary to the profit-seeking-causes-pollution theory is that wise and benevolent government bureaucrats are needed to solve this problem. This not only ignores political reality, but also ignores how the absence of property rights causes many pollution problems in the first place, and also how entrepreneurs solve many “externality” problems because it is profitable to do so.

In public finance students are taught that tax “loopholes” are inefficient because they supposedly create “artificial” market distortions. It’s much more efficient, they are taught, to let government bureaucrats spend more of your money. Then there’s the cornerstone of Keynesian economics – the canard of “the paradox of thrift” which asserts that savings reduces consumption, which in turn reduces GDP, which leads to lower savings. This theory has “justified” confiscatory taxation of interest income on savings for decades.

The intellectual godfather of mainstream economics will probably always be Paul Samuelson, whose Principles of Economics textbook dominated textbook sales for forty years, with almost all other textbooks during that time being imitations of his book. The statist bias that permeated that book and the others like it can be encapsulated by what Samuelson wrote in his 1988 edition – a prediction that by the year 2000 Soviet GDP would be larger than U.S. GDP.

All of this demonstrates why Austrian economics is more important now than ever. The economics profession has not been immune from the cult of political correctness. In fact, it was politically incorrect before political correctness was cool, as Mises’ comment about how the universities of his day were “nurseries of socialism” shows. Doug Casey was right when he wrote that most economists are political apologists masquerading as economists. Yours Truly recognized this as a college student decades ago, and was blown away by the discovery of Mises and the Austrian School, the writings of which very clearly showed that the Austrians were unique in that they were powerfully devoted to the intellectual search for the truth about how the economic world (and beyond) works, and how governments don’t work, and were not at all interested in being apologists for the plundering class.

via ZeroHedge

Natural resources are the backbone of modern manufacturing, necessary to produce everything around us.

According to 2021 data from Statista, 10 countries dominate the global natural resource landscape, each holding vast reserves critical for various industries.

Russia’s $75 Trillion in Natural Resources

Russia leads the pack with natural resources valued at $75 trillion, largely consisting of coal, natural gas, oil, and rare earth metals. At the end of 2018, Russia’s Ministry of Natural Resources and the Environment valued the country’s mineral reserves at approximately $1.44 trillion.

In terms of global share, Russia is unmatched in natural gas, holding the world’s largest proven reserves at 1.32 quadrillion cubic feet as of 2020—nearly 20% of the global total. Russia also ranks as a gold powerhouse.

Other Resource Giants

The United States ranks second, with an estimated $45 trillion in natural resources, including coal, timber, natural gas, and valuable metals like gold.

In Saudi Arabia and Canada, oil wealth drives natural resources, placing these countries third and fourth on the list. Saudi Arabia, with its vast oil fields, has been a leader in global energy markets. Canada, on the other hand, also benefits from substantial uranium deposits and is home to some of the world’s largest lumber companies.

Further down the list, China has vast coal reserves, positioning it as the top producer of the fuel.

Mineral-rich Brazil and Australia are leading producers of metals like iron ore, while Australia is also a top exporter of coal.

The Gini index for 2023 (an indicator used to measure whether the distribution of income or expenditure between individuals or households in an economy is moving away from or towards a perfectly equitable distribution) in Spain would be 35%, making it the fifth most unequal country in the EU.

On the other hand, the latest Intermon Oxfam report on “Crisis, inequality and poverty” warns that if social cuts continue, poverty in Spain could affect 40% of the population within the next decade, from which it can be deduced that Spain would have failed in its European commitment to the “Strategy 2020” which involved reducing its poverty by 1.5 million people.

According to the NGO, the poverty rate is currently at 20.2% of the population and affects almost 10 million people. According to the INE, 4 million people are already living in “severe poverty” (less than 307 euros per month). At the same time, and according to Eurostat data, the number of millionaires in Spain has increased by 13% in the last year, which is rapidly worsening a social fracture with unpredictable results.

New population architecture

The possible entry into recession of the German locomotive in 2025 will cause a significant reduction in exports, the consequent increase in the unemployment rate and the reduction of the Per Capita Income. This, combined with the loss of purchasing power of workers due to the dramatic reduction in salaries and the absence of the culture of domestic savings, will cause a severe contraction of internal consumption that could cause in the near future a productive desertification that would be incapable of satisfying the demand for basic products.

Likewise, the severe contraction of internal consumption will cause the commercial desertification of large urban areas, with the progressive disappearance of small businesses (food, clothing, footwear and car dealerships) and leisure and entertainment establishments (bars, cinemas, restaurants, discos and shopping centers) which will lead to the extinction of countless print and audiovisual media due to the loss of advertising revenue, leaving the Internet as a refuge for surfers.

Likewise, we will witness a severe stagnation of the real estate market, so that banks will try to sell off the foreclosed apartments that they will accumulate in their portfolios (considered “illiquid assets”) through auctions and the creation of real estate asset management companies, which will cause drastic falls in property prices, prices artificially revalued due to the real estate speculation of recent years.

A revitalization of the old towns and urban centers of cities is also foreseeable to the detriment of peripheral neighborhoods, motivated by the lack of liquidity in municipal coffers due to the decrease in tax revenues and which will force chronic indebtedness of the municipalities in order to continue maintaining the minimum public services. Finally, there will be an exodus to rural areas of an urban population affected by economic asphyxiation, repossession of homes and entry into the unemployment lists, with the consequent revitalization of large rural areas, rejuvenation of their population and return to already forgotten scenarios of an autarkic economy.

Germán Gorraiz Lopez – Analyst