Megathreats
Nouriel Roubini
Summary
A somewhat depressing but also eye opening book about the major threats that face our world the next decade.
Rating: 4/5
Notes
We are facing a regime change from relative stability to an era of severe instability
The megathreats we face will reshape our world. Change is coming, like it or not
1: the mother of all debt crises - the whole world has way too much debt
- Debt denominated in foreign currencies cripples a country’s ability to service and repay its international loans
- Consensus groupthink often rules amongst the world’s elites
- Borrow to invest, not to consume
- Private debt can be just as destructive, if not more so, than public debt
- What we owe, not what we own, will govern our status
2: private and public failures:
- Higher spread in bond yield relative to US T-bond, the more the market is expressing doubt in the bond issuer’s solvency
- Zombie companies are hiding an uncomfortable truth about the global economy
- When taxpayers are on the hook, moral hazard privatizes gains and socializes losses
- Defaults as a way of resolving debts are ugly business - it’s going to get nasty
- When interest rates go up, bond prices go up and vice versa
- We don’t want to face the truth, we are in a perpetual state of denial
3: the demographic time bomb
- ‘If the US goes broke and descends into chaos and generational conflict, the whole world will suffer probably in ways none of us can, or want to, imagine’
- Watch for headlines of generational conflict b/w young and old as young workers get taxed increasingly to bankroll retirees. They give up their future to old people to pay for their pensions and social services
- Legacies of comprehensive social welfare proframs leave Europe and Japan with the steepest hills to climb
- One solution to boost productivity growth is accelerating the immigration of younger workers
- Freer immigration has a more positive net impact on GDP than liberalizing trade, movements or capital or financial services
4: The easy money trap and boom/bust cycle
- Wherever you have a casino full of nearly free money, it leads to a volatile bubble
- Giving more drugs (easy and cheap money) to an addict in withdrawal reduces the short ter pain but makes the addiction worse or even fatal over time
- Now we are trapped with no solution that comes without a lot of pain
- Monetary easing fuels asset bubbles
- Since the Greenspan put, Bernanke Put, Yell Put and Powell put, investors know - when debt and equity markets wobble, central bankers will come to the rescue
5: the coming great stagflation
- Those who cannot remember the past are condemned to repeat it - George Santagon
- Prepare to revisit the 70s and dust off the misery index (unemployment + inflation). It’s at 10 in 2022 with inflation at 8%
- Trade deficit ballooned in the 70s as corporations with weaker currencies and high growth could sell products for less than domestic American companies thereby decreasing exports, increasing imports and reducing the competitiveness of local companies
- Stagflation in the 70s can be explained by oil shocks with misguided policy responses that relaxed restraints on inflation expectations
- When trouble is imminent, smart people often brush off the downside
- During the 70s, we had an inflation problem but not a debt problem. Now we have both
6: Currency meltdowns and financial instability
- As central banks, like the US fed, are drawn into the pursuit of foreign and national security policy, they are weaponziing the dollar and the value of our currencies are at stake
- The sanctions placed on Russia for the war will accelerate many countries to move away from a dollar-based financial system
- Italy is currently the weakest link in the Eurozone. If it falls, the EU likely falls. Italy is too big to fail and too big to save
- Currencies function as a unit of account, a scalable and widely used method of payment, a stable ‘store of value’, a stable value relative to an index of goods and services - crypto is none of these things so is not a currency
- The gini coefficient of bitcoin (measure of wealth inequality) is more than North Korea
7: The end of globalization
- We traded good jobs with strong wages for cheap imports at big box retailers
- The new cold war b/w China and it’s allies vs. the US and west is accelerating
- Globalization redirects wealth to the top and exacerbates inequality. We haven’t compensated those left behind in advanced economies as a result of free trade
- Building a social safety net and a welfare state for workers prevents upheaval and revolutions
- Displacement and rising inequality need urgent attention by policymakers in civilized societies, for self preservation if not for nobler reasons
- Data will become an asset as, it not more, valuable than goods and services
8: the AI threat
- ‘Every step forward is made at the cost of menstrual and physical pain to come’ - Nietzsche
- Wealth inequality is running out of control in the US and AI only accelerates that as the benefits will mostly go to the top
9: the new cold war between China and the US
- China’s belt and road initiative (BRI) built infrastructure across Asia, Africa and Latin America using Chinese loans and when countries can’t pay back the loans, the Chinese seize infrastructure
- The Chinese economy is a system of state capitalism where the arbiter is uncontestable political authority
- China is not moving towards the West and co-operation, it’s moving away
- The West must adjust its mindset - China is on track to become the world’s dominant power
10: an uninhabitable planet
- 10% of the world’s population lives near a coastline and are at risk of rising sea levels
- Emerging economies like India and China expect to increase emissions to 2030 and blame global climate change correctly on advanced economies
- Climate change increases the spread of pandemics as animals and humans interact more frequently
- There is no free lunch in the transition to green energy
Like a cancer that ravages bodies, megathreats will wreak havoc on global infrastructure and current wold order. Expect many dark days
We have borrowed our way to prosperity with no exit strategy
Megathreats will rock our world in sobering ways
Invest in short term bonds, gold/commodities and real estate with limited supply + some cash in case stocks crater
Unexpected growth and solving the energy problem could be 2 solutions to avoid disaster
***
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How the World Works
Noam Chomsky
Summary
A combination of books Chomsky wrote in the 80s and 90s about America and it's role in the world. Fascinating read and insight into one of the great thinkers of the 21st century
Rating: 5/5
Notes
The US invaded Greece in 1947 and supported a horrendous war which led to 160k Greek deaths. This was the model for Vietnam and allowed American business to gain and thrive
US policies in the 3rd world consistently opposed democracies if they couldn’t be controlled as real democracies believe government should respond to the needs of their own population rather than those of US investors
US-run contra forces in the 3rd world isn’t ordering killing - it’s brutal sadistic torture (Nicaragua, El Salvador, Guatemala)
From the Bolshevik revolution in 1917 till the collapse of the communist governments in eastern europe in the 80s, it was possible to justify every US attack as defense against the Soviets
If you want a global system that’s subordinated to the needs of US investors, you can’t let pieces of it wander off. It’s clearly stated in the documents of record
The US wants ‘stability’ meaning security for the upper classes and large foreign businesses
Solid case for impeaching every American president since World War 2 either outright as war criminals or involved in serious war crimes
El Salvador and Nicaragua were not covered by the US media in the 70s when US-supported brutal torture and murder were taking place
In the early 80s, America’s friends slaughtered 10s of thousands of Guatemalans with countless others tortured and raped
After Vietnam, the major US policy goal has been to maximize repression and suffering of countries demonstrated by their violence - blocked other countries from seeking aid
The US regularly carries out or supports aggression
For most of the 20th century, the US was the dominant economic power and used economic warfare as a weapon ranging from illegal embargoes to enforcement of weak IMF rules with their military becoming pre-eminent
The US tries to avoid negotiations with countries as the US fears it will lose and other countries will be better off
When a state has huge debts, it must divert the population from what’s happening and they do this by inspiring fear of our enemies (Russia in Europe)
The real enemy of the US has always been ‘the poor who seek to plunder the rich’. In America, it’s the opposite and has been for generations
‘The war on drugs’ was a manufactured media blitz by the US leadership to distract the population, increase repression in inner cities and build support for attack on civil liberties
The US government blocks international effort to seek peace (Russia and Ukraine)
Major media are large companies owned and interlinked with even larger conglomerates. The market is the advertisers and the product is audiences
The power in the US lies in the hands of people who determine investment decisions as they determine production, distribution and staff the government. They want a passive, quiescent population
The struggle of freedom is never over and requires active and sustained efforts
One important consequence of globalization is it extends the third world model to industrial nations where the average person has their jobs shipped away while the rich and elite continue to amass massive amounts of wealth
We’ve moved to an international state with the IMF, World Bank, G7 & EU, WEF where the general population doesn’t know what’s happening and it doesn’t know it doesn’t know
If the borrowing the US has done was used for constructive purposes like investment or infrastructure, the US would be better off, but it was used to enrich the rich - for consumption, financial manipulation and speculation which are all harmful
The class warfare of the last few decades has successfully weakened popular organizations leaving people to feel isolated
The US is so deeply in debt to the international financial community because of debt that they have a lock on US policy
Many of the large number of security council resolutions vetoed by the US have to do with Israeli aggression or atrocities
Invaders typically use local collaborators to run things for them by playing upon existing rivalries to get onne group to work for them against another
European wars were wars of extermination. If we were to be honest about history, we would simply describe it as barbarian invasion
There has always been racism but it developed as a leading principle of thought in the context of colonialism.
A standard technique of belief formation goes along with oppression
In the US, you’re not allowed to talk about the class differences, which is the real issue
When the US establishment talks about jobs, it means profits for its corporations
The elite are masters and they follow what Adam Smith said about ‘the vile maxim’ - all for ourselves and nothing for anyone else
People who aren’t owners and investors have nothing much to say in the US
Jefferson warned against banking institutions and corporations and said if they grow, aristocrats would’ve won and the revolution would’ve been lost
The ‘Free market’ is for the poor. We have a dual system - protection for the rich and market discipline for everyone else
There’s been a considerable increase in inequality and has the American society moving towards a third world model, thereby seeing increased crime and signs of social disintegration
A huge area of the media is dedicated to diverting people and making them more stupid and passive
There’s nothing individualistic about corporations who are totalitarian in nature
Free trade agreements result in reduced wages for local employees while predominantly benefiting the rich consumer while also destroying unions
Operation Paper Clip imported large number of known Nazi criminals
The American army’s counter-insurgency literature begins with an analysis of the German experience in Europe written with the co-operation of Naxi officials (instruments of statecraft - book)
US involvement in Chile with the coup in 1973 to reduce social democracy
The threat of a good empire is what the US worried about with reforms on uncontrolled capitalism
The US killed a few million people and destoryed 3 countries during the Vietnam war
A huge amount of business propaganda is to create wants
The answers to solve all these issues is to organize. Being alone you can’t do anything but if you join with other people, you can make changes
Under capitalism, investment is supposed to be as risk free as possible. No competition wants free markets - what they want is power
The government subsidizes corporations’ costs, protects them from market risks and lets them keep the profits
There’s never been much difference between the 2 business parties and the differences are disappearing
The CIA has been involved in drug running for generations (the politics of heroin book)
You need something to frighten people with, to prevent them from paying attention to what’s really happening to them. You have to engender fear and hatred
The first world lives in a highly indoctrinated society
Neoliberalism is nothing more than the imperial formula: free markets for you and plenty of protection for me. The rich would never accept it but they’re happy to impose it on the poor
The UN does mostly what US business wants
‘Politics is the shadow cast on society by big business’ - John Devery
If people dedicate themselves to organizing and activism, we’ll gain access to broader audiences
If you extrapolate to the future, it’s very ugly but the point is it’s not inevitable. It can be changed but we can’t change things till we understand them.
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