End of the War Machine, Both Money and Blood

The bold is mine:

Nations are losing the sinews of war. They have reached the limits of taxation. Any attempt to increase taxes will simply lead to reactions on the part of the public which will reduce the flow of revenue to the taxing agency. There really is a Laffer curve, and we are on the far side of it. The Federal Reserve is the major purchaser today of the federal debt. This means we are in the final stage of the alliance between fiscal deficits and central bank inflation. It will go on for a few more years, but the handwriting is on the various walls.

This means that the handwriting is on the wall for massive warfare. Empires have always had trouble with guerrillas. This was true in 1780, and it is true in Afghanistan today. When the men of a nation are willing to take up permanent arms in defense of the homeland, the resources of a controlling empire will be stretched to the breaking point. The centralized and highly expensive armaments of empire, which are based on the centralization of tax collection and money creation, can no longer compete with guerrilla action. That was what the British learned in North America in the 1770s and early 1780s.

The age of empires is ending, precisely because taxation has reached its limits, and monetary expansion is reaching its limits. The fiscal deficit of the United States indicates that taxes will no longer bring in sufficient resources to balance the budget. This leaves the Federal Reserve.

The military budget will eventually be cut. In the Great Default, it will be cut substantially. We see no replacement for the American Empire on the scene today. The rest of the world spends only a fraction of what we spend today. The Pentagon spends more than the next 14 nations spend, combined. There is no replacement in sight.

The liberals got their wish. They imposed the income tax system, and then they imposed steeply graduated rates of taxation. They also got their central banks. They abolished the gold standard. Then they got their world wars. They still will not admit that the first three factors combined to produce the final factor. We still do not have a history of American wars written in terms of the relationship between deficit financing and war. But eventually, we are going to get that study. The facts will not be covered up, as they presently are covered up, in the textbooks. The story is going to get out, but the implications will be resisted. There are conservatives who call for the restoration of some pseudo-gold standard, although not the gold coin standard. But the same conservatives call for an expanded American military. We cannot get both.

The Triumvirate of Modern Warfare
Gary North

It’s important that Christians keep their distance from the dying Empire.

Incidentally, one thing North didn’t mention was the rather sharp decline in the number of disposable young men, eager and ready to be torn apart in whatever battle their Betters have chosen for them to die in.

Back in October, Econimica provided an article in the tie between central banks, and declining birthrates, reposted below.

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Japan…Centrally Engineered Canary in the Coalmine

A quick backstory of Japan is too instructive and telling…not to tell. Because the story of Japan is really soon to be the story of nearly all the developed world. Know Japan; know thyself.

To begin, the rise, peak, and ongoing fall of Japan’s working age population of 15-64 year olds and employment among them (below). Note the Bank of Japan (BoJ) interest rate policy went down as population growth decelerated and then hit zero when population growth (consumer demand) peaked…and rates have remained at zero ever since, going on twenty-five years now.

Importantly, a declining male population is mirrored  by decades of declining male employment…but the declining female population is offset by employment gains. Females have been the sole source offsetting what would have been far larger employment losses…likely until now.

Checking the percentage of employed Japanese 15 to 64 year old males and females is pretty instructive. There seem to be limits that even central bankers can’t overcome. Only so much of a population can/will work.

Likely uncoincidentally, just as female participation begins it’s secular surge…Japanese births begin their secular collapse. But it isn’t just rising labor force participation, it’s higher education, lower marriage rates, and a secularly declining childbearing population…all leading to the ongoing collapse in Japan’s present and future population.

Be that as it may (that Japan is in indefinite decline), this is to discuss Japan’s present. And Japan is likely to bump up against peak employment (as Japan did in 2019).

But what is not going down, since 2012, are Japanese asset prices. Below, looking at year over year change in the 15 to 64 year old population (blue), BoJ discount rate (black), Nikkei 225 (yellow), and BoJ assets (red). The three decades of declining Nikkei mirroring the decelerating and then declining working age population…until the BoJ went all-in on quantitative easing, in 2012.

Or look at the total working age population and Japanese residential housing prices. Housing prices and working age population moving in sync…up, peak, down…until 2012.

Adding in the BoJ’s discount rate and quantitative easing. The end of “free markets” and beginning of central determined asset prices is in your face.

Just to leave no stone unturned, below residential asset starts (rising supply of housing) versus year over year changing working age population (demand).

Adding in the year over year changes in residential housing prices.

Finally, adding in year over year changes in BoJ’s asset holdings. Again, the end of “free market” pricing and beginning of centrally determined asset prices.

Anyway, the point is, if demographically “endangered species” Japan can continue building out new housing against a secularly falling population and engineer stock and home price appreciation…then what is to stop any and all central banks from doing the same? Just don’t expect free markets to make a return so long as central banks exist.
Thought I’d throw in a couple of extra credit charts…Japanese year over year change in working age (green columns) vs elderly (grey columns), discount interest rate (black), debt to GDP ratio (red line), BoJ assets held (blue line), and Nikkei 225 (yellow line). Essentially, debt didn’t move markets…QE does.

PS – all this goes for the EU, US, and most advanced/developing economies…plus almost surely this will go for China.

Posted by C Hamilton at 10:08 PM

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Here’s the pullquote I’m using from Economica’s article:

Likely uncoincidentally, just as female participation begins it’s secular surge…Japanese births begin their secular collapse. But it isn’t just rising labor force participation, it’s higher education, lower marriage rates, and a secularly declining childbearing population…all leading to the ongoing collapse in Japan’s present and future population.

The destruction of Japan as an ethnic group isn’t important to Japanese central bankers. What’s important is the extra taxes that women put into the workforce, that can be immediately spent on more government projects and to subsidize more government debt.

That’s… a rather interesting approach, for such an ethnically pure culture.

But it shouldn’t be so surprising: the destruction of a hefty chunk of the German workforce was executed by a specifically racial-national socialist government, and the racial-international socialist government of China absolutely demanded – and got – the elimination of the ethnic future of the Han population.

Just as the explicit impoverishment/extermination of much of the Soviet Union’s peasantry was conducted by an explicitly pro-peasant Soviet government. As it was for China. And Cambodia, for that matter.

Summary

Christians would be wise to stick with the Law & Ethics First approach of Christ — One Law For All — rather than the Blood First approach of the Darwinians.

One road leads not merely to survival, but to prosperity, and public honour.

The other road leads to death… coupled with additional wealth and power for the Central Planners, for a time.

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