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The great unravelling

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Real life Bond villain Klaus Schwab has become the focus of ridicule following crude attempts to remove articles praising Sri Lanka’s “Vision 2025” economic plan from the World economic Forum (WEF) website – the world’s leading proponent of the hi-tech fourth industrial revolution apparently not realising that nothing ever disappears from the internet

Sri Lanka was supposed to be the poster child for the Great Green New Reset, scoring a 98 percent ESG (Environment, Social and Governance) ranking.  Sri Lankan President Gotabaya Rajapaksa winning considerable praise from globalist leaders and climate activists alike for his speech to the COP26 conference in Glasgow last November:

“Sri Lanka recently restricted imports of chemical fertilizers, pesticides, and weedicides due to public health concerns, water contamination, soil degradation, and biodiversity impacts.

“Although opposed by entrenched lobbies, this has created opportunities for innovation and investment into organic agriculture that will be healthier and more sustainable in future.”

Critics of climate action have understandably focussed on this policy as “the reason” for Sri Lanka’s economic collapse and descent into political chaos – Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe having fled the country after the hungry masses invaded the presidential palace last week.  In spite of praise from organisations like the WEF and the world bank, however, the Sri Lankan economy was highly indebted and vulnerable to economic shocks long before the country’s leaders decided that a mass crash diet was in order.  The country’s main sources of foreign currency – without which it could not repay its debts – are tea exports and tourism.  Tourism was, of course, crushed in 2020 and 2021, as countries locked down and air travel ground to a halt.  In 2022, moreover, air travel is still disrupted, and far fewer consumers can afford international travel. 

Meanwhile, despite the Sri Lankan government believing that the switch to niche organic tea exports would make up in foreign currency for the loss of yield, the reality is that the market for organic tea is miniscule.  With a generalised increase in prices around the world eating into consumer spending, lower cost has become more important than environmental status for most consumers.  The result being that Sri Lanka’s income from tea exports has crashed.

The fertiliser ban, which has resulted in mass hunger, was merely the final act of a national government in thrall to an intellectually bankrupt global technocracy whose prescriptions for prosperity break all of the laws of thermodynamics.  As they flee the country in fear of their lives, they may contemplate the one common feature of all social revolutions… bellies rumbling with hunger.

For the wider world though, Sri Lanka is but the beginning of a great unravelling which is going to destroy the global economy.  Although it was never possible to predict in advance which country would be first to roll over, still less when it would begin – as Keynes is reputed to have said, “markets can stay insane longer than you can stay solvent” – the broad outline was visible to anyone who cared to look once states began to lockdown their economies:

“The supply destruction that is going on behind the scenes as corporations shut down operations and scrap equipment, machinery and vehicles will only come to public prominence when governments declare the pandemic to be over.  Only then, when key fuels and resources are no longer available to us in the quantities required will we fully understand the folly of shutting down economies in a failed attempt to halt the spread of a not particularly dangerous virus.  But the consequences of that third wave, which will give rise to evils from third world debt defaults and increased poverty and hunger to trade and resource wars, will be beyond our capacity to resolve.  Lacking the energy and resources even to develop a steady-state economy, the global economy which emerges out of the pandemic response can only collapse; most likely rapidly.”

This was always going to create the greatest risk to states like Sri Lanka which are heavily indebted and dependent on just one or two commodity exports to secure the foreign exchange currency they need to stay afloat.  According to the US thinktank the Council on Foreign Relations, Sri Lanka is just one country which was at risk of collapse.  Others include Argentina, Egypt, Ghana, Lebanon, and Pakistan.  Nor is the risk limited to the global south.  European states like Albania, Lithuania and North Macedonia are also candidates for near-term collapse as their dollar-denominated debt becomes unpayable.

The problem is compounded by a global investor flight which is driving the US dollar up to unsustainable highs… thereby devaluing the currency of any state which needs dollars to do business.  This is setting up a vicious spiral in which as more national economies crash, the more investors will seek the relative safety of US assets even if the return on these is miniscule… or even if the Federal Reserve takes the rate negative.

The pachyderm on the sofa in all of this though, is the volume of derivative “assets” which have been created on the back of all of this increasingly unrepayable sovereign debt.  Just as in 2008, we only discovered the extent of the derivatives based on mortgages after the banking system began to collapse, so this time round we will likely only fully understand the extent of the problem as the entire global economy succumbs to a world-wide sovereign debt crisis.

Unlike 2008, there won’t be any states left standing to bail the system out.  And with western leaders seemingly determined to drive the emerging Eurasian/BRICS bloc into setting up an alternative system which disadvantages the west, the prospect for a rapid descent into economic, political and social chaos looks inevitable.  Little wonder Herr Schwab and his buddies are keen to erase the WEF’s role in it.

As you made it to the end…

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