lewrockwell--2020-06-19--The Crisis Goes Up a Gear

The Crisis Goes Up a Gear

Dollar-denominated financial markets appeared to suffer a dramatic change on or about the 23 March .
This article examines the possibility that it marks the beginning of the end for the Fed ’ s dollar .
At this stage of an evolving economic and financial crisis , such thoughts are necessarily speculative .
But an imminent banking crisis is now a near certainty , with most global systemically important banks in a weaker position than at the time of the Lehman crisis .
US markets appear oblivious to this risk , though the ratings of G-SIBs in other jurisdictions do @ @ @ @ @ @ @ systemic one at this stage .
A banking collapse will be a game-changer for financial markets , and we should then worry that the Fed has bound the dollar ’ s future to their fortunes .
The dollar could fail completely by the end of this year .
Against that possibility a reset might be implemented , perhaps by reintroducing the greenback , which is not the same as the Fed ’ s dollar .
Any reset is likely to fail unless the US Government desists from inflationary financing , which requires a @ @ @ @ @ @ @ imagine in a presidential election year .
Flash Crash : A Trading ... Vaughan , Liam Best Price : $ 18.19 Buy New $ 17.93 The most important mistake economists and financial watchers make is to assume events and prices tomorrow are simply projections of those of today .
It is the basis of all economic and financial modelling .
Yet despite the hard lessons of experience economic forecasters persist with their misleading models .
Nowhere is the failure of linear projection from the past more important than in the lifeblood common to @ @ @ @ @ @ @ change in their utility over time , almost no one expects their demise , other perhaps at some point in the far distant future .
But what if this generally linear expectation is as wrong as all other forecasting models ?
What if the response to the current economic crisis is a more rapid depreciation of currencies ?
And what happens if they die altogether ?
And what are the consequences for the ordinary person ?
This article explores these what-ifs .
It examines the conditions that could lead to this outcome .
@ @ @ @ @ @ @ through extrapolation , but by telling us that every recorded currency collapse has occurred to fiat currencies unbacked by gold or silver .
So , we know it will happen — eventually .
Less understood is that the pattern is always the same : a prolonged period of falling purchasing power , followed by a sudden collapse when a currency ’ s users finally reject it .
In terms of time the latter phase usually lasts approximately six months .
The early morning of Monday , 23 March was a significant time , @ @ @ @ @ @ @ s trade-weighted index .
At the same time , gold , silver and copper prices , having fallen in the weeks before turned sharply higher .
And while oil initially followed , it was a month before it resumed its uptrend — delayed by the delivery hiatus in the futures markets which briefly drove the price negative .
The S & P 500 rallied the following day , ending a near 30 % decline before recovering all of it , and then some .
1 Troy Oz .999 Pure Si ... Buy New @ @ @ @ @ @ @ markets decided that economic growth , both in the US and the rest of the world was going to continue following lockdowns , and growing demand for key commodities was going to be resumed .
Or , as the decline in the dollar ’ s TWI indicated , the purchasing power of the dollar was going to decline , and commodity prices were reflecting an accelerating downtrend for the dollar ’ s purchasing power .
The performance of the S & P 500 since 23 March , being unhinged from any business conditions @ @ @ @ @ @ @ flood of money emanating from the Fed is fuelling stock prices .
It is also fuelling prices of all other financial assets .
The turnaround in silver is a more subtle story , shown in the chart as the reciprocal of the more usual gold/silver ratio .
Silver had been ignored , classed solely as an industrial metal .
Gold was seen by the financial community as the only metallic hedge against uncertainty in the financial system .
That changed on 23 March when the gold/silver ratio peaked at 125 on the previous @ @ @ @ @ @ @ to outperform gold with the gold/silver ratio currently down to 98 .
We might look back and pinpoint this time as marking the beginning of a return to some moneyness in silver .
The weeks before had seen the Fed ease monetary policy .
On 3 March , the Fed cut its funds rate from 1 ½ % to 1 % .
In the accompanying announcement the Fed said that the fundamentals of the economy remained strong , but the coronavirus posed evolving risks to the economy .
On 15 March , the @ @ @ @ @ @ @ this time to zero , but the statement now said the coronavirus had harmed communities and disrupted economic activity in many countries , including the US .
On a twelve-month basis , overall price inflation and price increases for other than food and energy were running at below 2 % .
The Fed announced renewed quantitative easing of at least $ 500bn of Treasury purchases and $ 200bn of mortgage-backed securities “ in the coming months ” .
It was “ prepared to use its full range of tools to support the flow @ @ @ @ @ @ @ thereby promote its maximum employment and price stability goals.
” That day the Fed made two other announcements .
The first detailed arrangements for the encouragement of credit expansion to support both consumers and businesses , including the reduction of reserve ratios for all banks to zero .
The second concerned the reduction of costs in drawing down USD swap lines at the other major central banks .
They were followed over the course of the week by a series of announcements facilitating the availability of credit .
Clearly , the Fed was @ @ @ @ @ @ @ .
And taking a phrase from the last head of the ECB , the Fed had signalled it was prepared to do whatever it takes without limitation .
But the response in the markets took a week to develop into an inflection point , a normal pause before a new direction is found .
Since the Fed is one step removed from the non-financial economy it relies on commercial banks to implement its monetary policy .
But commercial banks will only act as the Fed ’ s agents if they are confident the @ @ @ @ @ @ @ .
If the current crisis is simply a matter of the coronavirus being contained before everything returns to normal , then bankers might be prepared to take a punt on an increase of bank lending .
But as time passes , the losses mount .
Business and consumer defaults are increasing , and the prospects for a rapid recovery appear to be receding .
Furthermore , liquidity strains in the banking system are resurfacing , despite the massive injections of QE by the Fed .
After subsiding from the panicky days of last @ @ @ @ @ @ @ increase again totalling anything between $ 20— $ 100bn daily .
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It has been generally forgotten that the global economy was already facing a recession before the virus lockdowns .
Trade wars between America and China and bank credit expansion having run for a decade were a repeat of the conditions that led to the Wall Street Crash in 1929 , when the Smoot-Hawley Tariff Act following the roaring twenties was enacted , bank credit imploded , and the 1930s depression followed .
@ @ @ @ @ @ @ on their balance sheets and fear of bad debts has taken over from lending greed .
The global banking cohort is increasingly desperate to reduce balance sheet commitments at the same time as the Fed and other central banks are frantic to see them expanded .
It is no wonder that the Fed ’ s expansion has remained bottled up in financial markets , driving financial assets even further into dangerous overvaluation territory .
Consequently , without liquidity flowing more freely into the non-financial economy , bad debts can only deteriorate further , @ @ @ @ @ @ @ banks .
Systemic issues are being ignored When the coronavirus first became an economic issue , there were mounting concerns over payment failures in supply chains .
In the US , these payments are effectively the equivalent of gross output , which at the end of last year was running at $ 38 trillion .
While we regard gross output as the value of products as they flow through their production stages , the payments flow the other way , back down the chains .
Therefore , the $ 38 trillion figure can @ @ @ @ @ @ @ of all supply chain payments in the US , to which must be added the dollar equivalents of supply chain payments outside the US for semi-manufactured imports .
Not all supply chains have been completely disrupted , so the good news is payment disruptions onshore should be significantly less than $ 38 trillion but could easily be half that .
But there is likely to be additional disruption from abroad , a point addressed by the Fed when it increased the number of central banks ( but not China ) having access to @ @ @ @ @ @ @ commercial banks are not so much from the largest corporations , likely to be bailed out if in trouble , but from lower tiers of borrowers .
This affects banks with exposure to collateralised loan obligations , which are bundled loans to companies often unable to raise funds any other way — today ’ s version of the collateralised debt obligations that blew up the banking system in 2008 .
Additionally , banks have direct loans and revolving capital exposure on their balance sheets with all businesses in the $ 38 trillion of @ @ @ @ @ @ @ of the US ’ s G-SIBs — global systemically important banks — is less than a trillion dollars .
Yet the supply chain failures that they are expected to backstop are many trillions — multiple times their market capitalisation , and even of their balance sheet equity .
It seems hardly possible that the US banking system will survive the current supply chain disruption without help .
The added bad news is that the US G-SIBs are rated much more highly in stock markets than their Chinese , Japanese , Eurozone , Swiss @ @ @ @ @ @ @ 1 above .
[ i ] It indicates that a systemic failure in dollar-denominated financial markets is not widely expected , given the generally higher market ratings afforded to US G-SIBs than for those in other jurisdictions .
This probably explains why this topic is not yet a significant issue for dollar investors , though individual bank failures are more obviously an issue in other jurisdictions , where some G-SIB price to book ratios are below 30 % while those of US G-SIBs average 93 % .
The next significant event therefore will @ @ @ @ @ @ @ G-SIB , if not in America , then elsewhere .
Given the sheer scale of the problems in supply chains in all currencies and the accumulating bad debts attributable to lockdowns it could happen in a matter of weeks .
Presumably , failing banks will be taken into public ownership with the Fed backstopping it with yet more inflationary finance .
The impact on the Fed ’ s balance sheet , which has already grown to over $ 7 trillion will probably be several times its current size .
But that , on @ @ @ @ @ @ @ to destroy the dollar .
A more direct danger is posed from monetary policies aimed at supporting financial asset values .
In common with other major central banks the Fed has become reliant on a policy of ultra-low interest rates to fund its government ’ s deficit .
At the same time , there has been a longstanding belief , particularly in America , that rising prices for financial assets , chiefly stocks , have been vital to generate a wealth effect and therefore maintain public confidence in the economic outlook .
In @ @ @ @ @ @ @ been taken to extremes with even teenagers reportedly buying fractionalised stocks through aggregating platforms , such as Robinhood , as if it is a just another computer game .
In more normal times the excessive speculation in the markets seen today would encourage the Fed to inject some caution into monetary policy ; but the Fed can not backtrack for fear of triggering a catastrophic collapse .
Consequently , the future of the dollar has become firmly tied to that of confidence in financial markets .
With a rapidly escalating budget deficit the @ @ @ @ @ @ @ , the cost of which already absorbs $ 400bn in interest charges annually .
The Trump administration had increased its deficit to record levels in the good times when tax revenue was buoyant .
And now the crisis has hit , higher interest rates will expose the US Government to a debt trap .
This is a weapon the Fed can not use .
As noted above , the next market shock is likely to be a systemic failure in the banking system .
It matters not where that occurs , but when @ @ @ @ @ @ @ .
Not only do they withdraw funds from banks they deem to be at risk thereby increasing their problems , but they also reduce cross-border currency exposure .
The dollar is most exposed of all currencies to the latter risk : on last known figures foreigners owned about $ 25 trillion in securities , short-term paper and bank deposits , while Americans held roughly half that invested mainly in illiquid production facilities abroad , limited portfolio exposure to listed securities and with very little liquid foreign currency exposure .
In our headline chart @ @ @ @ @ @ @ turning point was 23 March and its subsequent downturn was part of a bigger commodity picture with gold , silver , copper and — belatedly — oil prices rising .
In March , US TIC data showed that foreigners reduced their dollar exposure by $ 227.9bn , only offset by US residents ’ net sales of foreign securities of $ 133.3bn .
[ ii ] Here is the evidence that in troubled times money heads for home .
Additionally , that month saw a trade deficit of $ 44.4bn suggesting total foreign-related dollar @ @ @ @ @ @ @ is only part of a bigger dollar picture , but it does appear foreigners were reducing their dollar exposure at the time that the dollar ’ s TWI peaked on 23 March .
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This is important , because there are two market factors that have always led to a fiat currency collapse .
The first is selling by foreigners , which appears to have commenced , and in this respect the dollar is particularly exposed .
With some $ 25 trillion invested @ @ @ @ @ @ @ destruction to the dollar ’ s purchasing power from this source is significant .
As global trade shrinks further , not only will foreigners be driven by the need to redeploy dollars into their currencies of origin , but they will stop funding the US Government , choosing to sell down their US Treasury holdings , a process which has already started .
If the Fed is to successfully fund the growing budget deficit it must absorb foreign sales of US Treasuries as well as maintain sufficient levels of QE to fund a @ @ @ @ @ @ @ the consequences of a systemic failure .
The spell cast over financial assets will be broken .
First , investors and speculators are likely to turn their attention to equities , being obviously the most overvalued financial assets at a time of intensifying crisis .
Foreign investors will join , selling down their portfolio exposure , repatriating some , if not all of the proceeds by selling dollars as well .
Next , with a falling dollar and a growing sensitivity to the political aspect of the crisis , market participants will reassess @ @ @ @ @ @ @ and question the yield suppression policy of the Fed .
Dollar selling seems bound to intensify .
It will then become obvious to everyone that the Fed is sacrificing the dollar in order to fund the government , keep the banking system going and to support the economy by attempting to provide the liquidity to defray supply chain failures .
It will already be demonstrably failing to support financial asset prices , which has become the visible manifestation of a successful monetary policy .
It would be a miracle if this failure , @ @ @ @ @ @ @ a socialistic president being lined up by the Democrats , does not lead to a full-blown financial and dollar crisis .
Unless the Fed can raise interest rates to the point where it is too expensive for speculators to short the dollar ( which we can rule out ) , it will enter the second phase of its collapse , driven by US residents realising the dollar is losing purchasing power , rather than prices rising .
The purchasing power of any money depends on the balance between money and goods maintained by @ @ @ @ @ @ @ the money in favour of goods , then money ’ s purchasing power declines , potentially to zero .
Following foreign selling , this is the second phase of the destruction of a fiat currency , which in past examples have taken roughly six months for it to become worthless .
There are three factors that could shorten this timescale even further : the replacement of cash and cheques by digital payments , modern communications leading to the rapid spread of information , and as a consequence of the development of cryptocurrencies , @ @ @ @ @ @ @ unbacked fiat currencies .
The case for fiat currency survival beyond 2020 The circumstantial evidence that the dollar will collapse before the year-end is mounting .
Cassandra opened her casket , the evils escaped , and only hope remains trapped .
Or so it seems .
We can not divine the future .
We can only sift the evidence , be aware of common fallacies and avoid the temptation to wrongly extrapolate from yesterday into the future .
While our method may be better than the macroeconomic forecasting beloved of the establishment , @ @ @ @ @ @ @ And it is possible the US Treasury might attempt a reset , perhaps using Treasury dollars , otherwise known as greenbacks , which were last issued in 1971 .
But without axing government welfare commitments to the American public , returning to balanced budgets and abandoning Fed dollar denominated debt this sort of legerdemain is unconvincing .
Furthermore , the dollar ’ s reserve role for other currencies would have to be abandoned because of the monetary inflation involved in Triffin ’ s dilemma .
And other currencies tied to the Fed ’ @ @ @ @ @ @ @ still face their own collapse .
A reset abandoning the Fed ’ s dollar in favour of greenbacks is possible .
But history has shown that the introduction of a replacement currency for one that has collapsed fails unless government financing by monetary expansion is demonstrably abandoned .
Only time will tell whether in a presidential election year the US Government musters the clarity of purpose to implement a new lasting dollar regime .
The US Treasury says it still has over 8,000 tonnes of gold .
If it is willing to drop @ @ @ @ @ @ @ of gold ’ s monetary function , America could reintroduce gold convertibility for the greenbacks .
This would probably be a last resort .
It reneges on the Fed ’ s balance sheet note — which in these conditions would be its only significant asset , involves the abandonment of the welfare state and America ’ s longstanding geopolitical aims , and it allows China to gain potential advantage by displacing the dollar with a more convincing gold convertibility of its own .
China has deliberately cornered the gold bullion market in plans @ @ @ @ @ @ @ Deng .
Almost certainly , following the introduction of its Regulations on the Control of Gold and Silver ( 1983 ) , the Chinese state accumulated sufficient gold for its strategic purposes by the time it then permitted its citizens to buy gold with the opening of the Shanghai Gold Exchange in 2002 .
The gold acquired by the state at that time is not declared as monetary gold and the quantity is unknown , but after examining inward investment flows net of trade deficits in the 1980s and growing export surpluses subsequently @ @ @ @ @ @ @ foreign exchange gained into gold at contemporary prices suggests a position of some 20,000 tonnes of bullion was likely to have been accumulated by 2002 .
There is no way of establishing the facts , and therefore statements about the Chinese state ’ s ownership of bullion are necessarily speculative .
But additional evidence is compelling : • China is now the largest gold mining nation by far , extracting an estimated 4,200 tonnes since 2010 , more than any other nation .
This has been driven by government policy .
• The @ @ @ @ @ @ @ refining , taking in doré from abroad to add to Chinese stocks .
At the same time , virtually no Chinese refined gold kilo bars are permitted to leave the country .
• In 2002 , when the Shanghai Gold Exchange was set up by the Peoples ’ Bank of China the Chinese government encouraged its nationals to acquire physical gold , even advertising its attractions in state media .
Since 2010 alone , 17,200 tonnes have been delivered into public hands by the SGE .
These figures were achieved by importing bullion @ @ @ @ @ @ @ • Its allies in Asia , principally members of the Shanghai Cooperation Organisation , have also been acquiring gold .
Russia has been particularly aggressive in dumping dollars for gold .
• China now dominates physical gold markets and can be said to control them .
Given all these verifiable facts , it seems unlikely that a state which centrally plans would not have acquired for its own use substantial quantities of bullion ahead of the establishment of the SGE .
America knows it and continues to resist gold having a monetary role @ @ @ @ @ @ @ changed , it would restrict the dollar ’ s circulation abroad .
It would mark the end of dollar hegemony and a gold-backed yuan would become the foreign currency of choice throughout Asia , eastern Europe , the Middle East and Africa .
A banking crisis in the coming weeks is an increasingly likely event , given the scale of disruption to supply chains .
The escalation of bankruptcies and of non-performing loans worldwide will almost certainly take the banking system down .
It will be a watershed , a wake-up call to @ @ @ @ @ @ @ normality after the coronavirus passes .
For the moment , central banks are throwing money at the problem ; money which remains stuck in financial assets , inflating them even further , and not being transmitted to the non-financial economy by banks already over-leveraged to failing borrowers .
We can be certain central bankers and government treasury departments are only now grasping the enormity of these problems , but they are still behaving as if chucking money at them is a viable solution .
They will only destroy their unbacked fiat currencies , @ @ @ @ @ @ @ dollar , is already in progress .
The clock is ticking from 23 March .
While there may be attempts at a fiat money reset , without clear legal commitments from central banks and treasury departments to end inflationary financing , any reset will only delay currency destruction by a matter of months .
The consequences of such an outcome are always devastating , the more so because all major westernised central banks are committed to the same inflationary policies at the same time .
The political consequences do not bear thinking about @ @ @ @ @ @ @ rather than later , metallic money will regain circulation .
And when prices are set in gold or silver , perhaps through fully backed substitutes , the stability they bring will end the trappings of fiat currencies .
All this destruction is measured in current terms , nearly all from statistics collected by the Bank for International Settlements .
Gone will be worldwide fiat currency debt , amounting to some $ 250— $ 300 trillion .
Gone will be all OTC derivatives which settle in fiat , amounting to a further $ 560 @ @ @ @ @ @ @ , a further $ 33 trillion .
Gone will be options , a further $ 65 trillion .
All these , totalling over $ 900 trillion , are only part of the destruction .
Global deposits held as bank balances totalling $ 60 trillion will evaporate .
Worldwide equity markets denominated in fiat are a further $ 70 trillion ; anything that does not migrate from fiat pricing disappears , including most , if not all ETFs .
Goodbye to hedge funds .
Goodbye to offshore financial centres .
Goodbye to onshore financial @ @ @ @ @ @ @ of fiat money .
Life will be very different , and those not prepared for it , principally by retaining a store of non-fiat , sound money , which can only be physical gold and silver until credible substitutes arise , will face impoverishment .
Measured in real money , the value of non-financial physical assets will collapse due to the preponderance of desperate sellers to whom survival is most important , even though priced in worthless fiat their prices will have risen .
The experience of inflationary collapses in Germany and Austria @ @ @ @ @ @ @ , when country estates went for almost nothing in gold-back dollars and $ 100 would buy a mansion in Berlin .
None of this is expected .
It may not happen , but the chances of it happening appear to have increased significantly from 23 March .
[ i ] Thanks go to Professor Kevin Dowd for help in preparing the table in Figure 1 .
The views and opinions expressed in this article are those of the author ( s ) and do not reflect those of Goldmoney , unless expressly stated @ @ @ @ @ @ @ purposes only and does not constitute either Goldmoney or the author ( s ) providing you with legal , financial , tax , investment , or accounting advice .
The Best of Alasdair Macleod

Dollar-denominated financial markets appeared to suffer a dramatic change on or about the 23 March. This article examines the possibility that it marks the beginning of the end for the Fed’s dollar.
At this stage of an evolving economic and financial crisis, such thoughts are necessarily speculative. But an imminent banking crisis is now a near certainty, with most global systemically important banks in a weaker position than at the time of the Lehman crisis. US markets appear oblivious to this risk, though the ratings of G-SIBs in other jurisdictions do reflect specific banking risks rather than a systemic one at this stage.
A banking collapse will be a game-changer for financial markets, and we should then worry that the Fed has bound the dollar’s future to their fortunes.
The dollar could fail completely by the end of this year. Against that possibility a reset might be implemented, perhaps by reintroducing the greenback, which is not the same as the Fed’s dollar. Any reset is likely to fail unless the US Government desists from inflationary financing, which requires a radically changed mindset, even harder to imagine in a presidential election year.
Introduction
Flash Crash: A Trading... Vaughan, Liam Best Price: $18.19 Buy New $17.93 (as of 03:39 UTC - Details) The most important mistake economists and financial watchers make is to assume events and prices tomorrow are simply projections of those of today. It is the basis of all economic and financial modelling. Yet despite the hard lessons of experience economic forecasters persist with their misleading models.
Nowhere is the failure of linear projection from the past more important than in the lifeblood common to everything. While knowing that state-issued currencies change in their utility over time, almost no one expects their demise, other perhaps at some point in the far distant future. But what if this generally linear expectation is as wrong as all other forecasting models? What if the response to the current economic crisis is a more rapid depreciation of currencies? And what happens if they die altogether? And what are the consequences for the ordinary person?
This article explores these what-ifs. It examines the conditions that could lead to this outcome. History gives us a guide, not through extrapolation, but by telling us that every recorded currency collapse has occurred to fiat currencies unbacked by gold or silver. So, we know it will happen — eventually. Less understood is that the pattern is always the same: a prolonged period of falling purchasing power, followed by a sudden collapse when a currency’s users finally reject it. In terms of time the latter phase usually lasts approximately six months.
Assessing the turning point
The early morning of Monday, 23 March was a significant time, marking the top of the dollar’s trade-weighted index. At the same time, gold, silver and copper prices, having fallen in the weeks before turned sharply higher. And while oil initially followed, it was a month before it resumed its uptrend — delayed by the delivery hiatus in the futures markets which briefly drove the price negative. The S&P 500 rallied the following day, ending a near 30% decline before recovering all of it, and then some. 1 Troy Oz .999 Pure Si... Buy New $41.99 (as of 03:39 UTC - Details)
Something had changed. Either markets decided that economic growth, both in the US and the rest of the world was going to continue following lockdowns, and growing demand for key commodities was going to be resumed. Or, as the decline in the dollar’s TWI indicated, the purchasing power of the dollar was going to decline, and commodity prices were reflecting an accelerating downtrend for the dollar’s purchasing power.
The performance of the S&P 500 since 23 March, being unhinged from any business conditions, gives us a clue: the flood of money emanating from the Fed is fuelling stock prices. It is also fuelling prices of all other financial assets.
The turnaround in silver is a more subtle story, shown in the chart as the reciprocal of the more usual gold/silver ratio. Silver had been ignored, classed solely as an industrial metal. Gold was seen by the financial community as the only metallic hedge against uncertainty in the financial system. That changed on 23 March when the gold/silver ratio peaked at 125 on the previous business day. It is now beginning to outperform gold with the gold/silver ratio currently down to 98. We might look back and pinpoint this time as marking the beginning of a return to some moneyness in silver.
The weeks before had seen the Fed ease monetary policy. On 3 March, the Fed cut its funds rate from 1 ½% to 1%. In the accompanying announcement the Fed said that the fundamentals of the economy remained strong, but the coronavirus posed evolving risks to the economy.
On 15 March, the Fed cut its funds rate again, this time to zero, but the statement now said the coronavirus had harmed communities and disrupted economic activity in many countries, including the US. On a twelve-month basis, overall price inflation and price increases for other than food and energy were running at below 2%. The Fed announced renewed quantitative easing of at least $500bn of Treasury purchases and $200bn of mortgage-backed securities “in the coming months”. It was “prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”
That day the Fed made two other announcements. The first detailed arrangements for the encouragement of credit expansion to support both consumers and businesses, including the reduction of reserve ratios for all banks to zero. The second concerned the reduction of costs in drawing down USD swap lines at the other major central banks. They were followed over the course of the week by a series of announcements facilitating the availability of credit.
Clearly, the Fed was engaging the ultimate in aggressive monetary policies. And taking a phrase from the last head of the ECB, the Fed had signalled it was prepared to do whatever it takes without limitation. But the response in the markets took a week to develop into an inflection point, a normal pause before a new direction is found.
Central bank inflation and bank credit difficulties
Since the Fed is one step removed from the non-financial economy it relies on commercial banks to implement its monetary policy. But commercial banks will only act as the Fed’s agents if they are confident the rewards are greater than the risks involved. If the current crisis is simply a matter of the coronavirus being contained before everything returns to normal, then bankers might be prepared to take a punt on an increase of bank lending.
But as time passes, the losses mount. Business and consumer defaults are increasing, and the prospects for a rapid recovery appear to be receding. Furthermore, liquidity strains in the banking system are resurfacing, despite the massive injections of QE by the Fed. After subsiding from the panicky days of last September, overnight repos are on the increase again totalling anything between $20—$100bn daily. 2020 American Silver E... Check Amazon for Pricing.
It has been generally forgotten that the global economy was already facing a recession before the virus lockdowns. Trade wars between America and China and bank credit expansion having run for a decade were a repeat of the conditions that led to the Wall Street Crash in 1929, when the Smoot-Hawley Tariff Act following the roaring twenties was enacted, bank credit imploded, and the 1930s depression followed. Similarly, banks are now highly leveraged on their balance sheets and fear of bad debts has taken over from lending greed. The global banking cohort is increasingly desperate to reduce balance sheet commitments at the same time as the Fed and other central banks are frantic to see them expanded.
It is no wonder that the Fed’s expansion has remained bottled up in financial markets, driving financial assets even further into dangerous overvaluation territory. Consequently, without liquidity flowing more freely into the non-financial economy, bad debts can only deteriorate further, with loan risk rapidly increasing for commercial banks.
Systemic issues are being ignored
When the coronavirus first became an economic issue, there were mounting concerns over payment failures in supply chains. In the US, these payments are effectively the equivalent of gross output, which at the end of last year was running at $38 trillion. While we regard gross output as the value of products as they flow through their production stages, the payments flow the other way, back down the chains. Therefore, the $38 trillion figure can be taken as proxy for the sum of all supply chain payments in the US, to which must be added the dollar equivalents of supply chain payments outside the US for semi-manufactured imports.
Not all supply chains have been completely disrupted, so the good news is payment disruptions onshore should be significantly less than $38 trillion but could easily be half that. But there is likely to be additional disruption from abroad, a point addressed by the Fed when it increased the number of central banks (but not China) having access to its swap lines.
The risks to commercial banks are not so much from the largest corporations, likely to be bailed out if in trouble, but from lower tiers of borrowers. This affects banks with exposure to collateralised loan obligations, which are bundled loans to companies often unable to raise funds any other way — today’s version of the collateralised debt obligations that blew up the banking system in 2008. Additionally, banks have direct loans and revolving capital exposure on their balance sheets with all businesses in the $38 trillion of onshore supply chains.
The market capitalisation of the US’s G-SIBs — global systemically important banks — is less than a trillion dollars. Yet the supply chain failures that they are expected to backstop are many trillions — multiple times their market capitalisation, and even of their balance sheet equity.
It seems hardly possible that the US banking system will survive the current supply chain disruption without help. The added bad news is that the US G-SIBs are rated much more highly in stock markets than their Chinese, Japanese, Eurozone, Swiss and UK competitors, shown in Figure 1 above.[i] It indicates that a systemic failure in dollar-denominated financial markets is not widely expected, given the generally higher market ratings afforded to US G-SIBs than for those in other jurisdictions. This probably explains why this topic is not yet a significant issue for dollar investors, though individual bank failures are more obviously an issue in other jurisdictions, where some G-SIB price to book ratios are below 30% while those of US G-SIBs average 93%.
The next significant event therefore will almost certainly be the failure of a G-SIB, if not in America, then elsewhere. Given the sheer scale of the problems in supply chains in all currencies and the accumulating bad debts attributable to lockdowns it could happen in a matter of weeks. Presumably, failing banks will be taken into public ownership with the Fed backstopping it with yet more inflationary finance. The impact on the Fed’s balance sheet, which has already grown to over $7 trillion will probably be several times its current size. But that, on its own, may not be enough to destroy the dollar.
A more direct danger is posed from monetary policies aimed at supporting financial asset values. In common with other major central banks the Fed has become reliant on a policy of ultra-low interest rates to fund its government’s deficit. At the same time, there has been a longstanding belief, particularly in America, that rising prices for financial assets, chiefly stocks, have been vital to generate a wealth effect and therefore maintain public confidence in the economic outlook. In current markets, this overvaluation policy has been taken to extremes with even teenagers reportedly buying fractionalised stocks through aggregating platforms, such as Robinhood, as if it is a just another computer game.
The dollar’s inevitable descent
In more normal times the excessive speculation in the markets seen today would encourage the Fed to inject some caution into monetary policy; but the Fed cannot backtrack for fear of triggering a catastrophic collapse. Consequently, the future of the dollar has become firmly tied to that of confidence in financial markets.
With a rapidly escalating budget deficit the US Government has a growing funding requirement, the cost of which already absorbs $400bn in interest charges annually. The Trump administration had increased its deficit to record levels in the good times when tax revenue was buoyant. And now the crisis has hit, higher interest rates will expose the US Government to a debt trap. This is a weapon the Fed cannot use.
As noted above, the next market shock is likely to be a systemic failure in the banking system. It matters not where that occurs, but when it does it makes bank depositors autarkic. Not only do they withdraw funds from banks they deem to be at risk thereby increasing their problems, but they also reduce cross-border currency exposure. The dollar is most exposed of all currencies to the latter risk: on last known figures foreigners owned about $25 trillion in securities, short-term paper and bank deposits, while Americans held roughly half that invested mainly in illiquid production facilities abroad, limited portfolio exposure to listed securities and with very little liquid foreign currency exposure.
In our headline chart we noted that the dollar’s turning point was 23 March and its subsequent downturn was part of a bigger commodity picture with gold, silver, copper and — belatedly — oil prices rising. In March, US TIC data showed that foreigners reduced their dollar exposure by $227.9bn, only offset by US residents’ net sales of foreign securities of $133.3bn.[ii] Here is the evidence that in troubled times money heads for home. Additionally, that month saw a trade deficit of $44.4bn suggesting total foreign-related dollar selling amounted to $177.7bn. This is only part of a bigger dollar picture, but it does appear foreigners were reducing their dollar exposure at the time that the dollar’s TWI peaked on 23 March. 2020 1/2 oz Gold Ameri... Check Amazon for Pricing.
This is important, because there are two market factors that have always led to a fiat currency collapse. The first is selling by foreigners, which appears to have commenced, and in this respect the dollar is particularly exposed. With some $25 trillion invested in US securities etc., the potential destruction to the dollar’s purchasing power from this source is significant. As global trade shrinks further, not only will foreigners be driven by the need to redeploy dollars into their currencies of origin, but they will stop funding the US Government, choosing to sell down their US Treasury holdings, a process which has already started. If the Fed is to successfully fund the growing budget deficit it must absorb foreign sales of US Treasuries as well as maintain sufficient levels of QE to fund a rapidly increasing budget deficit.
Just imagine the consequences of a systemic failure. The spell cast over financial assets will be broken. First, investors and speculators are likely to turn their attention to equities, being obviously the most overvalued financial assets at a time of intensifying crisis. Foreign investors will join, selling down their portfolio exposure, repatriating some, if not all of the proceeds by selling dollars as well. Next, with a falling dollar and a growing sensitivity to the political aspect of the crisis, market participants will reassess the US Government’s funding requirements and question the yield suppression policy of the Fed. Dollar selling seems bound to intensify.
It will then become obvious to everyone that the Fed is sacrificing the dollar in order to fund the government, keep the banking system going and to support the economy by attempting to provide the liquidity to defray supply chain failures. It will already be demonstrably failing to support financial asset prices, which has become the visible manifestation of a successful monetary policy. It would be a miracle if this failure, in Trump’s election year with a socialistic president being lined up by the Democrats, does not lead to a full-blown financial and dollar crisis.
Unless the Fed can raise interest rates to the point where it is too expensive for speculators to short the dollar (which we can rule out), it will enter the second phase of its collapse, driven by US residents realising the dollar is losing purchasing power, rather than prices rising. The purchasing power of any money depends on the balance between money and goods maintained by its users. If they collectively reject the money in favour of goods, then money’s purchasing power declines, potentially to zero. Following foreign selling, this is the second phase of the destruction of a fiat currency, which in past examples have taken roughly six months for it to become worthless.
There are three factors that could shorten this timescale even further: the replacement of cash and cheques by digital payments, modern communications leading to the rapid spread of information, and as a consequence of the development of cryptocurrencies, wider public foreknowledge of the weaknesses of unbacked fiat currencies.
The case for fiat currency survival beyond 2020
The circumstantial evidence that the dollar will collapse before the year-end is mounting. Cassandra opened her casket, the evils escaped, and only hope remains trapped.
Or so it seems. We cannot divine the future. We can only sift the evidence, be aware of common fallacies and avoid the temptation to wrongly extrapolate from yesterday into the future. While our method may be better than the macroeconomic forecasting beloved of the establishment, a predicted outcome is never reality. And it is possible the US Treasury might attempt a reset, perhaps using Treasury dollars, otherwise known as greenbacks, which were last issued in 1971. But without axing government welfare commitments to the American public, returning to balanced budgets and abandoning Fed dollar denominated debt this sort of legerdemain is unconvincing. Furthermore, the dollar’s reserve role for other currencies would have to be abandoned because of the monetary inflation involved in Triffin’s dilemma. And other currencies tied to the Fed’s dollar held in their reserves would still face their own collapse.
A reset abandoning the Fed’s dollar in favour of greenbacks is possible. But history has shown that the introduction of a replacement currency for one that has collapsed fails unless government financing by monetary expansion is demonstrably abandoned. Only time will tell whether in a presidential election year the US Government musters the clarity of purpose to implement a new lasting dollar regime.
The US Treasury says it still has over 8,000 tonnes of gold. If it is willing to drop its neo-Keynesian economics and its long-standing denial of gold’s monetary function, America could reintroduce gold convertibility for the greenbacks. This would probably be a last resort. It reneges on the Fed’s balance sheet note — which in these conditions would be its only significant asset, involves the abandonment of the welfare state and America’s longstanding geopolitical aims, and it allows China to gain potential advantage by displacing the dollar with a more convincing gold convertibility of its own.
China has deliberately cornered the gold bullion market in plans that go back to the time of Deng. Almost certainly, following the introduction of its Regulations on the Control of Gold and Silver (1983), the Chinese state accumulated sufficient gold for its strategic purposes by the time it then permitted its citizens to buy gold with the opening of the Shanghai Gold Exchange in 2002. The gold acquired by the state at that time is not declared as monetary gold and the quantity is unknown, but after examining inward investment flows net of trade deficits in the 1980s and growing export surpluses subsequently, a ten per cent allocation of foreign exchange gained into gold at contemporary prices suggests a position of some 20,000 tonnes of bullion was likely to have been accumulated by 2002.
There is no way of establishing the facts, and therefore statements about the Chinese state’s ownership of bullion are necessarily speculative. But additional evidence is compelling:
• China is now the largest gold mining nation by far, extracting an estimated 4,200 tonnes since 2010, more than any other nation. This has been driven by government policy.
• The state controls all Chinese gold and silver refining, taking in doré from abroad to add to Chinese stocks. At the same time, virtually no Chinese refined gold kilo bars are permitted to leave the country.
• In 2002, when the Shanghai Gold Exchange was set up by the Peoples’ Bank of China the Chinese government encouraged its nationals to acquire physical gold, even advertising its attractions in state media. Since 2010 alone, 17,200 tonnes have been delivered into public hands by the SGE. These figures were achieved by importing bullion from the West in enormous quantities.
• Its allies in Asia, principally members of the Shanghai Cooperation Organisation, have also been acquiring gold. Russia has been particularly aggressive in dumping dollars for gold.
• China now dominates physical gold markets and can be said to control them.
Given all these verifiable facts, it seems unlikely that a state which centrally plans would not have acquired for its own use substantial quantities of bullion ahead of the establishment of the SGE. America knows it and continues to resist gold having a monetary role. If America’s anti-gold policy changed, it would restrict the dollar’s circulation abroad. It would mark the end of dollar hegemony and a gold-backed yuan would become the foreign currency of choice throughout Asia, eastern Europe, the Middle East and Africa.
Conclusions and consequences
A banking crisis in the coming weeks is an increasingly likely event, given the scale of disruption to supply chains. The escalation of bankruptcies and of non-performing loans worldwide will almost certainly take the banking system down. It will be a watershed, a wake-up call to all those who expect a return to normality after the coronavirus passes.
For the moment, central banks are throwing money at the problem; money which remains stuck in financial assets, inflating them even further, and not being transmitted to the non-financial economy by banks already over-leveraged to failing borrowers.
We can be certain central bankers and government treasury departments are only now grasping the enormity of these problems, but they are still behaving as if chucking money at them is a viable solution. They will only destroy their unbacked fiat currencies, and that destruction, starting with the dollar, is already in progress. The clock is ticking from 23 March. While there may be attempts at a fiat money reset, without clear legal commitments from central banks and treasury departments to end inflationary financing, any reset will only delay currency destruction by a matter of months.
The consequences of such an outcome are always devastating, the more so because all major westernised central banks are committed to the same inflationary policies at the same time. The political consequences do not bear thinking about.
At some stage, hopefully sooner rather than later, metallic money will regain circulation. And when prices are set in gold or silver, perhaps through fully backed substitutes, the stability they bring will end the trappings of fiat currencies. All this destruction is measured in current terms, nearly all from statistics collected by the Bank for International Settlements.
Gone will be worldwide fiat currency debt, amounting to some $250—$300 trillion. Gone will be all OTC derivatives which settle in fiat, amounting to a further $560 trillion. Gone will be listed derivatives, a further $33 trillion. Gone will be options, a further $65 trillion. All these, totalling over $900 trillion, are only part of the destruction.
Global deposits held as bank balances totalling $60 trillion will evaporate. Worldwide equity markets denominated in fiat are a further $70 trillion; anything that does not migrate from fiat pricing disappears, including most, if not all ETFs. Goodbye to hedge funds. Goodbye to offshore financial centres. Goodbye to onshore financial centres. Goodbye to $100 trillion of fiat money.
Life will be very different, and those not prepared for it, principally by retaining a store of non-fiat, sound money, which can only be physical gold and silver until credible substitutes arise, will face impoverishment. Measured in real money, the value of non-financial physical assets will collapse due to the preponderance of desperate sellers to whom survival is most important, even though priced in worthless fiat their prices will have risen. The experience of inflationary collapses in Germany and Austria in the early 1920s showed the way, when country estates went for almost nothing in gold-back dollars and $100 would buy a mansion in Berlin.
None of this is expected. It may not happen, but the chances of it happening appear to have increased significantly from 23 March.
—
[i] Thanks go to Professor Kevin Dowd for help in preparing the table in Figure 1.
[ii] https://home.treasury.gov/news/press-releases/sm1009
The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information purposes only and does not constitute either Goldmoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice.
The Best of Alasdair Macleod


lewrockwell--2020-06-19--How the Soldier’s Revolt Ended the Vietnam War

THE MOST neglected aspect of the Vietnam War is the soldiers ’ revolt–the mass upheaval from below that unraveled the American army .
It is a great reality check in an era when the U.S. touts itself as an invincible nation .
For this reason , the soldiers ’ revolt has been written out of official history .
Yet it was a crucial part of the massive antiwar movement whose activity helped the Vietnamese people in their struggle to free Vietnam–described once by President Johnson as a “ raggedy-ass little fourth-rate country ” –from U.S. domination .
The legacy of @ @ @ @ @ @ @ defeat in Vietnam–despite more recent U.S. victories over Iraq and Serbia–casts a pall on the Pentagon .
They still fear the political backlash that might come if U.S. ground forces sustain heavy casualties in a future war .
Fragging : Why U.S. Sol ... Lepre , George Best Price : $ 25.08 Buy New $ 22.95 The army revolt was a class struggle that pitted working-class soldiers against officers who viewed them as expendable .
The fashionable attempt to revise Vietnam War history , to airbrush its horrors , to create a climate @ @ @ @ @ @ @ not acknowledge that American soldiers violently opposed that war , or that American capitalism casually tolerated the massacre of working-class troops .
Liberal academics have added to the historical distortion by reducing the radicalism of the 1960s to middle-class concerns and activities , while ignoring working-class rebellion .
But the militancy of the 1960s began with the Black working class as the motor force of the Black liberation struggle , and it reached its climax with the unity of white and Black working-class soldiers whose upsurge shook U.S. imperialism .
In Vietnam , @ @ @ @ @ @ @ form as the mass stateside GI antiwar movement , which consisted of protests , marches , demonstrations and underground newspapers .
In Vietnam , the aim of the soldiers was more modest , but also more subversive : survival , to “ CYA ” ( cover your ass ) , to protect “ the only body you have ” by fighting the military ’ s attempt to continue the war .
The survival conflict became a war within the war that ripped the armed forces apart .
In 1965 , the Green Machine @ @ @ @ @ @ @ put into the field ; a few years later , it was useless as a fighting force .
“ Survival politics , ” as it was then called , expressed itself through the destruction of the search-and-destroy strategy , through mutinies , through the killing of officers , and through fraternization and making peace from below with the National Liberation Front ( NLF ) .
It was highly effective in destroying everything that military hierarchy and discipline stand for .
It was the proudest moment in the U.S. army ’ s history .
@ @ @ @ @ @ @ the American working class , the soldiers ’ revolt has been hidden from history .
The aim of this essay is to reclaim the record of that struggle .
SVT 3 x Bulk Flag Bunt ... Buy New $ 24.99 From 1964 to 1973 , from the Gulf of Tonkin resolution to the final withdrawal of U.S. troops from Vietnam , 27 million men came of draft age .
A majority of them were not drafted due to college , professional , medical or National Guard deferments .
Only 40 percent were drafted @ @ @ @ @ @ @ minority , 2.5 million men ( about 10 percent of those eligible for the draft ) , were sent to Vietnam.3 This small minority was almost entirely working-class or rural youth .
Their average age was 19 .
Eighty-five percent of the troops were enlisted men ; 15 percent were officers .
The enlisted men were drawn from the 80 percent of the armed forces with a high school education or less .
At this time , college education was universal in the middle class and making strong inroads in the better-off sections @ @ @ @ @ @ @ in 1965 and 1966 , college graduates were only 2 percent of the hundreds of thousands of draftees.4 In the elite colleges , the class discrepancy was even more glaring .
The upper class did none of the fighting .
Of the 1,200 Harvard graduates in 1970 , only 2 went to Vietnam , while working-class high schools routinely sent 20 percent , 30 percent of their graduates and more to Vietnam.5 College students who were not made officers were usually assigned to noncombat support and service units .
High school dropouts were @ @ @ @ @ @ @ to combat units that did the fighting and took the casualties .
Combat infantry soldiers , “ the grunts , ” were entirely working class .
They included a disproportionate number of Black working-class troops .
Blacks , who formed 12 percent of the troops , were often 25 percent or more of the combat units.6 When college deferments expired , joining the National Guard was a favorite way to get out of serving in Vietnam .
During the war , 80 percent of the Guard ’ s members described themselves as joining @ @ @ @ @ @ @ connections to get in–which was no problem for Dan Quayle , George W. Bush and other ruling-class draft evaders .
In 1968 , the Guard had a waiting list of more than 100,000 .
It had triple the percentage of college graduates that the army did .
Blacks made up less than 1.5 percent of the National Guard .
In Mississippi , Blacks were 42 percent of the population , but only one Black man served in a Guard of more than 10,000.7 TIKI Brand 6-Inch Mold ... Buy New $ 19.99 In @ @ @ @ @ @ @ working class that had moved in a conservative direction during the Cold War , due to the long postwar boom and McCarthyite repression .
Yet , in the five years before the war , the civil rights movement had shaped Black political views .
The troops had more class and trade-union consciousness than exists today .
The stateside Movement for a Democratic Military , organized by former members of the Black Panther Party , had as the first points of its program , “ We demand the right to collective bargaining , ” @ @ @ @ @ @ @ the federal minimum wage.
” 8 When the Defense Department attempted to break a farm workers ’ strike by increasing orders for scab lettuce , soldiers boycotted mess halls , picketed and plastered bases with stickers proclaiming “ Lifers Eat Lettuce.
” 9 When the army used troops to break the national postal wildcat strike in 1970 , Vietnam GI called out , “ To hell with breaking strikes , let ’ s break the government.
” 10 Shortly after the war began , radicalism started to get a hearing among young workers @ @ @ @ @ @ @ northward from 1965 to 1968 , 200 cities had ghetto uprisings–spreading revolutionary consciousness among young , working-class Blacks .
In the factories , those same years saw a strong upturn in working-class militancy , with days lost to strikes and wildcats doubling.11 Left-wing ideas from the student movement were reaching working-class youth through the antiwar movement .
In 1967 and 1968 , many of the troops had been radicalized before their entry into the army .
Still others were radicalized prior to being shipped to Vietnam by the GI antiwar movement on stateside @ @ @ @ @ @ @ against the harsh reality that the officers viewed working-class troops as expendable .
The officer corps was drawn from the 7 percent of troops who were college graduates , or the 13 percent who had one to three years of college .
College was to officer as high school was to enlisted man .
The officer corps was middle class in composition and managerial in outlook .
Ruling-class military families were heavily represented in its higher ranks.13 In the Second World War , officers were 7 percent of the armed forces , an @ @ @ @ @ @ @ officer corps used the postwar permanent arms economy , with its bloated arms budget , as its vehicle for self-expansion .
By the time of the Vietnam War , the officer corps was 15 percent of the armed forces , which meant one officer for every six plus men.14 After the end of the Korean War in 1953 , there was no opportunity for combat commands .
As the old army song goes , “ There ’ s no promotion/this side of the ocean.
” In 1960 , it took an excruciating 33 @ @ @ @ @ @ @ colonel .
Many of the “ lifers , ” professional officers and noncommissioned officers ( NCOs ) , welcomed the Vietnam War as the opportunity to reinvigorate their careers .
They were not disappointed .
By 1970 , the agonizing wait to move up the career ladder from second lieutenant to colonel had been reduced to 13 years.15 Over 99 percent of second lieutenants became first lieutenants , 95 percent of first lieutenants were promoted to captain , 93 percent of qualified captains became majors , 77 percent of qualified majors became lieutenant @ @ @ @ @ @ @ became colonels.16 The surest road to military advancement is a combat command .
But there were too many active duty officers of high rank , which produced intense competition for combat commands .
There were 2,500 lieutenant colonels jostling for command of only 100 to 130 battalions ; 6,000 colonels , 2,000 of whom were in serious competition for 75 brigade commands ; and 200 major generals competing for the 13 division commands in the army.17 General Westmoreland , the commander of the armed forces in Vietnam , accommodated the officers by creating @ @ @ @ @ @ @ command .
In Vietnam , support and service units grew to an incredible 86 percent of military manpower .
Only 14 percent of the troops were actually assigned to combat .
Extravagant support services were the basis for the military bureaucracy .
The armed forces created “ numerous logistical commands , each to be headed by a general or two who would have to have high-ranking staffs to aid each of them.
” Thus it became possible for 64 army generals to serve simultaneously in Vietnam , with the requisite compliment of colonels @ @ @ @ @ @ @ lived far removed from danger , lounging in rear base camps in luxurious conditions .
A few miles away , combat soldiers were experiencing a nightmarish hell .
The contrast was too great to allow for confidence–in both the officers and the war–to survive unscathed .
Soldiers in Revolt : GI ... Cortright , David Best Price : $ 10.27 Buy New $ 12.95 Westmoreland ’ s solution to the competition for combat command poured gasoline on the fire .
He ordered a one-year tour of duty for enlisted men in Vietnam , @ @ @ @ @ @ @ troops hated the class discrimination that put them at twice the risk of their commanders .
They grew contemptuous of the officers , whom they saw as raw and dangerously inexperienced in battle .
Even a majority of officers considered Westmoreland ’ s tour inequality as unethical .
Yet they were forced to use short tours to prove themselves for promotion .
They were put in situations in which their whole careers depended on what they could accomplish in a brief period , even if it meant taking shortcuts and risks at the @ @ @ @ @ @ @ temptation many could not resist .
The outer limit of six-month commands was often shortened due to promotion , relief , injury or other reasons .
The outcome was “ revolving-door ” commands .
As an enlisted man recalled , “ During my year in-country I had five second-lieutenant platoon leaders and four company commanders .
One CO was pretty good…All the rest were stupid.
” 19 Aggravating this was the contradiction that guaranteed opposition between officers and men in combat .
Officer promotions depended on quotas of enemy dead from search-and-destroy missions @ @ @ @ @ @ @ immediate high body counts were threatened with replacement .
This was no idle threat–battalion commanders had a 30 to 50 percent chance of being relieved of command .
But search-and-destroy missions produced enormous casualties for the infantry soldiers .
Officers corrupted by career ambitions would cynically ignore this and draw on the never-ending supply of replacements from the monthly draft quota.20

The hidden war
Our army that now remains in Vietnam is in a state approaching collapse, with individual units avoiding or having refused combat, murdering their officers and noncommissioned officers, drug-ridden, and dispirited where not near-mutinous. Conditions among American forces in Vietnam that have only been exceeded in this century by…the collapse of the Tsarist armies in 1916 and 1917. Armed Forces Journal, June 19711
THE MOST neglected aspect of the Vietnam War is the soldiers’ revolt–the mass upheaval from below that unraveled the American army. It is a great reality check in an era when the U.S. touts itself as an invincible nation. For this reason, the soldiers’ revolt has been written out of official history. Yet it was a crucial part of the massive antiwar movement whose activity helped the Vietnamese people in their struggle to free Vietnam–described once by President Johnson as a “raggedy-ass little fourth-rate country”–from U.S. domination. The legacy of the soldiers’ revolt and the U.S. defeat in Vietnam–despite more recent U.S. victories over Iraq and Serbia–casts a pall on the Pentagon. They still fear the political backlash that might come if U.S. ground forces sustain heavy casualties in a future war. Fragging: Why U.S. Sol... Lepre, George Best Price: $25.08 Buy New $22.95 (as of 03:40 UTC - Details)
The army revolt was a class struggle that pitted working-class soldiers against officers who viewed them as expendable. The fashionable attempt to revise Vietnam War history, to airbrush its horrors, to create a climate supportive of future military interventions, cannot acknowledge that American soldiers violently opposed that war, or that American capitalism casually tolerated the massacre of working-class troops. Liberal academics have added to the historical distortion by reducing the radicalism of the 1960s to middle-class concerns and activities, while ignoring working-class rebellion. But the militancy of the 1960s began with the Black working class as the motor force of the Black liberation struggle, and it reached its climax with the unity of white and Black working-class soldiers whose upsurge shook U.S. imperialism.
In Vietnam, the rebellion did not take the same form as the mass stateside GI antiwar movement, which consisted of protests, marches, demonstrations and underground newspapers. In Vietnam, the aim of the soldiers was more modest, but also more subversive: survival, to “CYA” (cover your ass), to protect “the only body you have” by fighting the military’s attempt to continue the war. The survival conflict became a war within the war that ripped the armed forces apart. In 1965, the Green Machine was the best army the U.S. ever put into the field; a few years later, it was useless as a fighting force.
“Survival politics,” as it was then called, expressed itself through the destruction of the search-and-destroy strategy, through mutinies, through the killing of officers, and through fraternization and making peace from below with the National Liberation Front (NLF). It was highly effective in destroying everything that military hierarchy and discipline stand for. It was the proudest moment in the U.S. army’s history.
Like most of the revolutionary traditions of the American working class, the soldiers’ revolt has been hidden from history. The aim of this essay is to reclaim the record of that struggle.
A working-class army
The Vietnamese lack the ability to conduct a war by themselves or govern themselves. Vice President Richard M. Nixon, April 16, 19542
SVT 3 x Bulk Flag Bunt... Buy New $24.99 (as of 03:40 UTC - Details) From 1964 to 1973, from the Gulf of Tonkin resolution to the final withdrawal of U.S. troops from Vietnam, 27 million men came of draft age. A majority of them were not drafted due to college, professional, medical or National Guard deferments. Only 40 percent were drafted and saw military service. A small minority, 2.5 million men (about 10 percent of those eligible for the draft), were sent to Vietnam.3
This small minority was almost entirely working-class or rural youth. Their average age was 19. Eighty-five percent of the troops were enlisted men; 15 percent were officers. The enlisted men were drawn from the 80 percent of the armed forces with a high school education or less. At this time, college education was universal in the middle class and making strong inroads in the better-off sections of the working class. Yet, in 1965 and 1966, college graduates were only 2 percent of the hundreds of thousands of draftees.4
In the elite colleges, the class discrepancy was even more glaring. The upper class did none of the fighting. Of the 1,200 Harvard graduates in 1970, only 2 went to Vietnam, while working-class high schools routinely sent 20 percent, 30 percent of their graduates and more to Vietnam.5
College students who were not made officers were usually assigned to noncombat support and service units. High school dropouts were three times more likely to be sent to combat units that did the fighting and took the casualties. Combat infantry soldiers, “the grunts,” were entirely working class. They included a disproportionate number of Black working-class troops. Blacks, who formed 12 percent of the troops, were often 25 percent or more of the combat units.6
When college deferments expired, joining the National Guard was a favorite way to get out of serving in Vietnam. During the war, 80 percent of the Guard’s members described themselves as joining to avoid the draft. You needed connections to get in–which was no problem for Dan Quayle, George W. Bush and other ruling-class draft evaders. In 1968, the Guard had a waiting list of more than 100,000. It had triple the percentage of college graduates that the army did. Blacks made up less than 1.5 percent of the National Guard. In Mississippi, Blacks were 42 percent of the population, but only one Black man served in a Guard of more than 10,000.7
TIKI Brand 6-Inch Mold... Buy New $19.99 (as of 03:40 UTC - Details) In 1965, the troops came from a working class that had moved in a conservative direction during the Cold War, due to the long postwar boom and McCarthyite repression. Yet, in the five years before the war, the civil rights movement had shaped Black political views. The troops had more class and trade-union consciousness than exists today. The stateside Movement for a Democratic Military, organized by former members of the Black Panther Party, had as the first points of its program, “We demand the right to collective bargaining,” and “We demand wages equal to the federal minimum wage.”8 When the Defense Department attempted to break a farm workers’ strike by increasing orders for scab lettuce, soldiers boycotted mess halls, picketed and plastered bases with stickers proclaiming “Lifers Eat Lettuce.”9 When the army used troops to break the national postal wildcat strike in 1970, Vietnam GI called out, “To hell with breaking strikes, let’s break the government.”10
Shortly after the war began, radicalism started to get a hearing among young workers. As the Black liberation struggle moved northward from 1965 to 1968, 200 cities had ghetto uprisings–spreading revolutionary consciousness among young, working-class Blacks. In the factories, those same years saw a strong upturn in working-class militancy, with days lost to strikes and wildcats doubling.11 Left-wing ideas from the student movement were reaching working-class youth through the antiwar movement. In 1967 and 1968, many of the troops had been radicalized before their entry into the army. Still others were radicalized prior to being shipped to Vietnam by the GI antiwar movement on stateside bases. Radicalizing soldiers soon came up against the harsh reality that the officers viewed working-class troops as expendable.
The middle-class officers corps
Let the military run the show. Senator Barry Goldwater12
The officer corps was drawn from the 7 percent of troops who were college graduates, or the 13 percent who had one to three years of college. College was to officer as high school was to enlisted man. The officer corps was middle class in composition and managerial in outlook. Ruling-class military families were heavily represented in its higher ranks.13
In the Second World War, officers were 7 percent of the armed forces, an amount normal for most armies. The officer corps used the postwar permanent arms economy, with its bloated arms budget, as its vehicle for self-expansion. By the time of the Vietnam War, the officer corps was 15 percent of the armed forces, which meant one officer for every six plus men.14
After the end of the Korean War in 1953, there was no opportunity for combat commands. As the old army song goes, “There’s no promotion/this side of the ocean.” In 1960, it took an excruciating 33 years to move from second lieutenant to colonel. Many of the “lifers,” professional officers and noncommissioned officers (NCOs), welcomed the Vietnam War as the opportunity to reinvigorate their careers. They were not disappointed. By 1970, the agonizing wait to move up the career ladder from second lieutenant to colonel had been reduced to 13 years.15 Over 99 percent of second lieutenants became first lieutenants, 95 percent of first lieutenants were promoted to captain, 93 percent of qualified captains became majors, 77 percent of qualified majors became lieutenant colonels and half of the lieutenant colonels became colonels.16
The surest road to military advancement is a combat command. But there were too many active duty officers of high rank, which produced intense competition for combat commands. There were 2,500 lieutenant colonels jostling for command of only 100 to 130 battalions; 6,000 colonels, 2,000 of whom were in serious competition for 75 brigade commands; and 200 major generals competing for the 13 division commands in the army.17
General Westmoreland, the commander of the armed forces in Vietnam, accommodated the officers by creating excessive support units and rapidly rotating combat command. In Vietnam, support and service units grew to an incredible 86 percent of military manpower. Only 14 percent of the troops were actually assigned to combat. Extravagant support services were the basis for the military bureaucracy. The armed forces created “numerous logistical commands, each to be headed by a general or two who would have to have high-ranking staffs to aid each of them.” Thus it became possible for 64 army generals to serve simultaneously in Vietnam, with the requisite compliment of colonels, majors etc.18
These superfluous support officers lived far removed from danger, lounging in rear base camps in luxurious conditions. A few miles away, combat soldiers were experiencing a nightmarish hell. The contrast was too great to allow for confidence–in both the officers and the war–to survive unscathed. Soldiers in Revolt: GI... Cortright, David Best Price: $10.27 Buy New $12.95 (as of 03:40 UTC - Details)
Westmoreland’s solution to the competition for combat command poured gasoline on the fire. He ordered a one-year tour of duty for enlisted men in Vietnam, but only six months for officers.The combat troops hated the class discrimination that put them at twice the risk of their commanders. They grew contemptuous of the officers, whom they saw as raw and dangerously inexperienced in battle.
Even a majority of officers considered Westmoreland’s tour inequality as unethical. Yet they were forced to use short tours to prove themselves for promotion. They were put in situations in which their whole careers depended on what they could accomplish in a brief period, even if it meant taking shortcuts and risks at the expense of the safety of their men–a temptation many could not resist.
The outer limit of six-month commands was often shortened due to promotion, relief, injury or other reasons. The outcome was “revolving-door” commands. As an enlisted man recalled, “During my year in-country I had five second-lieutenant platoon leaders and four company commanders. One CO was pretty good…All the rest were stupid.”19
Aggravating this was the contradiction that guaranteed opposition between officers and men in combat. Officer promotions depended on quotas of enemy dead from search-and-destroy missions. Battalion commanders who did not furnish immediate high body counts were threatened with replacement. This was no idle threat–battalion commanders had a 30 to 50 percent chance of being relieved of command. But search-and-destroy missions produced enormous casualties for the infantry soldiers. Officers corrupted by career ambitions would cynically ignore this and draw on the never-ending supply of replacements from the monthly draft quota.20
Read the Whole Article


lewrockwell--2020-06-19--Gene Drive Technology: What Species Should We Make Extinct Today?

—Freedom includes the natural right to resist and reject any technology that endangers life .
A passionate and dedicated scientist says , “ I have a plan .
By manipulating genes , we can make invasive rodents extinct , on an island where humans are living.
” In the next fraction of a second , a flurry of questions pops up and jumps up .
Does this mean genetic manipulation can make ANY species extinct ?
Welcome to the world of gene drive technology .
HOOSUN American US Fla ... Buy New $ 12.99 Here is a passage from Gene @ @ @ @ @ @ @ an enormous amount of referenced information on the subject : “ Gene drives are a gene-editing application that allows genetic engineers to drive a single artificial trait through an entire population by ensuring that all of an organism ’ s offspring carry that trait .
For example , recent experiments are fitting mice with ‘ daughterless ’ gene drives that will cascade through mouse populations so that only male pups are born , ensuring that the population becomes extinct after a few generations.
” “ Proponents have framed gene drives as a breakthrough @ @ @ @ @ @ @ .
However , the Gene Drive Files reveal that these ‘ conservation ’ efforts are primarily supported by military funds.
” So it appears the answer is yes .
Gene drive technology could be deployed to wipe out troublesome plant-parasites , weeds , crops , animal pests , animals , and…humans .
Mull that over with your morning coffee .
Several years ago , the UN was considering a recommendation to call a moratorium on the use of gene drives .
Here is what the Gene Drive Files reports about that tussle and @ @ @ @ @ @ @ scene : “ Documents received under Freedom of Information requests reveal that the Bill and Melinda Gates Foundation paid a private agriculture and biotechnology PR firm $ 1.6 million for activities on Gene Drives .
This included running a covert ‘ advocacy coalition ’ which appears to have intended to skew the only UN expert process addressing gene drives… ” American Flag 3x5u2019 ... Buy New $ 19.97 “ Following global calls in December 2016 from Southern countries and over 170 organizations for a UN moratorium on gene drives , emails to gene @ @ @ @ @ @ @ Information request by Prickly Research reveal that a private public affairs firm ‘ Emerging Ag ’ received funds from the Bill and Melinda Gates Foundation to co-ordinate the ‘ fight back against gene drive moratorium proponents ’ .
” There ’ s more from the Gene Drive Files .
It involves the military : “ A trove of emails ( The Gene Drive Files ) from leading U.S. gene drive researchers reveals that the U.S. Military is taking the lead in driving forward gene drive development.
” “ Emails obtained through a freedom @ @ @ @ @ @ @ reveal that the U.S. Defense Advanced Research Projects Agency ( DARPA ) has given approximately $ 100 million for gene drive research , $ 35 million more than previously reported , making them likely the largest single funder of gene drive research on the planet .
The emails also reveal that DARPA either funds or co-ordinates with almost all major players working on gene drive development as well as the key holders of patents on CRISPR gene editing technology.
” “ These funds go beyond the US ; DARPA is now also directly @ @ @ @ @ @ @ including monies given to an Australian government agency , CSIRO ) and researchers in the UK .
The files also reveal an extremely high level of interest and activity by other sections of the U.S. military and Intelligence community.
” OYOCO Patio Umbrella L ... Buy New $ 13.47 ( $ 6.74 / 100 g ) People will argue the military involvement is “ defensive ” in nature .
The Pentagon must know what our enemies are doing in their gene drive research labs , so we can hopefully combat those efforts .
@ @ @ @ @ @ @ past , such claims about US military research on nuclear weapons and bio/chemical warfare were proven false .
The “ defensive ” research included the push to develop offensive capability .
Knowing how military planner think ( and not just in the US ) , I ’ m sure their researchers are trying to figure out how to use gene drives to eliminate “ just a select part ” of the human population .
Meaning the enemy .
Which leads to the next point : The what-could-possibly-go-wrong question .
As I ’ ve @ @ @ @ @ @ @ and greatest gene editing tools ( e.g.
, CRISPR ) , which are used for gene drives , are far from slam-dunk precise , despite official assurances .
For example , Nature Communications , May 31 , 2017 , “ CRISPR/Cas9 targeting events cause complex deletions and insertions at 17 sites in the mouse genome.
” Unintended genetic “ deletions and insertions.
” And how about this study ?
It was published in Genome Biology on June 14 , 2017 , and is titled , “ CRISPR/Cas9-mediated genome editing induces exon skipping by @ @ @ @ @ @ @ exon is “ a segment of a DNA or RNA molecule containing information coding for a protein or peptide sequence.
” So you can see that exon skipping or deletion is a very bad idea .
Filimino Keep America ... Buy New $ 8.99 In other words , ANY gene editing done on ANY species opens the door wide to all sorts of errors and unforeseen consequences .
Doomsday genetic warfare and mutually assured destruction are the far shore of insanity…but closer in , where the highly limited experiments are taking place , @ @ @ @ @ @ @ .
Insanity reigns there as well .
“ I went to Monsanto , and I spent a lot of time with the scientists there , and I have revised my outlook , and I ’ m very excited about telling the world .
When you ’ re in love , you want to tell the world.
” ( Bill Nye , the science guy ) “ I know it ’ s a long shot and people would say it ’ s ‘ too absurd ’ … but I ’ m doing this with @ @ @ @ @ @ @ day.
” ( Arikuni Uchimura , quoted in “ Japan bio-scientists produce ‘ singing mouse ’ ” , The Independent , 21 December 2010 . )
“ Genetic engineering is to traditional crossbreeding what the nuclear bomb was to the sword.
” ( Andrew Kimbrell , executive director of Center for Food Safety ) The Best of Jon Rappoport

—Freedom includes the natural right to resist and reject any technology that endangers life.
A passionate and dedicated scientist says, “I have a plan. By manipulating genes, we can make invasive rodents extinct, on an island where humans are living.”
In the next fraction of a second, a flurry of questions pops up and jumps up.
The overarching question is:
Does this mean genetic manipulation can make ANY species extinct?
Welcome to the world of gene drive technology. HOOSUN American US Fla... Buy New $12.99 (as of 03:42 UTC - Details)
Here is a passage from Gene Drive Files, a vital site with an enormous amount of referenced information on the subject:
“Gene drives are a gene-editing application that allows genetic engineers to drive a single artificial trait through an entire population by ensuring that all of an organism’s offspring carry that trait. For example, recent experiments are fitting mice with ‘daughterless’ gene drives that will cascade through mouse populations so that only male pups are born, ensuring that the population becomes extinct after a few generations.”
“Proponents have framed gene drives as a breakthrough tool for eradicating pests or invasive species. However, the Gene Drive Files reveal that these ‘conservation’ efforts are primarily supported by military funds.”
So it appears the answer is yes. Gene drive technology could be deployed to wipe out troublesome plant-parasites, weeds, crops, animal pests, animals, and…humans. Mull that over with your morning coffee.
Several years ago, the UN was considering a recommendation to call a moratorium on the use of gene drives. Here is what the Gene Drive Files reports about that tussle and the appearance of Bill Gates on the scene:
“Documents received under Freedom of Information requests reveal that the Bill and Melinda Gates Foundation paid a private agriculture and biotechnology PR firm $1.6 million for activities on Gene Drives. This included running a covert ‘advocacy coalition’ which appears to have intended to skew the only UN expert process addressing gene drives…” American Flag 3x5u2019... Buy New $19.97 (as of 03:42 UTC - Details)
“Following global calls in December 2016 from Southern countries and over 170 organizations for a UN moratorium on gene drives, emails to gene drive advocates received under a freedom of Information request by Prickly Research reveal that a private public affairs firm ‘Emerging Ag’ received funds from the Bill and Melinda Gates Foundation to co-ordinate the ‘fight back against gene drive moratorium proponents’.”
There’s more from the Gene Drive Files. It involves the military:
“A trove of emails (The Gene Drive Files) from leading U.S. gene drive researchers reveals that the U.S. Military is taking the lead in driving forward gene drive development.”
“Emails obtained through a freedom of Information request by U.S.–based Prickly Research reveal that the U.S. Defense Advanced Research Projects Agency (DARPA) has given approximately $100 million for gene drive research, $35 million more than previously reported, making them likely the largest single funder of gene drive research on the planet. The emails also reveal that DARPA either funds or co-ordinates with almost all major players working on gene drive development as well as the key holders of patents on CRISPR gene editing technology.”
“These funds go beyond the US; DARPA is now also directly funding gene drive researchers in Australia (including monies given to an Australian government agency, CSIRO) and researchers in the UK. The files also reveal an extremely high level of interest and activity by other sections of the U.S. military and Intelligence community.” OYOCO Patio Umbrella L... Buy New $13.47 ($6.74 / 100 g) (as of 03:42 UTC - Details)
People will argue the military involvement is “defensive” in nature. The Pentagon must know what our enemies are doing in their gene drive research labs, so we can hopefully combat those efforts.
As we’ve seen in the past, such claims about US military research on nuclear weapons and bio/chemical warfare were proven false. The “defensive” research included the push to develop offensive capability.
Knowing how military planner think (and not just in the US), I’m sure their researchers are trying to figure out how to use gene drives to eliminate “just a select part” of the human population. Meaning the enemy. Which leads to the next point:
The what-could-possibly-go-wrong question. As I’ve shown in past articles, the latest and greatest gene editing tools (e.g., CRISPR), which are used for gene drives, are far from slam-dunk precise, despite official assurances.
For example, Nature Communications, May 31, 2017, “CRISPR/Cas9 targeting events cause complex deletions and insertions at 17 sites in the mouse genome.” Unintended genetic “deletions and insertions.”
And how about this study? It was published in Genome Biology on June 14, 2017, and is titled, “CRISPR/Cas9-mediated genome editing induces exon skipping by alternative splicing or exon deletion.” An exon is “a segment of a DNA or RNA molecule containing information coding for a protein or peptide sequence.” So you can see that exon skipping or deletion is a very bad idea. Filimino Keep America ... Buy New $8.99 (as of 03:42 UTC - Details)
In other words, ANY gene editing done on ANY species opens the door wide to all sorts of errors and unforeseen consequences. Doomsday genetic warfare and mutually assured destruction are the far shore of insanity…but closer in, where the highly limited experiments are taking place, there is no safety zone, either. Insanity reigns there as well.
“I went to Monsanto, and I spent a lot of time with the scientists there, and I have revised my outlook, and I’m very excited about telling the world. When you’re in love, you want to tell the world.” (Bill Nye, the science guy)
“I know it’s a long shot and people would say it’s ‘too absurd’… but I’m doing this with hopes of making a Mickey Mouse some day.” (Arikuni Uchimura, quoted in “Japan bio-scientists produce ‘singing mouse’”, The Independent, 21 December 2010.)
“Genetic engineering is to traditional crossbreeding what the nuclear bomb was to the sword.” (Andrew Kimbrell, executive director of Center for Food Safety)
Reprinted with permission from Jon Rappoport’s blog.
The Best of Jon Rappoport