The Atlantic Periphery: Fault Lines

It is becoming clear to anyone with even a modicum of political insight that London remains the epicenter when considering the mounting challenges enveloping the continent.  Every night for over a week, Islamists continue their nightly rampage through Jewish towns in London’s Stamford Hill-Golders Green section.  The government does nothing.  May’s Premiership is dysfunctional and the neoliberal model that characterized so much of England’s economic success is no longer.  We’re in terra incognita; an edge vaunting toward collapse that aggravates polities.  By any measure, we’re in for a long hard slog.

While London burns, it remains deeply divided over how best to address its self inflicted wounds.  British socialists throughout either chamber cannot acknowledge Thatchers achievements, for they never believed in market based solutions or privatization, deregulation or tax reduction.  The fatal conceit continues all the same.  Not even having London remain the center of globalization provides relief.  Who will emerge to master England’s terra incognita?  Theresa May?

By any sound recapitulation, the Keynesian demand side ideology isn’t working either.  England’s welfare state is growing more militant while ever larger government led credit schemes falter to deliver growth.  One cannot look to trade unionism nor to industrial strategies for relief.  Does anyone believe that George Osborne will rise?

We should remember that in 1976 England was in IMF receivership given the ideological paralysis of its governing parties.  Thatcher’s aspirational conservatism was real as was her Soviet threat, both domestic and continental.  Certainly London can find the fortitude to press on, right?

What has come to pass for England is political misjudgment.  The impasse isn’t without precedent, however, no one wants a history lesson; but how is England to embrace what its governing majority openly repudiates. The fact is no policy short of economic revolution can save England.  Here’s why.

Tories have been ambivalent and divided over continental aims for over a generation.  The division toppled Thatcher, destroyed her successor named John Major and permanently weakened New Labor.  As of today, the breech is mended because the Euroskeptics have won.  Tories who abandoned Cameron for the independence movement have returned, so why the mess?

The answer is discerned in viewing last weeks election as a referendum expressing public sentiment.  We’re living in a post-Cameron order now.  This is characterized as simple anger at the status quo embodied in failed neoliberalism. The financial crisis undermined the public’s faith in governing institutions. No one can tell if we’re looking at a leveling of an old political landscape or a plausible birth of a new one.

Before anyone begins thinking in terms of a new order, remember what faces England now is the imposition of public order, the immediate reduction of economic malaise, raging Islamists and Brexit.  The outcome of how she manages will foretell British future.

Get ready for a partial reprise of the ’70’s.

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How To Understand African Political Economies

The continent of Africa really is difficult to embrace without stolid concepts shaped from both geography and history.  Can one really make sense of Ghana and its British heritage as a west African nation state surrounded by failed French colonies?  How about Senegal, a longtime French ally now home to English vacationeers?  What of viewing Tunisia and its strong French (Catholic) secularism lodged alongside the Magreb?  There remain more questions than answers, but even still, by any calculation, the Limpopo river and its national tributaries in Mozambique, Kenya reaching up the African Horn has more symmetry with the Mughal-Afghan led empires that dominated the western Renaissance than all of the long Romanesque history of north Africa.

By any calculation, the continent is moving, but which framework encapsulates the myriad components shaping its volatility?

When the U.S. Federal Reserve imposed zero interest rate policy, hordes of money left the U.S. continent in search of return in developing economies.  That had to end.  But with cheap labor, commodity rich resources and compliant governments, African political economies saw an upsurge that has unwound.  The painful slowdown reveals a lot about Africa.

Accelerating population growth was used by economists to justify raging GDP & productivity growth; not anymore.  Rwanda’s capital city of Kigali looks like a Keynesian ghost town of empty skyscrapers and hollowed out cities.  The demand side of Keynesian aggregate growth being driven by central bankers never really had any historical credibility here.  Even Nigeria and Angola, we’ve witnessed nearly 90% of federal revenue tied to oil, burst. Given its un-diversified national portfolio, these nation states have nothing to replace oil with.  The Saudi’s are watching what just may happen to Riyadh.

The commodity turmoil is exacerbated by drought & volatile currency regimes.  Even farmers can’t get to unload their wares.

When Nigeria refused to let its currency float freely in response to plummeting oil, an overvalued currency met a black-market that coalesced blunting all monetary transmission vehicles.  When credit agencies downgraded them, the central bank was faced with current-capital account crisis’ and surging black markets.

Wait, it gets worse.  Kenya’s government has capped interest rates effectively halting all lending; Mozambique and Tanzania face bond bankruptcies.  The Keynesian mess is a vortex from which African government cannot escape.

The fragility of the entire continent is on display, with exceedingly high debt to GDP ratio’s coupled to weak industrial bases, these economies don’t have the fiscal strength to address growing problems.

For Africa to kick its addiction to commodity export growth, it must dump its overt love affair with centralized-demand driven Keynesian growth models.

1aThe dhow’s of the Swahili in Mozambique

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Mexico’s PRI Wins In Close Political Fight

Mexico’s ruling elite, the Institutional Revolutionary Party (PRI) won slims marginal victories in Mexican elections yesterday.  If the insurgent challenger named Delfina Gonmez Alvarez had won, it would have permanently rocked the PRI image of dominance.  Instead, the PRI held in Mexico City as well in smaller states like Coahulia, just immediately north of Mexico City and Nayarit in the west as well as Veracruz.

Why does this matter?

Mexico’s feudal like political order isn’t open to market based policies, it despises reform and has openly sought to dismantle the very reforms that have favorably placed the peso in advantageous terms. Mexican citizens have lost faith in dynasties that have long characterized the PRI, not to mention crime, illicit drugs and massive unemployment.

The only good Mexican derivative has been Dr. Augustin Carstens, Milton Friedman’s protege from Chicago administering Mexico’s Central Bank.  He’s been upfront regarding tight monetary policy, transparent rule of law and weak governing institutions that have plagued Mexico for decades.

By any measure, the fight for Mexican independence is still on.


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What Trump Gets Right About Trade

Professionals don’t get paid to think.  They get paid to earn a living.  This means that the vast majority of the chatter-class in think tanks, Universities and the media commintariat earn their wares diachronically.  That means they specialize in presenting and defending fallacies of historicism.  This was dramatically evidenced in how team Trump had characterized free trade as a practice.  The truth is, he was talking about its impact and how trade is implemented as a formal instrument of state policy.  For Trump, both reveal a startling omission of credibility, for how else is one to explain the impact of capital flows between say China & the U.S.

No one captured this better than Dr. Irwin M. Stelzer.  Dr. Stelzer is a contributing editor to the Weekly Standard as well as a columnist for the Sunday Times in London.  His recent article titled “Retaliation Nation” exemplifies how Trump got it right.

For the American’s, free trade is a textbook abstraction for the allocation of resources and the efficient specialization of labor.  For everybody else, its mercantilism masquarading as national defense.  How else does South Korea defend the chaebol.

These realities don’t exist for the Americans.  We’re left inept with policies that are chiefly driven by the impact of both globalization and confiscatory taxation.  Want to credibly threaten China?  Do tax reform.  Want to fix Bretton Woods?  Have Treasury openly pursue an industrial policy of appreciation.  Reagan had both appreciation, growth and soaring unemployment.

As Dr. Stelzer wrote “ask a German manufacturer how well he’d do if the euro, a seriously undervalued currency for Germany, kept low by inefficient southern European industries, were replaced by the deutsche mark.  Ask a European farmer how well he’d do if the protection provided by EU rules were removed.  Ask a Japanese auto manufacturer how he’d fare in his own home market if non-tariff barriers to the importation of American made goods were removed. . . ”  

Stelzer knows that the United States’ main enemy is China, a centrally managed political economy with goals other than the efficient allocation of capital.  Beijing openly seeks self preservation of Marxism.  This means the elimination of any democratic institution that would recognize the supremacy of civil society.

How does China accomplish its goals.

It openly seeks to capture and retain entire industries that wish to produce and evade taxation.  That means our multinationals are captured by the Han masters and they’ll continue to subsidize every single industry that currently resides in China for the maintenance of Sinic Imperium.  It means zombie companies, theft of intellectual property, manufactured balance sheets and a complicit central bank.  And that’s what they’ve already accomplished.  Their immediate future regards permanent servicing of emerging industries by state owned banks & financial institutions.  The envelopment of new and emerging foreign acquisitions.  As Premier Li Keqiang revealed in March “we will accelerate R&D on, and commercialization of new materials, artificial intelligence, integrated circuits, new energy, bio-pharmacy, and 5G mobile communications. . . all to field new industrial clusters that will service China’s self interests.”  

National power, not efficiency is China’s objective.

We can’t roll back these gains unless we’re ready to do one thing:  A Convention of the States.

If we’re to unleash the American Imperium in the service of free peoples, we’ll need to do monetary reform, tax reform, entitlement reform, federalism and hosts of other painful initiatives.  None of these can be accomplished from inside Washington.

To threaten China credibly, we must return to the vision of the Founding.  Without it, we’re toast.


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Ukraine: What is to be Done

Ukraine is suffering badly.  The entire southeastern portion just above Crimea is now a wasteland.  Mother Russia controls entire swaths of territory that remain uncontested yet not allied totally to Moscow either.  As it stands now, Ukraine is a lesson every dictator is watching, for when they gave up their nuclear weapons, Moscow swept down enveloping them; Ukraine today suffers from both an ersatz civil war and partition.  Today, it is no mans land.

Moscow is using local separatists ideologically allied to Moscow, however, the reality on the ground is growing more difficult to contain or turn around.  Russian backed separatists are kept busy by a cult of militarism that looks increasingly dystopian.  Their is no economy, leaving vast swaths of Ukrainians moving north to Kiev in hope of settling outside an imposed war zone.  To resolve this conflict the Americans need to arm the Ukrainians, as it currently stands, the Americans are playing a waiting game, but Ukraine can no longer wait.

How did the west arrive with a defeatist agenda?

Minsk-2 was the cease fire agreement that ratified the dissolution of the Ukrainian army by Russia.  It meant that Moscow needed to return territories and cease hostilities.  It never will.  As it stands today, Ukraine is frozen and paralyzed.

For Washington to get Putin’s attention we’ll need to turn Ukraine into a battlefield that bleeds Putin.  If war is Clausewitzian, we need to discern the regional politics to make any engagement worthwhile.  The territories captured by Moscow have ceased having any political center, they aren’t administered or ruled, this greatly reduces the scope of any engagement.  What the west is doing is waiting for Mother Russia to implode.

The resurrection of eastern Ukraine, historically known as Novorossiya would help damage Putin; what Moscow has done is foment discord throughout the world in the hope of exhausting Washington.

Ukraine needs to be rescued.  It may already be to late.


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Pakistan’s ‘Relief Valve’, The Azaadi of Kashmir

The Economist  provides an unrivaled summary of the geopolitical consequences of the British partition of India.  Positioning Muslim majorities on both sides of India effectively sought to keep New Delhi in a perpetual state of siege.  Only Northern Ireland & Israel proper resemble the politics of partition at the end of the Second World War.  Given how the British panicked at the dissolution of Empire and the destruction of Pound sterling, it shouldn’t surprise anyone that Kashmir remains a tinderbox.

It remains difficult for anyone to tie the contemporary geopolitical mix of Kashmir to the partitioning of India.  Diachronically it is correct, but Kashmir, Northern Ireland and Israel have indigenous political dynamics that no longer possess any resemblance to Empire or 1947.  Kashmir continues to be saddled with a destructive historicism, as if Islamabad has no role in fomenting disruption.  As it stands today, Kashmir remains a relief valve that the Pakistani Army uses to its advantage.  Fix the opacity animating Pakistani civil-military relations and you no longer have Kashmir as a problem.

Let’s not forget, Pakistan isn’t a country, its an army with a country.  As realists like Thucyddies have taught for centuries, the nature of regime matters.

What happened in Kashmir when Modi sought demonetization?

Rock throwing Kashmiri youths went home because Peshawar’s counter-fitting stoped.  The regime in Islamabad pays Kashmiri “liberators” (azaadi) nearly $8 per projectile.  The Pakistani military establishment (the Punjabi’s that arrogate to themselves to rule “the Land of the Pure“) don’t live in a free society with robust free markets, free press and a vibrant civil society.  Given how exhausted contemporary Palestinians are from their conflict with Jerusalem, Kashmir may be the only place to witness deliberately manufactured violence.

Modi’s governing majority in New Delhi has sought to administer Kashmir by a coalition between the Hindu nationalist Bharatiya Janata Party (BJP) and the Kashmiri’s People’s Democratic Party.  This interrupts the Pakistani agenda of disruption and violence.

By any measure, the crisis of Kashmir requires a political settlement, but this cannot occur until Pakistani leadership understands the limits of its writ in Kashmir.  Until then, India, Washington & Islamabad are tied into a gordian knot.


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Returning Home: Trump’s Learning Curve

By the time team Trump settles in from his trip to Riyadh, Rome and Brussels, he’ll have enough new insight into the reach and scope of his executive office than he’s ever had, now comes the hard part, how to apply it domestically.  By any raw calculation, he’s behind, trailing badly.  A shake up of his office staff will not be sufficient, what’s needed is a new Presidential tone regarding the gravity of U.S. policy traction.  We’re losing everywhere because for eight years we squandered capital.

What has team Trump learned upon arrival from abroad.  He’s learned that he can’t take for granted the control of the House anymore.  Without clear legislative wins in bold pastel colors, he’s toast and most members of the House already know it.

Trump has learned that he’ll need to break new ground if he’s to recover anything.  That means learning new skills.  It also means that the ground his opposition must tread isn’t favorable to them either.  If the opposition should gain more than 24 seats in the upcoming midterms, his presidency is over.  They’ll have impeachment lined majorities in both chambers along with chair residing over committees; the Dems will railroad everyone to achieve the destruction of team Trump.  But to do so, they’ll need to gain traction against those who gave Trump his win.

It isn’t clear that the Republic is tired of Trump.  Major media and the Democratic party may be setting themselves up again for slaughter.  Both the Republic and team Trump are out of time, if the Don is to dominate his rivals, he’ll need better preparation, finer execution, thicker skin and deft handling of both his domestic and international agenda.

Just ask Reagan in 1981.


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What Is A Tory?

When Hayek wrote “Why I Am Not A Conservative“, he was referencing Tory leadership. This is often misunderstood by American liberals and conservatives.  Hayek implicitly knew that the American doctrine of natural rights possessed affinity with those mores needed for equity-capital formation, even though he despised Marxism, he also disliked Tories.  Why?

The answer is discerned in witnessing Theresa May’s recent call for elections.  She needs to dump every single Tory Europhile on her bench.  With this current majority, she’ll get slaughtered when the battle joins in Brussels.  The fear of sabotage is real, we’re witnessing a leader who openly trucked “remain“, now in charge of procuring a Brexit.

Her latest spat with her own Europhile Tory bench regarding health care funding specifically embodies a predicament that only she can resolve.  Hence the election.

The nasty truth is that the entire House of Lords is socialist and Tory maidens running the ruling establishment have never been market based fundamentalists.  This puts into relief the backdrop of Thatcher’s achievement as she railed against entrenched union membership and an openly socialist media commentariat.  Truth be told, it was Milton Friedman who sent Allan Meltzer to fortify Maggie’s limited formal grasp of neoclassical economics.  When the Times of London openly opined against Thatcher’s market based reforms it was Meltzer who took on and slaughtered established dandies of Keynesian kraft.

Thatcher’s achievement saved Britain.  Now Theresa May knows why the German’s referred to Maggie as the Iron Lady.


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The End of Europe: The Limits of Secular Thought

I try not to cringe when I read most of what accounts for smart books these days, I’m thinking of The End of Europe:  Dictators, Demagogues & the Coming Dark Age by James Kirchick.  In my view, this book rapidly acknowledges why Henry Ford’s definition of history was right.  For Ford, history is “one damned thing after another“.  Do we really need a diachronic approach to how Europe is failing today?  Do we?  If a reader is a millennial, it would be acceptable, because so much of what constitutes education for this segment of American society is pure ignorance.  So if you’ve spent the last several years or decades succumbed to television, then Kirchick is your man.  If however, you’ve been introduced to greater writers of the mid-to-late 20th century like Solzhenitsyn, or say Robert Bartly, then Kirchick isn’t your truck.

The European project, as the European Union is known, was Paris’ concoction for accommodating American suzerainty over the European continent at the end of World War II, while Paris punished Berlin.  Given France’s near permanent geopolitical, fiscal and monetary weakness after the war, it sought to openly apply its own advantages while appeasing Washington, all the while it sought Teutonic subjugation.

Ironically, it is Germany today that rides Europe; given Berlin’s continued external surplus, it is Bonn, Stuttgart, and Berlin that usurp Paris and by extension, most of Continental Europe.  The peace, stability, prosperity, democracy and social harmony that characterizes European social order since 1947 isn’t an indigenous muscular liberal center.

With the collapse of Europe under the jackboot of Prussia, it fell to the Americans to vanquish what Europe couldn’t.  The impact of that, is what underwrote any European achievement.

Where else other than Europe and the Mediterranean littoral does one walk through grave yards to get to the beach?

Clearly their are problems throughout the Eurozone and its dominant periphery.  Russia continues to harass the North Atlantic, Scotland, the Baltic, all the while enveloping eastern Europe just outside the Bosphorus.  We witness a near permanent weakening of the Warsaw Pact; having engrossed liberal transformation under Reagan and John Paul, the Poles, Hungary’s own Fidesz Party and its charismatic irredentist minister Viktor Orban including Slovakia, the Czech Republic have all splintered under the pall of heavy capital flows of globalization.

How does Europe win.

It is my view that unless Europe rediscovers its Christian heritage it fails.

As of this writing, the Church is failing.

Here’s the good news, even militant secular thought is nothing less than gnostic rationalism.  The Church Fathers and more have tread this ground already.  By any standard, this is an old trick.  What may prevent any resurgence is economic frailty, Islamism, nuclear parity abroad, and economic autarky.  Its already happening.

Europe really doesn’t need an ever tightening union.  It needs nationalism.  It needs liberty and by extension confrontation.

If Europe is to recover any sense of its own identity, it must confront the open ideologies that underwrite its growing welfare state, its administrative state, its overwhelming socialist policies that prevent growth.

The U.S. had its Volcker and Reagan, will Europe discover hers.


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