Wednesday, March 27, 2019

How the Federal Reserve has Replaced the American Worker

If there were no trade deficits, there would be no loss of jobs overseas. But by allowing America to export fiat money in lieu of actual goods or services, the Federal Reserve has made workers unnecessary.
Listen to this post: Twilight Patriot - 27 March 2019

A lot of Americans hold some form of the opinion that the Chinese, or foreigners in general, are taking away their jobs. The common reaction, at least among the more unthinking portion of the population, is to demand restrictions on trade so that the United States can stop losing in the trade war.

Hence the burst of popularity that Mr. Trump experienced when he declared “I am a Tariff Man.” Trump has won the support of millions of American workers by promising not to let foreign workers replace them.

But while this voting bloc at least has more sense than the conservative intellectuals of yesteryear who saw the trade deficit as a good thing, they have not, for the most part, asked the question that really matters, which is: Why do we have a trade deficit in the first place?

The basic idea behind trade is that one party gives up something for another thing of equal value. If such a principle were followed in international commerce, one country’s workers would never find themselves replaced by another’s, since any imports would have to be paid for by an equal value in exports. Any jobs lost to competition with imports would be made up for by growth in export sectors.

And that was indeed how trade once worked, back in the days of gold and silver currency when the balance sheets had to balance, and no country could run a trade deficit. But now, in the days of fiat money, America can get away with running up a $900 billion trade deficit. Our country avoids paying for its imports with an equal amount of exported goods, and it does this by exporting fiat money instead.

The Chinese are not to blame. It is the Federal Reserve that has replaced the American worker.

China, and other foreign nations, aren’t so much beating us at a trade war as they are lending us the money to buy their own products. And it’s a strategy that won’t last forever.

Foreign workers are exchanging the fruits of their labours, not for an equal value of our goods and services, but for debt that will probably never be repaid. The dollar-denominated securities that they getting in exchange are in high demand at the moment, but eventually America will cease to be the world’s dominant economy, and the dollar will lose a lot of its value.

In the long run, foreign workers stand to lose just as much as American workers. And ultimately the blame for this lays at the feet of an economic system which has taken the power to create wealth away from workers – namely, gold and silver miners and the other laborers who create things for which gold and silver can be exchanged – and put that power into the hands of central banks.

Workers in foreign countries are being taken advantage of by the Federal Reserve. And workers in America itself are becoming increasingly unnecessary, because bankers can create fiat money to be exported in lieu of actual industrial or agricultural products.

American workers don’t need a Tariff Man to advocate for their cause. Free trade is beneficial to everyone so long as hard money forces both sides to offer goods of equal value. The ideas of Ron Paul offer a way out of this mess, but at the cost of changes that neither party’s mainstream is willing to make.

The status quo, with America as a pirate state which loots other countries’ wealth by exporting its worthless fiat currency, is appealing to the monied interests which control the Federal Reserve, and which own most of Congress. But remember, pirates who live off of loot have no need for honest workers.

The choice, for the American working man, is to either support the cause of sound money, or else accept his replacement by the Federal Reserve.

Thursday, March 7, 2019

It Shouldn’t Be Depressing To Talk About Winter

My prediction of a continuing economic decline, no matter which party is in power, has elicited complaints that my blog is depressing. But hard times need not be depressing if you are prepared for them.
Listen to this post: Twilight Patriot - 7 March 2019

My earlier post, The Economy is Smaller than in 2000, has elicited quite a bit of discussion among my friends. The complaints are that it is depressing, and that I provide no solutions for America’s continuing decline. And the latter criticism is true – I made it clear that I don’t think either political party has the will or ability to reverse the decline.

But I think it is unfair to call my post depressing. Yes, the economy is going to keep declining, but individuals can still be frugal and take care of themselves and their families. People have survived, and are surviving, much poorer economies all over the world.

What I am doing is predicting a lean season, an economic winter. It is as if one September, a man says that the temperature has been falling and will keep falling and no amount of politicking will change it, and in reaction, all of his neighbours accuse him of preaching despair and gloom.

Obviously, there are analogies other than the seasons to which our situation can be compared. For example, one commentator summarized my earlier thesis as: “Nothing can be done to right the ship!? No course corrections are possible?”

I’m not saying that course corrections are impossible, only that neither party has the will to make the corrections we need – such as austerity and sound money. In the ship analogy, it’s definitely important to have a good pilot at the helm during a storm. And Americans would have done well to have chosen Ron Paul for the presidency back when he was still running.

But the pilot is not everything. You also need the common sailors to bust their backs and bail the water out of the ship. Ordinary Americans can bail the water out by working hard, living within their means, and having more than two children. But too few Americans are doing this, and no amount of fighting over who is at the helm will change that.

To return to the seasons analogy: You might be looking for a blog that, like many blogs, says something along the lines of: “These are dark and gloomy times. It’s autumn in this country. It’s November, and November is usually followed by December, but if we work really hard, we can make the next month be July!”

If that’s the case, then Twilight Patriot is not the blog for you. Everyone knows that twilight is followed by nightfall, which, after a while, is followed by morning. The secret to being happy is to learn to do well in every part of the cycle, not to complain about how the future is depressing.

Empires rise and fall. Nations prosper and then they decline. Individuals can outlast the systems into which they were born. The current order is rotten, and deserves to be replaced by something else. I intend to outlast it and stick around to help build that something else. And I hope all of you plan to do the same.

Saturday, March 2, 2019

Saudi Arabia’s Commercialist Pit

Saudi Arabia, like many countries, is ruled by short-term thinking. But the House of Saud is making its mistakes in a part of the world where the phrase "heads will roll" has retained its literal meaning.
Listen to this post: Twilight Patriot - 2 March 2019

Many nations are guilty of short-term thinking and an overly-commercial outlook on life. When we hear criticisms of this sort, we tend to think of them as applying to the United States, Britain, and other European countries – but it may turn out that one of the first wealthy nations to fall on account of such thinking will be Saudi Arabia.

Granted, the Saudis don’t have all the problems of the West, but the ones they do have they have in superabundance. In any case, their situation is worth a close examination as an example of the kind of pit that commercialism can get a country into.

I will begin with a rundown of Saudi Arabia’s current economic situation.

The per-capita GDP is $21,096, highest of all the large Muslim countries, though it is slightly down from last year. Petroleum accounts for 90% of exports. Although the oil will not run out anytime soon, the shale revolution has allowed other countries to become less dependent on Arab oil, and Saudi Arabia is now third among oil producers, after the United States and Russia. Saudi Arabia’s leaders have been talking about the need to diversify for a long time, but no change is forthcoming.

Income inequality is very high, and the youth unemployment rate is 25%. Saudi Arabia closed out 2017 with government debt at 17% of GDP, up from 2% three years earlier.

At its core, Saudi Arabia’s economic system consists of a wealthy elite pursuing highly profitable, albeit short-term economic successes, while a large class of forgotten, obsolete peasants grows increasingly dissatisfied with the whole operation.

And it isn’t just lower-class Arabs to whom the Saudi Kingdom is turning a blind eye. Remember, Saudi Arabia is the heartland of global Islam, and its King, whether he wants to be or not, is seen as the leader and protector of all the world’s Muslims. So important, indeed, is his guardianship over Mecca that the title “Custodian of the Two Holy Mosques” comes before “King” in his list of honorifics.

And the King is not living up to it. You may recall all the news recently about how China has imprisoned a million Uighar Turks in concentration camps, resulting in a lot of impotent howling from the few Westerners concerned about human rights, and a lot of business-as-usual from the West’s leaders.

The Saudi King could have done something about this – many of his subjects urged an oil embargo against China. This would have brought the Chinese to their knees, because unlike the US and Russia, China has little domestic oil production and must rely on Arab imports. Instead, Prince Mohammed bin Salman went to Beijing to personally assure China’s leaders that there would be no disruptions in trade.

To the south of Saudi Arabia lies Yemen, a culturally similar but much poorer country, and a portent of what is to come in Saudi Arabia if its problems continue to go unaddressed. Yemen is locked in civil war against the Houthi Rebels, a group which modeled its rise to power on the successes of ISIS.

One difference is in flag design. To the Houthis, ISIS’ famous Black Standard, inscribed with “There is no God but Allah, and Mohammed is his Prophet” seemed too tame. The Houthi flag consists of a white field with red and green letters spelling out:

Allah is Great!
Death to America!
Death to Israel!
Curse on the Jews!
Victory to Islam!

Remember, this is the national flag of the state that the Houthis are trying to set up. And it isn’t just a flag. For instance, when the Houthis overran Sana’a along with its university, all the students were issued new ID cards bearing this motto.

These are not, by any stretch of the imagination, the good guys. But to millions of disaffected Muslims, they look like the good guys when the Saudi Kingdom elevates commerce over the rights of poor Muslims around the world. ISIS, the Houthis, and other movements of that sort feed on the indifference of the elite.

There is a reason that the friendship of Saudi Arabia’s elites toward the United States has engendered hatred toward that country among the common people. Remember, 15 out of the 19 hijackers on 9/11 were from Saudi Arabia.

The House of Saud has dug itself deep into the pit of commercialism. While its mistakes and short-term thinking aren’t intrinsically worse than what America’s leaders have done, Saudi Arabia is making those mistakes in a much harsher environment.

Islamic terrorists like to chant about killing Americans and Israelis, but in real life, they mostly kill moderate Muslims. The Saudi rulers are at the top of their list. And when the Houthi flag, or something like it, is fluttering over the seven minarets in Mecca, we can expect nasty things to start happening. This is, after all, a part of the world where the phrase "heads will roll" has retained its literal meaning.