Western Economy, Explained

And this is why I enjoy reading Karl Denninger's The Market Ticker:

Oh boy, the imagery this conjures up....

"Just when the European recovery story looked played out, the European Central Bank sent out a new mating call to equity investors with a major policy package that included rate cuts."

You're going to get mated with all right.

The problem is that it's going to be in one of the holes that does not offer the prospect of reproduction.

Today's Western economy, in a nutshell.

This is why I think all the recent protestations of power are just a bunch of hot air. 

Following the Money

Despite numerous cogent analyses, and even frank admissions by former and current Imperial officials, indicating that their interventions around the world - and specifically in the Balkans - have been motivated by considerations of power, there are still some who maintain that the wars were all about the money.

This is a fundamental misunderstanding of the force driving politicians. Most of us normal folk want money because with enough of it (and how much is ever enough?) we think we can afford all the comforts of life we desire. But once you reach a certain level of power, money ceases to be an object. You don't have to worry about purchasing things; you can simply take them.

The other day an Imperial propaganda outfit revealed that Wesley Clark, the "General who led NATO’s campaign against Serbia in 1999" (that's one way of putting it) has asked Kosovo's government (sic) "for a licence to transform the country’s untapped coal reserves into fuel". Sure enough, a chorus arose: See, Kosovo was all about the ore, the oil, the mineral wealth!

No. Kosovo was about breaking Serbia, so as to conquer the Balkans and establish an axis with Turkey and the Middle East, while erecting a barrier around Russia. All ancient geopolitics, really. Any potential profit for Empire's camp-followers was merely icing on the cake. But the cake itself is hegemony in Eurasia.

The following is adapted from two emails sent to me by an astute reader, familiar with Balkans business deals. I won't reveal his name; suffice to say I have full confidence he knows what he's talking about.

The phrasing "License for Oil" is a bit deceiving. If you look at this API article (which can be read in full for free) then it seems that his company is seeking a license to 1) explore for coal, and, if found, 2) convert coal into gas and 3) convert gas into synthetic fuel ("oil").  If you look at the website of his company, Envidity Inc., you will see that they are already developing a coal-to-synfuel project in Mongolia, where they have obtained an exclusive license for coal extraction in an area of 774 sq. km.

On their page "About Us" you will see that they do not hide their association with Wesley Clark, and they are not entirely ignorant of his glorious military past: "...In his last assignment as Supreme Allied Commander Europe he led NATO forces to victory in Operation Allied Force, saving 1.5 million Albanians from ethnic cleansing." [!!!]

Looking over their website from a business point of view, it is clear that they are a bunch of experts with an idea, but no money or financial backing so far. They are betting everything on the theory of "peak oil"...  In addition, Kosovo's energy and transportation infrastructure is atrocious (probably not much better than Mongolia's), so unless the energy to run the conversion process will come from the coal itself then their facility would be a net consumer of electricity from the Kosovo power grid, and Kosovo is already a net importer of electricity, I believe.

Anyway, the thing seems to me like a pipe dream. Even their Mongolian project so far is merely at the stage of obtaining rights for the coal, and these people do not look to me like people who know about financing, building, and operating large chemical plants. (And they seem to be saying that this project would provide royalties to the Kosovo regime of €300 million/year, which implies sales of billions of euros per year, which would need a very large plant.) So unless we see them first succeed in finding someone with the pockets deep enough to backstop a construction project of a billion or two euros in Mongolia, we should conclude that they are just dreamers.

Sure, coal is known to exist in Kosovo, and in fact it is the only source that they have so far for producing electricity. And sure, there exist technologies to convert coal into gas and then into liquid. But these technologies are so expensive that I am not aware of any such plants operating at the present time. Here is an article posted yesterday about such a plant that is going to be constructed in West Virginia: this plant, which will produce 18,000 barrels of synfuel a day, is expected to cost $4 billion, so you can imagine how much Wesley Clark's plant would cost that "could eventually produce up to 15.9 million litres (100,000 barrels) a day". And no matter how many NATO troops may be available for free to guard their facilities, if they employ any of the local people then they will face horrendous problems with theft, corruption, careless maintenance, and so on.

The important thing is that due to this depression almost no projects of over €250 million are moving forward anywhere in SE Europe, and this would be a project of over €1,000 million. And it is entirely a gamble on "peak oil". In addition, the project would be in Kosovo, and I have the impression that no significant infrastructure, industrial, or energy project has moved forward in Kosovo since "independence", not even wind parks or hydro plants of €5-50 million, much less something of €1,000 million.

A few months ago I did some research, trying to find any register of "environmental impact assessments" (EIAs) in Kosovo. I found that the Priština regime did indeed publish a very rudimentary EIA law back in about 2004, requiring significant projects to file EIA studies and obtain EIA decisions. But I found no evidence at all - even in the Kosovo Official Register - that any such filings or decisions had ever been made.  I think to date it is all merely hypothetical.

More attractive than the coal would be the minerals, since the mountains of the Balkans are rich in all kinds of minerals, and the highest mountains - around KosMet - have some of the most exotic minerals. But if the Trepča mine complex is almost completely idle because no foreign investors have been willing to step forward, you can imagine that for an economically questionable project like coal liquefaction it will be harder still to obtain money from abroad.

So you see, Clark's project is a pie in the sky. It is much more likely, in my estimation, to be a front for some serious money-laundering than ever to actually produce any fuel. I suppose Clark figured he'd never be chairman of the Joint Chiefs, so he's settling for the next best thing, trying to cash in his "popularity" to profit from a snake-oil scheme. It's a long way from a self-styled noble knight saving the Albanians-in-distress to a vulture picking at their refuse - but I can't say I'm particularly surprised.

Follow the Money

In the latest installment of the saga of Ejup Ganic, we read he was bailed out by "Diane Jenkins," born Sanela Catic, "former Bosnian refugee who became the wife of Britain's highest paid banker." Forgive me if I doubt the account in the Daily Mail that gives her middle name as "Dijana"; Bosnians, whether Muslim or Christian, simply don't have middle names.

Seriously, you can't make this stuff up. A mystery bottle blonde bombshell bails out the war crimes suspect, only to be revealed as a poor little refuge girl who struck gold by becoming the bride of London's richest bankster? Hollywood, eat your heart out.

While we're on the subject of money, here's something I've been meaning to mention for almost a month now, but never got round to. You see, frantic clamoring by investors in the Bank of Collective Serbian Guilt (hat tip to Chris Deliso for this memorable phrase) to have the "international community" get involved in Bosnia again is always justified by the alleged necessity to impose reforms and create a "functional state". They won't deny that Bosnia has sucked in enormous amounts of foreign aid (though they won't mention it either, unless pressed), but their explanation is that all of it was wasted because those evil Serbs (who else?) are blocking the central government from functioning properly and making the best use of it.

The only problem with this is that in Bosnia itself, centralization is championed by people who have by far the most abysmal record of governing their own affairs. So when they demand they get to govern everyone else's, why the surprise when everyone else is not exactly inclined to agree?

Let's leave aside for the moment the question of values and principles, and the paradox of federated and subsidiary governments such as the UK, Germany and the United States of America (or should that be United State?), whose representatives want for Bosnia a degree of centralization unacceptable in their own countries. And let's not dwell at this point on the fact that the de facto international protectorate in place since 1996 has provided a powerful disincentive for Bosnian communities to actually work out the differences over which they waged a war and continued to bicker about after the armistice. The fundamental issue at stake is whether the communities can live together in peace, or if one would try to lord it over the others. When you have three communities deeply mistrustful of each other, the very last thing you want to do is give them a powerful central government to fight over. Yet that is precisely what the Empire is trying to do.

Of the three communities that live in Bosnia, only the Muslims desire a centralized government. In part, this is because they believe Bosnia ought to be a nation-state, with them as the "nation", while Serbs and Croats are simply interlopers with "spare homelands". They also believe their suffering during the war entitles them to things. But beneath the rhetoric and emotions, this agenda is also driven by a very real financial motive.

You see, the Muslim-Croat Federation is broke.

During the war, the Islamic world sent countless amounts of money to the regime of Alija Izetbegovic, to support the holy war against the alleged "genocide" of Muslims at the hands of Serbs and Croats. Very little of that money ever reached the Muslim civilians; some was spent to equip the military, but most was simply appropriated by Izetbegovic's cronies. After the war, a river of financial aid came from the West. It was calculated at one point that Bosnia had received more foreign aid per capita than all of Western Europe under the Marshall Plan. But while the Marshall Plan funds went into resurrecting the economy, the Bosnian aid was like pouring water into the desert. It simply vanished.

Oh, some of it went to rebuilding the war-torn housing and roads. Much went to a plethora of non-governmental organizations organizing seminars about tolerance and peace and whatever. A lot went to fund elections every year, then every two years, or support a gargantuan bureaucracy within the Muslim-Croat Federation (eleven sets of governments. ELEVEN!). Some surely ended up paying for a host of new mosques and their imams. The rest lined the pockets of government officials and "businessmen" who became tycoons thanks to government connections and support. But hardly anything went into producing anything of value. Bosnia had a lot of industry prior to the war. Now it has almost none.

As governments throughout the world are becoming aware, it is easy to come up with new welfare and entitlement programs when the money is flowing in. But what do you do when it dries up? Cutting the entitlements can often result in angry mobs in the streets.

The Federation government was reminded of that in October 2009, when a host of war veterans shut down the capital for a day, protesting the announced 10% cut to their benefits. Besieged, the government caved in to their demands, even though the cut was required by the IMF as one of the conditions for a new loan that would go towards servicing the budget obligations. Yes, you heard right - Bosnia is borrowing money to cover welfare bills.

This isn't to say that the Serb Republic is in a stellar shape. But it has a more sensible tax structure and isn't being dragged down by welfare payments. For years, Muslim politicians (Croats have very little say in the Federation) bribed their voters and lined their pockets with someone else's money. Now that the money spigot is drying up, they can't cut back on the bribes, or the masses will get nervous. So they want to punt the problem up to the central government. No doubt they plan to have it distribute tax revenue "fairly". And not surprisingly, the Serbs and Croats are having none of it. Their refusal is neither selfish nor spiteful, but rather a rejection of this scheme for plunder - robbing Peter and Paul to pay Mustafa, if you will.

May as well ask "Diane Jenkins" and her bankster husband to bail them out.

Already Too Late?

Continuing the chronicle of warnings and predictions pointing out the untenable situation of the Empire, here's what Chalmers Johnson, author of "Blowback", "Sorrows of Empire" and "Nemesis, told a reporter of the San Diego Union-Tribune today:

"If we cannot cut back our long-standing, ever increasing military spending in a major way, then the bankruptcy of the United States is inevitable. As the current Wall Street meltdown has demonstrated, that is no longer an abstract possibility but a growing likelihood. We do not have much time left.”

The Johnsons, it's fair to note, are unencumbered by children or stocks, two common articles of faith in the country's prosperity. Johnson's UC pension is secure. He can afford to cast a cold eye on the future.

“It's possible that it's over – and there's nothing to be done,” he told me with a ghost of a smile.

It's anything but "fair" to note that Johnson lives on a "secure" pension (how much will it be worth if and when the US dollar follows its Zimbabwean cousin?), or that he and his wife are not "encumbered" by children. Matter of fact, belief that children are a burden probably has a lot to do with the overall decline of the Western civilization - but that's another topic for another time.

None of this should detract from the very real possibility that the Empire has already driven off the cliff, and that the "stimulus" and the Great Socialist Agenda amount to pushing on the accelerator pedal while in free fall.

Wishful thinking or fact? We'll find out soon enough.

Down to One Question

One can write a dozen essays and argue oneself hoarse over the merits of market economy and still get the ignorant response typical of most people, that governments need to "regulate" the market else it "fails."

I can't count the number of such situations I've found myself in over the past decade or so, and I wish I had this pearl from William Norman Grigg (Pro Libertate), published today on LRC:

Obama is a reasonably bright fellow. Somebody he respects – assuming there is any great enough to command his attention and rebuke his errors – needs to ask him this question, and compel him to answer:

"If the key to prosperity is a centrally planned economy fueled by fiat currency, why isn’t Zimbabwe the wealthiest nation in history?"

Yes, indeed, why not?

As Worthless as Dollars

Here is what James Grant wrote in the New York Times on October 26 this year, commenting on the choice of Ben Bernanke as the new Fed Chairman:

"...the post-1971 dollar is purely faith-based. Not since the Nixon years has a holder of dollars had the privilege of exchanging them for a statutory weight of gold. Rather, the dollar is a piece of paper, or electronic impulse, of no intrinsic value. It is legal tender whose value is ultimately determined by the confidence of the people who hold it."

If faith can make dollars valuable, it stands to reason that lack of faith can make them worthless. Something to ponder.