Modern American Policy: Stupid Or Sinister?

  A rather long but accurate analysis of post Covid America.

  For anyone who understand a modicum of finance and economic theory, the direction looks ominous. A war with Russia or China is not winnable but what if the goal is not winning but just "war". Permanent war to justify bloated budgets, restricted freedoms and "free" money? 

 A good question which looks more and more pertinent.

Authored by Matthew Piepenburg via GoldSwitzerland.com,

American policy has been acting in ways which suggest either a desperate ignorance or a sinister restructuring of the national narrative.

Surveying the Senseless

The USA is now staring down the barrel of four-decade high inflation, an inverted yield curve and the highest debt levels in its history as Wall Street recently enjoyed the strongest relief rally since 2020 on the bad news of yet another Fed rate hike (75bp) into a percolating liquidity crisis.

Huh?

In a Fed-led dystopia marked by years of printed rather than earned liquidity, bad news is now good news to markets who nervously seek pretexts for central bank stimulus rather than actual earnings or GDP.

In such distorted landscapes, positive jobs data creates sell offs and crippling rate hikes induce rising stocks.

For almost 2 years, while we and other candid market observers were warning of crippling inflation, our central bankers were describing it as “transitory” with a dishonesty similar to the current recession is not a recession meme.

Huh?

Meanwhile in DC, we see growing signs of a political culture less about public service and more about self-service.

Wealth disparity in the home of the brave has passed the highest levels ever recorded and points directly to the slow and empirical death of the American middle class.

The suburbs around DC are growing richer with lobbyist and polo-playing defense contractors buying concessions and second homes from politicians who openly sell votes for reelection in a democracy that more resembles an auction house than a house of representation.

A former tobacco tsar at the FDA, for example, recently took an executive role at Phillip Morris while an executive at Raytheon (America’s second largest defense contractor) just took a key post at the Department of Defense.

Alas, the foxes not only guard the hen house, they run it.

The Land of the Free?

If fascism is defined as “the perfect merger of the state and corporate powers” (See Mussolini circa 1936), then the USA may still be the land of the brave, but it no longer resembles the land of the free.

JP Morgan, led by a $35M/year Jamie Dimon, just paid a $96M “fine” for a $20B profit garnered from openly manipulating the gold market.

Huh?

At the same time, once great (and now police-defunded) cities like Chicago, NYC, and San Francisco are seeing tumbleweeds blowing past office vacancy rates as high as 40% following an historically disastrous COVID lockdown policy which did far more psychological, criminal and financial damage ($7T and counting) to America than a flu with less than a 1% Case Fatality Rate.

Huh?

Turning to foreign policies, having failed to deliver “freedom and democracy” to Vietnam, Iraq, Libya, Syria, and Afghanistan at the cost of America’s best sons and daughters, one wonders why the US has spent another $60B to bring “freedom” to the Ukraine when millions of US children live in poverty.

All Americans hate to see civilians suffer in needless wars. But many who blindly wave Ukrainian flags in moments of ad-water, instant-virtue signaling from a government-led media can’t place Ukraine on a map nor bother to examine the complex history of its Russian tensions which date back to the 1750s.

Furthermore, sending an IQ, history and geography challenged Kamila Harris to pre-war Ukraine with a NATO narrative only accelerated the February drums of war (and the financially disastrous sanctions that followed) in the same way that Pelosi’s recent trip to Taiwan seems to be more about flaming rather than cooling the war hawks.

Does the US, with over 800 military bases in 70 countries actively seek war, or does it seek peace? Thousands are dying in the East for what many professional US statesmen believe was an easily avoidable war.

Has the military industrial complex, against which Eisenhower (no stranger to war) warned in January of 1961, hi-jacked American politics?

Meanwhile, as American monetary and fiscal policy reached new levels of open insanity in the seemingly deliberate fear-campaign led by “experts” like Fauci in the dramatically-described “war against COVID,” the latest boogieman out of DC is an equally unaffordable war against an equally-hyped climate change.

If passed, “The Inflation Adjustment Act of 2022,” now sitting on Biden’s desk (or pillow), seeks further dollars that America does not earn yet which the White House assures won’t be inflationary.

Huh?

Do the foregoing samples of questionable policy failures evidence open stupidity, or is there something more systemic at play?

The Fed: “Advancing the Few at the Expense of the Many”

My take on the Fed is only that: My take. It is based upon the premise (and bias) that the Fed is driven, as Andrew Jackson warned, to serve the few and not the many.

This presumption comes not only from personal observations, but a careful study of the Fed’s illegitimate practices and origins, far too complex to unpack here but detailed in Gold Matters.

The Ongoing Inflation Lie

As I’ve been writing and saying for months, the Fed’s current inflation narrative as well as “solution” is as openly bogus as a 42nd Street Rolex.

There is little about the current inflation narrative that compares to the 1970’s, and hence little about Powell’s current policies which remotely compare to the so-called Volcker era of 1980, which ended, by the way, in a recession.

Nevertheless, I am fascinated by the extensive time, brain-power and pundit attention given to explaining current inflation.

Fancy concepts from “demand-pull” to “supply shocks,” or “extraneous shocks” and “accelerants” to even “black swans” are used to explain a 9.1% CPI inflation scale (which, if DC truly wishes to be “Volcker-like,” is closer to 18% using the metrics of his era…).

The Simple Inflation Truth

Inflation, which was already steadily rising pre-Putin and percolating pre-COVID, is nothing more than the direct consequence of USD debasement driven by: 1) years of openly addictive mouse-click money (>10X since 2008) from the Eccles Building and, 2) fatal fiscal spending from the White House, be it red or blue.

In just the last 24 months, the Fed created 50% more mouse-click money than all the money that ever existed in the 256 years of its national existence.

Such numbers are a tad “inflationary,” no? Alas, costs are rising because our grotesquely inflated/de-valued dollar is tanking.

Between 1776 and the un-immaculate conception of the Fed in 1913, a USD was once a USD.

Since 1913, however, a USD is really (worth) nothing more than a Nickle.

Why?

Broken Faith vs. Store of Value

Because when a central bank creates trillions of those dollars out of thin air with no link to an underlying real asset or an equivalent exchange for a good or service (as Germans like Alfred Lansburgh, Austrians like von Mises and Americans like Andrew Dickson White argued), that dollar is nothing more than a symbol of broken faith rather than a store of genuine value.

Like a glass of wine filled with a swimming pool of water, the dollar is diluted; it’s flavor, color and value ruined. Since 1971, and when measured against a single milligram of gold, the USD, like all other fiat currencies, has lost greater than 95% of its value.

The Fed: Blaming vs. Accountability

Rather than confess the toxic reality (and complicity) of the fatal and inflationary expansion of the broad money supply, the DC elites first tried to call it “transitory,” and when that failed, they tried to call it “Putin’s inflation.”

Really?

There’s no doubt that the sanctions against Putin sent gas prices and the CPI higher—especially in Europe. And there’s also no doubt that the trillions of fiscal and monetary dollars used to “fight” COVID were CPI tailwinds.

But a tailwind does not mean a cause.

Take the “war on COVID” and the $7T+ in combined fiscal and monetary dollars used to combat it.

I’m not here to end the COVID debate with medicine or science, of which I’m clearly no expert. But many of us (including Rand Paul or Christine Anderson) would agree that neither was Fauci, the CDC, the WHO or the NIH.

Almost everyone (vaxed or un-vaxed, masked or un-masked) has already caught the virus; it’s fairly clear that locking the country down for well over a year did nothing but cost money and freedoms while destroying businesses who deserved to choose for themselves whether to stay open or shut.

There will be others who disagree, but in my legally, historically and financially educated mind, not since the oxy-moronic Patriot Act have I seen a greater crime (or psy op) against a nation’s own citizens and their once inalienable rights and civil liberties as that which was embodied by the 2020 lockdowns.

As Ben Franklin warned, a nation which surrenders its freedoms in the name of security deserves neither.

Critical Thinking Locked Down

As a kid who won athletic scholarships to some of the finest schools (from Choate to Harvard) in America, I learned the trade of critical thinking, which any of us can acquire, with or without a shiny diploma.

What particularly sickened me, however, was that the very schools (prep to grad level) who taught me the history, laws and methods of thinking critically, independently and openly, were the same knee-bending schools who collectively insulted those same principals by shutting their doors to the un-vaxed and censoring alternative views from professors and students who thought differently.

Were these lockdowns proof of humanitarian concern or were they test-drives for increasingly centralized control over national and international markets, currencies and populations?

From the very beginning of the pandemic, expert virologists, physicians and even vaccine creators (as evidenced by the meetings at the AIER in Great Barrington) with equal if not far superior credentials than Dr. Fauci, were openly censored, gas-lighted and criminalized by the media as flat-earth “conspiracy theorists”—the now favorite term of art for anyone who disagrees with DC’s often comically official narrative on anything from WMD to the current definition of a recession.

Thus, when considering the current inflation narrative and its causes, was the US merely stupid in imposing financially crippling lockdowns or were there sinister forces engineering fear as a means of pushing the masses into dependency while the Fed printed more dollars for the repo and bond markets (a hidden “bailout’) than for Main Street?

Saudi Did It?

Others may want to blame the Saudis and the high oil prices for the inflation we see today.

It’s worth reminding, however, that today’s oil price is roughly the same as it was in April of 2020.

The Solution Narrative

As far as combatting inflation, that too creates a great deal of space for debate, error and comedy.

Many, including the Fed’s James Bullard, Lael Brainard or Neel Kashkari have been arguing for aggressive rate hikes to kill inflation.

But with inflation already at 9.1%, such “above-neutral” would require the Fed to follow the IMF’s recommendation that interest rates be at least 1% above inflation rates. In an honest world, that would require a 10.1% interest rate policy, which would immediately bankrupt Uncle Sam.

Instead, Powell is boasting of an “aggressive” 2.25-50% Fed Fund Rates to fight 9.1% inflation, the policy equivalent of storming the beaches of Normandy with squirt-guns.

Meanwhile, the Cleveland Fed, as per my recent articles, is using dishonest math to publicly claim positive 1% real rates despite the fact that when measuring even a 3% yield on the 10Y UST against a 9.1% inflation rate, the USA is in fact living in a world of at least -6% rather than +1% real rates.

Like the CPI scale itself, the Fed is openly lying about negative real rates.

Sadly, such clever math is now the new DC normal. The Fed won’t say what the rest of us know, namely: The only tool to fight Fed-made inflation is a Fed-made recession, which they will deny in plain sight.

The Recession Narrative

The latest lie from on high, of course, is the valiant attempt by Powell, Biden and Yellen to downplay 2 consecutive quarters of negative GDP as a non-recessionary “transition” despite such data effectively confirming the very definition of a recession.

Instead, DC would now have us believe that positive labor and unemployment data is non-recessionary.

In particular, the BLS is boasting 528,000 newly created jobs in July (and 2M year-to-date), which places US unemployment at an admirable 3.5%, the lowest level seen in 50 years.

Unfortunately, a little bit of honest math indicates that those “new jobs” don’t represent new folks finding work, but sadly, just folks already-employed who are taking on second or third jobs to survive rising inflation costs.

The July labor force participation rate actually went down, which means there are less not more people in the work force.

In April of 2019, I did a more extensive report on the DC math used to artificially puff US labor data (U3 and U6) which is far worse than officially reported.

But who needs real math or honest data when DC’s comforting words feel so much better?

Such consistent trends of sanctioned dishonesty, however, force us to question the intelligence and desperation of our so-called “leadership.”

From Fake Math to Real Wars

I’ve written and spoken extensively about the avoid-ability of the war in Ukraine as well as the foreseeable stupidity of the Western sanctions against Putin, all of which have empirically backfired at every level– from the slow collapse of the petrodollar (and hence USD) to the slow rise of a stronger, Eastern-lead trading block among the BRICS.

The petrodollar is no laughing matter. Since de-coupling from the gold standard, the US relies on the forced global purchase of oil in US Dollars to prevent this already debased currency from losing even more demand, and hence value and power.

Only two global leaders have since tried to stand up to the petrodollar power in the past. Saddam Hussein wanted to buy oil in euros and Khaddaffi wanted to buy oil in gold; and just look what happened to them…

Unfortunately for the US, both China and Russia have nuclear weapons. Hence, the US playbook of fighting wars or indirectly eliminating leaders to keep its financial interests secure got a little bit messier this February when poking at Putin.

The Dollar Fairytale: Another Open Lie from On High

Despite openly objective evidence of an increasingly unloved USD, DC continues to boast of the relative strength of the USD on the DXY.

What DC won’t say, however, is that this “strength” is only measured against a tanking yen and euro, two debt-soaked currencies who don’t have enough reserve currency clout to afford a currency-boosting rate hike.

Against the Chinese Yuan, however, the US has less of which to boast…

In short, the USD is anything but strong.

As discussed above, its inherent purchasing power has been neutered by over a century of devaluation and is little more than the best horse in the Western glue factory.

Profitable War Drums

Given the failings and open lies above, from inflation realism and recessionary word-smithing to dying currencies and rising, unpayable debts, why on earth would the US now be saber rattling over the Ukraine or pinching the Chinese bear over Taiwan?

Is it to spread democracy and freedom by helping the underdog, whatever the sacrifice?

Well, one of our most famous underdogs, military generals and presidents, George Washington, warned over 2 centuries ago to precisely avoid such foreign entanglements. “Truly enlightened and independent patriots,” he argued, focused on prosperity within their borders not peripheral wars outside them.

Despite such warnings, the US has spent a lot of time fighting outside its borders rather building unity within them.

Why?

One sad but empirically proven argument is that war is historically good for tanking GDP and struggling stock markets.

In March of 2018, I penned an eerily prescient analysis of how US stocks love global war, and warned of escalations against Russia and China.

In particular, I addressed the historical data of the “war dividend,” which tracked US markets reacting favorably to de-stabilization outside its borders.

Thus, even if Generals Washington and Eisenhower warned against such conflicts, Wall Street and the defense contractors who lobby DC love a good war.

Why?

Because war feeds US markets. Conflicts overseas create massive capital flows into the relative safety of the US.

During the Iraq War, hundreds of billions in Middle Eastern assets rushed into US markets while NATO bombs landed in Iraq. Between 2003 and 2008, the Dow rose steadily upwards.

During the Vietnam War (which killed 58,000 Americans and 1.2 million Vietnamese), the Dow gained 53%. When the war ended, the markets promptly fell, and fell hard.

During the Great War of 1914-1918, the Dow nearly doubled. As for WW2, the Dow rose by 164% between Pearl Harbor in 1941 and VJ day in 1945.

Given such numbers, was the recent idea of sending a kindergarten-level intellect like Kamila Harris to negotiate peace (?) with Putin in early 2022 deliberately set up to fail?

Was Pelosi’s recent flight to Taiwan a commitment to ensure freedom? Or is there a more sinister, yet hidden, motive to push for war in a time of economic disaster at home?

Is America Heading in the Opposite Direction of Its Founding Fathers?

History confirms that every debt crisis leads to a financial crisis, a market crisis, a currency crisis, social unrest, a political crisis, and ultimately extreme authoritarian and centralized control from the far political left of right.

Given how increasingly centralized our openly broken yet centrally controlled markets, economies and politics have become, and given the acceleration and scope of the open lies, backfiring polices and unpayable costs and debts which have emerged in the post-COVID and post-sanction new normal, is it possible that the USA is headed toward a similarly authoritarian fate?

Is it possible that the by ignoring the clear warnings of figures like George Washington, Thomas Jefferson, Andrew Jackson, Benjamin Franklin and Dwight Eisenhower, that America is heading in the opposite direction of its founding principles?

Is it possible that the openly failing inflation, recessionary, domestic and foreign polices listed above are more than just a list of stupid mistakes, but indicators of a set-up for something more sinister?

Are our markets, economies, currencies and individual freedoms being sacrificed to the altar of order, control, safety and security?

Is DC creating an intentional class of American lords and serfs, in which the former hand out stimulus checks to prevent the later from reaching for pitch forks?

As we learned in the Europe of the 1930’s or the lockdowns of the 2020’s, fear (be it viral, militant or economic) is a potent tool of control—it turns revolutionary anger into malleable subservience.

Just a thought.

Did Lockdowns Turn Americans Into Lazy Bums?

  But who on earth thought lockdowns, wars and a state of permanent crisis would have no social effects in the long term?

 Here in Japan, 30 years of not restructuring the economy and related shrinkage has brought a complete crash of the birth rate. The countryside is much too old on average to have children and the cities are not rich enough to afford them.

 As for work, why bother? Inflation will eat away whatever extra effort you invest in your job. Better learn how to save money, barter, produce what you need and become resilient. "That" will pay in the long term. Economists always thought that people were rational. They were right. So if they act irrational, it is only because you do not get the full picture.

Authored by Jeffrey A. Tucker via Brownstone Institute,

It looks as if we can add another line to the long list of lockdown harms. Sloth. 

This explains so much actually. For months, we’ve been watching working/population ratios and labor participation rates and have been stunned by how they both continue to plummet. We search for explanations. Early retirement. Women driven out due to childcare shortages. Unemployment payments. 

All these factors contribute but there is still more to explain. 

In the midst of the astonishing hullabaloo over the raid of Donald Trump’s home – and the confiscation of a pro-freedom Republican Congressman’s smartphone – the Bureau of Labor Statistics dropped a remarkable report on labor productivity. Here we see something we’ve never seen before. 

It’s low and falling. Lower than it has been than in the entire postwar period. It breaks all records. This chart is from 1948 to the present. It adjusts for all factors including participation, population, retirement, and so on. It only looks at hours over output. Here is what we see. 

What does this mean?

The immediate response might be that Americans have gotten lazy. They got used to their Zoom lifestyles and pretending to work. They want to hang around on apps, Tweet, chat it up with their friends on Facebook or Slack, and otherwise fake out the boss who can’t fire them anyway for fear of lawsuits. They aren’t doing much anymore, at least not those in high-end employment in professional office suits. 

I resisted that conclusion and looked more deeply into how this number is calculated. It looks at total economic output compared to the number of labor hours from wage and salary employees involved in making that output. The result is a figure that estimates productivity per hour. And yes, it is probably widely inaccurate as these sorts of macroeconomic magnitudes tend to be. We use them anyway because they are consistently inaccurate: the same method used to calculate in one quarter is used to calculate in all. It thereby becomes useful. 

And what it reveals is probably what we might expect. American workers have dealt with lockdowns and shutdowns, plus vaccine mandate demoralization, plus inflation eating away at real wages, plus an existing or impending recession, and you have the result. A nation of goof-offs. 

It might be more than that. Lockdowns kicked off a national substance-abuse crisis: liquor, drugs, weed, you name it. And depression too. Even today, one cannot help but notice the smell of weed in large cities. This is not the smell of ambition and productivity. 

We can combine this with the sheer number of people who have left the workforce completely and you paint a grim picture. 

Economist and Brownstone Senior Fellow David Stockman has an interesting take on this. Rather than just fire people outright, companies are keeping unproductive employees on the payroll just in case. He writes:

Today’s Q2 productivity report…came in at -4.7%, on top of the -7.7% decline posted in Q1. Together they amount to the worst back-to-back productivity declines ever reported.

Our point is that this development puts a whole new angle on the so-called “strong” labor market. To wit, owing to the labor market turmoil and disruptions of the Covid-Lockdowns and massive stimmy injections since 2020, employers are apparently hiring on a just-in-case basis like rarely before. This is otherwise known as top-of-the-cycle labor hoarding.

As shown below, since Q4 2021 economic output, which is a close derivative of real GDP, has shrunk by –1.2%. By contrast, the US nonfarm payroll has increased by 2.77 million jobs or nearly +2.0%.

Needless to say, with far more labor spread over contracting output, labor productivity took it on the chin. That is to say, bad Washington policies including $6 trillion of stimmies, massive money-pumping and the brutal Lockdowns of the Virus Patrol have apparently left employers dazed and confused.

At length, however, employers will wake-up to the fact that bloated payrolls against declining sales will result in a severe profit margin squeeze. Then the labor-shedding and layoffs will commence big time, even as the Keynesians in the Eccles Building are reduced to babbling about the “strong” labor market which suddenly vanished.

What he is getting at is what I’ve called (after Keynes) the coming euthanasia of the overclass. It won’t be the people actually doing real stuff who will face layoffs but the Zoom workers who stayed home because government said they could and their employers could not object. Employees gradually discovered that they could be anywhere – at the pool, in bed, on the road, climbing mountains – and so long as they had a Slack app running, no one could tell. 

Lockdowns acculturated an entire generation to believe that work is fake, productivity is a ruse, money comes for nothing, the boss is an idiot, and many workers are privileged to be wealthy forever due to papers handed out for $200,000 by colleges and universities. Who needs productivity, much less ambition? 

In the old days, in an ethos formed from bourgeois experience over hundreds of years, the idea of working and doing one’s part was ingrained as a moral habit, part of the liturgy of life itself. When the government told everyone to stop in the name of virus control, something went haywire in people’s brains. If governments say that the work ethic amounts to nothing but pathogenic spread, and we can all contribute more by staying home and doing less, it’s hard to go back. It wrecked a generation. We are paying the price now. 

The good news for the productive few is that this means higher wages and job opportunities galore, especially if you have actual skill and a desire to work. The bad news for everyone else is that many companies will soon discover that you are useless. That’s when the unemployment numbers will start ticking up, making this recession look more like ones in the past except for the relentless decline in real wages. 

To answer the question about whether Americans have become lazy bums, the answer is many but not all. It’s sector specific. And individual specific. 

Strange times. Sad times.

Epic Collapse Is Upon Us

  As we have documented over the last two years, the combination of financial profligacy, Covid-19 lockdowns, Ukraine war and Green energy nonsense can only have one issue down the road. We are fast approaching this point. 

 Let's hope the American Empire, the European Union and the Chinese Communist Party instigated mega real estate bubble all dissolve gracefully but somehow, I doubt this will be the case. 

 In Asia, we say that the wasp stings the crying cheek. It looks more and more like a full hornet's nest is coming at us.   

Submitted by the Daily Reckoning

What’s wrong with the world? Let me count the ways…

The Western gambit against Ukraine is a bust, a foolish miscalculation that was obvious from the start. All it accomplished was to reveal the pitiful dependence of our European allies on Russian oil and gas, leaving their economies good and truly scuppered without them.

The Russians will likely end up with control of the Black Sea and probably the Ukraine breadbasket as well. So now Europe will starve and freeze.

Did they really want to commit suicide like that? Do the populations of Germany, France, Italy, the Netherlands, Spain and the rest just aim to roll into oblivion? Probably not. Rather, we are entering the season of upended governments.

Europe is suddenly a magnificent mess with governments falling like duckpins, industry shuttered from lack of fuel and citizens rising up against insane World Economic Forum (WEF) diktats to drastically reduce livestock and shut down farming — in effect declaring food production an unacceptable environmental hazard.

Cutting Your Own Throat

This, of course, after the governments of Euroland cut their own throats by self-sanctioning themselves out of Russian oil and natgas.

It’s especially bizarre in Germany, the largest economy of the region, which had just this year conclusively realized and admitted that its “green energy” policy was a complete bust, forcing them to shut down major wind turbine installations and resort to producing electricity with coal.

Nice job, greenies. Your idiotic policies are forcing economies to turn to coal, the dirtiest fossil fuel. Of course, the governments of Merkel, and then Olaf Scholz, have revealed themselves as the sheerest hypocritical idiots.

The globalist stooges implanted everywhere will probably be overthrown. I can envision a scenario where NATO and the Euro Union will dissolve in impotent ignominy, and the various countries involved will have to renegotiate their destinies, forgoing U.S. advice and coercion.

They might even become adversaries of the USA, not allies. Did you forget we fought two wars against Germany not so long ago? And all those countries have been fighting each other since the Bronze Age, too.

History’s a Prankster

It may seem unbelievable, but history never stops reminding us what a prankster it is. A strange and terrible inversion has occurred in this Fourth Turning.

Somehow, Mr. Putin’s Russia will be left to represent what remains of international rule-of-law while the Western democracies sink deeper into a morass of deranged despotism. Anyway, they are too busy conducting war against their own people to even pretend to assist their Ukrainian proxies.

We can’t forget that “Joe Biden” crammed nearly $60 billion into the Ukraine money-laundering machine since February, which will just spew hallucinated capital back out into increasingly disordered financial markets.

Look: The indexes are up worldwide this morning. Why? Because global business is so good? I don’t think so.

Meanwhile, there are reports of huge amounts of Western-supplied weapons turning up on the black market. Apparently, some Ukrainians are even selling these weapons to the Russians!

“An Epic Crackup Is Upon Us”

An epic crackup is upon us. Every place in the world is primed for meltdown, and a few lands in the periphery are already sinking. Sri Lanka is broke and out of gas after being set up as a WEF  low-carbon ecostate experiment.

Panama is in revolt over extreme government corruption, food scarcity and the aftereffects of an especially severe two-year-long COVID lockdown that the rest of the world hardly heard about — perhaps because China has operational control over the vital Panama Canal and the CCP has operational control over the World Health Organization, which set up Panama as a lockdown lab project.

In the U.S., moving toward autumn, what we have to look forward to is the blatant desperation of the claque behind “Joe Biden.” Their propaganda machine will probably go all out on climate change and renewed COVID hysteria.

There are always heat waves in midsummer. CNN acts shocked that it’s over 100 degrees in Texas. Really? Never seen that before?

Meanwhile, behind the news about emerging Omicron subvariants, the vaccine injuries and deaths mount and the CDC pretends not to notice. They are just lying as usual. You’re used to it. You pretend it’s to be expected. You’ve forgotten that it wasn’t always so. Soon, it will matter.

Help Is on the Way — A Few Years From Now

Meanwhile, the November midterm elections are only a few months away. Democrats are panicking they’re going to get smoked at the polls. Well, here’s a prediction: A new pandemic is declared in early October, complete with lockdowns, while Google partners with Facebook to roll out a new vote-by-phone app. They’ll say it’s all necessary “to save our democracy.”

By some miracle, then, the Democrats add 30 more seats to their house majority and five in the Senate. Then we enter the new frontier of the Green New Deal and Build Back Better. In other words, the USA heads towards complete collapse.

Speaking of “Joe Biden,” whose idea was it to send the wind-up doll president to Saudi Arabia? I can just imagine what went on in the chamber in private with “JB” and MBS (Crown Prince Mohammed bin Salman), virtual autocrat of the oil-soaked desert land. And wasn’t that fist pump just priceless?

What concessions did “Joe Biden” win from the Saudis? Saudi Arabia graciously agreed to bump up its oil production somewhere in the 2025–2027 time frame — a real triumph for U.S. diplomacy. Nice. Doesn’t really do much for us in the short term, does it?

People, Get Ready

And now the ground is even shifting under the Chinese Communist Party (CCP) as China’s extravagant matrix of city-building, mortgage debt and banking fraud rattles its financial system. What a surprise!

Potent as it has been in bribing politicians around the world, infiltrating governments and cultural institutions in every land and getting the news media to do their bidding, the CCP is apparently losing its grip on the Chinese people, who are sick of being locked down, tracked and swindled.

The tanks are out. This is not the same movie as Tiananmen Square, 1989. This is the CCP bankruptcy, an epic event that will thunder through “the global south,” sending Africa into famine and chaos and South America into yet another rotation of elites.

Pretty soon, it’s going to be every country for itself in this main event of the fourth turning (aka the long emergency). Global unity is a mirage, along with all the preposterous narratives of a world government.

And in every country for itself, it’s going to be every community, every family, every person for itself until, emergently and painfully, everyday life can be reorganized from the ground up.

People, get ready.

Pakistan is Bankrupt, Protests Everywhere. China's financial crisis (Video - 14')

  Now as predicted months ago, it is the turn of Pakistan to fall... 

 This will be relentless, country by country from the outside in.

 

"Completely Unprecedented" Martin Armstrong Warns Trump Raid Is "Deathblow To Democracy"

  While we are being distracted, our democracy is falling apart.

 The Greek democracy didn't survive the fall of Pericles. The Roman Republic was already in tater when Cesar crossed the Rubicon. The Venetian Republic lasted a little longer thanks to an ingenuous system to limit graft and tenure politicians.

 Clearly the American democratic system is approaching the end and with it the Western hemisphere will fall back into darker ages once again.

 Martin Armstrong is a brilliant investor and as such he offers a sharp and to my opinion accurate perspective over the risks in the coming months. But the core of the problem/rot is much deeper and as such can't be easily remedied. 

 In 1944, America became an empire at Bretton Woods.

 In 1971, the US dollar became a fiduciary money with no restrictions on issuance, what the French called the time, an exorbitant privilege and soon after the World currency when Saudi Arabia accepted that all purchases of oil should be paid in USD. 

 In 1981, Reaganomics launched the fire-wheel of permanent deficits followed in 1998 by the abolition of the Glass Steagall act, the fundamental distinction between deposit banking not taking risks on the market with client money and investment banking who could, unleashing the following 20 years of Casino gambling on Wall Street. 

 In 2001, the Patriot act eviscerated freedom and marked the start of permanent wars in the Middle East allowing the "deep State", mostly the CIA and other agencies to grow out of proportion thanks to pork and dark money. The praetorian guards were reborn!

 Finally in 2020, the global cabal of the WEF-linked elites asserted their power over the Western Hemisphere thanks to their total control over international institutions, pretending that a recurrent but engineered virus was a "new" deadly pandemic. 

 All this took 70 years to build. 70 years of peace and prosperity thanks to the aversion to war of traumatized populations in the West and the extraordinary reliance on oil, the most dense and concentrated energy ever used until now.  

 This era is over. From now on energy and resources will be sparse and expensive. As for economic growth, forget about it. Phony statistics are replacing the real stuff. There won't be any recession as long as governments do not declare one. Same for wars, pandemics and almost everything. 

 Truth will soon become a revolutionary act.    

 Carpe Diem! Enjoy the coming months, what comes after will be darker.

Via Greg Hunter’s USAWatchdog.com,

Last month, legendary financial and geopolitical cycle analyst Martin Armstrong said the time to prepare is now for the chaos that is coming in 2023. 

The destabilization of America has been kicked into high gear early with the FBI raid on President Trump’s Florida home this week.  Armstrong explains,

“This really is unprecedented...

In the United States, we are supposed to have civilized transfer of power.  That’s all coming to an end.  I am not being dramatic here.  From a legal perspective, this is completely unprecedented.  The danger of this is once they have done this, if the Republicans are ever allowed to get back into power, they would only end up doing the same thing to the Democrats...

It’s striking a real deathblow to the very idea of a democracy.  We are not, at least we were not until today, someplace like Guatemala where you throw the opposition in jail, kill them or whatever you do.  This is what’s going on.  They are so afraid of Trump running in 2024 that this is just over the top.  Once they did this, there is no end.”

Armstrong says the Democrats are in “dire straits” at the polls–and they know it.  Armstrong thinks the Trump raid by the FBI is an act of desperation, and it will “backfire,” but that’s not the only play in the Democrat playbook for the midterms in November.  Armstrong says,

“I have been warned that the Democrats have been maneuvering, and the reason they are allowing all the illegal aliens to come in is they intend to allow them to vote.  You already had the Justice Department go after one state that said you had to prove you are an American to vote, and they filed a suit against them saying that they violated their civil rights.  At that stage of the game, hey, all of Europe, Australia, everybody should just send in a vote.”

Armstrong’s says forget what the mainstream polls are saying about voter support for Democrats and Joe Biden because the real numbers are much lower than the public is told.  Armstrong’s “Socrates” computer program shows Joe Biden has just 12% of support in America.  Maybe this is why Democrats are desperate and realize they have to cheat and break the law to stay in power.  It’s not going to get any better, and the entire world is in the same sinking boat.  Armstrong says,

“We basically are sitting here in the middle of the collapse of Western civilization.  It’s socialism that is collapsing because these people have done nothing but borrow money to bribe them to vote for them...

There is no way to pay it back, and they had no intention of paying it back...

Europe is, just forget it.  You have emerging markets collapsing around the world because to sell their debt, they had to put it into dollars.  Sri Lanka, Lebanon, Pakistan, Argentina are falling apart on a global scale.”

Armstrong thinks the dollar will be strong for now and not to expect a collapse in the USA anytime soon because America will be the last man standing. 

That said, Armstrong does see the possibility of a “stock market collapse in September.” 

Armstrong is also “worried about civil war or extreme civil unrest in 2023 in America.” 

Armstrong is seeing a “world war coming in 2024 or after.”

Armstrong also said, “My computer warns that there may not even be an election in America in 2024.  It’s reaching that critical period.  So, this raid on Trump is like throwing down the gauntlet.  Everything is gone.”

There is much more in the nearly 53-minute interview.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with Martin Armstrong, cycle expert and author of the upcoming new book “The Plot to Seize Russia, Manufacturing World War III” for 8.9.22.

The US is about to go full Louis XVI

  Often a good lesson is a lesson from history. Unfortunately few countries seems to learn which is why history tends to repeat again and again.

 From the Romans onward, our ancestors faced the same problems and used the same solutions sometimes successfully, often not so much. No prize for guessing how this one will end!

Source: sovereign man

On September 3, 1783, after nearly a year of excruciating back-and-forth negotiations, all sides had finally gathered together in Paris to sign a historic peace agreement.

It was a pretty important peace deal. Because the Treaty of Paris, as it is now known, is what formally ended the American Revolution, and when Great Britain legally recognized the United States as an independent nation.

The treaty was signed in Paris because France had been a major supporter of the US war effort. And just as soon as the ink was dry, French King Louis XVI ordered his finance minister to prepare an accounting of exactly how much money France had spent on US independence.

The result was nothing short of astonishing—more than 1 billion livres.

To put that number in context, the French Treasury’s entire annual revenue only amounted to around 200 million livres.

So they had basically sunk FIVE YEARS worth of their tax revenue fighting someone else’s war.

Granted, Britain was still one of France’s main rivals. And the French did not care for British King George III.

But the American War was simply too costly, and France had already been on very shaky financial footing well before this point.

Louis XIV had nearly bankrupted the country a century before. His successor, Louis XV, had to drastically slash expenses and could barely hang on financially.

Then, in 1774, just prior to the American Revolution, Louis XVI became king at a time that France was rapidly deteriorating.

You’d think that with so much economic turmoil at home that he would have focused on his own national interests… and, in lieu of money, weapons, and ships, he would have instead sent the royal thoughts and prayers to America.

But no. Lucky for the United States, Louis XVI courageously fought the American Revolution down to the very last French taxpayer.

Only after the war did Louis finally take stock of the situation and realize the truth: America was in a much better position. Britain was bruised but still powerful. Yet his own

France was nearly bankrupt and desperately in need of cash. Not exactly a win/win.

Louis XVI was King, but his powers were limited; he was beholden to the legislature, called the Estates-General, and he couldn’t simply decree new taxes without their consent.

The King did, however, control the tax collectors. And Louis made sure they had every authority to coerce, harass, and intimidate money out of French citizens.

French tax collectors had the authority to walk right into people’s homes unannounced, conduct surprise inspections to look for hidden wealth, and walk away with whatever money or property they felt would satisfy the peasant’s tax bill.

This is actually a pretty common theme throughout history: governments that are on the ropes routinely resort to plundering the savings of their citizens.

Several ancient Roman emperors, in fact, from Diocletian to Valentinian III, famously sent ruthless tax collectors to harass their citizens and steal their wealth. Several ancient Chinese dynasties did the same thing. So did the declining Ottoman Empire.

Significantly ramping up tax collection efforts is typically a hallmark of an economy and empire in decline.

So we can’t be too surprised that, in its latest legislative bonanza, the US government is setting aside $80 billion for IRS tax collection efforts.

They’re calling the bill, of course, the Inflation Reduction Act. This is pure comedy—the legislation will do no such thing. Why would inflation, which in part was caused by excessive government spending, magically dissipate because of more government spending? It’s ludicrous.

But inflation aside, front and center in the legislation is $80 billion in funding for the IRS, primarily to step up its tax collection and enforcement efforts.

To put that number in context, the annual budget for the IRS is about $12 billion. So, even though the $80 billion will be leaked out over a period of several years, it constitutes a major increase in the IRS budget.

The entire idea is based on a bizarre notion known as the ‘tax gap’. This is the difference between the amount of tax the government collects, versus the amount the government thinks they should collect.

In other words, the tax gap represents how much they believe people are cheating. And the estimates vary wildly, from $100 billion per year to a whopping $1 trillion per year.

Frankly these numbers have always seemed to me like they were completely made up. No one has explained how they actually come up with such estimates. They just barf up some number and pretend that it’s true.

Obviously there are a whole lot of hardcore tax cheats out there, stealing and defrauding the system. But that’s not why the IRS is receiving an $80 billion boost.

This money will go to hire a small army of tax inspectors who will fan out across the nation on a giant fishing expedition that will ensnare countless middle class Americans and small businesses.

Certainly they’ll catch a few cheats along the way. And they may even find a few bucks to close that mythical ‘tax gap’.

But at what cost?

One of the biggest problems with the US economy right now is that it’s so much more difficult to produce goods and services.

Over the past few years, the people in charge have put up endless road blocks and obstacles for small business.

They vanquished the labor market and made it all but impossible to find workers. They destroyed the supply chain. They engineered historically high inflation. They came up with a myriad of costly new environmental and public health rules.

On top of that they constantly create new rules and regulations, many of which step far beyond the government’s authority.

(Last year, for example, the CDC Director decided in her sole discretion that she controlled the entire $10+ trillion US housing market.)

23% of full-time workers today require a government license to do what they do, according to the US Department of Labor. Even being a hairdresser is full of red tape and costly bureaucracy.

This new threat of widespread tax audits is going to be yet another obstruction to Americans’ productivity…. at a time when the economy desperately needs maximum focus.

Inflation is raging because there is a serious, global imbalance between the supply and demand of goods and services.

Specifically, demand is too strong because they doled out trillions of dollars in free money. And supply is weak because nearly every single government policy makes it harder for people to produce (which is yet another hallmark of empires in decline).

Now, on top of everything else, there is a very high likelihood of being harassed by the tax authorities.

Audits are incredibly unpleasant, costly, and time-consuming. Even if all of your accounts are in order and you’ve done nothing wrong, a tax audit monopolizes a tremendous amount of time and money.

It’s debilitating. Say goodbye to actually running your business, growing sales, or spending time with your family on nights and weekends… and say hello to preparing for your tax audit.

Your time will now be spent digging up receipts, finding old contracts, and trying to recall specific details of trivial decisions you made years ago.

Plus you’ll most likely have to pay outside experts to assist with the process, like CPAs and attorneys. And naturally the government does not reimburse you for such expenses. But at least you’ll get to deduct them… from your taxes.

In the end, after endless financial scrutiny, the government may conclude that you owe them a few bucks because of some undocumented deduction from several years ago. So you write them a check for some trivial sum… after having spent countless hours and effort taken away from your productivity.

The cost/benefit just doesn’t compute. And that’s why healthy, prosperous nations don’t engage in such absurd activities. They don’t need to.

Taxes ultimately represent the government’s ‘slice’ of an economic pie. So when a country is prosperous and an economy is strong, the government’s slice continues to grow because the overall economic pie is constantly getting bigger.

But nations in decline don’t see it this way. For them, the pie is shrinking. So they think the only way to increase their slice is to go after other people’s crumbs.

History shows this is absolutely the wrong move. Raising tax rates, inventing new taxes, and recruiting armies of tax collectors only makes the pie shrink even more.

Their efforts, instead, should be focused on making the pie bigger. But they don’t think that way.

Bear in mind this is all brought to you by the same people who are shoveling your tax dollars out the door to Ukraine $50 billion at a time. It’s very ‘Louis XVI’ of them.

All of these trends—the cannibalistic surge in tax authorities, the anti-productive regulations, the economic scarcity mentality—are all hallmarks of an empire in decline.

The situation is NOT terminal. It is NOT irreversible. But it is reason enough to have a Plan B.

China’s Economy Slumps Further, Raising Fears Of Layoffs

  China is quickly moving to the core of the current financial crisis raising further the odds of a confrontation in the Taiwan strait. 

 There is nothing strange to this phenomenon. In 1929, it is in New York, the rising market at the time, that the market crashed. And it is also the US which recovered first after the 2WW. 

 The circumstances are different so history may well take another path. But some of the similarities are striking. The Americans are squeezing the Chinese almost exactly as they squeezed the Japanese in the 1930s when Japan invaded Manchuria. Still, China is not Japan. Nor is Russia similar to Germany. There is no lack of natural resources on either side this time. It is uncanny to see the world slipping almost unconsciously into a setup where war is the only possible outcome.

Authored by Alex Wu via The Epoch Times (emphasis ours),

This aerial photo shows cargo containers stacked at a port in Lianyungang in China's eastern Jiangsu province on May 9, 2022. (STR/AFP via Getty Images)

Both official and independent data show that China’s economy has slumped further in the second quarter of the year, with manufacturing slowing down unexpectedly and a downturn in the real estate sector intensifying. This has raised fears of a wave of layoffs in the second half of the year adding to already severe unemployment issues in China.

China’s economy deteriorated further in July, said a China Beige Book International (CBBI) report in early August, which provides independent economic data. Factory outputs and new production orders in China reached their slowest since mid-2020, and retail employment was at its worst in more than two years, according to the latest CBBI survey. Deterioration in revenue growth for manufacturers and retailers curtailed profits, the report said.

On Aug. 1, official data revealed even worse numbers in manufacturing and real estate. Data released by the Chinese regime’s statistics bureau showed that the purchasing managers index (PMI) of China’s manufacturing industry for July was 49.0 compared with 50.2 in the previous month, a decrease of 1.2 percentage, which is below the critical level of 50.

In July, with more cases of COVID-19 emerging in parts of China, the communist regime continued its strict “zero-COVID” measures, putting many cities in lockdown, including industrial centers and economic hubs.

Manufacturing activity had rebounded in June after the lockdowns were lifted in parts of mainland China but have now slumped again.

The China Real Estate Index Research Institute publicized that in July, the average price of new residential buildings month-on-month in 100 cities in mainland China dropped instead of increasing, and the average price of homes further plummeted. Price drops for new houses were greater in cities, especially in the Yangtze River and Pearl River deltas, where housing prices had been increasing in previous years.

A general view shows Evergrande residential buildings under construction in Guangzhou, in southern China’s Guangdong Province on July 18, 2022. (JADE GAO/AFP via Getty Images)

Property sales in the 17 cities tracked by the Index Research Institute fell 33.4 percent month-on-month in July, compared with an 88.9 percent jump in June as lockdowns lifted.

High Unemployment Rate

According to a report by major Chinese finance website Caixin, employment in the domestic manufacturing sector has continued to shrink, with the employment index falling to its lowest point in 27 months. The report attributed the layoffs to cost-cutting measures of factories, weak sales, and a “cautious attitude toward hiring” across industries.

In addition, nearly 11 million college students in mainland China graduated in the summer—a record high. According to official data released by the Chinese regime, the unemployment rate for urban youth aged 16-24 climbed to 19.3 percent in June, also record high.

Thousands of job seekers flock to an employment fair in Hefei, east China’s Anhui Province on Feb. 25, 2015. (STR/AFP/Getty Images)

Due to widespread uncertainty about employment, consumer confidence remains fragile. For those who still have jobs, many are more reluctant to spend money.

Official data shows that economic growth in mainland China slowed to 0.4 percent year-on-year in the second quarter. The outside world believes that China’s economy may even already be in recession, as the Chinese regime is known for its lack of transparency and often reports false numbers.

Dim Prospects

At China’s ruling Communist Party’s (CCP) Politburo meeting on July 28, the regime acknowledged that this year’s international environment is “complex and severe,” and that domestic tasks are “difficult and arduous.” The CCP leadership remained silent on the 5.5 percent economic growth target it set for this year. Analysts say this suggests that the CCP believes it will ultimately fail to achieve this goal.

Independent current affairs commentator Tang Jingyuan told The Epoch Times that the downturn in Chinese real estate, a pillar industry and the largest sector of local government investment and revenue, has intensified. “Manufacturing employment continues to shrink, and unemployment hits a new high, and manufacturing corresponds to the export of China’s economy. It shows that the mainland China’s consumption stimulus policy has no effect,” he said.

“These data reflect that the three pillars of China’s economy: investment, exports and consumption, are overall in deceleration or even stalling. On this basis, the CCP authorities still stick to ‘zero-COVID’ policy, which will only hurt the Chinese economy,” Tang said.

“To make matters worse, China’s economic crisis is not a question of whether it can achieve the targeted growth rate, but whether it can stabilize the economy in the next five or even 10 years.”

Semiconductors Emerge As Battleground In US-China Race

  As expected the battle for semiconductors is quickly heating up as one of the key front in the confrontation between China and the US. But unlike the Moon race of the 1960s between the USSR and the US, the weapons are not technology and science but sanctions, trade embargoes and restrictions dividing further the world into blocks. 

 The risk of such a strategy is that even if we escape a hot war in the short term, we will end up with a huge fracture zone with "sporadic eruptions" almost anywhere: Political plate tectonics on a grand scale! But unlike the cold war of the last century, this one will be fought with high-tech weapons and mercenaries guarantying a spillover in short order.

 Silicon (article below), lithium, all rare elements, most metals (copper, titanium), food, energy... the list is endless and all without exception will sooner than later be under some kind of embargo. The post-war free trade world we have enjoyed over the last 70 years is truly over.

Authored by Jessica Mao via The Epoch Times (emphasis ours),

300-millimeter wafers are pictured in a machine for coating with gold in a clean room during the mass production of semiconductor chips at the Bosch's semiconductor plant in Dresden, eastern Germany, on July 12, 2022. (Photo by Jens Schlueter/AFP via Getty Images)

As every aspect of modern life becomes more and more digitized, not just the economies of nations but their sovereign influence will rely more and more on the command of technology.

Although the United States and China are not engaged in traditional warfare, they are engaged in a war of ideas, trade, and technology, especially in semiconductor hegemony, where both sides are battling for supply and advancement.

In recent years, the United States has made a series of moves to hinder and outpace Chinese development in semiconductors, including persuading Asian semiconductor powerhouses to join its alliance, passing a massive spending bill to aid domestic chip production, and banning exports of high-end chipmaking equipment to China.

In late July, the United States expanded its bans on exports to China of equipment that can make semiconductors up to 14 nanometers in size, according to major U.S. chipmaking equipment suppliers, such as Lam Research Corp. and KLA, who were notified by the government about the expanded restrictions.

Previously, the United States had banned the sale of equipment that can produce chips of 10 nm or smaller to Chinese chip manufacturers.

Generally in semiconductor fabrication, the smaller the process technology, the more advanced the chip. The smaller the technology node, the higher the transistor density and the lower the chip power consumption, resulting in higher performance. However, the smaller manufacturing process requires more advanced material and equipment, and will incur a greater cost in R&D and production.

Semiconductors are seen on a circuit board that powers a Samsung video camera at the Samsung MOBILE-ization media and analyst event in San Jose, Calif., on March 23, 2011. (Justin Sullivan/Getty Images)

The development follows a historic $52 billion bill passed by U.S. congress on July 27 to aid domestic chip makers in research, development, and production volume. One of the conditions is that the companies receiving the funds will not increase advanced chip production in mainland China.

The U.S. Department of Commerce said the tightening policies impair “PRC efforts to manufacture advanced semiconductors to address significant national security risks to the United States.”

Meanwhile, the United States is also reportedly planning to ban the exports of U.S. chipmaking equipment that produces advanced NAND chips to major Chinese chipmakers, such as Yangtze Memory Technologies Corp (YMTC).

YMTC is a state-owned company and China’s only storage NAND flash memory manufacturer competing with major U.S. manufacturers. Its global market share is about 5 percent. In a report released by the White House in June 2021, YMTC was identified as the “national champion” enterprise of the Chinese regime, having received $24 billion in subsidies from the Chinese government.

NAND chips are used to store data in a wide range of electronic devices such as smartphones and personal computers, as well as in the data centers of companies such as Amazon, Facebook, and Google.

If the NAND chip initiatives are officially issued, they will be the first time that the United States uses trade restrictions to contain China’s ability to produce non-military use memory chips, broadening the scope of protecting the U.S.’s national security and dealing a massive blow to Chins’s memory chip industry.

On Aug. 1, U.S. senators, including Senate majority leader Chuck Schumer (D-N.Y.), requested that the Department of Commerce add YMTC to the U.S. trade blacklist.

The move could further hamper the growth of China’s semiconductor industry and protect American companies; the only two U.S. memory chip makers, Western Digital and Micron Technology. The two account for about a quarter of the NAND chip market share.

According to a Bloomberg report, the United States is also pushing the Netherlands and Japan to stop the chipmaking equipment suppliers, ASML and Nikon, from selling lithography machines to China. The move could potentially deal a severe blow to major Chinese chipmakers such as Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong Semiconductor Ltd.

US CHIPS Act

On July 26, the U.S. Senate voted to advance its Chips and Science Bill aimed at boosting domestic semiconductor production and improving technological competitiveness with China.

The bill was later passed in the U.S. House of Representatives on July 28 and signed into law by President Joe Biden on Aug. 2.

Senate Majority Leader Chuck Schumer (D-N.Y.) speaks alongside a bipartisan group of U.S. Senators, including (L-R) Roger Wicker (R-Miss.); Mark Warner (D-Va.); Todd Young (R-Ind.), and Maria Cantwell (D-Wash.), following the passage of the CHIPS Act, providing domestic semiconductor manufacturers with $52 billion in subsidies to cut reliance on foreign sourcing, at the U.S. Capitol in Washington, D.C., on July 27, 2022. (SAUL LOEB/AFP via Getty Images)

The legislation will provide $280 billion in funding to prop up and kickstart domestic semiconductor manufacturing and research; the price tag is far above previous legislation that aimed to provide just $52 billion to manufacturers.

Officially dubbed the CHIPS [Creating Helpful Incentives to Produce Semiconductors for America] Act of 2022, the measure would provide tens of billions of dollars in subsidies and tax breaks to technology corporations in an effort to spur new market growth, as well as funding for government-backed tech research.

Proponents of the legislation have long said that it’s necessary in order to maintain a competitive edge with China, which is pouring money into its own domestic chip production.

The legislation also clarifies that entities receiving U.S. government funding are prohibited from engaging in transactions involving substantial expansion of semiconductor manufacturing in China or any other foreign country of concern for at least ten years after the Act takes effect.

These restrictions are designed to prevent chipmakers from significantly expanding the production of chips more advanced than 28nm in China within the next decade.

Even though the 28-nanometer chips are a few generations behind today’s advanced semiconductors, they are still widely used in cars, lower-end smartphones, appliances, and more.

Chip 4 Alliance

The United States has also been working to persuade Asian semiconductor powerhouses to participate in its “Chip 4 alliance.”

The U.S.-led alliance aims to strengthen cooperation in the semiconductors industry among the United States and the East Asian powerhouses of Taiwan, South Korea, and Japan to build a secure supply chain that excludes China.

Taiwan and Japan have already agreed to participate in the Chip 4 alliance proposed by the United States this March, pending South Korea’s decision to join.

The United States has reportedly given South Korea a deadline to decide whether it will join the “Chip 4 alliance” by Aug. 31, according to local South Korean reports citing unnamed sources in Washington.

The "Unthinkable" In US-China Crisis

 The US-China relation is locked in a Thucydides trap and quickly approaching the danger zone where economic measures take a strategic aspect and become indistinguishable from war!

Authored by Maria Ryan via Consortium News,

One aspect of U.S. House Speaker Nancy Pelosi’s trip to Taiwan that has been largely overlooked is her meeting with Mark Lui, chairman of the Taiwan Semiconductor Manufacturing Corporation (TSMC). Pelosi’s trip coincided with U.S. efforts to convince TSMC – the world’s largest chip manufacturer, on which the U.S. is heavily dependent – to establish a manufacturing base in the US and to stop making advanced chips for Chinese companies.

U.S. support for Taiwan has historically been based on Washington’s opposition to communist rule in Beijing, and Taiwan’s resistance to absorption by China. But in recent years, Taiwan’s autonomy has become a vital geopolitical interest for the U.S, because of the island’s dominance of the semiconductor manufacturing market.

An employee at Intel Corporation’s wafer fabrication facility in Chandler, Arizona. Image: Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division.

Semiconductors – also known as computer chips or just chips – are integral to all the networked devices that have become embedded into our lives. They also have advanced military applications. Transformational, super-fast 5G internet is enabling a world of connected devices of every kind (the “Internet of Things”) and a new generation of networked weapons. With this in mind, U.S .officials began to realise during the Trump administration that U.S. semiconductor design companies, such as Intel, were heavily dependent on Asian-based supply chains to manufacture their products.

In particular, Taiwan’s position in the world of semiconductor manufacturing is a bit like Saudi Arabia’s status in OPEC. TSMC has a 53 percent market share of the global foundry market (factories contracted to make chips designed in other countries). Other Taiwan-based manufacturers claim a further 10 percent of the market.

As a result, the Biden administration’s 100-Day Supply Chain Review Report says, “The United States is heavily dependent on a single company – TSMC – for producing its leading-edge chips.” The fact that only TSMC and Samsung (South Korea) can make the most advanced semiconductors (five nanometres in size) “puts at risk the ability to supply current and future [US] national security and critical infrastructure needs.”

This means that China’s long-term goal of reunifying with Taiwan is now more threatening to U.S. interests. In the 1971 Shanghai Communique and the 1979 Taiwan Relations Act, the U.S. recognised that people in both mainland China and Taiwan believed that there was “One China” and that they both belonged to it. But for the U.S. it is unthinkable that TSMC could one day be in territory controlled by Beijing.

'Tech War'

For this reason, the U.S. has been trying to attract TSMC to the U.S. to increase domestic chip production capacity. In 2021, with the support of the Biden administration, the company bought a site in Arizona on which to build a U.S. foundry. This is scheduled to be completed in 2024.

The U.S. Congress has just passed the Chips and Science Act, which provides $52 billion in subsidies to support semiconductor manufacturing in the U.S. But companies will only receive Chips Act funding if they agree not to manufacture advanced semiconductors for Chinese companies.

Image: Taiwan Semiconductor Manufacturing Company Limited , TSMC, Hsinchu Science Park, Taiwan. Wiki Commons

This means that TSMC and others may well have to choose between doing business in China and in the U.S. because the cost of manufacturing in the U.S. is deemed to be too high without government subsidies. This is all part of a broader “tech war” between the U.S. and China, in which the U.S. is aiming to constrain China’s technological development and prevent it from exercising a global tech leadership role.

In 2020, the Trump administration imposed crushing sanctions on the Chinese tech giant Huawei that were designed to cut the company off from TSMC, on which it was reliant for the production of high-end semiconductors needed for its 5G infrastructure business. Huawei was the world’s leading supplier of 5G network equipment but the U.S. feared its Chinese origins posed a security risk (though this claim has been questioned). The sanctions are still in place because both Republicans and Democrats want to stop other countries from using Huawei’s 5G equipment.

The British government had initially decided to use Huawei equipment in certain parts of the U.K.’s 5G network. The Trump administration’s sanctions forced London to reverse that decision. A key U.S. goal appears to be ending its dependency on supply chains in China or Taiwan for “emerging and foundational technologies,” which includes advanced semiconductors needed for 5G systems, but may include other advanced tech in future.

Pelosi’s trip to Taiwan was about more than just Taiwan’s critical place in the “tech war.” But the dominance of its most important company has given the island a new and critical geopolitical importance that is likely to heighten existing tensions between the U.S. and China over the status of the island. It has also intensified U.S. efforts to “reshore” its semiconductor supply chain.

What Putin and China just did to the WEF is a game changer | Redacted with Clayton Morris (Video - 12')

  While the US is agitating with empty gestures (Biden "bumping" MBS in Saudi Arabia, Pelosi supporting Taiwan), Russia and China are moving on building a new world independent from the WEF (World Economic Forum) cabal, now in full control of most Western nations.    

 Neither Putin nor Xi are great friends of democracy but they are the last hope of the world of escaping the WEF dystopia of permanent wars, "green" economic destruction and recurrent virus lockdowns which are now the new normal in Europe and the US.    

 Thanks to captive medias, very few people yet see it that way in Western countries but in the rest of the world, the picture is getting clearer. This is the reason for the pivot of Asia, India, Africa and South America, close to 80% of the world population towards this non-Western centric economic arrangement. 

 The risks are extreme. Because none of the blocks are ready for war, they pile up economic and financial damages on each others endangering the stability of their social systems and in doing so, eventually increasing the chances of a nuclear confrontation. 

 We are as expected in this forth turning on the edge of the precipice.