Ali’s blog

Mostly quant stuff with occasional digressions

Terra Incognita

Posted by alifinmath on January 24, 2009

If I’ve been remiss in posting, it’s not because there’s been too little to post about; on the contrary there has been — paradoxically — too much to post about. The world is going through a tectonic shift; something corresponding to the end of one geological period and the beginning of another. And it’s not that something this gargantuan wasn’t foreseen — it was on the cards, at least in general terms — but rather that its exact shape couldn’t be forecast (at least by me). Now that we’re in this storm, I’m bereft of the usual slick analysis. The old tools and ideas simply don’t work; we’re in terra incognita and the old conceptual maps are useless.

What seems to be at stake — and I write diffidently — is the survival of a US-dominated political and military order. In a certain sense the economics — which everyone has been focusing on — is almost ancillary. And in fact it always has been. People keep referring to the present situation as a “financial crisis.” They are profoundly mistaken. This crisis was precipitated by the financial unsustainability of a certain political and military order. It’s the current viability of this order that is the real crisis. This order has sometimes been called “globalisation,” sometimes “neoliberalism,” and sometimes “The Washington Consensus.” This scheme has involved the use of a US-dominated financial system to cover growing US economic weakness, and to keep going a massive con on the rest of the world in order to keep both the US military power and its plutocratic elite in place; conversely, it has been to use military power to help keep the financial house of cards aloft by coercion (US strategy in the Middle East is the prime example). I’m oversimplifying, of course, and I’m not sure I’m being entirely clear. But this seems to me to have been the core of American “grand strategy.” And now it’s come a cropper.

I have no confidence in this new administration: behind the figurehead of the new president are the same shadowy figures, the same gray eminences. This figurehead of a president hasn’t the foggiest idea of what’s really happening and wouldn’t know what to do even if he had real power. I didn’t bother voting: the American system is a complete sham; the fix is in and we’re presented with two virtually indistinguishable candidates who agree on everything important (which is never open to public discussion) but make a great clamor about things which matter not.

I do not know what the administration is going to do: if it is seriously contemplating this public works project, it should realise it will not work. No more than Roosevelt’s New Deal did during the Depression. This is what we refer to as a “crisis of the system.” And there seems to be no easy way of thinking about it — our usual tools don’t work. In my humble opinion we have to look beyond mathematics, beyond finance, and beyond economics: these will confuse us and camouflage what is really important. We have to focus, instead, on military power and coercion, and on who gets what resources and by what means. Thus, for example, discussion of whether the US banking system is technically insolvent is beside the point. These paper financial losses have lost meaning today. What is at stake is whether the US-dominated order of resource appropriation can stay in place and whether this declining power has the power to be able to enforce its extortion. The financial system has been a front for a system of global exploitation — this latter is what is key. Nothing else.

Postscript: I just stumbled across this radio interview with F.W. Engdahl. The interview is not ideal in that Engdahl’s interlocutor is not well-informed but Engdahl speaks along the same lines as my post above. For those not in the know, I heartily recommend Engdahl’s book, “A Century of War.” I recommend downing a stiff drink first — it’s depressing listening.

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