Musings Report 2017-1 1-7-17 What Do Central States/Banks No Longer Control?
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What Do Central States/Banks No Longer Control?
Last week's Musings Report quoted socio-historian Immanuel Wallerstein: "Countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system."
The quote is from Wallerstein's recent meditation on China:
China is Confident: How Realistic?
"The question is how realistic is this self-assessment of China? There are two premises embedded in China’s self-confidence, whose validity need to be investigated. The first is that countries, or rather the governments of states, can actually control what is happening to them in the world-economy. The second is that countries can effectively contain popular discontent, whether by suppression or by limited concessions to demands.
If this was ever even partially true in the modern world-system, these assertions have become very dubious in the structural crisis of the world capitalist system in which we
find ourselves today."
Wallerstein is asking a Big Question: what do central states and banks no longer control?
This is a Big Topic, i.e. one that could eventually impact everyday life for billions of people.
It is also an "under the radar" topic because central banks/states still claim absolute control over their currency, role in the global economy, what's legal/outlawed, and so on.
We believe their claim of control because they've more or less been able to control most of the society/economy for the past 60 years.
Wallerstein is suggesting that era has ended and states/central banks are losing control of the value of their currency, their role in the global economy and social discontent.
I don't think Wallerstein picked China out a hat. Though every global power is experiencing the same erosion of control, China is visibly losing control of the value of its currency, the yuan.
This matters because instability in a nation's currency quickly spreads to the economy and then to society: as a currency depreciates, the value of everyone's money declines, i.e. the purchasing power of their money is diminished.
When a currency is devalued, everyone holding that currency is instantly poorer.
When people become poorer through no fault of their own, they become angry with the authorities who engineered the devaluation or let it happen.
This leads to the social discontent Wallerstein references.
Another erosion of purchasing power occurs when wages stagnate while the price of goods and services rises. Can central states/banks control the erosion of wages? There is little evidence they can.
As for a nation's role in the global economy: those confident in China's ascent to global #1 power assume China will remain the world's workshop at least until its domestic populace can absorb all the goods it produces.
But it seems increasinlgy evident China's role as the world's workshop is under threat, and that it doesn't control the erosion of that role. Domestic populism in the nations that buy much of China's output is trending against globalism, wages are rising in China as China's populace urbanizes, and the potential for trade wars is rising.
As for what's outlawed/banned: the War on Drugs was a colossal failure in terms of outlawing the use of drugs. There is evidence that outlawing drugs actually increases consumption of the outlawed drugs.
Recently, I've been engaged in some lively online debates about the possibility of China banning bitcoin transactions. The mere possibility of China restricting bitcoin sent the price plummeting about 30%, from $1149 to sub-$900.
Most people in the discussion reckon China (or any government with a high degree of control of its populace) can shut down bitcoin with no difficulty. They believe the threat of a severe penalty would be enough.
I'm not so sure. Look what prohibiting alcohol in the U.S. accomplished: it created an entire economy devoted to bypassing the authorities' restrictions on alcohol. The penalties were fairly severe, but threats didn't work when vast profits beckoned.
If a nation's currency is in a freefall, threats are unlikely to be effective. Indeed, threatening the populace as they try to retain the purchasing power of their money would be an act of desperation born of a loss of control.
I think Wallerstein is right: nations/central banks are losing control of the value of their currencies, their role in the global economy and the social discontent that arises as the erosion in the currency and global role start impacting average citizens.
It's not difficult to see the seeds of populist discontent, or the counter-productive nature of states/central banks attempting to outlaw solutions that are outside their control.
Nation-states will be loathe to lose control, or even the illusion of control. But many global dynamics are beyond the control of even the most powerful states and central banks.
Summary of the Blog This Past Week
We Can Only Afford One, So Choose Wisely: Social Security/Medicare, Cartel Cronyism or Inflation (Central Banking) 1/6/17
Trump Aims to Cut the Neocon Deep State Off at the Knees 1/5/17
Why Profits Are Faltering 1/4/17
Prosperity = Abundant Work + Low Cost of Living 1/3/17
Fragmentation and the De-Optimization of Centralization 1/2/17
Best Thing That Happened To Me This Week
The side airbags deployed when my wife was broadsided by a big van.
Market Musings: will the Dow top 20,000?
The Dow Jones Industrial Average (DJIA) is more a media signal than an actual measure of the U.S. economy. Its power as a signal has increased as the stock market has become the primary signal of "recovery" (along with the unemployment rate).
So will the DJIA top the round-number 20,000? It touched 19,999, so it seems likely a few silly extra points will be added to top 20K.
Just out of curiosity I pulled up a weekly chart of the DJIA. A "nothing fancy" technical analysis indicates that the DJIA broke out above a resistance level that had acted as a ceiling for almost two years.
Indicators are oversold, but markets in bull advances can remain oversold for quite some time.
MACD is still rising, so there's no warning sign there of an impending collapse.
Technicians tend to like double bottoms, as they suggest a bottom was tested and held.
While I'm as concerned as anyone else that stocks appear overvalued by fundamental measures, this chart suggests the recent breakout is being digested and another advance of unknown duration is likely on the horizon.
From Left Field
US Music Industry Report (Buzz Angle)
Universal basic income already exists for the 1%
Will Automation Make Us Poor? short answer: it will make many of us poor... but this author buys the hope this isn't true...
HSBC Report on Peak Oil (PDF) Global Oil Supply
Martin Wolf: The long and painful journey to world disorder: As the era of globalisation ends, will protectionism and conflict define the next phase?
Everyday Authoritarianism is Boring and Tolerable
Authoritarian Neoliberalism and the Myth of Free Markets
A giant wave of store closures is about to hit the US
Scottish Elevator With Voice Recognition (with subtitles) (3:36)(via U. Doran)
The End of Progressive Neoliberalism
The Coming Tech Backlash
The War on Stupid People: American society increasingly mistakes intelligence for human worth.
The Invention of Capitalism: How a Self-Sufficient Peasantry was Whipped Into Industrial Wage Slaves
"Keep a cool head and maintain a low profile. Never take the lead - but aim to do something big." Deng Xiaoping
Thanks for reading--
charles |
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