[The entire Western mainstream media and establishment set of virologists went out of their way to provide protection for, of all countries, China,]

My conspiracy theory is that Covid-19 comes from a virus jointly engineered and unleashed by the Western and Chinese elites. This theory is supported by a combination of how unlikely the virus is to be natural (as detailed by Dr Li-Meng Yan's paper) and other attending events, including what strongly appears to be cover-up:

- The entire Western mainstream media and establishment set of virologists went out of their way to provide protection for, of all countries, China, which is  normally painted as a bad actor with every chance, by saying the virus is natural.

- The silencing of dissenting scientific voices.  Why not let the debate play out, if Dr Yan's argument or conspiracy theories have no merit.

- Somehow, early containment failed in all major Western economies and China, and these just happen to be the major sufferers of the debt bubble.  This happened when quite a few other countries have shown that early containment is possible.  As I've argued, it's not just Trump and his ilk who were responsible for the slow response.  The media and entire political class implicitly supported the do-nothing response, until it was too late.

- The suppression of HCQ+ as an excellent Covid treatment, even though this fact has been well documented around the world.  The media widely published 'studies' with flat-out fake data (for which major journals have retracted the publications, too late) that almost totally destroyed the image of HCQ+ among the public.  This is not to mention publicizing numerous studies on HCQ+ that were improperly done, some inexplicably so, that are negative about this treatment.  (For the effectiveness of HCQ+ treatment, see here, here and here.)

- The sudden appearance of a virus (RatG13) that was touted as a natural close relative of Sars-CoV-2 after theories of lab-made origin appeared.  RatG13 turned out, on close examination, to be most likely a lab creation, but one that was done too hastily to provide a believable evolutionary pathway.

- First and not least, the overwhelming incentives for the global elites to deflate the global debt bubble without taking the blame for the resulting pain.  In fact, in Sept. 2019, a fire erupted deep in core of the system (the repo market crisis.) Over the weeks and months, it could only be contained but somehow never put out, even with the supposed unlimited monetary powers of the Federal Reserve.  There's a good chance that the financial system's natural implosion had already started.

Perhaps, individually, these events could each be argued as happenstance, or what not.  But taken as a whole, they present a compelling set of evidence.

[why did establishment Western scientists argue so hard that the virus was natural?]

See my recent post for background.

We now have direct evidence that the virus was engineered in a lab, in the form of a published paper by Dr Li-Meng Yan, open to peer review from around the world.

The interesting question is: why did establishment Western scientists argue so hard that the virus was natural?  And even more interesting: why did the entire Western mainstream media allow only that side of the argument to air?  Who have that kind of power?

On almost any issue, the West doesn't defend China.  Why do it now?  And on such an important issue?  Maybe revealing China as the engineer of the virus gets one step closer to the truth, and the truth is that the West and China collaborated on the virus?  (E.g. we know for sure Fauci himself has been involved in 'gain of function' research supported jointly by US and Chinese government labs, ie looking into how we can make viruses more transmittable, etc.)

Who knows, if China is made to look guilty, it will reveal evidence that the West was involved?

Anyway, as I said, the paper is open to peer review.  Oh, wait, sorry, but Twitter just suspended Dr Yan's account from where she published the link to the paper.  Oops.

Surely, the entire Western establishment can't be afraid of the writings of a 'rogue Chinese scientist?'

As I wrote here, my working theory is that China and the West were both responsible for deliberately releasing the coronavirus in order to reset the global financial and economic systems, and blame the pain on the virus.

We now have additional evidence to support this theory.

As we know, in recent days, US Democrats have been accusing President Trump of knowing the seriousness of the virus in January and February but minimizing the problem in public.  But if we look at the record, Dr Fauci and Democratic leader Nancy Pelosi were doing pretty much the same thing.

Doesn't this begin to look like a 'bipartisan' policy to get the US into the Covid crisis?

(P.S. I am not defending Trump at all -- I'm only saying people like Fauci, for sure, knew at least as much as Trump about how serious it was, and that the entire Western media and political class effectively ensured that early containment would be impossible.  Fauci and others may have been better at covering for themselves by saying 'this may get worse,' but no one was calling for actions to contain the virus early enough to avoid the large number of infections and deaths we have seen.)

[Example: The Bank Account]

This essay generated quite a lively discussion when I wrote it a few years ago.  Here is an updated version, with many minor or moderate changes in content and wording, based on my latest understanding.

*****

Instead of honest democracy or free-market meritocracy, we truly live under rule by parasites.  (This term is not meant to be derogatory but to be apt.  I suppose many, if not most of us, would opt to be one of the parasites, if given the choice.)

Trying to describe how the financial and political elites receive unearned wealth and power can get complicated very quickly.  To find a simple but rigorous theory to cover most major features of the beast requires looking at it the right way.

By and large, how it works is that:

• The elites use state power to prop up the values of money, debt, and other financial assets artificially, to benefit those who issue them, i.e. themselves.  When some over-valued asset eventually must crash, the entire economy suffers the loss of jobs, business and savings.
  

Example: The Bank Account

Public illusion. A commercial-bank 'deposit' is as good as money.  You will get all your money back, any time you want.

Reality. 'Deposits' are really loans to the bank which lends them to borrowers, some of whom may never pay them back.  Another danger is that savers may ask for their money at any time, while loans by the bank tend to have longer-term maturities.

How to bridge myth and reality. An truly free-market system would drive banks to communicate expectations openly.  A simple example could be having 'depositors' expect to lose money if the bank makes bad loans.  The problem with such an honest system, of course, is that top politicians and bankers wouldn't benefit much, since people would likely put much less money in banks.

The confidence trick.  The government props up the illusion, while it can.  Classic tools over the centuries include allowing banks to collude by rescuing each other in a crisis, bailing banks out with public money, and providing deposit insurance.  If this gives bankers the incentives to take too much risk, bankers redeem themselves by being a lender to the government.  Since both sets of elites benefit, what problem is there?  (In recent decades investment banks and money market funds have formed a shadow banking system which plays an equivalent role.  While the last US commercial-bank bust happened in the 1980s' savings-and-loan crisis, the last shadow-bank variety occurred in 2007-8.)

Analysis. While credit is indeed crucial to economic growth, to use government power to prop up the values of loans to banks, and then to rely on bureaucrats and their rules to limit risk-taking by bankers is a distortion of the credit market.  It is the driver of much human misery.  Central planning, somehow, always benefits the few at the expense of the many, even if it claims to do just the opposite.


Example: Government Bonds

Public illusion. The 'full faith and credit' of the government stands behind the IOU it issues to you.  Your IOU is as good as money.

Reality. Since much public debt is almost as trusted as money, incurring this debt is almost as good as printing money.  Politicians thus have an incentive to maximize the issuance of debt to receive free political capital, even if this destabilizes their own system in the long run.  Public debt all over the world goes only up.  Even though powerful governments can keep their debt bubbles going for a century or more, those incentives mean that their IOUs will eventually lose value, one way or another.

How to bridge myth and reality. Even aside from the moral problems of 'money' creation and putting burden on people who can't yet vote, public debt should at least be allowed to sink or swim in the capital markets.  If a government incurs too much debt, savers would be incentivized to punish it by demanding a higher yield, and politicians would in turn be incentivized to cut back borrowing.

The confidence trick. When savers get too wary of public debt, the central bank steps in to buy it with freshly printed money, thus propping up the value of these IOUs.  This is done in the name of 'monetary policy,' either by buying public debt directly as 'open market' operations, or, more frequently, by supplying banks with cheap new money so they will buy it.  Most of the time, savers can't fight city hall, and will thus tend to buy and hold IOUs, further limiting the downside risk of their values.  This entire system thus amounts to a bubble.

Analysis. It doesn't matter how powerful a government is -- Public debt always crashes eventually.  The dominant global empires of Spain, the Netherlands, and  Britain were destroyed by this crash in their days.  (In the case of Britain the relevant 'public debt' took the form of paper pound sterling that was officially an IOU for a fixed amount of gold.)  No one believes US debt is really payable with anything close to the purchasing power savers and foreign central banks used to buy it, although by the time its value can no longer be propped up, most politicians and voters who have benefited from issuing it will have been gone.


Example: Money

Public illusion. Central banks issue and destroy currency to manage economic output for the benefit of the public.  At least in the West, proper management has resulted in low and constant inflation that has justified the public's evident trust in currency's value.

Reality. The real job description of the central bank is to safeguard the state-bank alliance.  It holds power over the most central asset, money, in order to discourage both politicians and bankers from issuing assets too fast and thus endangering the system.  The goal is well-paced harvesting of the fruits of real work.  Over the decades, prices only move in one direction: up.

How to bridge myth and reality. Unfortunately, there is no way to remove the incentives to abuse the issuance of money while the state or a banking cartel has any role in the issuance.

The confidence trick. The problem of holding up the public's trust in currency was solved in a simple fashion by the classical gold and silver standards in their day, while the authorities had enough precious metals to back their paper.  Today, the central bank needs to keep the return on 'safe' assets (e.g. short-term Treasuries, insured deposits) above the return on non-state-issued assets, i.e. gold, silver and Bitcoin.  (Recent books like 'Gold Wars' and 'The Gold Cartel' have come up with good evidence of central-bank suppression of precious metal prices by trading derivatives.)  In this it seems to succeed most of the time, but fail spectacularly at other times.  It also needs to keep the return on 'safe' assets below the return on risky assets like stocks, over the long term.  The goal of both operations is to use state power to force savers to take risks and help prop up the bubble economy.  (Ever wonder why financial crisis always seems to come back?)  When you hear of 'tightening' or 'loosening' the money supply, this control is what's really going on.  So, it's not that the public trusts currency; most feel they have no choice.

Analysis. It's not, as most mainstream ecnomists claim, that state-controlled money is required for modern economic growth.  The Italian Renaissance and Scottish 'free-banking' era were counter-examples.  It's really the other way round.  The real productivity of the modern world gives value to the financial assets issued by the elites, and thus help sustain their financial inflation, at least until the perverse incentives destabilizes the system anyway.  In the Middle Ages, money was physical gold and silver -- when there was no wealth to extract, the state couldn't create its financial inflation.


Final Thoughts

A key feature of this system is that it doesn't matter if you understand it.  You still must gamble, or risk your savings being eaten away by inflation.  The gamble by the public as a whole is certain to end in loss, since the elites will always destabilize asset values to the point of collapse.  The lose-lose proposition works the same way as literal highway robbery -- you can certainly hold on to your money; you just can't keep your life at the same time.

That said, there are times when the elites are likely to be forced to devalue their money, and with it all other conventional assets, against gold, silver and Bitcoin, in order to hold on to power.  This makes it statistically profitable to hold non-state-issued assets at those times.  (An analogy would be standing at the front of the line to redeem deposits for cash during a bank run, or to redeem pound sterling for gold at the Bank of England just before Britain was forced off the gold standard.)  Necessarily, only a minority will profit from this bet, but its existence is a healthy incentive that pushes the elites to minimize financial inflation.

This devaluation is conceptually the same as 'banana republics' having to devalue their currency against the dollar because they've printed too much.  The typical way to do this is to strongly deny any prospect of devaluation until the very moment, devalue as fast as possible (and devalue enough to keep their system stable for a while,) and deny any further devaluations in future.  So, it's perhaps no accident that the price movements of gold, silver and Bitcoin have been long and gradual declines most of the time, punctuated by sharp rises over short periods, and rising overall over the long term.

The system is an 'open conspiracy.'  Instead of secrecy, it relies on a combination of state power and ignorance by the public.  The only sustainable path to achieving a healthy and just system is for the public to wake up.  But the devaluation of its issued money against non-state monies shows that, in a subtle but profoundly real sense, the system is a paper tiger.  Since the power of the modern imperial system depends necessarily on various alliances of self-interest as well as the perception of its support for classically liberal ideals, if enough people, and people in the right places, refuse to be intimidated, or expose its nature, the system must make concessions, and make the world perhaps a little better.

This possibility of piecewise progress exists in all corners of the system, at most times.  Here, then, is where our hope must be for the future.  It will be a long battle indeed, and we must be prepared for the entire duration.

Latest news!

The Lancet recently published a major attack on hydroxychloroquine (HCQ) as Covid-19 treatment (which has really been shown around the world to be an excellent treatment).

The study has just been retracted by its authors because the data seems to be totally fraudulent.  E.g. the authors couldn't even name the hospitals which provided them with data, when their Australian data looked suspicious to some researchers.

Of course, since the mainstream media relied heavily on this study to attack HCQ just recently, we can now expect a full, immediate and highly visible announcement of their error.  

Why would anyone do something like this?  Think of the enormous consequences in human lives.  Why would any perpetrator expect to get away with this?  So, what kind of power is behind this attack?

Think, and you will understand.  (For details see my original piece on HCQ.)

A couple of weeks ago, I posted here my theory that the virus was released intentionally by China and the Western elites to effect a reset of the global financial system.  It was quite a lively discussion!

We have one more important piece of evidence now.

It appears that hydroxychloroquine (HCQ) is a truly effective treatment for early patients, that can potentially be a game changer in the fight against covid-19.  See reports here, here and here.

I know the controversial US President Trump is a big supporter of this treatment, but this is a time to put politics aside and look at the science.

In the US, two high-profile reports have just been published against using the treatment, and have generated much coverage in the mainstream media, with predictable results.  (One comes from the US Veterans' Health Administration, and the other is published by The Lancet.  I won't provide the links because they're everywhere!)

Chris Martenson of PeakProsperity.com has argued that both studies are flawed, because the key to effective treatment is starting treatment early, plus the inclusion of zinc, and neither of these studies consider those factors.  French doctor Didier Raoult, an advocate of HCQ, also finds major problems with the studies.  (He has written an open letter to The Lancet in protest.)  In addition, Martenson has looked at the design of 3 major future US-based studies on HCQ and found them 'designed to fail' by not accounting for early treatment and zinc.

One has to ask the question, why, oh why?

If HCQ is indeed an unfairly maligned, highly promising treatment, it does look as if the entire US establishment, not just the anti-Trump politicians and media, and not just big pharma (who stand to profit from much more expensive future vaccines and treatments, whereas HCQ is a generic) is against HCQ, and are desperate to make sure patients don't get cured.  This would be consistent with my theory that the Coronavirus was released in order to effect a controlled, gradual reset of the financial system.

I have not seen a rebuttal of the arguments by Martenson and Raoult.  Raoult also complains that raw data was withheld from public review in the case of the Lancet report, against tradition.

Again, one has to ask, who has (have) this kind of power and ambition, to destroy what appears to be the biggest hope for the biggest problem facing the world?

[why have the Western media and the small circle of involved mainstream scientists (e.g. Daszak, Fauci, etc.) been covering for China and vigorously dismissing any theory that the virus came from a lab?]

It seems to me, the virus was almost certainly made in a lab.  See the links at the bottom to Chris Martenson's analysis of the genomic sequences.  (Watch the videos.)

That said, the question remains, why have the Western media and the small circle of involved mainstream scientists (e.g. Daszak, Fauci, etc.) been covering for China and vigorously dismissing any theory that the virus came from a lab?  (For example, ZeroHedge got its Twitter account suspended just for being the first to report some Indian scientists' findings of possible genomic manipulation in the virus' creation.)

(We know that the Western mainstream media are not simple reporters of facts.  They heavily attacked Julian Assange as 'a disgusting person' when the only crime the man had committed was exposing abuses by US politicians and military, exposures that couldn't be challenged on the facts.  They also failed to report that the Swedish women who 'accused Assange of sexual assault' admitted no assault took place.  In fact, why should Julian Assange's WikiLeaks even exist?  If a leaker has explosive material, why wouldn't they go to a 'reputable' established media outlet like the New York Times or Washington Post to get it published?  There can be no doubt in my mind that the mainstream media is key ally of the Western financial-imperial system of alliances.)

There seems to be no reason why these Western entities should, with one voice, cover for China's mistaken or deliberate release of the virus, UNLESS...

The Western establishment has been working with China to develop the virus.  There is much evidence of this (again, see the videos under the links,) including Fauci's sponsorship of 'gain of function' research in past years that explored how to manipulate natural viruses and turn them into...  something like the coronavirus.  (All of this should be a matter of public record.)

As they always say, ask first, who benefits?

The answer is, both China and the West.  They both suffer from the last stages of a financial asset bubble that needs to be deflated before a disorderly bust happens.  This bust would not only result in even more economic pain than today, but also point the blame directly at the modern system, with central-bank-money at its core.  This would endanger the power and prestige of all major political and financial elites of the world.  The virus is a way to deflate the bubble, reset the system by essentially wiping out the debt, but blame the economic pain on something other than the system's design.

Further (circumstantial) evidence of a co-operation includes the fact that, somehow, all major Western countries allowed the virus to spread until it was too late for containment, and had to shut down their economies.   Also, the repo market crisis erupted in September, and the Federal Reserve seemed unable to fix it once and for all.  This suggests something deep in the financial system was already broken beyond repair.  In addition, there was a Canadian lab which had a habit of getting its materials 'stolen' by Chinese (as Canada was not subject to strict post-9/11 controls over US labs.)  Its director suddenly died on a business trip to Kenya during the outbreak in China.

For details:

https://www.peakprosperity.com/coronavirus-are-our-scientists-lying-to-us/
https://www.peakprosperity.com/more-evidence-covid-19-may-not-be-natural/

[1918 - 1929: Strong Phase.]

What we have today is a pandemic, economic depression, and world war, all rolled into one.  We may become nostalgic for the old days when they came one at a time.

(I say world war, because we have multiple conditions that resemble or simulate war.  There is a geopolitical battle between the US and China that runs barely in the background.  There is a suspension of trade.  Free-market economic forces are on lock-down, and we're being asked to unite, sacrifice, and work for 'victory.'  Extraordinary regulation, surveillance, and control by the government are now conceivable even in the West.  Last but not least, if you're careless or unlucky, you can become one of the casualties, anywhere in the world.)

The key reason to doubt a return to any 'normalcy' is that, just as happened across the two world wars of the past, the world system is in the middle of a major transition.

History may be viewed as a series of strong and weak phases of the US-led world system.  (This is a simple but IMO effective framework for people with limited inside information, that is, all of us.)  During a strong phase, the system is confidently leading and imposing its will on the world.  During a weak phase, the system must retrench, re-organize itself, and transition to something different in order to survive and thrive again.  During this phase, extremely 'crazy' things always seem to happen.

1918 - 1929: Strong Phase.  This was a period of fixed exchange rates, but with the dollar beginning to replace gold as global reserves.  The supports for the system were US growth and financial strength, with Germany having decidedly been neutralized as a threat to the system by World War I.  The results were renewed globalization and a general condition of prosperity and peace across the West.

1929 - 1945: Weak Phase.  Financial asset values and economic demand collapsed and the dollar had to be devalued against gold.  Even this had to be coupled with a ban on private gold ownership in the US to keep the system stable.  To keep peace with a shocked and suffering public in the US, fiscal stimulus on a large scale was used, with limited effect.  Globalization collapsed and political extremism took root abroad under even worse economic conditions.  All of this, eventually, took a second world war to resolve.

1945 - 1971: Strong Phase. Another period of fixed exchange rates, but with the dollar totally dominating global reserves.  A major factor of stability was that the world had decided to give unconditional love to the dollar, in concert with the Bretton Woods foundational institutions, whose terms were dictated by the US as the biggest victor of the war.  Another major support was pulling a Western middle class into the winning alliance, with advances in educational and other social-democratic benefits.  This formed a strong political consensus in favor of the West's dealings with the developing world and the Soviet Union.  Financial-institution excesses were contained by strong regulation.  Globalization proceeded economically but not financially (but this proved eventually unsustainable.)  Even with the Soviet Union as a constant threat to the system, the result was a prosperity in the West that reached the majority of the public.

(I chose 1971 somewhat arbitrarily as the end of this period.  The system had been gradually weakening during the 1960s.  The US, as is human nature, took advantage of its strength to live beyond its means via the dollar system and its trade with Western Europe and Japan.  1971 was a symbolic end-of-era because, that year, a run on US gold by European governments finally forced the US to default on the dollar's convertibility to gold at a fixed rate.)

1971 - 1982: Weak Phase. In effect, the dollar was vastly devalued against gold, and the West entered a floating exchange rate system.  Financial assets performed poorly.  Economic pain was shared between stagnation and inflation, as the system adjusted to the reality of yet another loss of faith in its foundation, the dollar.  Support from the new petro-dollar system forced on Saudi Arabian rulers and other oil producers proved insufficient, and eventually the US had to endure a serious bout of high interest rates and recession to restore faith in the dollar.  This decade of 'malaise' also saw the loss of the Vietnam War, as well as the peaking of educational attainment by the US public.

1982 - 2000: Strong Phase The dollar advanced or held steady against gold.  Advertised as a return to free-market policies, Western bankers were invited back into the winning alliance, and the Western middle class 'invited' out.  Also invited in are developing-world producers and governments, in the form of full-blown globalization, with a big US asset bubble as side effect.  The fighting and winning of the Cold War also became a major support and boost to the system.  In particular, China's vast labor pool and cheap currency became one of the great supports.  Inequality and financialization (the buildup of financial assets and their values) had begun, but this period is remembered for the 'goldilocks' conditions of low interest rates, low inflation, and high GDP, in the West.  Most Westerners were at least able to enjoy stable or declining prices, as a result of globalization.

2000 - ?: Weak Phase. The dollar was 'devalued' against gold several fold.  Competitive devaluations among major currencies occurred (especially after the 2008 crisis.)  Major declines of asset values occurred in 2000-1, 2008-9, and 2020.  On the surface, low interest, low inflation and decent GDP numbers were maintained in the US, but without the energetic zeitgeist of the previous period.  Economically it's been a period of muddling through, with Western central banks loosening money to stave off crisis and buy time, while blowing serial bubbles.  Geopolitically and politically, the US-led system suffered a series of setbacks, as against Iran and Russia, with China eventually becoming hostile (though after helping with post-2008 crisis management) and with unhelpful nationalist and isolationist populism growing in the West itself.  In 2020, a coronavirus global pandemic shut down the entire economy.

Since this is the stage set for the 2020 pandemic, it's hard to see how things can 'return to normal' after it completes its course.  At best, the authorities will patch things up as they did in 2001 and 2009, for some more muddling through.  But this will only further increase the imbalances currently in the system (one of which is that inequality and financial instability have been reinforcing each other,) and set the stage for an even bigger crisis, perhaps a decade down the road.  (We note that each crisis has been worse than the previous one during this period.)  Since part of the core nature of the Western system is that the elites are incentivized to destabilize their own system, the more imbalance there is, the more perverse the incentives will become, and the bigger the next crisis.

However, an alternative outcome after 2020 is that an entirely new global order will emerge.  Any economic pain and authoritarianism necessary to transition to this world can be blamed on the pandemic.  With China, Russia, and other more or less independent centers of power likely still standing, the new arrangements will likely be negotiated rather than dictated.  I can only speculate that the following are possible features of a new 'strong phase:'

For the economy, technology will take center stage as the new engine of growth.  This will both preserve the West's pre-eminent seat at the economic table and have the 'desired' side effect of enabling more regulation and control by the state for maintaining the system (see below.)

For money and finance, there will be a big move towards a cashless system in the West, which will enable meaningfully negative interest rates -- a major new tool for authorities to deal with crises in the future.  In addition, it's possible that the totally fiat money system since 1971 will be blamed for the financial instability since then, and overt exchange-rate targets (or ranges) will be set against non-state monies by Western central banks.  Either way, there should be a big 'devaluation' against these monies to stabilize the system to start with.

In politics, surveillance and regulation by the state (to keep the system stable) will become stronger and will be rationalized as necessary for avoiding economic pain from a crisis (as evidenced by the severe economic pain from the pandemic.)  This will be stronger in China and Russia than in the West, but all countries will go in this direction, with the West having 'private' entities like Google and Facebook do this work.

Geopolitical developments are difficult to predict at this time.  The only guess I can make is that major rivals of the West will be handled more or less peacefully for a number of decades, until India has matured enough to take over as the new superpower while allowing the US and Europe to have a soft landing.  All efforts will be made to avoid Chinese world leadership, as it will likely not be friendly enough to the West to allow a gentle decline.

So, a century's pattern reveals that the system is inherently unstable.  When the system is strong, it tends to allow itself to be exploited by its beneficiaries, until eventually it becomes unstable and weak.  At those times, it tends to try out different things or bide its time, until it finds the right winning alliance and becomes stable again, for now.  Thus, not only does it alternate between strong and weak phases, but each period has quite different features from all the others (even when comparing one strong phase against another.)  The severe dislocations we're experiencing now strongly suggest we are at a key transition point.  In any case, this will be a good opportunity for the system to make a transition to a new, stable phase, since any economic pain of the transition can be blamed on the virus.  Certainly, the serious imbalances of 2019 and the decade before did not make for stability.  There's every likelihood that we will not return to that period.

[Deflation/default]

Think of the modern system as a theatre whose management has sold more tickets than there are seats in the house.  Our rulers benefit primarily from issuing money and debt at no cost, so the incentive for them is usually to issue more.  (As a result, there are more claims to wealth than actual wealth, i.e. goods and services, at current prices.)

During 'normal' times, the ticket holders are confident that they can always get seats with their tickets, the show is continuous, and they don't all try to go in at the same time.  However, when that confidence is broken by some event, exposure, or whatever, the theatre manager must make difficult choices:

Deflation/default: invalidate (or devalue) certain types of tickets.  This is probably the most painful approach: financial markets crash, 'wealth disappears,' and people lose jobs.

Inflation/devaluation: make 50-minute tickets good only for 30 minutes.  This is probably the least painful, as it spreads the pain evenly and proportionally according to wealth.  But this will be management's last resort because it exposes the true nature of system for all to see.

Financial repression: announce a 'temporary' ban on entering the performance hall.  We must be flexible with moral principles at critical times!

Imperialism: make other theatres honor our tickets.  Give them a share of the benefits, or threaten them with 'regime change,' or both.

Economic growth: build more seats.  Unfortunately, growth is not directly under the control of our rulers.  Companies must come up with new products that the public will pay money for.  Sometimes, ideas just aren't there.  (Even worse, during times of big asset bubbles, with their concentration of artificial wealth, new products tend to appeal only to the lucky.  Demand for these products disappear quickly when asset values go down.)

That's basically it.  Those are the only choices.  Historically, Western countries tended to spread the pain among multiple bad choices, to make each approach less draconian.

So, it would be a mistake to think that deflation and default would be spared their fair share of use.  The central banks will of course make a show of using monetary 'bazookas' to 'save' markets and the economy.  The reality is that avoiding asset deflation entirely would put too much of the burden on the other approaches.  When a virus can be blamed for economic pain, there's all the more reason in favor of deflation.  Yes, Fed action will save us from the worst structural disasters, but there will be deflationary pain.  (Don't buy stocks yet!)

In the early 1930s, the Fed did nothing as banks collapsed, people lost their deposits, and the US entered the worst of the Great Depression.  For the 2008 crisis, the Fed's Kashkari has just admitted the Fed didn't do enough to ease the pain, even though, just as today, the Fed made a show of rescuing the economy.  We shouldn't expect this time to be different.

Ultimately, theatre management must greatly reduce the imbalance between tickets and seats, for the sake of long-term stability.  The virus provides a great opportunity to do this, by receiving the blame for any pain and disruption.  Making rich holders of stocks and bonds pay part of the price will be too tempting to ignore.

Scientists have found HIV fragments in the virus DNA that seem unlikely to be naturally evolved.

We know that this virus has certain unprecedented behaviors, like long incubation period, asymptomatic transmission, ease of transmission and severe re-infection that seem designed to evade containment.

And FWIW, the White House announced an investigation of the virus as a weapon.

But, if you think that the shenanigans stop with the Chinese government, think again.  Apparently, a Canadian lab (ie one exempt from strict post-9/11 rules on securing bio agents) has been in the habit of getting its vials 'stolen' by Chinese.  Strangely, its director just died while attending a conference in Kenya.  For details and background, see this link.

To make the plot even thicker, it seems the virus predominantly targets East Asians who have a far higher proportion of ACE2 receptor cells than Caucasians, Africans or Arabs.  (It's through these receptors that the virus binds to and attacks human cells.)

I don't know anything beyond the public information.  What I can say is:

Objectively, at the end of the expansionary phase of the asset-inflation cycle of the modern financial and economic system, it benefits the long-term stability of the system to have a reset or re-calibration.  Such an event is always painful, at the very least transferring wealth from one set of people to another.  But if it can be blamed on something other than the core nature of the system, then it's a net benefit to the system.  (This applies to the Chinese economy, all other economies, and the global economy as a whole.)

Please see this for background.

No, Facebook's new cryptocurrency, Libra, is not a new 'world currency,' as The Economist proclaims, nor a way to supplant (or protect Facebook and users against) the world's fiat money, as Bill Blain seems to think.

It's not even a real cryptocurrency whose value (in theory) stands on its supply and demand.  Libra's value will be pegged to a basket of dollars, euro, etc. by the Central Bank of Facebook.

What it will be is a new colony of the Western empire.  A country can, these days, be a sphere of activity, not just a geographic area.  Libra may be transacted across borders, but it is no universal money if its value comes from activities on Facebook and is issued and backed only by the Central Bank of Facebook.  (The Central Bank of Facebook stands ready to redeem each coin for a basket of national currencies, at a fixed rate.)

Why 'colony?'  Because what Facebook will do is precisely what official colonies of Britain and unofficial ones of America have done for centuries: use the value of real products and services produced in the colony to help support the paper money issued by Britain or America.  (To protect itself against the monetary policies of the 'mother country,' a colony must sell exports to buy and store reserves of the paper currency of the 'mother country.'  But, yes, you guessed it, not gold or silver.)

In any real sense, Libra will never be 100% backed by reserves of 'real money,' (as The Economist calls national currencies.)  Where would the fun be for Mark or colonial or banana-republic elites?  Why would you bother issuing a money if not to create wealth out of thin air?

If Libra becomes a magnet drawing new paid activity and associated software systems to Facebook, its reserves of dollars and euro will have to grow as this new economy grows.  I.E., more demand for dollars while Mark and software developers are doing all the work.  If, surprise surprise, the Central Bank of Facebook issues too much Libra and confidence collapses, Mark will take all the blame.  If anything, the demand for dollars will only go up, as users scramble to sell Libra for dollars and/or Libra is officially devalued, so the same dollar buys more real work.  (We've seen this movie before -- it's called the 'developing world.')

Libra won't be a brave new world; it goes way back to the old and enduring world that the top elites, if not everyone else, know well.  It's as if either a new Japan or a new banana republic has arisen from the sea, ready to serve the West with its teeming millions.  My quick guess is that it's more banana republic than Japan, judging by the scandals that have already plagued the company.  But who knows.  Holders (HODLers?) of state-free assets need not worry.  Things like this happened time and again over the last century.  State-free assets have endured.

P.S. Sorry if you think the Central Bank of Facebook exists, reading the above.  No, officially it will be a 'consortium,' where the Facebook delegation will be 'totally separate' from Facebook itself.  Right.

What we despise are the socialist countries of Cuba, the Soviet Union, China in the socialist days, etc.  We think that we have basically free-market, democratic systems in the West.

I invite everyone to think again.  I make the case that, while the above countries lived under economic socialism, we live under financial socialism, and that the results aren't all that different, fundamentally speaking.

Socialism depends on the ignorance of the people to survive.  Check and check.

It depends on the silencing of dissident voices.  Check and check.  Time and again, my discussions with economists suggest it's not that they don't know the system is rigged.  They don't want to know.

Central planning, whether in the economy or in money, is marketed as giving power to benevolent experts to act for the public good, with the reality of taking from the many to give to the few.  Check and check.

Periodic purges or revisions tell us the pain we're experiencing is due to the failure of past leadership and ideas.  Somehow, the system is fine but the people never seem to measure up.  Check and check.

Inequality is institutionalized.  People with centralized wealth and power tend to pass them to their offspring.  What we have, in effect, is modern feudalism.  Check and check.

One way or another, violence is the ultimate guarantor of the elites' power.  Mao: "political power comes from the barrel of the gun."  Paul Krugman: "the dollar is backed by men with guns."

Democracy is allowed as long as it only makes the system look good.  Socialist countries had real elections only at the town or village level.  The West has real elections only at the circus level.  Check and check, for filling positions of real power by 'indirect democracy.'

This is not to say there aren't major differences between 'capitalist' and socialist countries.  There are.  But not in a fundamental way, and not in the long run.

Sadly, it's true worldwide that those with power will not give it up easily, and certainly not for the good of the society at any time.  The only possible resistance, apart from self-education, is to cast a suspicious eye to every narrative promoted by the mainstream media, especially as it pertains to wars and terrorism.

It is here that the rubber meets the road, where our literal blood is spilled for the benefit of the elites.  It's here that we must be truly vigilant.

Did Western capitalism defeat both Communism and Fascism?  Yes.

Is the Western ruling class objectively superior to Communist and Fascist rule?  Yes.

Would the fight against Communism and Fascism have even been necessary if the West had lived up to its professed ideals?  No, because Communist forces rose in Russia by the Western-inspired bloodshed of World War I, and Fascist forces rose in Germany and Japan by the West's self-inflicted Great Depression.  But the sharp contradictions within socialism and Fascism sealed their fates as short-lived systems.

And we turn now to money and economics...

Will sound money replace fiat money?  I predict yes, though the next version of sound money won't be a declared gold or silver standard, but 'managed exchange rates' between state-issued money and a host of 'hard' monies, including cryptocurrency, which will amount to the same thing on the ground.

Is sound money objectively superior to fiat money?  Yes.

Will the fight against fiat money have even been necessary if the Western elites maintained a truly free market system?  No, fiat money arose because the Western elites had slowly painted themselves into a corner by financial inflation to benefit politicians and bankers.  Fiat money, or, more realistically, money backed by artificially cheap oil and artificially cheap goods from developing countries, was the short-term solution to keep the world system stable, and can only be a short-term solution.

The duality is interesting!

I wrote the following in a discussion about gold and silver standards on another board.  Enjoy!

---------------------------------------------------

Clear eyes, my friends, clear eyes.  Over the long term, judge the true nature of a system by its fruits, not by the words attached to it, especially those uttered by central banks.

Did the dollar and other state currencies retain their values in gold or silver?  No.

Did the bankers and politicians create lots of money and debt under the standards?  Yes.

Did the gold and silver standards suppress the currency price of precious metals temporarily?  Yes, by definition, the currency price of gold/silver was fixed.

Did the elites keep installing this system over 300+ years, knowing it had 'failed' and would 'fail' everywhere?  Probably.  England's financial inflation was out of control less than ten years after the Bank of England was founded in 1690.  (It's not as if the elites have been inexperienced!)

Given this history, you have to forgive me for engaging in the wild, conspiracy-theory-nutsy speculation that, juuuuuuuuuuuuust perhaps, the elites used the metallic standards to prop up paper money and debt so they could create more of them.

Gold and silver standards did work as designed, however, when, after the bursting of a financial bubble, it was time to transfer most of the pain to the public, and away from the elites who had created the bubble in the first place, by choking the money supply, in the name of safeguarding the gold/silver standard and upholding the moral commitment to redeem paper for the same amount of gold or silver.  (Their golden goose system would have lost credibility fast if they had chosen devaluation/inflation as a response to the crisis -- i.e. they would have paid the price for the bubble.)

Absolutely brilliant.  (In reality, 'fiat money' is not worthy enough to tie the shoes of the gold standard, from the elites' point of view.  That's why, most likely, it won't last, and we're going back to something like the gold standard, except with multiple 'hard monies,' including Bitcoin.)

And true, there is no free market in money in this world.  That was my point (in response to the claim that the dollar is world reserve currency because of supply and demand.)

We should count ourselves lucky for being born in the narrow window of history when the elites lost control.  Do not lose the opportunity to profit spectacularly from it.

[are]

I wrote the following in defense of my thesis that something like the gold standard is coming back:

I was at first surprised to read that Thomas Jefferson saw that the state-bank elites would take wealth from the rest of the population by alternating inflation and deflation.  It was through much evidence and reflection that I saw how true it is.

The role of deflation is not just to protect the reputation of their system by keeping their money 'sound' (though that's very important to them.)  It's also to correct the distortions in the economy by re-orienting productive forces and sobering up the over-consumption in order to get the population ready for another round of growth and inflation.  (This all sounds reasonable until you realize that it was the elites who caused and benefited most from the inflation that caused the distortions in the first place, and the general public who suffer the most during the adjustment by deflation.)  Deflation is every bit as 'necessary' as inflation.

Whether gold standard or fiat money, the basic character of the system has never really changed.  (The elites didn't institute gold and silver standards out of the goodness of their heart any more than they did the fiat system!)  Even under fiat money, consumer prices in the West haven't risen too quickly, for most of the past 45 years.  (You could say consumer goods are a substitute for gold, for now.)  Also, under a (de-facto) gold or Bitcoin standard, inflation is possible to create, if the price of gold or Bitcoin is high enough.

There are major differences between hard-money standards and fiat.  The big forces that ended the gold standard over the 20th century were increased democracy and power of labor unions in the West.  This has tilted policies in favor of inflation, at least in the West.  You can see this clearly by how gold prices were flat over centuries from 1690, in Britain and the US, but rose 50-fold in dollars since the early 20th century.

In effect, what is going on is that the elites have been forced to placate the outer ring of their alliance, the Western voters.  They have been reducing the severity of deflationary pain in the West, in hopes of keeping these people happy.  A bigger share of the pain has been shifted outside the West.  The avoidance of painful but economically necessary adjustments in the West has made the countries structurally and temperamentally less productive, while, paradoxically, the supposed strength of these countries are at the heart of the power of the Western elites.

So you can see they have a fundamental problem on their hands, at this point.  You can argue that, one way or another, more painful adjustments must take place among Westerners, or the entire modern global system will be damaged, maybe seriously.  It may not be a totally done deal, but there are two major reasons now is a good time to impose this severity.

First, it's clear to anyone paying attention that all the financial distortions and boom-bust cycles over the last decades are heavily tied to Western inflationary policies.  To convince the educated of the need for 'sound money,' the elites will only need to unleash certain select truths to the media.  Second, the rise of 'populism' across the West provides both an indication of the long-term problems of inflation and a convenient scapegoat for the coming pain from deflation.  If markets crash and economies contract, it's because of the surface-level problems of Trump's aggressive policies, or Brexit, both of which are the embodiment of this 'populism.'  Or at least that's what the mass media will say.

Ultimately, the Western elites' power base includes the perception that they are uniquely friendly to free markets and property rights.  State-sponsored asset inflation simply can't go on forever, and a particularly nasty proponent for this, fiat money, might have to be rooted out.  Even though, as I mentioned, nothing is 100% certain, and there may be delays and bumps on this road, this is where I would place my bet.

[I wrote the above as a reply to a fellow poster on another forum who argued that the Western elites will never give up fiat money, which is the basis of their power by inflation.]

Please discuss!

I do not have direct evidence either way, but I have come to the conclusion that, if Bitcoin did not exist, the Western elites would have liked to create it in secret.  My indirect evidence includes:

- Bitcoin has not been killed by a combination of regulation, market manipulation, and propaganda after 10 years.  As turbulent as the price has been, Bitcoin has been an excellent long-term bet.  Whatever assault it has suffered, it always seems to survive.

- Bitcoin has taken demand away from gold and silver, which traditionally are the big threats against central bank money.

- If central banks secretly own lots of Bitcoin (we still don't know who really owns "Satoshi's bitcoins!") they will have the best of both the gold-standard and fiat worlds in the future.  (I will explain this when I have time.)

Today's inspiration comes from this piece about how antagonistic nationalism, a new method of mass communications, hard-ball international politics, etc. produced a terrible war, and might produce another.

I would like to look even deeper.

While the 1900s were at the end of the First Age of Globalization, we can argue that we're near the end of the Second.  Both periods of globalization amount to efforts by a declining global empire to continue to prop up the value of its issued money by shifting production to cheap-labor countries.  If you can buy cheap goods with paper pound sterling or dollars, you have confidence in the monies' value.

And the blow-back from that effort was the rise of a less-than-friendly rival power.  Back then, it was Germany.  Today it's China.

Antagonistic nationalism is a natural product of the end of a financial bubble.  While the elites of all countries jointly profited during the growth phase of globalization, the later fragility of the bubble meant these elites must now share the pain.  How to allocate pain becomes an endless international struggle, as witnessed by surface-level stories of conflicts over North Korea, the South China Sea, trade wars, etc.

Which brings us to the mass media and its reportage of reality, or lack thereof.  Before World War I, hatred of imperial Germany was fanned pretty effectively by a British media tycoon.  In this thought-provoking piece investor philosopher Ben Hunt argues that we humans are hard-wired to happily accept simplifying narratives of reality (that he calls 'memes' and 'the common-knowledge game.')  And the elites know this.  (This would explain why the US media covered the Russian/Assad atrocities in Syria more readily than the US/Saudi ones in Yemen at the same time.)

It's perhaps not surprising that the mass media and national rivalries reinforce each other to bring about a toxic cocktail of prewar conditions.

In my opinion, all of this is just politics and deception that are fueled by an increasingly fragile global financial bubble.  I would not get emotionally attached to the argument of any set of elites.  Let them fight their battles but keep us out of the war.  In the end, as they always say, just follow the money, and you'll find the truth.

[incentives]

Establishment commentators tend to blame every financial crisis on the "bad luck" of a whole host of factors coming together to create a "perfect storm."  What they "forget" is that the incentives of the modern system always drive the elites themselves to destabilize their own system.  Not sometimes.  Not most of the time.  Always.

They will say that the 2007-8 crisis was a combination of the US banking deregulation of the 90s, the US political agenda of moving poor people into home ownership, the poor financial oversight by the George W. Bush administration, the 'global savings glut,' the existence of a shadow banking system in the US, the loose monetary policy in the aftermath of the dot com bust, etc. etc.  All true.  What they forget to mention is that, if it were not these factors, there would be others (stock buybacks anyone?)  If it hadn't happened in 2007-8, it would have been later.

Only looking at the top of the world system, ie Britain in the 19th century and the US later, we can see that:

- There was a financial crisis in Britain roughly every 10 years from 1810 to the 1860s.

- The British Empire bought itself a couple decades by making gold the only money, and not silver.  (Thereby making itself rich at the expense of silver countries -- not unlike what the US might be doing with crypto-currencies today.)  But in 1890 a financial crisis in London made it necessary for the Bank of England to be bailed out by gold from other central banks, the first time in history.

- Soon after world-leader status was moved to the US, in 1929-31, the Great Depression started with a series of financial crises.

- Though the bloodshed of World War II bought a few decades of stability under the US, it was forced to renounce its promise to allow foreign governments to redeem every $35 for an ounce of gold, in 1971.

- The 1970s global crisis of confidence in the dollar forced the US to pay 20% interest on 30-year Treasuries by about 1980.

- The US stock market crashed in 2000.  By 2002, the NASDAQ had lost 78% of its value at the peak.

- The entire world system teetered on the brink of collapse in 2008.

Remember that, we're only talking about the top of the world system, which is the most stable, by design.  (Paper pound sterling in the 19th century and dollars in the 20th were the world's top reserve currencies of their day.  Every effort is made to make other countries fail first -- e.g. the emerging markets crisis of today helps protect the value of US money and debt.)  Further down the ladder, there were many more crises, plus conflicts and wars.

So the long view reveals the truth.  And the truth is that you can't escape the perverse incentives that make individual members of the elites want to profit or prop up the system today by storing up even more trouble for future elites.  These incentives come directly from the system's core nature of theft and deception.

If we listen to mainstream economists, the reason for recurring crises is that, for some reason, people just want to keep losing money.  They keep chasing risky assets whose high values have nothing to do with being propped up by state-bank-elites.  Right.

This system also punishes prudent people who put the most trust in its promises and its official narratives.  But we have a long-term defense: buy gold, silver, and Bitcoin!

It is of course no surprise that some among the big beneficiaries of the status quo will denounce Bitcoin and cryptos.

That is not what I want to write about.  The really interesting thing is what these three *didn't* say.  They didn't use the biggest argument against Bitcoin and cryptocurrencies, the new systems' biggest weakness.

That weakness is that cryptocurrencies are not limited in supply, as a whole.  Anyone can copy some code, rewrite some code, and 'create value' out of thin air.  This will dilute the value of current coins and can become no different from today's inflationary fiat money.  Unlike gold, the value of crypto is not protected by nature.

So these three VIPs threw everything they had against cryptos (including phrases like 'rat poison,') but forgot to use their biggest weapon!

Why?  My guess is that they've been directed by the elites to say bad things about cryptos (and trust me, the elites have plenty of leverage against people like these.)  The goal was to cool down public speculative demand for cryptos, at this moment, but not cause a big drop.  This would be consistent with my theory that the top Western elites are really behind cryptos, for their own reasons.

Today's real tyranny is in the realm of money, where it can hide and surround itself with a benevolent, free-market and free-trade loving facade.

But we don't have to go into financial minutiae to really understand the problem.  It's actually quite simple, when properly viewed.

In order to grow, the economy must take risks, that is, make investments.  But who is to say which investments are worth risking for?  If the financial markets were free, each success or failure would be borne by the person investing their savings.  These incentives would tend to encourage good investing, for simple self-interest.

Unfortunately, in the world we live in, these decisions are not free.  Financial markets are fundamentally manipulated by the control of money and core financial assets by governments and central banks.  The political and financial elites have the incentives to prop up optimism, because optimism raises the values of the money and debt they issue, thus giving them wealth and power.

This optimism is supported by all the tricks in the bag, and the mirage is bound to be exposed eventually, because of an entire scaffolding of perverse incentives within.

But the elites don't seem to worry: when the day comes, the deception can be supported with more application of state power, the top elites can be bailed out, the problem can be blamed solely on the current occupants of power, and/or the unpayable debts can be inflated away.  In the mean time, rake it in!

Most likely, not much of these drastic medicines will even be needed.  The average person won't really understand why they just can't seem to sell or find a job.  That is, most of the weight of the pain can be put on deflation, as happened during the Great Depression and the Great Recession.

In the final analysis, our world is not really different from a socialist control-economy, where the commissars proclaimed their undying commitment to do the best for the people, but enjoyed special access to the luxuries of life.  The exercise of power and the confiscation of economic freedom just occurs at a deeper level of the system.