Organic Corruption

​​This is a natural, organic kind of corruption, a normal part of life. Like gray hair or age spots, it can be creamed over. But the decay continues below.​

Friday, May 17, 2024 

Bill Bonner, writing today from Dublin, Ireland  

What a wonderful, wacky world. 

The Dow crossed the 40,000 mark yesterday. But, adjusted for inflation, it is still well below a genuine, new all-time high. If we’re right, stocks will become less valuable in the years ahead, in real terms, not more valuable. We’ll see. 

And there’s something funny about it... something phony... that we’re trying to understand. Are our companies really becoming more profitable? If real wages aren’t really going up, where are the buyers coming from? Is the nation really getting richer?  

Still not clear what is going on, we’ll keep plodding forward, looking at how corruption is self-limiting... and what it means. 

William Pesek in the Asia Times, writing on Tuesday: 

This week, Biden will unveil plans to quadruple taxes on Chinese electric vehicle (EV) imports and slap huge tariffs on other key industries. The new levies on mainland EVs will reportedly skyrocket to 102.5%. Other priority industries could see tariffs double or triple. 

It’s Biden’s latest ploy to out-Trump Trump, and ultimately a losing ticket in terms of raising American living standards. It also risks provoking China to retaliate in ways that backfire on US consumers and investors. 

Trying to out-Trump Trump may not be a wise move. But it follows the familiar pattern of corruption... making things worse for nearly everyone. 

Michael J. Hicks comments: 

Today’s tariff announcements will raise prices for consumer goods in the months to come.  

Of course, they will. But why raise consumer prices? Because consumers won’t realize it until after the election?? And in the meantime, there are powerful special interests — the auto industry and the United Auto Workers — who would like to be protected from competition.? And Michigan just happens to be one of the ‘swing states’ that will determine the election’s outcome?  

Just askin’... 

In the long run, protecting US automakers from competition will almost guarantee that Detroit’s EVs will never be competitive. 

And so... say goodbye to another US industry. 

‘We Think, They Sweat’

But wait, bending steel (as in, making autos) is an ‘old’ industry; it’s something for other countries, not us, isn’t it? We think, they sweat, right? 

But what if the product of so much thinking isn’t so smart after all? 

For illustration, let us turn back to the Ukraine, where bending steel is extremely popular right now. The Russians bend it around tanks, and guns, and artillery shells... and seem to be winning the war. 

A question: how come ‘the West’ cannot win... even when the adversary is outnumbered (in GDP terms) 30 to 1? The US and its allies have 30 times the GDP of Russia. And yet, it is the Russkies who are gaining ground, not America’s proxy warriors.  

As we will explore next week, maybe bending steel is important after all... and maybe much of America’s stock market... its GDP... its ‘wealth’... and its military power is as phony as its fake dollar. 

Recall that back in May 2022, Zelensky and Putin almost had a deal to end the war. Last month Foreign Affairs magazine published the results of its investigation into how the peace deal got derailed. Kit Klarenberg reports that it failed because: 

“British Prime Minister Boris Johnson offer[ed] President Volodymyr Zelenskyy the blankest of blank cheques to keep fighting.” 

The US and its allies wanted to keep the war going. They said it ‘weakened Russia.’ There has been no evidence of that; Russia has actually grown stronger, economically and militarily. But one thing NATO aid accomplished for sure was to move more of the public’s wealth to the firepower industry and its many fans in Congress and the media.  

​​This is a natural, organic kind of corruption... a normal part of life. Like gray hair or age spots, it can be creamed over... but the decay continues below.​ 

And now, victory seems unattainable. But the Biden team surely won’t permit a settlement now... not before the November election. It would be bad ‘optics’ for the re-election campaign. Alas, more Ukrainians and Russians will have to die to keep the chimera of victory alive. 

​​Looking more closely, we see that the Pentagon and its firepower industry partners prefer big budgets. They also prefer expensive, sophisticated weapons; the margins are bigger... the follow-up ‘support’ and ‘training’ and ‘maintenance’ bills are bigger... and when they fail, which is often, the replacements are another huge source of profit.​ 

National security concerns take second place. Andrew Cockburn: 

Successive “game changing” systems - such as the Switchblade drone, the M-1 Abrams tank, Patriot air defense missiles, the M777 howitzer, the HIMARS precision missile, GPS-guided bombs, and Skydio drones endowed with artificial intelligence, were all dispatched to “the fight,” as the military like to call it, with fanfare and high expectations. All were destined to fail... The $60,000 Switchblade drone, produced in limited numbers due to cost, proved useless against armored targets and was quickly discarded by Ukrainian troops in favor of $700 Chinese commercial models ordered online. The $10 million Abrams tank not only proved distressingly vulnerable to Russian attack drones but in any case broke down repeatedly and was soon withdrawn from combat...  

Gustav C. Gressel adds detail: 

This is why Ukraine holds back the heaviest western fighting equipment like the M1 Abrams main battle tank. It is too heavy, and if it gets stuck in the mud, recovering this vehicle takes too long, and necessitates the assistance of at least two other main battle tanks. Such an assembly would be immediately targeted by the Russians. 

The corruption that leads Washington to misspend money it doesn’t actually have leads it to undermine the ‘services’ — such as national security — that it is supposed to provide. It also seems to distort the whole economy into a strange, unnatural thing — like a sinister lover, who flatters her victim, and leads him to his ruin.  

More to come...  

Regards, 

Bill Bonner 

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