The problem with sanctions

What people usually mean by sanctions is this: “If you behave contrary to my expectations, I will not trade with you”. A normal, expected answer to this is “Ok, suit yourselves, but good luck trying to heat your homes without gas, and trying to sell all those luxury goods in your oversaturated markets.”

What America means by sanctions is something else: “If you behave contrary to my expectations, I will not only not trade with you, I will also forbid you to use the agreed upon world reserve currency in trade with other countries, I will forbid international banks to do business with you under threat of blocking them out of the world reserve currency and payment systems, I will order financial institutions to confiscate your money, and forbid everyone to trade with you if they don’t want to share your fate.”

Basically, America is pressuring other countries to enforce their arbitrary sanctions, or else. This means that the sanctioned country can’t just exchange unpleasantries with America and proceed to do its thing with third parties; the third parties are threatened with exclusion from international financial system and trade, which is a dangerous thing if you have debt, and today everybody does; America controls the agencies that assess one’s creditworthiness, and if someone’s credit rating suddenly becomes “risky due to sanctions”, that would be too bad, wouldn’t it?

In a situation where the sanctioned country is militarily much weaker than America, it can’t really do much other than starve and resort to covert means of conducting trade. But in a situation where America tries to sanction a military peer (Russia or China), such sanctions are de facto a declaration of war, because it is much more effective to destroy America with military means, than to have your trade restricted, risking economic suffocation.

A question

There’s a financial asset that grew 17% over the last month, while another financial asset moved mostly sideways.

One of those assets is bitcoin, and the other is gold.

If you guessed that it was gold that grew 17%, congratulations, your brain is working properly.

 

A conspiracy theory

Let me formulate a geopolitical hypothesis.

In 2008, American strategic planners performed a stress test of the oil production capacities, and they found out that the production had peaked in Saudi Arabia and other Arab countries. This triggered an alarm, because if the markets kept growing, this would result in a mass panic when others found out in “free market” ways, and the result would be an exponential rise in oil prices, which would greatly enrich Russia and Venezuela, which had the greatest reserves. This could not be allowed, since those countries are America’s political rivals.

For this reason, they triggered an artificial and controlled market deflation, and they also started the anti-hydrocarbon propaganda in form of the global warming panic which demonized the CO2. Also, they pressured Venezuela into destruction, so that its oil reserves would remain mostly untapped, and America could trivially invade them and take those by force at a later date. Furthermore, they started the process of international isolation and pressure against Russia, because such a technologically advanced country could not be allowed to funnel the profits from its vast oil and gas reserves into advancement of their industry and influence in the world.

Since the Arab countries basically ran out of petroleum reserves, they were prodded into internecine wars which are meant to consume all of their financial reserves.

Ukraine was intentionally kept in a state of depleted, impoverished, decivilized, corrupt shithole in which openly fascist gangs control the political scene, like a festering wound in Russia’s underbelly, where America introduced increasingly provocative elements in hope to make Russia invade and introduce order by force, which would trigger international sanctions, and the situation would be kept in perpetual Afghanistan-like war by helping the resistance movement while Russia would bleed resources, which would cause its demise. This is why the Americans now look like a cat that ate a canary, because they think everything went according to their plan. If Russia didn’t invade, they would actually invade Russia from Ukraine. If Russia invaded, it would trigger a trap.

Preparations

This morning I wrote a lengthy article about preparations for the incoming shitstorm, but then I paused, reconsidered, and deleted the text. You see, if you waited until now to prepare, it’s too late. In theory, you might still manage to do something, like buying some food, cosmetic consumables, medications, filling up the car, stocking up on toilet paper in case you shit yourself, and so on, but things like that radiation dosimeter I bought – I don’t think you can buy it anymore, because it’s Russian, and Russia is blocked. I’m afraid that’s a sign of things to come – back ordered, not available in your country, not available at all, not accepting payment in your currency, not accepting crypto, website not accessible, website error, payment provider not working, bank closed due to excessive demand, bank not working because it fell below minimal legal requirement for reserves, and so on.

My message to Russians: your enemies hate you, but they hated you yesterday and the day before, and now at least you understand why your President and your government embarked on this course; don’t for a moment believe all this hatred and malice has anything to do with Ukraine, other than Ukraine being one of its minor instruments. It is now time to stay the course, and to pray.

Cascade collapse

People have been adopting leftist attitudes and allowing the leftists to assume control of governments and meta-governmental institutions for decades in the West, probably guided by the sentiment that the Soviet block collapsed, the cold war is over, communism is no longer a political threat, so what could go wrong, especially since the communists changed their appearance and started fighting for either the environment or women’s rights or gay rights or veganism or what not, instead of workers’ rights, so they stopped looking like the stereotypical communists.

I’ll tell you what can go wrong.

Communism is not just a political threat. It’s an ideological poison. It feeds off of narcissism that makes people think they are changing the world for the better, while they are just sabotaging a system that works, until it crashes, because there are too many artificially imposed obstacles to overcome. Introduce environmental laws that make companies change their processes, and say they will adapt. Ban or restrict certain products, and say the marketplace will adapt. Introduce artificial stimuli that helps defective products like the wind power turbines, and hinders superior products such as natural gas turbines and nuclear power plants, thus making something inherently defective into a dominant factor, and driving something inherently stable and efficient into extinction. Then introduce covid restrictions and lockdowns, and trade wars and sanctions to your main trade partners.

This world can now easily feed 8 billions of people, while it could barely feed more than a billion for most of its history. It could barely feed 3 billions in the 1970s. You know what’s the reason behind the difference? It’s the economy. Not science, not technology, not democracy and human rights, but economy. When the economy grows to a certain size, you create certain types of jobs that couldn’t otherwise exist. For instance, if you have a village of a hundred or so families, you can only have a few primary jobs – farmers, fishermen, a local merchant perhaps, and a blacksmith. Possibly a priest. You just don’t have enough interest for anything else, so no other business can have enough demand to stay profitable. Also, there’s not enough free time or energy anyone can devote to anything beyond survival, so even literacy is uncommon. However, if you grow the economy enough, like in the medieval Italy, you get people who build and maintain roads, people who maintain the rule of law, merchants and tradesmen of all kinds, and even artists and scientists, when there’s a sufficiently large wealthy ruling class that can afford to buy trinkets and keep a Leonardo or Michelangelo on hire, giving them enough time to work on unproductive things with no immediate benefit for survival. Extend this more, and you start developing precise mechanics, steam technology, then electricity and so on, and eventually you end up with everyone having a smartphone in their pocked, connected to a global information network, even if they are stupid enough to think the Earth is flat and use the device to argue this nonsense online.

The larger the economy, the larger percentage of jobs that deal with niches such as laptop repair, entertainment, or, in my case, making it possible for businesses to navigate various totalitarian restrictions imposed by the states upon the banking system in order to prevent anyone from being able to conduct business if some socialist busybody put their business type on some “high risk” list, and they don’t know how to navigate hundreds of forms in order to satisfy the anal needs of risk departments. There’s absolutely no way this could be a viable business model in anything other than a global dystopia, but it is because here we are.

So, if something breaks in an economy of this size, with so many jobs and business models that depend on exactly this level of intricacy and specialisation in order to be viable, and the environment changes enough so that they would have to re-qualify in order to do something else, you are basically playing a game of finding a critical threshold – if you mess up enough things, you no longer have a small percentage of people who need to adapt to the changing landscape; you have cascade failure, where you lose entire industrial branches, and thousands of businesses that satisfied various specialised needs on the market that no longer exist.

So, what happens when you mess things up enough so that the business can either raise the prices in order to survive, or just outright die? They will raise the prices. Then people with low income will no longer be able to survive, and the state will have to either print money or raise taxes in order to finance subventions. These taxes will put additional pressure on the productive parts of society which will then again raise the prices to keep themselves afloat, and with every iteration of this cycle some of them will price themselves out of the market, and an increasing percentage will switch to grey or black economy – basically, they will continue doing business, but will no longer pay taxes, or register with the state in any way, which will keep the economy running but force the state to either accept the permanently reduced tax income, or crack down on the grey/black economy and thus make survival of the population harder, and increase criminality of the entire economy, because they will introduce evolutionary pressure that favours the absolutely criminal and unscrupulous types. So, with several iterations of this you end up with the kind of dysfunction we had in the collapse of Yugoslavia or the Soviet Union, or in some shithole like Somalia.

At this point, the economy is no longer large enough to support anything sophisticated – no car industry, no airplane industry, no spaceflight, no merchant fleet, no microelectronics, no software industry, just piracy and armed robbery, smuggling, black market and subsistence farming. Such economy, extended globally, couldn’t support more than a billion people, which means that at least seven billion people would die. I say “at least” because this would create such a disastrous environment that the seven billion people doomed to die would first destroy and eat that one billion farmers who would otherwise have a chance, because the environment would initially favour the unscrupulous predatory types, who would be the last to survive, but who are also the least qualified to survive on their own once they destroy everybody else because they are inherently unproductive, so they would eventually die out.

That’s the future I see us progressing towards with every government regulation, with every restriction and lockdown, and when they say it’s all justified if it saves even one life, or reduces the CO2 output by one bit, I think to myself: “you damn fools, you will kill billions by trying to save thousands”. Economy is usually quite adaptive and reacts well to small changes and detriments, but when you break it enough, when you find that threshold of cascade collapse, there is no going back.

There’s all that talk about inflation, but what we’re seeing is not inflation, it’s contraction of the entire economy and the higher prices are the result of the reduced efficiency of the entire system, and my analysis says we are seeing the initial stages of the cascade collapse.