Sicut Erat, et nunc, et semper, et in Saecula Saeculorum....

OK, I think that I get it.

What Was...

For thirty five years, very clever people built up a financial industry and played down manufacturing industry in the west, outside Germany. They achieved this by a variety of means. One was the creation of a market in options and swaps, and bets known as 'derivatives', because they were derived from shares and bonds, which in themselves were pieces of paper backed by guesswork and trust.

This market swelled because of three things. One was the transfer of assets from government owned- or supported- housing to individuals and banks through the mechanism of mortgages, which separate legal and equitable ownership. This gave rise to assets, which could be the basis of borrowing and betting by individuals and banks. This fed into a hunger for insurance against the risk of default, and for the use of the money bet against the value of the loans for the houses and the rising value of the houses themselves.

By pooling the assets and derivatives, and then dividing up the pool, multiple markets were created which generated even more money. This gave rise to its own ingenious form of insurance, called credit-default swaps, where people made money by betting on the likelihood of the whole pool losing money and insuring against it. This insurance was then extended to other business loans, and collateral was secured by offering up multiply-mortgaged property that everyone expected to rise in value.

This financial behaviour was fuelled by a second process, which was in fact a twin one. It was built on massive urbanisation across the planet, which was in part a consequence of the money for new construction and in part a consequence of population growth and in part a consequence of the prosperity apparently created by the new global market. The global market required the rich countries to buy things made by poor people in poor countries who had no assets and fewer rights, and to oppress or educate their own poor people into service industries. Meanwhile, poor countries got rich and started providing service industries as well. They benefitted from the rich in rich countries using credit to make the aspirational classes in rich countries feel rich by using the aspirational classes in poor countries to provide services as well.

All of this increased the demand for commodities and gave rise to inflationary pressures in rich countries which had to be held back by a lack of government investment, the creation of off-balance mechanisms to borrow and tax, and the movement of power to autonomous central banks.

At the same time, oil at viable prices was running down, and demand for it was going up. Oil was central to the whole world.

When oil prices went too high, and inflation-suppressing measures and industrial clear-out and government privatisation and guarantees of debt got too great, energy started to leave the financial markets. This was accompanied by pointless wastes of money in wars, and negligence or silliness on the part of a degraded political-media class produced by the destruction of education in the nineteen sixties and seventies on both sides of the Atlantic. The west was immolating itself with a sort of flamable cretin-slime.

This led to a massive panic about a new depression, and to calls to return to the methods that fought the old depression.

What is...

The United States establishment, both under the Bush and Obama Adminstrations, was horrified by the collapse of the financial industry and all its clever markets. So it has resolved to print money and to borrow on its own credit from China and Korea and European banks and its own people and to throw this money into banks and financial instruments worldwide. It is, probably, holding up the same European banks it is nominally borrowing from.

This is because they have massive debts and are technically bankrupt, but no one is saying anything. In addition, European leaders cannot afford to allow their banks to fail, but are spending all their real money upholding the south and west of the european union, which is bankrupt, whilst staving off the effects of the insolvency of the states and peoples to the south and east. Europe cannot afford the euro, but no one can say this yet.

The United States is also pretending that it can rebuild its own economy with a federal stimulus to make improvements on crumbling federal infrastructure. It probably could, but as well as the rest of the world crumbling, many of its states are insovent, its national debt is way beyond GDP, and its deficit is well over a trillion dollars and is over an eighth of GDP. The credit-default swaps those clever US minds created are now ensuring bankruptcy rather than restructuring is the preferred route of many hedge funds when companies get into trouble. This is encouraging lawyers to issue specious constitutional challenges to the US federal effort to swap subsidy for equity and to create new companies run by the unions which are in effect pension and healthcare funds. In addition, the US cannot afford its pension and healthcare system.

The United States expects most of this to paid for by China.

China is not happy with this, and prefers to spend its money on central asian oil deals, calming relations with Russia, buying up African and South American commodities, and moving European defence procurement companies away from America. This is being done in part through exploring procurement relations with the European Defence Agency, though I can offer no clear source at present.

It has also developed a lucrative 'arms for oil' strategy, and is also selling or building defence infrastructure to countries as diverse as Sri Lanka and Iran. It is calling for a new world currency order and is gibbing at buying American bonds and is beginning to float the yuan.

So the United States is resorting to lending money to itself. The Chinese government do not like this at all.

What will be...

Well, who knows. We can guess, though. The Law of the Sea, which I have been going on about for years, is requiring a carve up of remaining and new commodity and energy resources. The Chinese and Indian navies are being built up massively, and the Indian Ocean is becoming a theatre of great tension.

The US is shut out of both processes. The Afghan war is going very badly. The US and Europe are about a third of the way down the economic precipice and the ropes are snapping, and a man who is a sort of Jewish Nixon (and I write as a zionist) is trying to engineer a confrontation between Israel and Iran, or doing a good impression of wanting to. The Euro is in quiet crisis, and has been to anyone with eyes to see for a year and a half at least. The Obama medicine in the US is a kill-or-only-partially-curative draught.

Put it all together and take your pick. Public ownership, just to uphold jobs and services, is here on a large scale. One of the questions I would ask is, 'will it be in the interests of business and the servile state, or will the people get a shout at more rational, cheaper services and monopolies over which some control and accountability will be exercised?'. The other is, 'who is going to be the first to default?'

We face more bankruptcies, more unemployment, more repossessions, more stagnation, and more insane sacrifice. I need hardly point out that the slop-fascism of global warming carbon taxes on top of all this is going to worsen things. There are grounds for hope, but don't doubt, this crisis is on and it is rooted in greed and a lack of virtue and a lack of capacity for thought brought on by the need of most people to earn the debt repayments that built the prisons that some of their aspirations are becoming. And China, and the east, are rising amidst a burning world. This may all end in tears, before smiles.

Here's a beautiful meditation on Tom Wait's Time. It seems appropriate. Incidentally, the crisis gif at the top of the post is I think Japanese, and is to be found here. It details the images for 'danger' and 'opportunity', but since I am translating a translation without actually speaking either language I may be wrong.