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Total System Failure Will Give Rise to New Economy
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Meteor impact with shock wave, fractal illustration.

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Nobody, anywhere, could have predicted what we are now witnessing: in a matter of only a few weeks the accumulated collapse of global supply chains, aggregate demand, consumption, investment, exports, mobility.

Nobody is betting on an L-shaped recovery anymore – not to mention a V-shaped one. Any projection of global gross domestic product (GDP) in 2020 gets into falling-off-a-cliff territory.

In industrialized economies, where roughly 70% of the workforce is in services, countless businesses in myriad industries will fail in a rolling financial collapse that will eclipse the Great Depression.

That spans the whole spectrum of possibly 47 million US workers soon to be laid off – with the unemployment rate skyrocketing to 32% – all the way to Oxfam’s warning that by the time the pandemic is over half of the world’s population of 7.8 billion people could be living in poverty.

According to the World Trade Organization’s (WTO) most optimistic 2020 scenario – certainly to become outdated before the end of Spring – global trade would shrink by 13%. A more realistic and gloomier WTO scenario sees global trade plunging by 32%.

What we are witnessing is not only a massive globalization short circuit: it’s a cerebral shock extended to three billion hyperconnected, simultaneously confined people. Their bodies may be blocked, but they are electromagnetic beings and their brains keep working – with possible, unforeseen political and other consequences.

Soon we will be facing three major, interlocking debates: the management (in many cases appalling) of the crisis; the search for future models; and the reconfiguration of the world-system.

This is just a first approach in what should be seen as a do-or-die cognitive competition.

Particle accelerator

Sound analyses of what could be the next economic model are already popping up. As background, a really serious debunking of all (dying) neoliberalism development myths can be seen here.

Yes, a new economic model should be revolving around these axes: AI computing; automated manufacturing; solar and wind energy; high-speed 5G-driven data transfer; and nanotechnology.

China, Japan, South Korea and Taiwan are very well positioned for what’s ahead, as well as selected European latitudes.

Plamen Tonchev, head of the Asia unit at the Institute of International Economic Relations in Athens, Greece, points to the possible reorganization – short term – of Belt and Road Initiative projects, privileging investment in energy, export of solar panels, 5G networks and the Health Silk Road.

Covid-19 is like a particle accelerator, consolidating tendencies that were already developing. China had already demonstrated for the whole planet to see that economic development under a control system has nothing to do with Western liberal democracy.

On the pandemic, China demonstrated – also for the whole planet to see – that containment of Covid-19 can be accomplished by imposing controls the West derided as “draconian” and “authoritarian,” coupled with a strategic scientific approach characerized by a profusion of test kits, protection equipment, ventilators and experimental treatments.

This is already translating into incalculable soft power which will be exercised along the Health Silk Road. Trends seem to point to China as strategically reinforced all along the spectrum, especially in the Global South. China is playing go, weiqi. Stones will be taken from the geopolitical board.

System failure welcomed?

In contrast, Western banking and finance scenarios could not be gloomier. As a Britain-centric analysis argues, “It is not just Europe. Banks may not be strong enough to fulfill their new role as saviors in any part of the world, including the US, China and Japan. None of the major lending systems were ever stress-tested for an economic deep freeze lasting months.”

So “the global financial system will crack under the strain,” with a by now quite possible “pandemic shutdown lasting more than three months” capable of causing “economic and financial ‘system failure.’”

As system failures go, nothing remotely approaches the possibility of a quadrillion dollar derivative implosion, a real nuclear issue.

Capital One is number 11 on the list of the largest banks in the US by assets. They are already in deep trouble on their derivative exposures. New York sources say Capital One made a terrible trade, betting via derivatives that oil would not plunge to where it is now at 17-year lows.

Mega-pressure is on all those Wall Street outfits that gave oil companies the equivalent of puts on all their oil production at prices above $50 a barrel. These puts have now come due – and the strain on the Wall Street houses and US banks will become unbearable.

The anticipated Friday oil deal won’t alter anything: oil will stay around $20 per barrel, $25 max.

This is just the beginning and is bound to get much worse. Imagine most of US industry being shut down. Corporations – like Boeing, for instance – are going to go bankrupt. Bank loans to those corporations will be wiped out. As those loans are wiped out, the banks are going to get into major trouble.

Derivative to the max

Wall Street, totally linked to the derivative markets, will feel the pressure of the collapsing American economy. The Fed bailout of Wall Street will start coming apart. Talk about a nuclear chain reaction.

In a nutshell: The Fed has lost control of the money supply in the US. Banks can now create unlimited credit from their base and that sets up the US for potential hyperinflation if the money supply grows non-stop and production collapses, as it is collapsing right now because the economy is in shutdown mode.

If derivatives start to implode, the only solution for all major banks in the world will be immediate nationalization, much to the ire of the Goddess of the Market. Deutsche Bank, also in major trouble, has a 7 trillion euro derivatives exposure, twice the annual GDP of Germany.

ORDER IT NOW

No wonder New York business circles are absolutely terrified. They insist that if the US does not immediately go back to work, and if these possibly quadrillions of dollars of derivatives start to rapidly implode, the economic crises that will unfold will create a collapse of the magnitude of which has not been witnessed in history, with incalculable consequences.

Or perhaps this will be just the larger-than-life spark to start a new economy.

(Republished from Asia Times by permission of author or representative)
 
• Category: Economics • Tags: Coronavirus, Free Trade, Wall Street 
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  1. Kali says:

    Being the “wise” (arrogant? well informed?) soul that I am, I’ve been screaming for years that folks need to reclaim the green spaces. “Reclaim a golf-course” was one of my earlier mantras.

    Why?
    Because unless we are producing food, energy, shelter, and all of the others necessities of life we will be (remain) utterly at the mercy of a bunch of globalist psychopathic Plutocrats. Therefore we need to develope a Real Economy: one which actually puts food on the table and has nothing at all to do with money, finance, globalism, etc.

    Again, being the “wise” (poor) soul that I am, I got out of “the system” many years ago, and have been living the life of a virtual peasant ever since.
    But this peasant has solar power, a shed-load of food in the ground, a mountain-full of firewood, and pure natural spring water on tap. Not to mention a community of like-minded friends around me. Oh, and an engineer for a husband.

    So, 5g notwithstanding (which we’re told “goes live” here in a couple of weeks… but which will not!) myself, my husband and our local and wider communities all around the world will be fine.

    I look out at the world, at the “plandemic” field hospital tents, the unsocial distancing, the draconian “laws” being enforcedone by order-following morons/sadists (take yer pick) and I’m certain that, unless the people recognise the dangers of the global lock-down, and the technology that’s being rolled out to create a global fascist dictatorship alongside an actual health crisis… unless the people Wake tf Up (!!) on mass, and begin immediately taking control of their own existance, their own physical needs sans the “economy stupid” the consequences will be catastrophic!

    We have NOW, this moment to act in our own best interest, to leave the capitalist/communist bs dichotomy behind and to GET FUCKING REAL.

    Sadly, as things are, I feel we’ll be lucky if a few escape, as the seeds of fear and confussion are being so liberally sewn right now.

    With much love and with very best wishes to each of you,
    Kali.

  2. What kind of shape is your and your community of like minded friends’ armory in?

    • Replies: @paranoid goy
  3. @Jim Bob Lassiter

    Why you ask about their guns, Bob? You getting the idea that reliance on the globalists failed, now you need to know if Kali’s stash can be appropriated for your family?
    Just kidding, I am also a ‘Kali’ type. but my pigs are in Africa, the threat of marauding empty stomachs is for us a way of life, like crickets, or mosquitos.
    I also suspect the economy to change. Only, when we wake up, globalisation will be so entrenched, the only food I expect in the supermarkets, will be overprocesses drek imported al the way from America and Israel, apparently the only countries still allowed agriculture. This whole mess is a globalist scam, why would they work for their own destruction? They have been planning this for long, announced it early last year. One thing about that “cospiracy”, these urks are bound to some law, and they can only do to us what we agree to. Currently, we are agreeing to a lot of ‘private sector’ (federal world government) excess.
    We are in for a Brave New World, fellas!

  4. Dwight D. Eisenhower warned us all about unchecked corporatist power aggregated immorally for purposes of power & control over sovereign power way back when. Today, we evidence why he warned us of shadow government like Blackrock subverting the tenor of the Constitution of the USA.

    The so-called ‘new economy’ will be apocalyptic in extremes of poverty-to-wealth extraction cohort that just managed yet another bailout via the Federal Reserve & Blackrock climbing into bed together at the expense of the USA taxpayers, and world.

    nCov-19 is mere subterfuge for the power play & wealth differential to avoid asking Congress for another bailout via stealth of a health emergency that is assumed to take precedence over finance & commerce worldwide.

    New economic activity will only last for the duration of civilization. Once civilization turns apocalyptic fear & survival will replace the hierarchy of needs presently assumed in contemporary parlance.

    Once the food supply is limited people will panic & contagion will ensue.

    US Military bureaucrats have already gone underground bunker in preparation for shadow government takeover.

    RW

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