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This one of the better interviews with Orlov that I have listened to. With Jay Taylor, he goes more into what is happening now and why things are not rosy the way the MSM likes to paint them.
For one you simply cannot apply the logic and solutions of the 1930s to today because as as Dmitry says it’s a totally different world today. In the 30s we still had oil coming out of our ears and nation states were autonomous. But these days that is not the case. We import the majority of our oil and there is no longer financial autonomy. What effects one, now effects all.
He also makes the point that the banks cannot function with a contracting economy. Which is what we are experiencing now and will increase. And that food price/availability is the key reason to nearly all revolutions. Including the Arab Spring.
So here is the interview. Sorry I cannot imbed.
http://cluborlov.blogspot.com/2012/07/interview-on-voice-america.html
I know there are those who still think the system can be salvaged and repaired, so go ahead and fill you boots. If it it amuses you to do so.
7 Comments
Dmitry’s interview begins at about 34:30.
I love the way Jay Taylor brings up the various memes though. Like how gas fracking will be our savior or technology or the FED will save us.
And Orlov so nicely and logically knocks them all down.
I cannot remember who said it. It may have been here, I don’t know but someone stated that the EU and the FED together could not save the financial world from a global melt down. It’s that bad.
If Orlov is correct, there will be at least 6 months of terror; the survivalist industry in all its nasty ramifications would be the rational source to prepare to come out of the other side into the new world order. Psychological and systemic Armageddon, but without the nucs.
The new international Magna Carta will control the new banks in addition to the King’s sword; having found out the hard way that WWIII’s nightmarish scenarios came about by economic meltdown rather than the MIC itself.
Oddly, it might be the strength and scope of our military, (martial law of course) that brings order to the chaos before all is lost. Otherwise who knows how long before we restore the semblance of civilization as we now know it.
Thanks CM for the Orlov reference. I took in the interview and also read “The Joy of National Default” a pretty good blog post. I liked the post better than the interview. In my view the interview lumped a lot of different categories together, and I found myself wanting to do a detailed a critique, but lacking the transcript, I ended by thinking it would be too much work. The blog post focused much more on the systemic factors involved in a possible collapse, and painted a much more persuasive picture of what might happen.
Having said that, it also seems to me that Orlov doesn’t emphasize enough the possibility that the political systems can stop the collapse. In the United States, the big banks can be taken into resolution literally over a weekend, and the Government workers can make sure that the supply of credit will not stop. Will they act that fast? I think they will. If Obama sees things collapsing at the speed Orlov indicates he will not hesitate to do what’s necessary to stop the collapse of credit. I don’t think bank bailouts would work this time, because Orlov’s credit collapse scenario would move at a greater speed than what we saw in 2008. On the other hand, Obama can move faster than Bush in taking unilateral action to take over the banks and defuse the crisis because Dodd-frank, a terrible law in most respects, does provide greater authority for taking the big banks into resolution.
On fuel self-sufficiency, if after the US financial system is saved by the Government, the Saudis don’t want to sell us oil, then I think we can get along on our own oil, oil from this hemisphere, and conservation/rationing/price controls. I vaguely remember WWII and what rationing was like then. I know that in an emergency rationing can be used again, if people view it as temporary. We can ensure that it is temporary by introducing energy conserving measures, and by developing solar, wind, and geothermal power sources on an emergency basis. I estimate that within 5 years a combination of these measures can replace middle eastern oil.
Of course, I’m assuming that others, at least Canada and Mexico, will export some oil to us, and will at least cover 20% of our energy needs. I then figure that more energy conserving use of our resources and rationing can give us another 20%. I also think that within 5 years we can expand alternative sources of energy to 20% of our needs. That leaves 40% of our needs which I think can be supplied by existing domestic fossil fuel sources. After the first five years of this I’d continue the emergency program to shift to alternative sources of energy so that within an additional 10 years fossil fuels aren’t fulfilling more than 20% of our energy needs.
So, to summarize, I don’t see that the United States or Canada, must collapse if there’s the kind of catastrophe Orlov identifies. Also, if the US, Canada, and Mexico stick together, then North America will be alright too, and would be reasonably self-sufficient, compared to many other areas of the world. furthermore financial collapse could be averted in many other nations apart from ours. Australia, the UK, Japan, China, New Zealand, all have financial systems with the necessary fiat currency capability, to survive banking collapses if they will only take over their banks during the crisis. China already has control of its banks, and the others can easily grab control of theirs if the political will is there. So just taking these nations into account and adding them to the nations of North America, we can easily envision a trading bloc that would be financially stable.
Other nations can also easily be added to that bloc. For example, Norway, Sweden, and Denmark are still using stable fiat currencies. They also have sufficient control over their own banks, so that their financial systems will not collapse.
Now let’s turn to the prospects for Europe. Here the issue is whether the ECB and the Eurozone can solve its political problems, or whether the monetary union collapses. Orlov talks about Greece, and tacitly equates the situation of Greece with what can happen in all nations. But all nations are not like Greece. Many of them have sovereign fiat currencies. They can control bond interest rates if they want to. They can set them. They can cease borrowing if they want to and just create the money they need for effective fiscal actions to lift their economies.
Greece can do none of these things right now because it is subject to the Euro which it does not control. This is true of Spain, Italy, Ireland, and all the other Eurozone members. They have all given up their currency sovereignty. So now they have a problem. In the event of a collapse, quick decisions will have to be made. Either the Eurozone will have to enable a central fiscal authority so that it can control the bond vigilantes or it will have to dissolve and each of the individual nations will have to revert to their currencies. Reversion will be painful. There will be economic contraction all over Europe, but the recent experience of Argentina suggests that it will take the nations of Europe only a year to recover if the individual governments use their fiat currency to support vigorous fiscal action to end unemployment and let their currencies float. At that point, the nations of Europe will have no problem entering a re-invigorated international trading system in which nations like Italy, Spain, and Ireland will do just fine even without cutting their social safety nets.
There’s much more to say about Orlov’s views and I don’t have the time to expose problems here. But, in general, I’ll say that his thesis is too much about the abstract global system and his theory about its dynamics. Reality however, is about more complex system dynamics at a number of levels of analysis. The components of the global system are not so well-integrated and so interdependent that a collapse of the financial system in many nations will spread to the whole system. Yes, there will be adjustments and some of them will be wrenching. But if the Governments react vigorously and in way that sets aside the false neoliberal paradigm and creates full employment is each of their nations, then most nations will be fine and Orlov’s projection will simply not be realized. What he says can happen. His scenario can be played out. But his result is neither inevitable nor highly probable. It’s going to take a lot of stupidity and evil on the part of political leaders to bring it about.
Oh, one more thing. Orlov’s emphasis in “debt” is too gross. To do an intelligent analysis of the significance of “debt” you have to distinguish between currency user debt and sovereign currency issuer debt. Currency user debt is way too high right now in most nations and certainly in the United States. We badly need a debt jubilee and a redistribution of nominal wealth. However currency user debt isn’t important financially, only politically. It’s not important financially because governments that control bond market interest rates and create their own money have an unlimited capacity to both issue and repay debt. For example, this fiscal year the US Treasury has repayed $56.2 Trillion in debt. No problem. Current interest rates at historical lows. Japan has a debt-to-GDP ratio of something like 230% (haven’t checked recently), and has bond interest rates just above zero.
On the other hand, public debt can be a political problem, as it is here, because people erroneously think that federal Government debt is analogous to household debt. That’s why I propose the $60 T platinum coin to pay off all the debt and remove the need to issue any more for 15 years. It’s easier to mint the coin and fill the public purse than it is to educate people about the government’s powers to create unlimited currency, and to get them to force Congress to give the Treasury back the power to create currency by re-locating the Fed within the Treasury Department.
Anyway, this became a much longer reply than I intended, so I’ll end here.
I like your analysis better than Orlov’s. I won’t have to shoot anyone stealing chickens. ;^)
Oh I agree that if the government were to step in and take control of the financial sector and even the energy sector, a lot of grief would/could be avoided.
The big questions s though, would anyone as president actually do this. Nationalizing these things would cause those on the right and more than a few on the left to go completely ballistic. The only way that would happen is for the president to declare a national emergency and take control.
Do you actually see that happening ?