Pylimitics

(and then there’s the madness…)

Most of the US, at least the part that gets reported in nearly any sort of media, seems to be baffled by the randomness and ignorance of the orange baby and its regime. The ongoing saga of the tariffs, for example, makes no effing sense. They’re “reciprocal” (they’re not); they’re supposed to bring money into the US (they don’t); they’re even applied to islands where only penguins live (don’t ask me). And the orange baby itself seems not to understand what’s going on.

But I think it has some degree of understanding, and to try to figure that out, think about its life experience. It has always been a poor businessman, propped up by a huge inheritance. Its most obvious and repeated experience has been declaring bankruptcy, which it did multiple times. And it (or the people it employs) was in fact pretty successful in using the bankruptcy system. So the orange baby knows, at some level, that if you’re in debt over your head, you declare bankruptcy and you get to restructure (or even eliminate) your debt.

That’s a tactic that businesses and individuals within our legal structure can use, and a sovereign nation is not the same sort of entity as a business. But the orange baby may not entirely grasp that notion, and if not, it has plenty of company. But the entity the orange baby is now “leading” is also in debt over its head, or at least in a lot of debt. Trillions of dollars. When a sovereign nation borrows, it’s not the same thing that a business or individual does — it probably shouldn’t even be described by the same word, but here we are. Anyway, the US debt is financed mostly by government bonds. The treasury sells them, bringing in cash, and agrees to make interest payments. At least superficially that’s the same as taking out a loan, right?

The whole tariffs thing might be explainable as the orange baby trying to “restructure the debt” as it has done in its business career when it has declared bankruptcy. The context is different, and in many ways the baby is screwing it up badly, but it could explain some of its motives, which otherwise seem nuts.

The financial soup a sovereign nation swims in is quite different from that of a US business. There are currencies, currency markets, and countless other factors I don’t even understand. But one major deal about the US debt is that we get to “take out loans” because our credit rating has been as high as those ratings go. That’s partly because of the US economy itself, and partly because the US dollar has been the “reserve currency” for the whole world since the 1940s. That comes from the Bretton Woods conference in 1944, which I’m not going to get into. But check it out; really interesting story.

At the moment, thanks in large part to the orange baby screwing everything up and undermining confidence in the US, our economy, and by extension the US dollar, the system set up in 1944 is starting to look shaky. It wasn’t much reported in the US, but the US SWIFT system, which is the established way international banks exchange money, was surpassed in daily financial volume by China’s CIPS system, which does the same thing, on April 16. What that means is that the yuan is challenging the US dollar as the world’s reserve currency.

And when your credit rating slides, you can’t borrow as much money any more, and your bankruptcy might not go as smoothly as you hoped.

See Also:

Alistair Crooke
Zero Hedge