Saturday, September 06, 2008

Third Wave: The Coming Crash

Actual photo from the last Great Depression
Photo (c)1937 by Margaret Bourke-White

All signs are that the United States is headed straight into an economic meltdown and a second Great Depression, and inquiring minds everywhere are asking when this coming economic crash will hit and what it will be like.

As to the first question, the gold standard of economic gurus - Nouriel Roubini - has predicted the Third Wave (a surfer term meaning "the Big One") for August-September of this year (Source). As for the second question, we do in fact have a good model for the coming living conditions in the history of the last Great Depression, which lasted from 1929 until 1940, and were eleven years of pure hell. See the Great Depression timeline at: Timeline.

The average unemployment rate during the whole period of the Great Depression was roughly 17% nationally, rising to 30+% in selected areas - the South, Appalachia, and the Midwest. Depending on where one lived, that was one person in five to one-in-three unemployed and unemployable. At the beginning of WWII, the rate was still 17%. The Great Depression was a world-wide event; with the possible exception of sub-Saharan Africa, no nation on earth was exempt. During those years, some 80% of the population dropped off the tax rolls! (Ibid)

The naked numbers are misleading, though, because in America the Midwest was also in the midst of a 100-year drought which combined with high winds and poor cultivation techniques to desertify hundreds of thousands of acres of the Midwest (creating the "black blizzards" of the Dust Bowl) and drove millions of farmers off their land, resulting in the great Okie migration to California. 50% of family farms failed during this time.

California then became the breadbasket for America, but at near-starvation wages for the laborers. My father (then a teenager) made $5 a day picking potatoes and other crops, which is backbreaking labor, and not for the old or infirm. That source of labor income is mostly gone now because of highly mechanized harvesting techniques, although stoop labor is still required for vegetables such as lettuce, berries, potatoes, etc. (The West coast is the source of beets, potatoes, apples, berries, leaf vegetables, carrots, strawberries, oranges, peas, etc from the Imperial Valley in Southern California up to the apple trees in Washington State and the potato fields of Idaho). Wheat and corn are Midwestern crops and almost entirely mechanized, but heavily dependent on fuel prices, so expect shortages of bread and maybe ration cards. Danger point: about half of today's American shopping cart is filled with products from overseas. Source.

Presently, harvesting in the West is principally done by Mexican migrant labor, with a smattering of low-rent whites, so one of the effects of the depression will be the instant roundup, incarceration and/or deportation of the present immigrant population in California and the Southwest, expanding to a national effort (that's what the "concentration camps" were built for; the roundup plans are already on the books). This will be a massive undertaking, so look for job opportunities in "law enforcement." Anyone caught in public speaking Spanish will probably be shot, beaten or hung on the spot by vigilante groups.

The coming depression may not be quite as severe as the last one, but it will still be bad. Most Americans will still have a job, but at reduced wages and benefits; they will pay more (sometimes a lot more) for critical items like food and gas, including heating and cooking fuels. Electricity prices will fluctuate wildly depending on what is generating your electric (hydro, gas or coal). The South will become almost unlivable as the air conditioners are turned off one by one. Most airlines will go the way of the dodo, and take Boeing and McDonald Douglas with them. This is not good, as Boeing is the largest exporter of American manufactured goods in the country.

Psychologically, almost everyone will suffer severe depression caused by job anxiety and constant worry brought on by the loss of cultural stability (Source). The mainstream media will be full of happy news that no one will believe. Well, the remaining sane people, anyway. As a happy side note, the Great Depression led directly to the explosion of the movie-making industry, as millions flocked to cheap movie houses ("Air Conditioned Inside!") as people sought escape from the reality-hell they were living in with the fantasy world of big screen Fred Astaire/Ginger Rogers fantasy land. In the new depression, Hollywood will continued to provide fantasy escape entertainment, but "reality TV" will be a non-starter.

There will be inner-city riots that will not and cannot be put down, with acres and acres of burned business districts. The six o'clock news will cover these extensively, but in no particular depth, per usual. (History as such does not exist to the people who bring you the "news").

Local banks failed at a rate of about 600 per year during the Depression; expect the same this time, so, local bankers will be chased down and subjected to kangaroo trials by angry citizens, then hung or exiled. Large roving gangs of unemployed youth (black, white, brown and yellow) will cause untold mayhem. There will be curfews everywhere.

During the Great Depression the Constitution was still in effect and presidential and congressional elections were still held as scheduled. However, Bush will still be in office when the Crash hits, and since the Constitution has been nullified in its entirety under his regime, there is the strong possibility that he will declare war on Iran, suspend the November elections, declare martial law, and resume the draft. In that case - and barring a military coup - expect riots everywhere (Source).

Short of that, there will be actual martial law in selected places, although functioning military authority will be limited to large population centers - the rural countryside will be mainly pest-free - as our military is mostly overseas and will take ages to bring back en mass. Don't expect to see many tanks in the street in any case: they're all in Germany or Kuwait (Source).

On the personal level, if you're Joe Sixpack, you have zero savings (in fact, the average American savings rate is zero), so to pay your rent you will attempt to sell your plasma TV, your DVD players, your PlayStation, and your gun collection piecemeal (but keep the shot gun and the .45) and try to trade the XLT monster truck for a Jap import, and good luck on that. The waiting lines for bankruptcy court will be around the block, and you will probably have to pimp your daughters to pay the lawyer's fees anyway.

Hospitals will close, but individual doctors may treat your cancer in exchange for freshly-killed poultry. Expect an uptick in sales of The Idiot's Guide to Self-Dentistry.

The majority of the unemployed will spend their days in line at the state welfare office. Unemployment insurance is a state function, and, as most states are near broke right now, they will run out of money very fast. The more enterprising among us will then go out and stand on the sidewalk and sell pencils, if they can afford to buy any. Technically, a city or state cannot go "bankrupt" under present US law, but they can and do run out of cash. Then they "reorganize" (Source: Still, when you're broke, you're broke. Then it's boiled shoe leather time, although I know personally and for a fact that there are people right now eating road kill.

Optimistic estimates are that this period of "economic instability" will be short-lived, but that's probably the result of the same wildly optimistic dreamland pseudo-thinking that got us into this mess in the first place. Realistically, I would guess that you can expect the same ten to eleven years of chaos and social disruption as the first Great Depression, which we really only got out of when we entered World War II. Think about that one, real hard.

The good news is that all the conditions are in place for a socialist revolution. You can expect heavily-armed resistance all over the place.

Life will not be easy after the crash, and you probably won't drop dead as a direct result of it, but you will definitely be living a vastly reduced lifestyle in economic, cultural and political terms. And if you think I'm kidding, you're an idiot and deserve everything you get. I sure as hell didn't make you hock your house or max out your credit line to buy a fucking $3,000 plasma digital High Definition TV set to watch "American Idol." You did.

Good night and good luck.

Related: Operation Garden Plot - The U.S. Military and Civil Disturbance Planning | Life During the Great Depression | Rex84

Tuesday, September 02, 2008

The New Reality Of A Multipolar World

The Medvedev Doctrine and American Strategy

By George Friedman/Stratfor

The United States has been fighting a war in the Islamic world since 2001. Its main theaters of operation are in Afghanistan and Iraq, but its politico-military focus spreads throughout the Islamic world, from Mindanao to Morocco. The situation on Aug. 7, 2008, was as follows:

  1. The war in Iraq was moving toward an acceptable but not optimal solution. The government in Baghdad was not pro-American, but neither was it an Iranian puppet, and that was the best that could be hoped for. The United States anticipated pulling out troops, but not in a disorderly fashion.
  2. The war in Afghanistan was deteriorating for the United States and NATO forces. The Taliban was increasingly effective, and large areas of the country were falling to its control. Force in Afghanistan was insufficient, and any troops withdrawn from Iraq would have to be deployed to Afghanistan to stabilize the situation. Political conditions in neighboring Pakistan were deteriorating, and that deterioration inevitably affected Afghanistan.
  3. The United States had been locked in a confrontation with Iran over its nuclear program, demanding that Tehran halt enrichment of uranium or face U.S. action. The United States had assembled a group of six countries (the permanent members of the U.N. Security Council plus Germany) that agreed with the U.S. goal, was engaged in negotiations with Iran, and had agreed at some point to impose sanctions on Iran if Tehran failed to comply. The United States was also leaking stories about impending air attacks on Iran by Israel or the United States if Tehran didn’t abandon its enrichment program. The United States had the implicit agreement of the group of six not to sell arms to Tehran, creating a real sense of isolation in Iran.

In short, the United States remained heavily committed to a region stretching from Iraq to Pakistan, with main force committed to Iraq and Afghanistan, and the possibility of commitments to Pakistan (and above all to Iran) on the table. U.S. ground forces were stretched to the limit, and U.S. airpower, naval and land-based forces had to stand by for the possibility of an air campaign in Iran — regardless of whether the U.S. planned an attack, since the credibility of a bluff depended on the availability of force.

The situation in this region actually was improving, but the United States had to remain committed there. It was therefore no accident that the Russians invaded Georgia on Aug. 8 following a Georgian attack on South Ossetia. Forgetting the details of who did what to whom, the United States had created a massive window of opportunity for the Russians: For the foreseeable future, the United States had no significant forces to spare to deploy elsewhere in the world, nor the ability to sustain them in extended combat. Moreover, the United States was relying on Russian cooperation both against Iran and potentially in Afghanistan, where Moscow’s influence with some factions remains substantial. The United States needed the Russians and couldn’t block the Russians. Therefore, the Russians inevitably chose this moment to strike.

On Sunday, Russian Prime Minister Dmitri Medvedev in effect ran up the Jolly Roger. Whatever the United States thought it was dealing with in Russia, Medvedev made the Russian position very clear. He stated Russian foreign policy in five succinct points, which we can think of as the Medvedev Doctrine (and which we see fit to quote here):

  • First, Russia recognizes the primacy of the fundamental principles of international law, which define the relations between civilized peoples. We will build our relations with other countries within the framework of these principles and this concept of international law.
  • Second, the world should be multipolar. A single-pole world is unacceptable. Domination is something we cannot allow. We cannot accept a world order in which one country makes all the decisions, even as serious and influential a country as the United States of America. Such a world is unstable and threatened by conflict.
  • Third, Russia does not want confrontation with any other country. Russia has no intention of isolating itself. We will develop friendly relations with Europe, the United States, and other countries, as much as is possible.
  • Fourth, protecting the lives and dignity of our citizens, wherever they may be, is an unquestionable priority for our country. Our foreign policy decisions will be based on this need. We will also protect the interests of our business community abroad. It should be clear to all that we will respond to any aggressive acts committed against us.
  • Finally, fifth, as is the case of other countries, there are regions in which Russia has privileged interests. These regions are home to countries with which we share special historical relations and are bound together as friends and good neighbors. We will pay particular attention to our work in these regions and build friendly ties with these countries, our close neighbors.

Medvedev concluded, “These are the principles I will follow in carrying out our foreign policy. As for the future, it depends not only on us but also on our friends and partners in the international community. They have a choice.”

The second point in this doctrine states that Russia does not accept the primacy of the United States in the international system. According to the third point, while Russia wants good relations with the United States and Europe, this depends on their behavior toward Russia and not just on Russia’s behavior. The fourth point states that Russia will protect the interests of Russians wherever they are — even if they live in the Baltic states or in Georgia, for example. This provides a doctrinal basis for intervention in such countries if Russia finds it necessary.

The fifth point is the critical one: “As is the case of other countries, there are regions in which Russia has privileged interests.” In other words, the Russians have special interests in the former Soviet Union and in friendly relations with these states. Intrusions by others into these regions that undermine pro-Russian regimes will be regarded as a threat to Russia’s “special interests.”

Thus, the Georgian conflict was not an isolated event — rather, Medvedev is saying that Russia is engaged in a general redefinition of the regional and global system. Locally, it would not be correct to say that Russia is trying to resurrect the Soviet Union or the Russian empire. It would be correct to say that Russia is creating a new structure of relations in the geography of its predecessors, with a new institutional structure with Moscow at its center. Globally, the Russians want to use this new regional power — and substantial Russian nuclear assets — to be part of a global system in which the United States loses its primacy.

These are ambitious goals, to say the least. But the Russians believe that the United States is off balance in the Islamic world and that there is an opportunity here, if they move quickly, to create a new reality before the United States is ready to respond. Europe has neither the military weight nor the will to actively resist Russia. Moreover, the Europeans are heavily dependent on Russian natural gas supplies over the coming years, and Russia can survive without selling it to them far better than the Europeans can survive without buying it. The Europeans are not a substantial factor in the equation, nor are they likely to become substantial.

This leaves the United States in an extremely difficult strategic position. The United States opposed the Soviet Union after 1945 not only for ideological reasons but also for geopolitical ones. If the Soviet Union had broken out of its encirclement and dominated all of Europe, the total economic power at its disposal, coupled with its population, would have allowed the Soviets to construct a navy that could challenge U.S. maritime hegemony and put the continental United States in jeopardy. It was U.S. policy during World Wars I and II and the Cold War to act militarily to prevent any power from dominating the Eurasian landmass. For the United States, this was the most important task throughout the 20th century.

The U.S.-jihadist war was waged in a strategic framework that assumed that the question of hegemony over Eurasia was closed. Germany’s defeat in World War II and the Soviet Union’s defeat in the Cold War meant that there was no claimant to Eurasia, and the United States was free to focus on what appeared to be the current priority — the defeat of radical Islamism. It appeared that the main threat to this strategy was the patience of the American public, not an attempt to resurrect a major Eurasian power.

The United States now faces a massive strategic dilemma, and it has limited military options against the Russians. It could choose a naval option, in which it would block the four Russian maritime outlets, the Sea of Japan and the Black, Baltic and Barents seas. The United States has ample military force with which to do this and could potentially do so without allied cooperation, which it would lack. It is extremely unlikely that the NATO council would unanimously support a blockade of Russia, which would be an act of war.

But while a blockade like this would certainly hurt the Russians, Russia is ultimately a land power. It is also capable of shipping and importing through third parties, meaning it could potentially acquire and ship key goods through European or Turkish ports (or Iranian ports, for that matter). The blockade option is thus more attractive on first glance than on deeper analysis.

More important, any overt U.S. action against Russia would result in counteractions. During the Cold War, the Soviets attacked American global interest not by sending Soviet troops, but by supporting regimes and factions with weapons and economic aid. Vietnam was the classic example: The Russians tied down 500,000 U.S. troops without placing major Russian forces at risk. Throughout the world, the Soviets implemented programs of subversion and aid to friendly regimes, forcing the United States either to accept pro-Soviet regimes, as with Cuba, or fight them at disproportionate cost.

In the present situation, the Russian response would strike at the heart of American strategy in the Islamic world. In the long run, the Russians have little interest in strengthening the Islamic world — but for the moment, they have substantial interest in maintaining American imbalance and sapping U.S. forces. The Russians have a long history of supporting Middle Eastern regimes with weapons shipments, and it is no accident that the first world leader they met with after invading Georgia was Syrian President Bashar al Assad. This was a clear signal that if the U.S. responded aggressively to Russia’s actions in Georgia, Moscow would ship a range of weapons to Syria — and far worse, to Iran. Indeed, Russia could conceivably send weapons to factions in Iraq that do not support the current regime, as well as to groups like Hezbollah. Moscow also could encourage the Iranians to withdraw their support for the Iraqi government and plunge Iraq back into conflict. Finally, Russia could ship weapons to the Taliban and work to further destabilize Pakistan.

At the moment, the United States faces the strategic problem that the Russians have options while the United States does not. Not only does the U.S. commitment of ground forces in the Islamic world leave the United States without strategic reserve, but the political arrangements under which these troops operate make them highly vulnerable to Russian manipulation — with few satisfactory U.S. counters.

The U.S. government is trying to think through how it can maintain its commitment in the Islamic world and resist the Russian reassertion of hegemony in the former Soviet Union. If the United States could very rapidly win its wars in the region, this would be possible. But the Russians are in a position to prolong these wars, and even without such agitation, the American ability to close off the conflicts is severely limited. The United States could massively increase the size of its army and make deployments into the Baltics, Ukraine and Central Asia to thwart Russian plans, but it would take years to build up these forces and the active cooperation of Europe to deploy them. Logistically, European support would be essential — but the Europeans in general, and the Germans in particular, have no appetite for this war. Expanding the U.S. Army is necessary, but it does not affect the current strategic reality.

This logistical issue might be manageable, but the real heart of this problem is not merely the deployment of U.S. forces in the Islamic world — it is the Russians’ ability to use weapons sales and covert means to deteriorate conditions dramatically. With active Russian hostility added to the current reality, the strategic situation in the Islamic world could rapidly spin out of control.

The United States is therefore trapped by its commitment to the Islamic world. It does not have sufficient forces to block Russian hegemony in the former Soviet Union, and if it tries to block the Russians with naval or air forces, it faces a dangerous riposte from the Russians in the Islamic world. If it does nothing, it creates a strategic threat that potentially towers over the threat in the Islamic world.

The United States now has to make a fundamental strategic decision. If it remains committed to its current strategy, it cannot respond to the Russians. If it does not respond to the Russians for five or 10 years, the world will look very much like it did from 1945 to 1992. There will be another Cold War at the very least, with a peer power much poorer than the United States but prepared to devote huge amounts of money to national defense.

There are four broad U.S. options:

  1. Attempt to make a settlement with Iran that would guarantee the neutral stability of Iraq and permit the rapid withdrawal of U.S. forces there. Iran is the key here. The Iranians might also mistrust a re-emergent Russia, and while Tehran might be tempted to work with the Russians against the Americans, Iran might consider an arrangement with the United States — particularly if the United States refocuses its attentions elsewhere. On the upside, this would free the U.S. from Iraq. On the downside, the Iranians might not want —or honor — such a deal.
  2. Enter into negotiations with the Russians, granting them the sphere of influence they want in the former Soviet Union in return for guarantees not to project Russian power into Europe proper. The Russians will be busy consolidating their position for years, giving the U.S. time to re-energize NATO. On the upside, this would free the United States to continue its war in the Islamic world. On the downside, it would create a framework for the re-emergence of a powerful Russian empire that would be as difficult to contain as the Soviet Union.
  3. Refuse to engage the Russians and leave the problem to the Europeans. On the upside, this would allow the United States to continue war in the Islamic world and force the Europeans to act. On the downside, the Europeans are too divided, dependent on Russia and dispirited to resist the Russians. This strategy could speed up Russia’s re-emergence.
  4. Rapidly disengage from Iraq, leaving a residual force there and in Afghanistan. The upside is that this creates a reserve force to reinforce the Baltics and Ukraine that might restrain Russia in the former Soviet Union. The downside is that it would create chaos in the Islamic world, threatening regimes that have sided with the United States and potentially reviving effective intercontinental terrorism. The trade-off is between a hegemonic threat from Eurasia and instability and a terror threat from the Islamic world.

We are pointing to very stark strategic choices. Continuing the war in the Islamic world has a much higher cost now than it did when it began, and Russia potentially poses a far greater threat to the United States than the Islamic world does. What might have been a rational policy in 2001 or 2003 has now turned into a very dangerous enterprise, because a hostile major power now has the option of making the U.S. position in the Middle East enormously more difficult.

If a U.S. settlement with Iran is impossible, and a diplomatic solution with the Russians that would keep them from taking a hegemonic position in the former Soviet Union cannot be reached, then the United States must consider rapidly abandoning its wars in Iraq and Afghanistan and redeploying its forces to block Russian expansion. The threat posed by the Soviet Union during the Cold War was far graver than the threat posed now by the fragmented Islamic world. In the end, the nations there will cancel each other out, and militant organizations will be something the United States simply has to deal with. This is not an ideal solution by any means, but the clock appears to have run out on the American war in the Islamic world.

We do not expect the United States to take this option. It is difficult to abandon a conflict that has gone on this long when it is not yet crystal clear that the Russians will actually be a threat later. (It is far easier for an analyst to make such suggestions than it is for a president to act on them.) Instead, the United States will attempt to bridge the Russian situation with gestures and half measures.

Nevertheless, American national strategy is in crisis. The United States has insufficient power to cope with two threats and must choose between the two. Continuing the current strategy means choosing to deal with the Islamic threat rather than the Russian one, and that is reasonable only if the Islamic threat represents a greater danger to American interests than the Russian threat does. It is difficult to see how the chaos of the Islamic world will cohere to form a global threat. But it is not difficult to imagine a Russia guided by the Medvedev Doctrine rapidly becoming a global threat and a direct danger to American interests.

We expect no immediate change in American strategic deployments — and we expect this to be regretted later. However, given U.S. Vice President Dick Cheney’s trip to the Caucasus region, now would be the time to see some movement in U.S. foreign policy. If Cheney isn’t going to be talking to the Russians, he needs to be talking to the Iranians. Otherwise, he will be writing checks in the region that the U.S. is in no position to cash.

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Reprinted, by permission, from Stratfor