- Four More Mega-Banks Join The Anti-Dollar Alliance
Submitted by Simon Black via SovereignMan.com,
That was fast.
Yesterday I told you how a consortium of 15 Japanese banks had just signed up to implement new financial technology to clear and settle international financial transactions.
This is a huge step.
Right now, most international financial transactions must pass through the US banking system’s network of correspondent accounts.
This gives the US government an incredible amount of power… power they haven’t been shy about using over the last several years.
2014 was one of the first major watershed moments when the Obama administration fined French bank BNP Paribas $9 billion for doing business with countries that the US doesn’t like– namely Cuba and Iran.
It didn’t matter that this French bank wasn’t violating any French laws.
Nor did it matter that only months later the President of the United States inked a sweetheart nuclear deal with Iran and flew down to Cuba to attend a baseball game with his new BFFs.
BNP had to pay up. A French bank paid $9 billion because they violated US law.
And if they didn’t pay, the US government threatened to kick them out of the US banking system.
$9 billion hurt. But being kicked out of the US banking system would have been totally crippling.
Big international banks in particular cannot function if they don’t have access to the US banking system.
As long as the US dollar remains the world’s dominant reserve currency, major banks must able to clear and settle US dollar transactions if they expect to remain in business.
This means having access to the US banking system… the gatekeeper of the US dollar.
But having watched BNP Paribas get blackmailed into paying an absurd $9 billion fine to the US government, the rest of the world’s mega-banks knew instantly that their heads could be next ones on the chopping block.
So they started working on contingency plans.
Blockchain technology provided an elegant solution.
Instead of passing funds through the US banking system’s costly and inefficient network of correspondent accounts, blockchain technology provides an easy way for banks to send payments directly to one another.
I cannot understate how important this technology is.
Blockchain may very well be what neutralizes the US government’s domination of the global financial system.
And while there’s been a lot of momentum in this direction (hence yesterday’s letter to you), even I’m surprised at how fast it’s moving.
Today, four of the world’s largest banks announced a brand new joint venture to create a new financial settlement protocol built on blockchain technology.
Deutsche Bank from Germany, UBS from Switzerland, Santander from Spain, and Bank of New York Mellon have joined together to launch what they’re naming the very un-sexy “utility settlement coin”.
Like Ripple, Setl, Monetas, and several other competing technologies, Utility Settlement Coin has the potential to end the reliance on the US banking system for cross-border payments and financial transactions.
Banks will be able to send payments to one another directly without having to transit through the Wall Street financial toll plaza.
(Global consulting firm Oliver Wyman estimates that the cost of clearing and settling international financial transactions at up to $80 billion annually.)
This has enormous implications, especially for US banks.
The Federal Reserve, for example, has already warned that financial technology could pose stability risks to the US financial system.
And they’re right.
If foreign banks are able to transact directly with one another without having to go through the US banking system, then why would they need to park trillions of dollars in the United States?
They wouldn’t.
Adoption of this technology could cause a gigantic vacuum of deposits out of the US banking system.
US banks would take a big hit. And the US government would have far fewer foreign buyers to sell its ever-expanding piles of debt.
Make no mistake, the adoption of this technology is a game-changing development with far-reaching implications. And it’s happening very quickly.
If these mega-banks can hit their milestones, they’ll launch commercially in eighteen months.
Mark it on your calendar– that may be the end of peak US financial dominance.
- Most Millennials Have Less Than $1,000 In Savings, Live Paycheck-to-Paycheck
The majority of millennials are living paycheck to paycheck.
A recent survey of millennials by HowMuch.net found that 51.8% of those aged 18-34 have less than $1,000 held between bank accounts and cash savings.
As Visual Capitalist's Jeff Desjardins notes, this echoes previous data we’ve seen – not just on millennials, but Americans in general. For example, we know that 14% of Americans have “negative” wealth. We also know that 62% of Americans don’t have emergency savings that could cover a $1,000 hospital visit or a $500 car repair.
Taking that into consideration, let’s dive deeper into this more recent millennial data…
Courtesy of: Visual CapitalistYOUNGER VS. OLDER MILLENNIALS
The broad survey data can be further divided into “younger” and “older” millennial segments: those aged 18-24, vs. those between 25-34.
Based on the survey question, an intuitive expectation would be that younger millennials are much more likely to have less than $1,000 in savings. After all, many of the people in this group would still be in school, and many are struggling withstudent debt.
However, the difference is far less than one may expect. While it is true that 57.6% of the younger demographic has less than $1,000 in savings, the older group is not much better off with almost half (47.1%) of them being in the same boat. This shows that many millennials in their late 20s and early 30s are still not able to generate substantial savings.
MALE VS. FEMALE MILLENNIALS
There is also a significant divide between male and female millennials here, with 56.7% of females having less than $1,000 in savings. Compare this number to the male percentage of 46.5%, and it is clear there is a substantial divide between genders.
Lastly, males are also more likely to have a substantial amount stored away in their bank account. According to the survey, 21.5% of males have more than $20,000 of savings, while only 11.9% females can say the same.
- Globalism Is A Barbaric Relic – Voluntary Tribalism Is The Future
Submitted by Brandon Smith via Alt-Market.com,
I have been writing rather extensively about the ideology of globalism in recent months, primarily because the battle lines between sovereignty and global centralization have never been more defined than they are in 2016. In the past, globalists have often hidden the true motives of their cult; namely the goal of erasing national borders and all remaining vestiges of self governance. Normally, they would only pronounce the great advantages of globalization while dancing around the fact that millions of people will not accept it. Today, however, the globalists have come out in direct confrontation with supporters of sovereignty.
After the Brexit referendum, a new tone appears to have been set. The elites have now entered the mainstream media to state in essence that yes, they are globalists, they want total centralization and they are here to fight a philosophical and/or physical battle with those they call “populists” (also known as conservatives and sovereigns).
When they have discussed globalization in previous years, it has always been presented as some kind of natural progression of events rather than an agenda. The first secret of elitist propaganda is their constant assertion that globalism is “inevitable;” that it is foolish to fight against it because it is the unavoidable future evolution of mankind. The fact is that if globalism is so inevitable, the elites would not need to expend trillions in capital and decades of energy trying to fool the masses into accepting it. If globalism is inevitable, couldn’t the elites simply lay back in their pool-side cabanas, sip their dry martinis and just watch it all unfold on its own?
Instead, the elites have foisted globalism upon the shoulders of the public, and are by some indications preparing for outright war in order to force us “populists” into compliance.
The second secret of elitist propaganda is their strategy to disguise centralization as decentralization. For instance, the new globalist claim is that a shift away from a system in which the dollar is the world reserve currency into a system in which a basket of currencies becomes the world reserve is a move towards a “multi-polar world.” Nothing could be further from the truth.
In reality, the basket currency system the elites are pushing for falls under the umbrella of the IMF’s Special Drawing Rights. Meaning a switch away from the dollar into the SDR will result in even MORE centralized power for the elites. That is not a multi-polar world; it is a uni-polar one.
It is schemes like this that expose the great weakness of globalism as an ideal — the elites cannot accomplish it without using deception and force against innocents. Such a philosophy is a failure by default.
The third secret of globalist propaganda is that they present the system as if it is a “new” idea. This is yet another lie. Globalism is merely another expanded form of centralization (or collectivism), and centralization has been the prevailing tool of cultural control for ages. If anything, the freely elected governments and voluntary tribalism of constitutional Republics is the newest and most advanced social concept in all of human history. Such systems present the potential for lasting decentralization, as long as participants remain vigilant to co-option by globalists.
Sadly, the people of America and the rest of the West have NOT been vigilant for quite some time, and today our experiment in sovereignty is being twisted, eroded and overrun.
Some seem to find new hope in the rise of conservative activism like the U.K.’s Brexit movement. As I explained in my pre-referendum article 'Brexit — Global Trigger Event, Fake Out Or Something Else?', these movements are a step in the right direction, but they have a tendency to underestimate the globalist strategy.
I suspect according to the evidence outlined in the article linked above, as well as the behavior of elites ever since the U.K. referendum passed, that a plan is underway to ALLOW conservatives and sovereign activists marginal victories. Ultimately, in order for the elites to achieve the long-game of total centralization, they need to fully demonize and destroy their philosophical opponents. That is to say, they need to make conservatives and freedom fighters out to be historical monsters, and themselves out to be the heroes of the day. The ONLY way for the elites to win is to fool the masses into accepting and even demanding globalization while casting out conservative principles as dangerous or evil.
But how would they make this possible?
It’s simple, really. They have already set the stage for an international economic and political crisis of epic proportions. Why not let conservatives and sovereigns take over as captains of an already sinking ship, then blame them when there aren’t enough lifeboats to save the passengers?
Following this line of thinking was how I was able to correctly predict the success of the Brexit vote, it is the reason why I have consistently argued that the Fed will continue to raise interest rates in 2016 despite multiple signs of a recessionary downturn, and why I believe Donald Trump will be the next president.
Once instability has run its course, and once the damage is done and the “populists” are blamed, the elites plan to swoop in with globalism as the fix-all.
The question then arises, if this is the strategy being implemented by the globalists, what can be done about it?
As with most conundrums, the problem is often the source identifier of the solution. That is to say, if centralization and the elites behind it is the problem, then decentralization and the removal of those elites from power is the most effective solution. If forced globalization is leading to the ruination of man, then voluntary tribalism may be the cure.
The issue actually has more to do with individual psychology than geopolitics.
Human beings have two inherent psychological qualities that can work together, or they can conflict; the need for individual liberty, and the need for community.
We are social creatures. We can accomplish great feats by working together, but the ideas for these feats are always born in the imaginations of individual minds. Without the group, the success of the individual can be greatly hindered. Without individual minds, the success of any group is impossible.
The elites would have us believe that individual success and community success are mutually exclusive; that we cannot have both. This is simply not true.
Globalists assert that if the individual focuses on his own success, then he cannot focus on the success of the group. This “conceited” self interest, they claim, will sabotage society as a whole and lead to humanity’s destruction. Therefore, under globalism, the individual must sacrifice his freedom of choice and association; he must sacrifice his right to apply his labors how he wishes, so that the group can supposedly thrive.
I would assert the opposite. Because all ideological groups are abstractions and not cultural facts, they are completely dependent on the success of the individual in order to thrive. While the individual may need help from others, he must be allowed to CHOOSE who those people are. He also must be able to CHOOSE how his ideas and efforts are realized. Otherwise, the ideas have no steward, no protector. Under globalism/collectivism, ideas immediately become the property of the group if they are even acknowledged at all, and the group does not think; the group is not capable of thinking. The group only has merit as long as the individuals within it have merit. The group is not real. And so, under the control of a vaporous collective, good ideas usually die.
With globalism as the dominant ideology, individual accomplishment falls and thus, the system itself will eventually fall.
This does not mean that the solution is to end all group interaction or organization so that individuals can go off to to form their own one-man, mini-nation states. If that is what an individual wishes to do then that is all well and good, but failure is just as likely in that scenario as it would be under globalism. Instead, the answer may be a return to tribalism, of a voluntary variety.
Our inherent needs for individual freedom as well as community interaction can in fact work together. The group does not need to supplant the individual to succeed, each member of the group just needs to share the same goals and understand the merits of those goals.
If a person does not understand or respect the goals of that group, then he can easily leave, or refuse to join. As long as it is unacceptable for any group to use force to compel an individual to participate, then there can be no loss of individual liberty. Under this model, we could see the rise of numerous tribes, and tribes within tribes. Some of them fleeting, some of them long lasting. Of course certain universal truths would have to be respected.
The most common argument against tribalism, whether voluntary or not, is the argument that it will lead to so many conflicting interests that chaos and violence is inevitable. Wars over resources and property will erupt, some claim, or society will falter into a dog-eat-dog survival of the strongest Mad Max scenario.
First, I would like to point out that globalization and centralization have not solved any of these problems. Globalism only seems to lead to more efficient war and death, rather than less war and death, and the sides are less defined. Under the global elites, people are constantly pitted against each other over false narratives and false flags. We become pawns that are sacrificed to further their objectives. I hardly see how this is a superior system. The only wars ever worth fighting are against centralizing tyrants.
Second, while tribal conflict is surely possible due to philosophical differences, the promotion of individual freedom, rather than the collective, as the essential element of society makes violent opposition far less likely.
Freedom is a universal inborn psychological construct. Almost all people have a sense of it and its usefulness. In fact, most fundamental moral principles including freedom are shared by people regardless of their cultural backgrounds. The only places in which freedom is not respected are places in which centralizing elites have propagandized and threatened the citizenry. Look at almost any totalitarian system and you will find under scrutiny that globalists helped give birth to these monsters from behind the scenes. When those elites and their influence are removed for a time, there is usually a natural wellspring resurgence of respect for liberty within that society.
Men and women will organize and rally around freedom without being lied to or threatened. There are not many ideologies that can make the same claim. Globalism certainly can’t.
Third, the next objection from skeptics will be that a handful of controllers under globalism would be preferable to tens of thousands of tyrants lording over thousands of fiefdoms. Again, these people just don’t seem to grasp the notion of voluntary community or the effectiveness of individual rebellion.
I would rather face a thousand minor tyrants with minor armies than a tiny cabal of tyrants with a global army. The difference being that it is far easier to erase a tyrant with a hundred men in my way than it is to erase a global tyrant with hundreds-of-thousands of men and a massive surveillance apparatus in my way. In a world where individual liberty is paramount and the people are armed, minor tyrants would be so terrified to pursue power they would likely be dissuaded altogether. The minimal protection they might muster would never be enough to stop every single bullet flying in their direction.
The idea of voluntary community is so foreign to the public today that it would probably need a catastrophe before such a system is ever adopted. But, since the global elites have already taken it upon themselves to create the catalysts for an economic and political crisis, we might as well take advantage and rebuild from the ashes with voluntary community in mind.
The elites never let a good crisis go to waste, maybe we should use the same strategy.
This, of course, requires that the liberty minded not only survive the catastrophe, but also fight back and remove the elites from the picture. There can be no voluntary tribes with the globalists in control of the mechanisms of power. They are themselves, in effect, a bastardization of a tribe that has been allowed through lack of vigilance to subversively and systematically destroy all other tribes. They have convinced much of the world through chicanery that their tribe is the ONLY tribe with merit.
The propaganda only works to a point, however. During any breakdown in normal social order, people invariably create their own social order, and they usually do this by forming small tribes. Families come together, neighborhoods come together, towns come together and so on, and they do this voluntarily, without being aggressively compelled by others. The natural default of human beings is freedom and tribalism; two things which do not necessarily have to conflict. Our natural default has never been to pursue globalism or utter collectivism at the expense of the individual; those kinds of machines are products of the treachery of a power-mad minority.
In the end, globalism is doomed to crash in a ball of flames, but not before the globalists attempt to take everyone else down with them. It would behoove us to start constructing our tribes now, rather than after the situation has become grim in the absolute. Through localized production, alternative trade models, local organization for mutual aid and defense, and the principles of liberty, America could become a network of tribes within a tribe; a self reliant system built around redundancy rather than interdependency.
The globalists? Well, they will try to stop us. But at least at that point the sides will be drawn more clearly. I cannot think of a better war to fight than a war to stop the barbaric trespasses of the global elites. And when it is all over, I look forward to a more complex and “chaotic” society where collectivist streamlining is abandoned for a wild west of voluntary associations. A land where tribes roam free.
- China's "Answer To LendingClub" Plunges Most On Record After Regulator Imposes Peer-To-Peer Caps
Over the years, China has valiantly struggled to convince the international public it will end its debt addiction any minute now, with the Politburo vowing year after year that it would if not delever in the immediate future, then surely limit the issuance of household loans. So far, every such attempt has been a failure, for one simple reason: as goes China’s debt, so goes the most important asset in China’s economy, its housing stock.
So while there are ample reasons to be skeptical, overnight China’s Banking Regulatory Commission unveiled its latest attempt to halt the country’s relentless debt load when it imposed limits on lending by peer-to-peer platforms to individuals and companies in an effort to curb risks in one part of the loosely-regulated shadow-banking sector. An individual can borrow as much as 1 million yuan ($150,000) from P2P sites, including a maximum of 200,000 yuan from any one site, the CBRC said in Beijing on Wednesday. Corporate borrowers are capped at five times those levels.
The regulator added, in what we doubt was an attempt to reassure industry watchers, that China had found problems in 1,778 online lending platforms, accounting for 43.1% of total.
China’s authorities are rightfully concerned about defaults and fraud among the nation’s 2,349 online lenders. In December, the country’s biggest Ponzi scheme was exposed after Ezubo, which until then had been China’s largest P2P lender, defrauded more than 900,000 people out of the equivalent of $7.6 billion and promptly folded (the response was hardly enthusiastic, as we revealed in a clip from February.)
The measures will probably leave about 200-300 P2P platforms by this time next year, said James Zheng, chief financial officer of Lufax, the top lending platform in China. “That’s okay because they’re cracking down on all the bad guys,” he said at a conference in Hong Kong. “What doesn’t kill will make you stronger. That’s the case for us.” Good luck.
Under the new rules, P2P lenders are barred from taking public deposits or selling wealth-management products and must appoint qualified banks as custodians and improve information disclosure.
“The P2P business is not very strictly regulated yet, but you can see the regulator is taking a step forward,” said Xu Hongwei, chief executive officer of Shanghai-based Yingcan Group, which tracks the industry. Products offered by P2P platforms in China can include anything from loans for weddings, guaranteed against the cash gifts that couples expect to receive, to high-yield lending for risky property or mining projects.
As Bloomberg notes, China’s P2P industry brokered 982 billion yuan of loans in 2015, almost quadruple the amount in 2014 and an approximately 10-fold increase from 2013, according to Yingcan. P2P firms attracted more than 3.4 million investors and 1.15 million borrowers in July, with loans extended at an average interest rate of 10.3 percent, according to Yingcan. Still, despite its torrid growth, P2P lending is still a tiny fraction of the overall loan market, and certainly of the broadest Total Social Financing universe, which infamously saw $1 trillion dollar in aggregate new loans created in the first quarter of 2016, providing a global credit impulse, which has since faded.
In any case, it appears that in this particular case, China is eager to halt this problem before it becomes too big. In April, China’s cabinet launched a campaign to clean up illicit activities in Internet finance, focusing on areas such as third-party payments, peer-to-peer lending, crowdfunding and online insurance. It suspended the registration of all new companies with finance-related names.
And we have our doubts that this latest “debt cap” will last, because earlier today, Peer 2 Peer lender Yirendai, the company which Bloomberg has dubbed “China’s answer to LendingClub” plunged 22%, the most on record since its December 2015 IPO, on massive volume, following yesterday’s imposed P2P limits. For a sense of scale, YRD created some $680 million in loans in Q2, up 118% Y/Y, with net revenue more than doubling to $110 million, or 140% Y/Y.
Needless to say, the company acts, and is priced like, a growth stock. The problem, as the chart below shows, is that the growth suddenly stopped.
Furthermore, if the company is indeed China’s answer to the recently devastated LendingClub, this is just the beginning, as the bubble has now popped with a little help from the government.
So will the CBRC relent, and lift the caps? It depends on just one thing, the only thing that the politburo is more worried about than asset bubbles – social unrest.
If enough people protest, get angry or downright violent as a result of the collapse in P2P stocks, and eventually, the entire industry, or simply are unable to obtain loans elsewhere should the industry falter, then Beijing will promptly undo what it has done. Until then, however, keep an eye on risk levels in China, where suddenly the most permissive marginal source of lending – and this risk asset upside – was just advised ordered to go into a state of near hibernation.
- University of Chicago Tells Millennials to Suck It Up, "We Do Not Condone 'Safe Spaces'"
In a refreshing and stark contrast to other universities that have seemingly tripped over themselves to accommodate every silly request from America's pampered Millennials in their never ending quest for "safe spaces," the University of Chicago has sent the incoming class of 2020 a letter making very clear that they will find no "safe spaces" in their intellectual journey at Chicago. The full letter is presented below but here are a couple of the best comments for your reading pleasure:
You will find that we expect members of our community to be engaged in rigorous debate, discussion, and even disagreement. At times this may challenge you and even cause discomfort.
Our commitment to academic freedom means that we do not support so-called “trigger warnings,” we do not cancel invited speakers because their topics might prove controversial, and we do not condone the creation of intellectual “safe spaces” where individuals can retreat from ideas and perspectives at odds with their own.
Just when we thought all hope had been lost, an establishment of higher learning finally steps up to interject some rational thoughts into the public discourse surrounding freedom of expression.
.@UChicago does not:
???? "support so-called 'trigger warnings'"
???? "cancel invited speakers"
???? condone "safe spaces" pic.twitter.com/DH7IVfYZ4U— Justice Don Willett (@JusticeWillett) August 25, 2016
The letter also directs students to a note it had previously written on freedom of expression…
The full letter can be reviewed in its entirety at the end of this post, but below are a couple of the gems that we particularly liked:
“Education should not be intended to make people comfortable, it is meant to make them think. Universities should be expected to provide the conditions within which hard thought, and therefore strong disagreement, independent judgment, and the questioning of stubborn assumptions, can flourish in an environment of the greatest freedom.”
Of course, the ideas of different members of the University community will often and quite naturally conflict. But it is not the proper role of the University to attempt to shield individuals from ideas and opinions they find unwelcome, disagreeable, or even deeply offensive.
In a word, the University’s fundamental commitment is to the principle that debate or deliberation may not be suppressed because the ideas put forth are thought by some or even by most members of the University community to be offensive, unwise, immoral, or wrong-headed.
For Millennials getting ready start at University of Chicago might we suggest some reading material (here) that we shared a few months back that might help you cope in the absence of "safe spaces" at your new home…
No matter where you go in life, someone will be there to offend you. Maybe it’s a joke you overheard on vacation, a spat at the office, or a difference of opinion with someone in line at the grocery store. Inevitably, someone will offend you and your values. If you cannot handle that without losing control of your emotions and reverting back to your “safe space” away from the harmful words of others, then you’re best to just stay put at home. Remember, though: if people in the outside world scare you, people on the internet will downright terrify you. It’s probably best to just accept these harsh realities of life and go out into the world prepared to confront them wherever they may be waiting.
- Demographic HomeMageddon Underway… Will Last Until At Least 2035
Submitted by Chris Hamilton via Econimica blog,
91% of all US home buying is done by those aged 20-69yrs/old, according to NAR data. In 2015, Millennials (20-35yrs/old) made up 35% of home purchases, Gen X (36-50yr/olds) bought 26%, Boomers (51-70yr/olds) 31%, and the Silent Generation (70+yrs/old) 9%. I'm no great fan of the NAR, but this makes basic sense as most homebuyers need an income to be homebuyers and most 70+yr/olds are retired and have the lowest average incomes of all the above groups.
Here's the very big problem for residential real estate… the chart below shows that over 70% of all the population growth among potential home buyers (20+yrs/old) from 2017–>2030 will be among the 70+yr/olds (chart shows average annual growth for the two groups from 2000–>2016 (left) and 2017–>2030 (right)). This is simply unprecedented in US history.
To put it in a broader context, the chart below shows annual growth in the 20-69yr/old population (red line) vs. annual growth in the 70+yr/old population (blue line) since 1980. That unprecedented, impending crossover in the lines means everything for real estate and the economy in general.
The impending nosedive in the growth of potential buyers vs. surge in elderly (those more likely to downsize or out-right sell than buy) should be quite disconcerting considering:
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Home prices are at or near '07/'08 bubble peaks meaning any new investments require far more cash down to achieve a positive cash flow
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Mortgage rates can effectively go no lower and a marginal increase is probable (unless the Fed reinitiates QE and implements NIRP)
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Present lending standards are far more stringent than during the '07/'08 fog-a-mirror NINJA free for all
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The dollar is likely to continue appreciating making foreign buying continually more expensive…and less likely (unless the Fed reinitiates QE and implements NIRP)
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Rents and rent to income ratios are off the charts to new records well above '08…maintaining the pace of rent appreciation is highly unlikely and rent declines may be the more probable course.
Plus, add in the pace of new housing creation continues ramping up (still only half way to '08 levels but still far more than can ultimately be absorbed with the changing dynamics). With so few new buyers, a growing quantity of new homes, and so many likely sellers…a very simple question must be asked, who will buy all those houses and at what price?
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- 5 Factors That Could Turn America Into Another Collapsed Empire
Authored by Todd Buchholz, originally posted op-ed at MarketWatch.com,
Nations are just as likely to unravel after periods of prosperity as afte periods of depression
Have you ever met an Ottoman? Or a Habsburg? Neither have I.
Like a chopped-up Magritte painting, all that is left of the Habsburgs is a homburg hat. Yet in the 1800s, the Ottoman and Habsburg Empires controlled a huge chunk of the modern world. One in 10 Americans can trace his or her heritage to Habsburg lands, which spanned most of middle Europe from Poland down to Dracula’s castle in Transylvania.
Many people have written about poor countries that have fallen apart. But rich nations fall apart, too. In fact, nations are just as likely to unravel after periods of prosperity as after periods of depression. The 2016 presidential campaign appears so bitter precisely because so many Americans worry that the “other” party’s candidate will annihilate the nation.
I have found five forces that undermine nations after they achieve economic success – and they are biting down on the U.S. today. We have little time to spare to renew the nation. Whichever candidate wins in November better come up with tough and effective solutions.
Falling birthrates
As countries grow rich, people have fewer babies. (The average American women now gives birth to just 1.89 children.) To keep up their lofty standard of living, citizens need new workers to serve them, whether as neurosurgeons in hospitals or as manicurists. This requires immigrants. But immigrants can splinter the dominant culture. So countries face either declining relative wealth or a fraying cultural fabric. Great empires of the past, from the Roman to the Venetian to the British, have faced this challenge — and failed to surmount it.
Globalized trade
Nations cannot grow and stay rich without trading. Countries that fold themselves into a self-contained bubble grow fetid, like a badly aerated terrarium. Or a dank prison, which pretty much describes North Korea. South Koreans, who believe in trade, are 17 times richer, live 10 years longer, and stand several inches taller than their neighbors. South Korea produces super-sharp Samsung flat screens, fine Hyundai cars and charismatic K-pop singers.
But there’s a downside to trade. It shakes the customs and character of the nation. Donald Trump has skillfully tapped into this anxiety and is right to ask whether trade deals like the Trans-Pacific Partnership are vigorously negotiated to boost the incomes of typical Americans, or simply to boost the ego of the president.
Rising debt loads
As countries grow richer, they build bigger bureaucracies and inflate their debts. Here’s a puzzle I call “The Paradox of Theft:” As a family grows wealthier, it is less likely to fall into deep debt, default and bankruptcy. But the opposite is true of individual countries — wealthier nations may pile up proportionately more debt than poorer nations.
Amid the Great Recession of 2010, developing countries like Mexico and Russia had smaller debt burdens than Japan, the U.S. and the eurozone. Why do we borrow more? Because we can! And because today’s politicians aren't held responsible for the debts they leave for our children and grandchildren.
Eroding work ethic
When a rich nation shatters, people don’t go hungry. They just stop waking up early. The proportion of adults who want to work has been sliding over the last 17 years. In West Virginia, only half of working-age adults have a job. Between 2000 and 2013, disability claims across the country surged 43%. Even though jobs have grown less dangerous, the chances of a judge approving a disability claim has jumped 50% since 1980.
We are seeing a structural shift: Millions have decided they just don’t care much for the idea of showing up for work in the morning and staying on the job until the end of the day.
To prod the unemployed back to work, I propose they receive a signing bonus if they accept a new job before their unemployment compensation payments run out.
The challenge of patriotism in a multicultural country
Unless rich nations discover and embrace their national characters, they won't survive. In many schools, the Pledge of Allegiance and “My Country ’Tis of Thee” have been pushed aside in favor of self-esteem chants. Characters like Columbus, the Pilgrims and George Washington have been disdained as pillagers, rather than as symbols of exploration, religious freedom and courage.
To help ensure that all learn America’s story and values, all immigrants and any U.S. student applying for a federal loan be required to get their passports stamped at no fewer than five historical monuments or museums around the country.
Is it too late?
Should the U.S. and European nations simply hold a “going out of business sale” while the wealthiest individuals sneak off to private islands or to New Zealand? The odds are against us, as the Spartans, Romans, Ottomans, and Habsburgs would attest — if they were still around.
But as Bill Murray said in Stripes: “We’re not Watusi. We’re not Spartans. We’re Americans, with a capital ‘A”…that means that our forefathers were kicked out of every decent country in the world. We are the wretched refuse. We’re the underdog. We’re the mutts.”
And we can win again.
- France To Deploy 3,000 Troops To Schools: "The Threat Is Real" Education Minister Says
Two weeks ago we reported that as part of its proactive effort to tackle future terrorist attacks, the French government announced that starting in September, French 14-year-olds would receive lessons how to survive a terrorist attack on their schools, following a spate of Islamist killings in recent months. It appears that was not enough, because earlier today the France interior minister Bernard Cazeneuve announced France would deploy about 3,000 reserve troops, train school authorities and ramp up school anti-terror drills in case of attacks, its education and security ministers announced on Wednesday, a week before the start of a new academic year.
“The threat is high, it is real,” Education Minister Najat Vallaud-Belkacem, said during a joint news conference in Paris alongside Cazeneuve. “This is not about ceding to panic or paranoia,” she added quoted by Reuters.
About 12 million students are expected to head back to school across France from on Sept. 1. All students aged 13-14 will be adding basic life-saving measures to their portfolio of skills, in case they need to provide assistance to classmates in a worse-case scenario. Right now, only 30% of students are trained, the Education Minister said in a Wednesday press conference, according to AP.
Around 500 school administrators will be trained every year at the national gendarme training center to manage crisis centers and act as liaisons with security officials, while some 1.2 million students in the fourth year of secondary school are expected to be trained in first aid. In addition to training students and staff stepping up to the plate, security forces have been ordered to be particularly vigilant around schools, and some 3,000 gendarme reservists will be deployed to provide reinforcement for local authorities, including police, Reuters reported.
“Throughout the year, particular attention will be put around schools. Active surveillance around schools, high-schools and universities will be reinforced by roving patrols,” Cazeneuve said. RT adds that the government has decided to provide 50 million euros ($56.2 million) to local councils to help them pay for security equipment such as video door phones and new alarm systems.
As previously reported, anti-terror drills in schools will also be increased to three per academic year, up from the current requirement of two drills per year. During those drills, students will be taught how to hide or escape. At least one drill will include a mock assailant entering the premises. Children aged two to six should not be told of any attacks or dangers during the drills, but will be taught to hide and keep quiet through games.
The French announcement comes at the same time as Germany is deciding whether to put “troops on the streets” to protect the population from terrorism. While a formal decision has yet to be announced, Europe’s distinct creep toward increasing militarization of society continues.
- Largest Saudi Bank Crashes To Record Low
Despite the exuberant rebound in the price of oil – and the hope that this means something other than an over-financialized commodity being short-squeezed by rumors – all is not well across the oil producers of the world. Having noted the record surge in default protection for Saudi Arabia (ahead of its looming debt deal)…
We note that National Commercial Bank's stock price has collapsed to record lows.
h/t @pierpont_morgan
This is Saudi Arabia's largest bank, and is often used as a proxy for the royal family's wealth.
Interestingly,just as we were surprised to see Saudi CDS "stabilizing" amid record demand for protection, NCB CDS has tightened dramatically in the last few weeks – as the stock has crashed…
If we were the tin-foil-hat-wearing types, we might suggest that every effort is being made to put lipstick on Saudi's credit pig before the looming debt deal is done.
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