From the Notebook posts are reworks of posts for my Patrons. This one is from August 23rd, 2021

One of the fundamental problems of central planning of any kind is what we systemic thinkers call the ‘Law of Unintended Consequences.’ It’s not really a law but it should be.

You know you’re dealing with an ‘unintended consequence’ of a policy when the politicians, bankers, regulators and their apologists in the media say something like, ‘well, you know, no one could have foreseen {fill in the blank}.”

Some of those blanks are:

  • The Housing Bubble of 2005-07 which caused the financial crisis of 2008.
  • The election of Donald Trump after decades of offering false choices to the American Electorate.
  • Most recently the collapse of the Afghan government to the Taliban and the U.S.’s ignominious retreat.

These are all events, and there are dozens more in your everyday life if you just begin looking for them, which nobody in charge would ever admit to having considered possible when they embarked on a particular policy but in hindsight were inevitable.

Policies of collective action under the rubric of the State, defined as that entity with the power to point guns at people to enforce their edicts, always result in these unintended consequences. But it’s not because those outcomes weren’t predictable but rather because they weren’t important to the people who implemented them in the first place.

They weighed the benefits as absolute and ignored the costs as trivial things they could, like a bad movie producer, fix in post-production.

So, with that in mind and looking at the saturation of fear porn and relentless march towards a locked-down, totally-controlled and regimented society as a result of COVID-9/11, I give you this note the other day from TASS, the Russian State’s news service.

Nezavisimaya Gazeta: Public’s attitude to globalization underwent shift during pandemic

People’s attitude to free trade and globalization has changed a lot since the onset of the coronavirus pandemic. Support for barrier-free trade has considerably declined. Russia is one of the global leaders in terms of people’s negative view of globalization, Nezavisimaya Gazeta writes, citing a poll conducted by the Ipsos company and the World Economic Forum. Only 48% of those surveyed in 25 countries agree that globalization is good for their countries. In Russia, one in three people stated that they reject the notion that globalization facilitates an effective economic policy.

Experts are not surprised by the declining interest in globalization. “People in large economic powers can see their daily expenses increase. Consumer prices used to be more stable before globalization began and free-trade zones were created,” economist Andrei Loboda said, pointing out that the change of sentiment had been sparked by rising inflation affecting economies worldwide.

Globalization has reached its limits and stopped boosting economic growth, BCS Chief Investment Strategist Maxim Shein pointed out. “The population’s income is falling, hence the decline in support [for globalization idea],” he said.
“A high level of consumption, easy access to any goods at relatively low prices, good wages, high pensions and access for businesses to foreign markets – all this used to be associated with globalization. However, in the late 20th and early 21st century, the global economy started to face crises, rising unemployment, a decline in the middle class and increasing income inequality. All these issues are also directly related to globalization,” Associate Professor with Department of Enterprise and Logistics at Plekhanov Russian University of Economics Igor Stroganov emphasized. Besides, large transnational companies and retail chains enter foreign markets, destroying small and medium-sized businesses and local agriculture. “In addition, labor migration increases competition on the labor market. People in many countries feel that way,” the economist stressed.

While we are bombarded daily by new polls suggesting that a majority of Americans love their mask or believe their neighbors should be held down and forcibly injected with an experimental gene therapy, the Russians have looked upon the face of the New Normal and rejected it.

This is the unintended consequence of pushing for Globalism, people see it for what it is and reject it.

The big question is why and to answer that I want to discuss what’s not discussed in the TASS note.

The Toxic Spread Trade

What’s not covered here is the role that central banking and the Cantillion Effect have on prices. The Cantillion Effect is where price rises from monetary inflation have a delayed effect as the new money spreads out through the society. Those that receive the money first get to spend that money at today’s prices which, over time, raises everyone else’s bid for the good or service that money then procures.

In reality, government is only in control of that first spend — from its coffers to the supplier. After that they money flow is chaotic based on the marginal utility needs of the person who receives it. But, what you can be assured of is no matter what, those closest to the source of the money have a massive advantage over those at the economic fringes.

This is why I find all the hand-wringing modern Progressives do over government spending so thoroughly repulsive. They argue for the very thing to help ‘poor people’ which impoverished them in the first place.

Their argument is instead of giving the money to the banks or the corporations but directly to the people then that would equalize the previous theft, a kind of reparations for past monetary sins. Of course, this is patent nonsense. Giving people money rather than just stop stealing from them is not the way back to a moral and sustainable economy.

But it is their path to more permanent power. Ah Ha!

So, the effect of central banks around the world printing money is to create a constant Cantillion effect at the national level. In the case of the U.S., The Fed gives the U.S. government and its member banks preferred access to capital at the lowest costs to borrow, while you get access at the highest cost, i.e. higher interest rates.

This subsidizes overseas investment while overstating the strength of the U.S. dollar, because those dollars can be spent to more effectively procure overseas labor and property than buying those same things here.

This exports the monetary inflation overseas while keeping a lid on domestic prices at home. It’s why it’s also so disingenuous of economic commentators to use domestic CPI as a measure of inflation to invalidate the Quantity Theory of Money, which I’ve written about before. If the money goes overseas, something’s price is getting inflated, just not that thing we’re measuring.

Using the CPI to measure inflation is like trying to measure a board with a stopwatch. It’s the wrong tool for the job.

As the Fed pushes and pulls the money supply through ‘monetary policy’ over time it greatly exaggerates the natural boom and bust cycle of the economy.

Now let’s take this one step further and think on the arguments made by Jeff Snider at Alhambra Partners who argues that with the creation of the offshore Eurodollar shadow banking system, the Fed itself isn’t even in control of its own monetary policy, those markets are.

This is another example of unintended consequences of major policy changes, turning over the role of new money creation to a central bank, versus basing it on a hard reserve asset like gold. It spawns a rough beast the central bank can’t control anymore than the government can control how you spend the money it pays you.

So, when those titanic forces want to enter into new markets through cheap money they demand it from the Fed and eventually the Fed accommodates them lest it get blamed for causing a global depression… sound familiar?

I’m simplifying Jeff’s arguments here, but the fundamental point he makes is valid.

At the same time it’s also irrelevant to the current argument because it doesn’t matter if the Fed or the Eurodollar depositors control the rate of new money creation. The Cantillion Effect of how that new money spreads globalism is the same, only the points of origin are different.

The Imperial Marsh

Large scale producers take advantage of the situation by investing overseas during the busts and repatriating their capital during the booms. In effect, they are reloading and waiting for the next Fed-induced cycle to commence. As those closest to the Fed, if not telling the Fed what to do, then they will also be best prepared when the policy shifts to take advantage of it.

This dynamic has played out at an accelerating pace during the 21st century as these boom/bust cycles become more and more erratic and the ‘monetary policy’ employed to support them more and more reckless.

In the end, it is the countries that begin rejecting this scheme by de-dollarizing that are the ones who insulate themselves from the effects of this capital in-and-out flow.  That’s why I’ve been bullish on Russia since 2013, ignoring people calling it a ‘value trap’ early on because of low equity market multiples.

Putin rejected globalism as an economic weapon and, in effect, turned globalism on itself by doing this. At the same time, he maneuvered Russia to control the marginal barrel of oil produced in the world.  This gave Russia the unique position of inserting the ruble into global trade while improving its regional relevance as the rebirth of central Asia can now commence with the collapse of the U.S. occupation of Afghanistan and the final nail in the coffin of the remnants of the British Empire.

From here the ruble’s fortunes look bright as long as the Bank of Russia doesn’t revert to its old ways.

Rejecting globalism is a real problem now for the Great Reset as individual countries can now move to regain control over transnationals who were told they would be allowed to run the world. Martin Armstrong has banged his shoe on the table about Big Tech getting the roles of the money-center banks for nearly two years.

Today I see the signs of the titanic struggle between the central banks and the shadow banking system complicating the plans of The Davos Crowd’s Great Reset everywhere as Big Tech makes good on its promises assist in the COVID-9/11 operation to destroy and remake the world.

In recent months, the clear policy from Premier Xi Jinping is for China to move rapidly to lockdown its domestic economy, cut down its tallest poppies, and send foreign capital packing. It never gave the Western banks the access they wanted. It was always globalism on China’s terms, not the West’s.

Now that Xi is making his moves, Davos is making theirs, attempting to blame them for COVID-9/11 and turn Americans into raving anti-China hawks willing to salve a bruised national ego by blowing shit up in China’s backyard.

Let’s hope this is the one aspect of the Great Reset that fails to materialize completely.

Rejecting western Globalists was Russia’s sin as well. Putin’s biggest challenge in his 20+ years in power has been to gain control over his central bank and the Russian financial system such that their inherent corruption worked for Russia and not for Davos. Russia, out of necessity, is much farther along in its quest to reverse/arrest globalism than China is.  

You can clearly see the hand of Davos at the legislative level trying to keep forcing this to work. The EU still enters trade negotiations demanding a country give it veto power over its “partner’s” local governments in bilateral trade…. and notice how many of these deals they’ve signed in the past couple of years.



COVID-9/11 is globalism’s last stand. It’s goal is explicitly to burn the world down to ‘build back better.’ I’m sure Davos asked both Xi and Putin many times to join the big club for the big win and they both said, “No.” This is where culture and history asserts itself.

Seriously, do these people have no memory of how Europe and the U.K. have treated China and Russia?

So, the WEF is now accelerating its scorched earth strategy. It’s clearly using what leverage it has in U.S. institutions to expend the last of the U.S.’s political capital with diplomatic and geopolitical ‘gaffes’ that even an amateur wouldn’t make. When you see government policy an order of magnitude more incompetent than can be explained by internal squabbling and petty corruption, you are dealing with something willful.

This is always what I’ve envisioned the ‘failure’ of the Great Reset to look like whenever I’ve invoked that idea.  They’ve taken their shot at it.  Where they have the most control and favorable laws/infrastructure — i.e. the English Commonwealth, France, Italy, Germany, Spain — they are ramping up the tyranny.

In the U.S. they are moving rapidly to liquidate as much of the U.S. as possible after having already reversed most of the good things done under Trump.  Pelosi first moved back the deadline on the Budget/Infrastructure/Debt Ceiling until October. Now she’s really twisting arms behind the scenes while Afghanistan takes all the attention trying to shoehorn them all through in the confusion.

If she can’t get that done then the House and Senate could get quickly bogged down in Afghanistan hearings, if not impeachment/25th Amendment talks. This is part of the reason why I think Powell was surprisingly dovish the other day at Jackson Hole. He’s got to stay on D.C.’s good side to get re-confirmed. He can afford, right now, to let the pressure off the global financial system until another funding crisis emerges in the domestic money markets.

So, the USDX falls a little, the euro backs away from oblivion and we look ahead at the German elections and the next FOMC meeting.

None of this is good news for globalists and globalism since they need that nearly $5 trillion to complete their takeover of the U.S. financial and political system.  You don’t have to be a dog to smell the rising fear.  It’s palpable now.

Pelosi needs these bills passed or her leadership of the Dems will collapse. The Squad is barking about getting rid of Powell while Pelosi begins to realize the whole administration is collapsing faster than Biden’s cognitive function.

The globalists need perpetual war in ‘shitholes’ around the world to keep laundering the easy Fed Funny Bucks to keep the entire Ponzi Scheme alive. With Afghanistan now off the table, where are we sending the military next to export inflation democracy?

But Powell, like the rest of them, know that globalism is failing and pushing any further for it will only accelerate the creation of what Vaclav Havel called “parallel systems.” Systems that exist outside of their control. So, I think he’s treading carefully here with monetary policy on purpose.

It’s Davos that is getting desperate. The more they grasp for total control the easier it becomes to see the Law of Unintended Consequences rearing its head as new solutions to age-old problems proliferate.

Don’t believe me?

The best and brightest in the U.S. stopped being engineers and scientists two generations ago when we stopped ‘building things.’ They became financiers and lawyers. This was an unintended consequence of the money flowing from D.C. and The Fed to those jobs to feed the growing regulatory state. Their kids learned to code because that’s where the growth was as the cheap money was funneled to subsidize the creation of today’s Big Data and AI systems they believe they will use to control the flow of everything the world over.

Today, however, those best and brightest have left Google and Facebook and are working in crypto to solve the very problem which started all this pernicious globalism in the first place. I’m not the only one seeing it. It’s clear where the innovation is and what these people’s motivations are — to reverse the Cantillion effect of privilege granted to those close to the King and let capital flow to where the people need it not where the tyrants do.

The Russians may be leading the way, if the polls are correct. Reject empire and ‘greatness,’ they are telling us. Our leadership is trying to shame us over Afghanistan. Don’t let them. Be contrite but internalize the lesson of humility and get back to work rebuilding what’s been lost. Opportunities for new systems abound.

Because the final consequence of Cantillion’s observations about prices is that eventually you run out of ways to squeeze people through fear and inflation. When that happens they squeeze back. 

Join my Patreon if you are ready to squeeze back.


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