On US Isolationism, Expectations for the Post-US World Order

[Heathen Hammer]

It appears the coordination between the emerging Axis powers has only grown stronger amidst the present crisis. Meanwhile the West continues to circle the drain, hindering any efforts at common defense. Will the democratic world order become a casualty of this disease? Time will tell, but it appears that if anything, the virus has dramatically accelerated existing geopolitical trends.

When did Russia say that it was an American bioweapon?

[Lord Thesaurian]

Bowing to heavy pressure from Beijing, European Union officials softened their criticism of China this week in a report documenting how governments push disinformation about the coronavirus pandemic, according to documents, emails and interviews.

Worried about the repercussions, European officials first delayed and then rewrote the document in ways that diluted the focus on China, a vital trading partner — taking a very different approach than the confrontational stance adopted by the Trump administration.

https://www.nytimes.com/2020/04/24/w...ronavirus.html

The global reach of the Politburo advances unabated, even in the midst of a historic crisis for which it is directly responsible. When the US ultimately fails to convince her allies to unite against Red China, it will cap decades of consecutive, high profile foreign policy failures in the defining moment of an otherwise slow malaise.

[Heathen Hammer]

The global reach of the Politburo advances unabated, even in the midst of a historic crisis for which it is directly responsible. When the US ultimately fails to convince her allies to unite against Red China, it will cap decades of consecutive, high profile foreign policy failures in the defining moment of an otherwise slow malaise.

So, just earlier you claimed that Russia said that coronavirus is American bioweapon. Did you retract your claim?

[Akar]

https://www.washingtonexaminer.com/o...-and-heres-why

https://www.ccn.com/many-russians-th...n-coronavirus/

https://www.polygraph.info/a/russia-.../30402622.html

https://foreignpolicy.com/2020/02/14...isinformation/

[Heathen Hammer]

None of those articles really quote a single Russian official making such claim. I guess nothing distracts the public from the current failure of globalism and neoliberalism then some good old Rusophobia.

[Akar]

Would you like to go ahead and move the goal post again, too?

[Heathen Hammer]

Would you like to go ahead and move the goal post again, too?

What goal posts did I move? The article posted in #98 claims that Russia is stating that US was behind the coronavirus. The articles you posted show that... there are social media posts in Russia that say that. Since when some random dudes social media posts reflects the official position of a whole nation? At the very least it would require a government official to make such a statement.

[Lord Thesaurian]

The Federal Reserve has unleashed what's frequently been called a bazooka in its efforts to calm markets. Its next step could be to go nuclear.

Should conditions on Wall Street deteriorate significantly, the central bank could go where it's never gone before: to passively intervene in the stock market for the first time ever, according to market analysts and economists.

The Fed already has unloaded an unprecedented level of ammunition against the tumult brought on by the coronavirus, so doing more would take it even further into uncharted waters.

However, interviews with a variety of market pros over the past week showed that the idea of the Fed venturing into the stock market seems anything but far-fetched. The Fed would need congressional permission to extend its operations, but it already has received wide latitude from the Treasury Department through emergency provisions in the Federal Reserve Act.

https://www.cnbc.com/2020/03/29/what...us-crisis.html

We may be approaching the end of capitalism as we know it. If the US, the standard bearer of market capitalism, directly undermines its own financial markets with de facto state intervention in order to soften an economic downturn, there will be considerably less daylight between the West and planned economy of Red China; certainly too little for my taste. The US economy is already running on a credit card and the stagflation resulting from dumping trillions into the economy as a short term signal boost for financial markets will weigh on growth for decades to come. How much longer can the ballooning power of the state borrow reactionary band aids at the expense of the very institutions upon which the state relies?

[Heathen Hammer]

For a second there, I thought that they were actually going to nuke Wall st. and got excited.
But yeah, the problem is that Fed is an anti-market anachronism and should be abolished. And big banks should be allowed to fail. When this happens, they will simply end up being replaced by other banks, as per free market competition. That way road to recovery is much more direct then continuation of the current practice.
Also you got any of them sources on Russia officially stating that coronavirus is an American bio-weapon?

[Mayer]

The world is slowly moving towards the direction of multipolarity, but Great Powers(like the USA for example) will still try to divide the world in spheres of influence.The so-called authoritarians don't have much in common, China is a communist dictatorship, Iran is a islamic republic and Russia is a presidential republic... like the USA, they have nothing in common other than being rivals to the US/enemies of US hegemony.

The Coronacrisis hits the liberal west harder, because the global marketplace/good chains are breaking apart and the service sector (like tourism) is crushed, also authoritarian measures like quarantine and quick response are prefered.

We may be approaching the end of capitalism as we know it. If the US, the standard bearer of market capitalism, directly undermines its own financial markets with de facto state intervention in order to soften an economic downturn, there will be considerably less daylight between the West and planned economy of Red China; certainly too little for my taste. The US economy is already running on a credit card and the stagflation resulting from dumping trillions into the economy as a short term signal boost for financial markets will weigh on growth for decades to come. How much longer can the ballooning power of the state borrow reactionary band aids at the expense of the very institutions upon which the state relies?

Fiscal policy is overrated, the state needs to calm down the public. If lifebuoys are necessary for small businesses and low-income households, so be it. The US national debt was ballooning because of high military spending and a trade imbalance. It's not stagflation, it's complete market failure: loss of supply and demand.
If the US can only think in ideological terms, then Red China will come on top.

[Love Mountain]

We may be approaching the end of capitalism as we know it. If the US, the standard bearer of market capitalism, directly undermines its own financial markets with de facto state intervention in order to soften an economic downturn, there will be considerably less daylight between the West and planned economy of Red China; certainly too little for my taste. The US economy is already running on a credit card and the stagflation resulting from dumping trillions into the economy as a short term signal boost for financial markets will weigh on growth for decades to come. How much longer can the ballooning power of the state borrow reactionary band aids at the expense of the very institutions upon which the state relies?

Hardly end of capitalism. Intervention for the sake of market stability is a well-accepted tool within the capitalist toolkit. Markets don't exist without States, and States are justified to use coercive measures in order to stabilize markets. Stagflation is unlikely to happen, and there is almost zero inflationary pressure in a recession economy. What do firms do when the economy is either contracting or barely growing? They slash prices, it doesn't matter how much money the financial system can loan out, prices are dictated by both demand and supply.

Short term monetary markets are dictated by velocity of money, not by the total money supply. In the long term, the massive expansion in the money supply will be curved either forcibly by the Fed, or by the gradual expansion of the U.S. economy and demand for USD. Just like in 2008, the people blowing the alarms on inflation are blowing them at the wrong time without looking at the bigger picture. Why would aggregate prices rise when people are saving money, firms are not hiring, and the government is barely spending?

[Lord Thesaurian]

The world is slowly moving towards the direction of multipolarity, but Great Powers(like the USA for example) will still try to divide the world in spheres of influence.The so-called authoritarians don't have much in common, China is a communist dictatorship, Iran is a islamic republic and Russia is a presidential republic... like the USA, they have nothing in common other than being rivals to the US/enemies of US hegemony.

The common interest of the authoritarian bloc is to end the democratic world order and carve out regional empires for themselves with the ability to project force globally, in order to isolate the US from the rest of the world, especially from traditional allies. This is hardly a secret. The US explicit goal, by contrast, is the same as it has been since the end of the Cold War: defend global democratic norms and stable world markets against violent authoritarian disruption. Given the polar distance between the two objectives, it is indeed possible we end up with a kind of multipolarity if all parties ultimately fail their objectives completely and we all just sit and glare at each other, like if the US had managed to implode alongside the USSR. I don’t see US adversaries imploding any time soon.

Fiscal policy is overrated, the state needs to calm down the public. If lifebuoys are necessary for small businesses and low-income households, so be it. The US national debt was ballooning because of high military spending and a trade imbalance. It's not stagflation, it's complete market failure: loss of supply and demand.
If the US can only think in ideological terms, then Red China will come on top.

The US exists by ideological mandate for ideological reasons. If, in an attempt to defeat their objectives, the US becomes like the regimes who have positioned themselves as ideological and geopolitical adversaries, we will have lost the argument all the same. By extension, US leadership position in world markets is built by international consensus established upon the US’ reputation for stability and even-handed transparency. Both of these are further undermined if the Fed starts officially underwriting private enterprise for domestic engineering purposes, like the rival regimes of authoritarian central planners who claim to offer a superior model. Additionally, the precedent of this kind of intervention, once done, is not easily relinquished, nor is it healthy for a free society.

Hardly end of capitalism. Intervention for the sake of market stability is a well-accepted tool within the capitalist toolkit. Markets don't exist without States, and States are justified to use coercive measures in order to stabilize markets. Stagflation is unlikely to happen, and there is almost zero inflationary pressure in a recession economy. What do firms do when the economy is either contracting or barely growing? They slash prices, it doesn't matter how much money the financial system can loan out, prices are dictated by both demand and supply.

Short term monetary markets are dictated by velocity of money, not by the total money supply. In the long term, the massive expansion in the money supply will be curved either forcibly by the Fed, or by the gradual expansion of the U.S. economy and demand for USD. Just like in 2008, the people blowing the alarms on inflation are blowing them at the wrong time without looking at the bigger picture. Why would aggregate prices rise when people are saving money, firms are not hiring, and the government is barely spending?

Stagflation =/= hyperinflation. Stagflation is always a possibility, has happened rather infamously in recent history, and may now just become one of many natural consequences when the massive cash bazooka ostensibly used to spare domestic productive capacity from the ravages of the virus ultimately fails to translate into the level of jobs and wages and growth needed to absorb it.

Alternatively, the Fed could turn around and tighten supply in such an environment, as you point out. But how? After all, the Fed had already been cutting rates in the midst of a supposed economic boom, and functioning as the buyer of last resort when markets struggled to both wean off QE and also absorb new US treasury bonds. On top of that, it’s facing these challenges at a time when flagging foreign demand is leading to predictions of rising interest rates, which will require even more support from the Fed.

And now? Even the massive measures undertaken so far merely keep the system afloat in the short term while policymakers try to assess the damage, with more in the pipeline. The impacts will become clear only after the initial timeframe of intended use. We’ll see, but if the argument is that the Fed can continue various rounds and versions of QE/stimulus/market pumps indefinitely, let alone at a time when US geopolitical twilight will increasingly threaten the assumptions underpinning King Dollar, I want my uni tuition back.

The Federal Reserve is largely credited for ushering in the age of the Great Moderation, a Goldilocks scenario of low unemployment, low inflation and sustained economic growth that followed the tumultuous stagflation of the 1970s. The Fed was able to achieve this by establishing credible monetary policy rules that emphasized their mandate of price stability and low inflation.

While our economy continues to benefit from the legacy of these policies, keeping interest rates too low for too long threatens to undermine this delicate balance. For years after the Great Recession, the Fed has been trying to lift a low inflation rate closer to their long-run objective. The coronavirus crisis might just be the event that will give them too much of what they have been looking for.

https://www.cnbc.com/2020/03/19/what...agflation.html

[Love Mountain]

Stagflation =/= hyperinflation. Stagflation is always a possibility, has happened rather infamously in recent history, and may now just become one of many natural consequences when the massive cash bazooka ostensibly used to spare domestic productive capacity from the ravages of the virus ultimately fails to translate into the level of jobs and wages and growth needed to absorb it.

Alternatively, the Fed could turn around and tighten supply in such an environment, as you point out. But how? After all, the Fed had already been cutting rates in the midst of a supposed economic boom, and functioning as the buyer of last resort when markets struggled to both wean off QE and also absorb new US treasury bonds. On top of that, it’s facing these challenges at a time when flagging foreign demand is leading to predictions of rising interest rates, which will require even more support from the Fed.

And now? Even the massive measures undertaken so far merely keep the system afloat in the short term while policymakers try to assess the damage, with more in the pipeline. The impacts will become clear only after the initial timeframe of intended use. We’ll see, but if the argument is that the Fed can continue various rounds and versions of QE/stimulus/market pumps indefinitely, let alone at a time when US geopolitical twilight will increasingly threaten the assumptions underpinning King Dollar, I want my uni tuition back.

There is little inflationary pressure when the velocity of money is so low. The economic downturn means both individuals and firms are unwilling to spend money unless necessary. Compounding this problem, are the effects of the lockdown which makes spending money for consumers and businesses, difficult. Thus even if the Fed were to deposit a hundred dollars into every bank account, every day, the inflationary effects would still be limited. Second of all, providing liquidity in order to prevent a financial collapse, insinuates the Fed buying securities and other financial instruments through PDCF, MMLF, and repo markets. That means the money is essentially padding Bankers' pockets who may have to take losses on loans or need liquidity for immediate payouts. This doesn't push a ton of money into people's hands or circulate liquidity through the economy. No, this just makes sure the banks can do day-to-day business.

In other words, the massive expansion of the money supply is mostly going towards the same place it did last time to do the same thing it did last time. It's propping up the economy, not inflating it.

[Lord Thesaurian]

There is little inflationary pressure when the velocity of money is so low. The economic downturn means both individuals and firms are unwilling to spend money unless necessary. Compounding this problem, are the effects of the lockdown which makes spending money for consumers and businesses, difficult. Thus even if the Fed were to deposit a hundred dollars into every bank account, every day, the inflationary effects would still be limited. Second of all, providing liquidity in order to prevent a financial collapse, insinuates the Fed buying securities and other financial instruments through PDCF, MMLF, and repo markets. That means the money is essentially padding Bankers' pockets who may have to take losses on loans or need liquidity for immediate payouts. This doesn't push a ton of money into people's hands or circulate liquidity through the economy. No, this just makes sure the banks can do day-to-day business.

In other words, the massive expansion of the money supply is mostly going towards the same place it did last time to do the same thing it did last time. It's propping up the economy, not inflating it.

Again, the Fed has been trying to prop up the economy and anemic inflationary pressure for a while now. Part of the reason inflation remains low is because of the liquidity trap that dulls Fed policy. At the same time, this doesn’t contravene stagflation risk because the latter arises from the potential for supply shock to cost-push price inflation at a time when the Fed has already been trying to boost liquidity and inflation through monetary policy.

If anything, cost push inflation is complementary to the drop in demand as a result of the virus. Producers will be less able to maintain low prices to meet low demand when their costs are increasing and revenues are cratering despite loans, cash injections, and bailouts. The risk for stagflation was already there during low rates, de facto easing, and the supposed economic boom, due to comparatively minor supply shocks and corresponding retail sector slowdowns, let alone going forward.

In such case, as I said, the Fed would be precluded from trying to reign in inflation due to market liquidity needs and recessionary pressures. Supply constraints plus increased money supply equals stagflation risk, independently of whether or not the Fed manages to avoid the policy mistakes of the 70s. Time will tell.

[Heathen Hammer]

The US explicit goal, by contrast, is the same as it has been since the end of the Cold War: defend global democratic norms and stable world markets against violent authoritarian disruption.

Nothing says "democratic norms" like slave markets and beheadings of infidels, which are a norm for America's allies in Middle East and North Africa.
Let's be honest here - US foreign policy had largely revolved around preserving globalist economic order, hence most of "exportation of democracy" occurred against countries that attempted to disturb it, with mixed success. Naturally, US has failed, as the order US is trying to maintain is itself archaic. Can't build a house on decaying base and all that. Even with its dominant position as military and economic powerhouse, you can't keep the world in 1950s forever. US needs to realize that the time of central banks is over. Cryptocurrency and post-corona world will eat all major bankers alive. Not that they don't deserve it.

[Love Mountain]

Again, the Fed has been trying to prop up the economy and anemic inflationary pressure for a while now. Part of the reason inflation remains low is because of the liquidity trap that dulls Fed policy. At the same time, this doesn’t contravene stagflation risk because the latter arises from the potential for supply shock to cost-push price inflation at a time when the Fed has already been trying to boost liquidity and inflation through monetary policy.

I don't know why you're disagreeing, when this is essentially what I said. Second, the suggestion that there is a stagflation risk is almost absurd. There is a very low risk, but not one that people should seriously consider. Again, because inflation risks are extremely low in a recessionary environment. And cost-push inflation is also unlikely. Oil prices are negative, and supply shocks are largely self-inflicted due to lockdowns, not because the workforce is dying off.

If anything, cost push inflation is complementary to the drop in demand as a result of the virus. Producers will be less able to maintain low prices to meet low demand when their costs are increasing and revenues are cratering despite loans, cash injections, and bailouts. The risk for stagflation was already there during low rates, de facto easing, and the supposed economic boom, due to comparatively minor supply shocks and corresponding retail sector slowdowns, let alone going forward.

Stagflation risks are always there because the government can always something up. Assuming all things remain equal, stagflation risks are simply not significant and weren't significant, even with high tariffs on China.

[Lord Thesaurian]

I don't know why you're disagreeing, when this is essentially what I said. Second, the suggestion that there is a stagflation risk is almost absurd. There is a very low risk, but not one that people should seriously consider. Again, because inflation risks are extremely low in a recessionary environment. And cost-push inflation is also unlikely. Oil prices are negative, and supply shocks are largely self-inflicted due to lockdowns, not because the workforce is dying off.
Stagflation risks are always there because the government can always

something up. Assuming all things remain equal, stagflation risks are simply not significant and weren't significant, even with high tariffs on China.

We don’t agree, because you’ve asserted that stagflation risk is “absurd” for reasons that don’t actually indicate that. Cost-push inflation doesn’t require oil to be the driver, and the rising costs and supply shocks rattling global supply chains are a systemic reality for the foreseeable future.

[Love Mountain]

We don’t agree, because you’ve asserted that stagflation risk is “absurd” for reasons that don’t actually indicate that. Cost-push inflation doesn’t require oil to be the driver, and the rising costs and supply shocks rattling global supply chains are a systemic reality for the foreseeable future.

Commodity prices are down.



Coronavirus didn't kill off a sizable portion of the labor force, it didn't destroy machinery, and it didn't wipe out the food supply. The drop in aggregate supply is due to a massive drop in aggregate demand. The problem post coronavirus won't be overpriced facemasks, but a lack of jobs and a psychology of thrift.

[Lord Thesaurian]

Commodity prices are down.

Coronavirus didn't kill off a sizable portion of the labor force, it didn't destroy machinery, and it didn't wipe out the food supply. The drop in aggregate supply is due to a massive drop in aggregate demand. The problem post coronavirus won't be overpriced facemasks, but a lack of jobs and a psychology of thrift.

We’ve been over this. Low demand does not preclude stagflation. Low demand compliments the supply shock, independently of the shape of market recovery. This is consistent with what we’ve seen happen to commodity prices in Q1, as you indicated.

Meanwhile, as all too usual in a crisis, international cooperation has given way to national sauve qui peut. What this represents is a self-imposed supply shock of immense magnitude. Such a supply shock reduces output and raises prices. Nor is the demand from this period entirely recoverable. Particularly when it comes to services, some of the consumption is permanently lost.

In the short run, the inflationary consequences of this massive adverse supply shock may be counter-balanced by a collapse in non-food commodity prices, much aggravated by the disastrously timed oil war. It will also be matched by the commensurate decline in demand, some voluntary, some enforced, some permanent, some simply delayed. In any case, at a time when the basket of goods and services that we buy has so suddenly been distorted out of all recognition, it will become almost impossible over the next few months to put together sensible and meaningful data for CPI, RPI, or any other inflation series.

But what will then happen as the lockdown gets lifted and recovery ensues, following a period of massive fiscal and monetary expansion (Baldwin and Weder di Mauro 2020)? The answer, as in the aftermath of wars, will be a surge in inflation, quite likely more than 5% and even in the order of 10% in 2021 (assuming that the pandemic gets tamed by the end of this summer – the longer the outbreak takes to tame, the weaker will be the ensuing surge in real activity and then inflation).

Even if central banks feel uncomfortable with such higher inflation, they will be aware that the continuing high levels of debt make our economies still very fragile. And if they try to raise interest rates in such a context, they will face political ire to a point that might threaten their 'independence'. Only when indebtedness has been restored to viable levels can an assault on inflation be mounted.

https://voxeu.org/article/future-imp...er-coronavirus

Systemic supply constraints plus increased money supply equals stagflation risk, and will haunt the US economy for the foreseeable future.

[Love Mountain]

We’ve been over this. Low demand does not preclude stagflation. Low demand compliments the supply shock, independently of the shape of market recovery. This is consistent with what we’ve seen happen to commodity prices in Q1, as you indicated.

Low commodity prices aren't due to the supply curve shifting. Commodity prices are low because the shift in aggregate demand has moved the equilibrium low.

Systemic supply constraints plus increased money supply equals stagflation risk, and will haunt the US economy for the foreseeable future.[/QUOTE]

i have no idea how this supports your point.