Really Fast Glance.

It seems that the issue with understanding the economy persists. So, what I did, I fast compiled available data, with the exception of agriculture, on crucial sectors among countries which rank high in the world to give some impression on the actual sizes of economies. 

I will never stop reiterating--economy IS energy. No energy--bid your dreams of becoming a global power goodbye, unless you secure energy supply, such as China is doing this very moment. So, highlighted in red are countries with a severe deficit of energy as represented in MTOE (Million Tons Oil Equivalent). Then I give some (only some) data on industrial sectors which matter in CINC (Composite Index of National Capability) and Barnett's famous 14 points.  Obviously, today CINC absolutely doesn't do the trick but it could be grasped even by a child that production of metals matters strategically, because without steel, aluminum or pig iron the civilization will simply grind to a halt. 

I didn't put in commercial aviation because we all know main players and there is no necessity to go over it. But especially in terms of Airbus which is a multi-nation conglomerate and in this case one needs to credit several countries, including Germany, where, as an example the integration facilities are located. But that doesn't mean that Germany out of own resources can produce serious commercial aircraft. She can't in a foreseeable future. In terms of consumer goods--those numbers are estimates of countries covering their needs out of own resources. And that's the issue here--look at EU members? Taken separately they are dwarfed by such countries as the US, Russia, not to speak of China, who dwarfs everybody else. That is why when I hear or read all those IMF or World Bank GDP ratings I smile. E.g. in fundamentals of economy Russia dwarfs Germany, not to speak of France or UK.  Moreover, Russian economy is grossly (and not without intention) undervalued, while Western economies are inflated to a grotesque degree by means of assets' value inflation and counting FIRE as part of GDP. Even good ol' PPP--Purchasing Power Parity adjuster doesn't work. That is why Military-Industrial Complex is included and there are ONLY two countries in the world capable out of own resources to produce all nomenclature of the advanced military hardware: US and Russia, with China following. France still tries to maintain her position within this exclusive club and we are yet to see where will it get her. 

I mean it when I say that using Western "economic statistics", especially in monetary form is as useless as treating cancer with aspirin. Remarkably, even aging Patrick Buchanan notes two days ago:

The Eclipse of Europe. Not only is the center of political gravity shifting from Europe to Asia, European unity seems a thing of the past.

For anyone who didn't drink the Kool-Aid of Western economism and strategic (pseudo)thought it was clear for a long time that Europe was on her downward spiral and as latest events with energy deficit have shown one cannot live on shares, abstract economic indices and outright delusional statistics. To live--one must produce. To live well--one has to have a good grasp of what good life is, a problem Western political "scientists" wrestle with without any success for a long time. One can live without latest Mercedes model, one cannot live without heat in winter and air-conditioning in summer. In the end, less expensive and no less practical Skodas or Ladas are available. In the end, there is always Toyota, or Hyundai. We live inside the ongoing collapse of the old world and evaporation of the old myths and chimeras. That is why Erdogan goes to Sochi and calls Putin his "dear friend". That is why, looking at European economies anyone with IQ higher than the room temperature wonders how do they even survive. Well, I will continue to try to elaborate on these issues to the best of my mental and physical abilities, but just take a brief look at those numbers--they tell the story. 

UPDATE: forgot to mention. The US is making a killing in Asia selling American LNG. Naturally. Now is the question: what about Europe--you know Atlantic solidarity, NATO and all that. Well, nothing personal, just business. In related news, BASF closed 40% of its operation, while UK's fertilizers industry is completely paralyzed, like completely stopped. It is all down right surreal. France now wants to government-control consumer prices...but...but what about "free market" and invisible hand?  

They Just Don't Learn.

Chris Hedges of RT, formerly of NYT, a Pulitzer Prize winner, what have you, wrote a piece two days ago. It is about the decline of the "US Empire" and the piece is filled with historical parallels and, naturally, the fate of the Soviet Union is mentioned, despite a rather dramatic difference between the context of Soviet collapse and America's disintegration. I understand where Hedges is coming from but then he suddenly exhibits a defining trait of America's intellectual class, without exception, attributable to the whole of it, no matter if it is neocon wing of it or honest peace-loving people, such as Hedges. 

Russia, whose economy is roughly the size of Italy’s, is also attacked for destabilizing the Ukraine, supporting Bashar al-Assad in Syria, funding France’s National Front party and hacking into German computers. Biden has imposed sanctions on Russia — including limits on buying newly issued sovereign debt — in response to allegations that Moscow was behind a hack on SolarWinds Corp. and worked to thwart his candidacy.

I wrote about this issue not for once, but the ignorant myth of Russia's economy being the size that of Italy's, Spain's, Australia's, you name it, continues to be perpetuated by many and this myth is not just patently untrue, it is downright dangerous. Because American "elite" resides in a delusion about outside world for the last 30 years at least, they continue to make their decisions based on absolutely false premises, many of which are being pushed on them through media. Let's face it, statements such as "the finest fighting force in history" or "the largest economy on planet" are as American as flag, apple pie and baseball. Modern United States cannot live without self-aggrandizing. But how about forensic mental experiment? I will start with... America's GDP which does not reflect America's claim (mostly through inflation of the value of assets) to being largest economy in the world, with China long ago overtaking the US as a main manufacturing hub of the world. It is just cold hard fact, China's real sectors dwarfs that of the US. Using US Dollar and its value as a measure of economy, in the meantime, is a sign of ultimate economic and geopolitical ignorance. 

On the other hand, even common sense, forget actual IMF data which defines Russia's economy as being larger than that of Germany, should prompt people who call themselves "journalists" to merely imagine what would happen to Italy if she, granted my love for Italian culture and football, ever decides to build the space program the size of Russia's, will start building nuclear power stations, maintain state-of-the-art armed forces and, simply, provide decent standard of living for most people in the climate which, as Texas has demonstrated recently, can only be described as a calamity. Even this small list of real industries should give a pause to any journo at best, in a worst case--this list is a good primer for the start of a serious cognitive dissonance. But, no. The spouting of this crap continues unabated, I can remind you another popular cliche--Russia punches above her weight. This is not just the issue of ignorance, albeit this too. It is a classic case of Kubler-Ross grief model with Stages 3 (Bargaining) and 4 (Depression) being manifestly present in contemporary American writings, be that by delusional neocons or by those who profess views opposite to neocons'.  

Truth is, should Russia have the economy the size of Italy's, she wouldn't be able to do what she does and that is setting global agenda and, frankly, laughing at West's sanctions and even direct sabotage. America's "garrulous patriotism" cannot take it across the whole political and ideological spectrum. In a Stage 3 (Bargaining) of Kubler-Ross this bargaining takes grotesque forms with mantras of American greatness which begin to sound more and more ridiculous and do not anymore provide a desperately needed therapeutic effect. They cannot, because America's slide towards the bona fide thirdworldism cannot be stopped within present pseudo-economic and political system and culture, and what's left is to fight facts of life. Recall, brilliant essay by Irina Alksnis, a very sympathetic towards America's plight, which since then has become even more relevant.   

However, to hear this simple advice--not to mention  following it--the United States need to stop, at least for an instance, and silence themselves. To stop shaking air with statements, declarations, demands, and threats, which come across as either strange, or outright silly because of their obvious inability to ever become a reality. But it is precisely, it seems, what the US is not capable of doing. As a result--the continuation of never-ending declaratory carousel: Moscow, Assad must go! Russians, we will provide for freedom of navigation in Kerch Strait! Russians, we will punish you for support of Maduro. But the most insulting for Americans is that only Russia can understand them. Because we remember the pain behind those words. 

And so it goes: America's economy is not the largest in the world, hasn't been for a long time, Russia's economy is not the size of Italy's, it is much larger than that, it is, actually, larger than that of Germany and continues the pursuit of economy of Japan, but even these forecasts, which forget to mention Germany's real industries shrinking for 28 months in a row now, even this BS, heavy on FIRE economy--a real reason behind America's decline--stats show where the Italy's and Russia's economies are. And again, America's real economy, not manufacturing of debt--the main US industry--is not $23 trillion, it is not even $15 trillion and is probably around 12-13, at best. 

Real size of Russia's economy? Probably around $5 trillion now and at least Russia doesn't count prostitution and illegal drugs trade as addition to GDP as EU does.

Counting Drugs and Prostitution in GDP Makes a Mockery of Budget Rules

I don't understand why the author is so incensed? In the world where Tesla and Facebook have bigger "capitalization" than Boeing or General Electric, anything is possible, so adding sales of heroin and the value of the side-road or truck stops' restrooms blowjobs is only natural for creating an impression of large booming "economies". In fact, I see no difference between prostitution and cooking of books which is MO of modern Western "economies". Actually, no--there is a difference, prostitution is more honest. But then again, in my latest book, I touch upon the issue of inability of modern Western media, at least the majority of them, to learn. It is a systemic problem and it is, as I am on record for years, impossible to cure after decades of America's self-aggrandizing which, at some point, reached a scale of a full Kafkaesque grotesque and even well-intentioned people, who see the problems, are not immune from baneful effects of a BS narrative industry, which missed the point that the ball is over and that the fancy carriage is nothing more than yet another pumpkin, under the teary glance of a Cinderella bound to dream about the magic night, not knowing that the Prince is not coming. 

Will they learn? I don't know....

What Could Be Better Than...

Sitting home (on standby lay-off)  in the evening, sipping my...latte and reading Michael Hudson. The only thing which could probably be better for pleasuring my mind and sensibilities is to watch Twin Peaks Season 4, which, sadly, doesn't exist yet, I keep my fingers crossed, but that would be too good to be true. So, the next best thing: Michael Hudson on this ever relevant issue of Real Economy and Modern Monetary Theory and how shit hits the fan in his (yet another) brilliant piece at Unz. Hudson doesn't mince words and for me, and many here and not here, who have experience with "socialism" in USSR, and actually studied political economy of capitalism, Hudson's observations hit the spot immediately:

If governments do not provide enough purchasing power by running budget deficits to enable the economy to grow, the role of providing money and credit will have to be relinquished to banks – at interest, and for purposes that the banks decide on (mainly, loans to buy real estate, stocks and bonds). In this respect banks are competitors with government over who will provide the economy’s money and credit – and for what purposes. Banks want the government out of the way – not only regarding money creation, but also for financial and price policies, tax policy and laws governing corporate behavior. Finance wants to appropriate public monopolies, by taking payment in natural resources or basic public infrastructure when governments are, by policy rather than necessity, short of their own money, or of foreign exchange. (In times past, this required warfare; today foreign debt is the main lever.)

Of course we all remember Holy Reagan's sacramental (yes, yes, we also heard about it in USSR): "Government is not a solution to our problem, government is the problem." It sounded so cute, especially for people in the US who were and are very high on the American social and economic ladder and who wage day and night their existential struggle against taxes on their wealth (and we know, taxes will make them poor and will force them to actually perform productive labor--a terrifying future, GULAG really) and because of that, as Hudson notes:

To get into this position, banks need to block governments from creating their own money. The result is a conflict between private bank credit and public money creation. Public money is created for social purposes, primarily to maintain production and consumption growth. But bank credit nowadays is created largely to finance the transfer of property and financial assets – real estate, stocks and bonds.

We all know--government is bad, bad, bad in the world of big fat dividends, capital gains taxation, houses which sell for very high hundreds thousands to millions, in the world of Porsches and private jets. Government is, what we are told, there to get our guns, money, liberties and other dear to us things, and hence financial capitalism, as we are told, is the only guarantee from evil government succeeding. Ahem, but here is the problem--government wouldn't be the problem in the society where this government is controlled by all those REAL checks and balances and by sophisticated enough electorate. Or, in addition, in the society, such as Russia, which has a profound historic experience in building its state (government) in such a way that is controls crucial economic activities in order to maintain social balance in the society. Same, to a large extent applies to China and, actually, many other Asian societies. This, in the US, is called (wrongly, of course) "communism", "socialism", Marxism and other "scary" titles all of which are designed to scare the shit from unsophisticated voter who doesn't have the time to figure out that, as an example, Cultural Marxism, has very little to do with actual Marxism and is as organic to Western Europe and the United States especially as baseball, Flag and Apple Pie. In fact, Cultural Marxism is an invention of, let's put it in simpler terms, "banks" and people behind FIRE economy to channel frustrations and economic dislocation of us, deplorable plebes, into the safe steam releasing valve of contrived, in fact totally unnatural, "values" and occupy, otherwise suspicious masses who do not live in mansions and drive Ferraris, with business of worrying about how many genders will be discovered in the next decade or how many different ethnicities and races are properly represented in the murky stream of mediocrity pouring out of Hollywood's sewer. In the end, it is so important to be inclusive and metrosexually "sophisticated".  

While all this game of shadows happens, Hudson posits (and I subscribe to every word of his here--I write about it myself for years now):

At issue is how to measure “the economy.” For the wealthy One Percent, and even the Ten Percent, “the economy” is “the market,” specifically the market value of the assets that they own: their real estate, stocks and bonds. This property and financial wrapping for the “real” production-and-consumption economy has steadily risen in proportion to wages and industrial profits. It has risen largely by government money and credit creation (and tax breaks for property and finance), along with its economic rent, interest and financial charges and service fees, which are counted as part of Gross Domestic Product [GDP], as if they were actual contributions to the “real” economy.

Music to my ears, I already wrote two, and am writing third, books wrapped around this whole thesis which dictates the real weight of strategic PREDICTORS, 90% of which are expressed in terms of tangibles: manufacturing base, machine-building, finished goods, scientific and educational prowess of the nations, not in prices for assets. But Hudson, as if thinking, that what he conveys was not making me feel good already, he delivers a blow:

Financial engineering replaces industrial engineering – along with political engineering by lobbyists seeking tax breaks, rent-extraction privileges, and government subsidy. To increase property and financial asset prices and corporate behavior, companies are drawing on credit and government subsidy not to increase their production and employment, but to bid up their stock prices by share buyback programs and high dividend payouts. Buybacks are called “repaying capital,” so literally this policy is one of disinvestment, not investment. It is favored by tax laws (taxing “capital” gains at a lower rate or not at all, as compared to taxes on dividends).

Oh boy, my smile is now wider than my face and it just feels good to know that all these years, what I, and many other people, from PCR, to Hudson to first rate thinkers in Russia, were writing about is coming true in a front of our very eyes--a complete implosion of the whole "economic" theory by Chicago boys and a violent stripping down of an American so called economy to its naked, bare bones, self and it is not a pretty picture. Once the hologram (as James Kunstler aptly calls it) of grossly overpriced or useless assets, convoluted bookkeeping and snake oil trading is switched off, we suddenly are presented with American economy which is dramatically smaller and less capable than it was assumed based on false Wall Street indices, and the economy which now can only be saved by government, if, of course, this government is capable of right decisions, which, at this stage is a huge question. After all, people in this government, in a decision circuit, are themselves the products of a hologram and many truly believe in their laissez faire' orthodoxy with all their hearts--because they do not know better. Even now, when US government, granted grossly incompetently, tries to prop up US economy which will never be the same. Because, economy based on "financial engineering" (aka fraud) and ran by "financial engineers" is bound to collapse. In general, just read Hudson's excellent piece. I did and enjoyed it mightily. We are not in Kansas anymore(c).

A Chronic Illness.

It seems incurable in the US. I was reading Kunstler's predictions (I don't make "predictions"--it is a silly business) today and bang, here it was: 

Russia is not our economic rival. Vast as its land-mass is, Russia’s economy is not much bigger than the economy of Texas. 

Ahh, no.  In one phrase, immediately, two major mistakes which are so symptomatic of the America's mental health this very same James Kunstler writes about:

Of course, this matter has even greater significance for correcting the meta-problem of America chronically lying to itself. RussiaGate and its spinoffs was such a gargantuan edifice of malicious dishonesty that it must be deconstructed in the courts, or the mental health of the nation may not recover.

Getting their numbers straight could be a good start. In fact, let's take a look at numbers. 

1. Will start with this tired thesis of Texas' economy being either larger or the size of Russia's economy. The brief look at the size of the Texas economy reveals, based on US government data, that its GDP was in 2018 $1.803 trillion.  Mind you, with Texas (as is the case with the US), does NOT have PPP index because it doesn't exist for the US or, rather, equals its nominal GDP which is denominated in US Dollars for global economy--a travesty of unimaginable scale. But still. This is not to mention the fact that out of those 1.8 trillion, huge chunk is "contained" in well known to us "industries" such as FIRE and other unspecified services. 

Go figure. Of course, Kunstler forgets another teeny-weeny fact, that Texas is an organic part of the US economy at large, and no matter how large Texan egos are, Texas without the United States will be immediately reduced, if viewed as a separate nation (well, they think themselves there in Texas), to a rather economically insignificant entity whose economy will immediately lose core industries required for the United States as a nation--how about aerospace? You get my drift. 

Now, we, of course, have to get to this damn Russia which not only produces practically everything on her own, but has an economy which ranked 5th ( I propose, and I have the argument, that it is 4th) globally and its actual size in accordance to IMF--another belch of a dysfunctional American financial voodoo system, well, judge for yourself, for 2019:

So, Russian actual economy dwarfs that of Texas, plus, which comes as an insult to injury for Texas, Russia produces things which Texas doesn't, and if taken as a separate "economy" will never be able to produce. Texas will never be able to produce within, let alone without, the United States nuclear icebreakers, space vehicles, whole spectrum of aviation from combat to commercial, to...Ah, here comes this second thesis by Kunstler:

2. Russia is "not economic rival" for the US. It is NOT black and white, because there are few critical fields in which Russia is not only a full fledged rival for the US, but actually THE ONLY competitor. I, of course, may start with this trivial puny hydrocarbons issue, which is also partially in the foundation of US non-stop economic sanctions on Russia, because Russia is clear and present danger to only one resource the United States needs desperately to export to EU and this is natural gas. In fact, what we observe currently is America's full blown economic warfare against Russia (and EU) precisely because Russia's massive hydrocarbons industry which is not only immensely competitive with the American one, but, actually, threatens US "plan" for EU. 

Then, of course, comes nuclear energy field, but here US nuclear energy is simply not competitor to a monster of Rosatom and its gigantic portfolio (from Rosatom 2018 report). 

And then come weapons... Here, not only Russia is not just "economic rival", she is a clear and present danger for the US. For a simple reason, she produces a spectrum of weapons systems Texas (even integrated into the US economy) will not be able to produce, especially from concept to R&D to a full manufacturing cycle. And then, of course, Russia offers weapon systems which the United States (let alone Texas) simply do not have. I do not like SIPRI (they are very questionable source of data) but even this dated (2017 chart) shows who real bosses in the global arms trade are. 

I omit here, of course, quality of weapon systems and in terms of cruise missiles, air-defense systems and combat aircraft, to name a few segments, US is losing ground pretty fast. 

So, is Russia economic rival to the United States? Oh, yes, she is. Especially when one peels off layer after layer of the American financial BS which passes as a GDP and faces a rather not that huge (large still) actual GDP, or, let's put it this way, value US real economy produces. In the end, this significant piece of news shouldn't have escaped Kunstler's attention, because it is yet another confirmation of upcoming Discretionary Spending crunch in the US of which so many people warned for years.

WASHINGTON – The Department of Defense has sent a plan to the White House that would cut the construction of more than 40 percent of its planed Flight III Arleigh Burke destroyers in in fiscal years 2021 through 2025.In total, the proposal would cut five of the 12 DDGs planned through the so-called future years defense program, or FYDP. In total, the plan would cut about $9.4 billion, or 8 percent, out of the total shipbuilding budget, according to a memo from the White House’s Office of Management and Budget to the Defense Department obtained by Defense News. The memo also outlined plans to accelerate the decommissioning cruisers, cutting the total number of Ticonderoga-class cruisers in the fleet down to nine by 2025, from a planned 13 in last year’s budget.The Pentagon’s plan would actually shrink the size of the fleet from today’s fleet of 293 ships to 287 ships

All this is not just the realization of the dramatic change in the warfare, which I termed a Real Revolution in Military Affairs, with massive tactical, operational and strategic ramifications, but also the fact that current military spending by the US is NOT sustainable, especially for a minuscule amount of bang for a buck US military was getting in the last couple of decades.  

These points which I outlined in this post are the main reasons for the United States initiating a Cold War 2.0 with Russia, which American elites always viewed in XX and XXI centuries as a threat and the only viable and capable impediment for their plans on global domination. Hence mental breakdown. Russians are keenly aware of what is going on with America and, as I pointed out earlier this year Russians can relate, as Irina Alksnis so brilliantly encapsulated:

However, to hear this simple advice--not to mention  following it--the United States need to stop, at least for an instance, and silence themselves. To stop shaking air with statements, declarations, demands, and threats, which come across as either strange, or outright silly because of their obvious inability to ever become a reality. But it is precisely, it seems, what the US is not capable of doing. As a result--the continuation of never-ending declaratory carousel: Moscow, Assad must go! Russians, we will provide for freedom of navigation in Kerch Strait! Russians, we will punish you for support of Maduro. But the most insulting for Americans is that only Russia can understand them. Because we remember the pain behind those words.  

On The GDP, Yet Again.

It seems this GDP question does not want to die.  First, out of the blue Michael Kofman and Richard Connolly of Center for Naval Analysis (CNA) write this:

An equally important problem is how one compares GDP and relative living standards. Russia’s economy, which may seem to be closer to the size of South Korea’s based on simplistic conversions at current market exchange rates, is more accurately reflected as the sixth largest economy in the world. This is because while market exchange rates are appropriate for measuring the value of internationally traded goods, PPP rates should be used when measuring non-traded goods and services. It is precisely these non-traded goods and services that tend to dominate military expenditure in countries like Russia that have sizeable and largely autarkic defense industries.

Well, it seems they read my books at CNA. In fact, I would dare to say that Russia's economy is, actually, fifth largest economy in the world. How so? Here is a demonstration in the most profound way--yes, I am not going to be talking about military hardware, where Russia gets a gigantic bang for a buck--by giving visuals for comparison of things people do not need special skills to understand. Here is one:

This is the house for sale in the hell of a nice community near....Mashkov Lake near Moscow (no, not Moscow, Idaho), 75 (47 miles) kilometers from the Red Square, near highways, beautiful established community with school, stores, the works. The house is on almost half-acre of land, has the area of 190 sq.meters or around 2050 square feet. It is on sale for R5.8 Million, that is, converting directly to USD, R5.8 million/62.2 = $93, 247. 

As you can see, if I would have been American economist I would immediately try: 

1. To find rough equivalent of this house in the United States around the city with such massive gravitas which could at least remotely compare to that of Moscow. Let's try in D.C. suburbs, right? The only thing remotely comparable to this house in Russia I found at Virginia Beach, VA.

2. As you can see, this house is 4.5 times more expensive than the Russian one, and it is 154 miles (as crow flies) from the US Capital. As you may expected, driving highways will be even longer distance. 

So, let us calculate GDP created by building these two houses in Russia and in US. Right! As you may have guessed it already, the United States created 4.5 times more GDP than Russia by building comparable house in a place which, let's be frank, is not exactly Moscow. Mind you, that Russia builds all kinds of real estate, from apartments to houses, like there is no tomorrow. In fact, the house like that near Moscow, near Krasnoyarsk or Voronezh would cost you less, much less. While in the United States for $93,000 you can buy, even in affordable Spokane, WA, this:

What a lovely charmingly decrepit piece of...history. Here is how PPP (Purchase Power Parity) GDP works, or, rather confuses most Western think-tank free-loaders who do not understand that most of what they know about the world outside is a baloney or a caricature. Like the fact that China's real middle class which has incomes comparable to that of the average US income is larger than the whole population of the United States. That is a good hint. In the end, for the same $439,900 in Virginia Beach, VA, one can always buy this IN Moscow:

And enjoy life on a full acre of nature with around 6,000 square feet of living space. Mind you, you will still have money left to not only furnish this thing but to host a huge housewarming party. I am sure if you are on the extravagant side, there will be money left on strippers too, good ones.

Now, can you scale down, or scale up, Russia's and American economies? Difficult still but it shows you, at least, what all those proverbial $22 Trillion of the US GDP are worth. Not as much as you may have thought before. Nor the argument that Russians do not earn as much is entirely valid. Yes, many Russians do not earn as much and that is ongoing problem, but, say, R60,000 which roughly converts into $965, gets you pretty comfortable living practically everywhere in Russia bar some places like Moscow or Sochi, especially if you own you apartment--very many Russians do and by own I mean OWN, not paying mortgage. There is a lot of what is going into those economic considerations. But it has to be understood today that nominal numbers in USD are absolutely meaningless and, in fact, dangerous because they create a false sense of confidence. But then, there is the other factor--a suppressed complex of inferiority. Shanghai skyline today can outshine anything out there, while many people from Western world, who partook in Western propaganda, upon ending up as tourists in Moscow, St. Pete, Sochi or any other major Russian city and cultural center are often subjected to a cultural shock and severe cognitive dissonance. Why do you think Moscow won tourist Oscar this year?  

And then, of course, comes this ever important factor--as Patrick Armstrong calls it--Russia is a full service economy, she produces literally everything from socks and shoes to refrigerators, space ships, cars, TV sets and advanced diagnostic medical systems. And, of course, Russia produces weapons, very advanced weapons and at least some people are beginning to get the message:

Russian procurement dwarfs that of most European powers combined. Beyond delivering large quantities of weaponry for today’s forces, Russia’s scientists and research institutes are far along in development of hypersonic weapons, such as Tsirkon and Avangard, along with next-generation air defense systems like S-500. This volume of procurement and research and development should not be possible with a military budget ostensibly the same size as the United Kingdom’s. When theory checks in with practice, the problem with the approaches that return such answers is plain for anyone to see.

But you read me for the last five years, didn't you (wink, wink)? Such admissions are extremely important since infuse a much needed cold fresh air of reality into the stale atmosphere of the Western echo-chamber of the military-political analysis wrought with risks of at some point of time BSing policy-makers into the suicidal belief of the invincibility of the American military which may start a war resulting in catastrophic material and reputational losses for NATO forces and thus creating conditions for dangerous "saving face" escalation to a nuclear threshold. THIS must be avoided at all costs and giving Western policy-makers more realistic impression about what they are dealing with in Russia is a good start for finding peaceful arrangements in this new multi polar world. In the end, Kofman and Connolly admit:

Russian military expenditure, and as a consequence the potential for Russia to sustain its military power, is much more durable and less prone to fluctuations than it might appear. The implication is that even at its current anemic rate of economic growth, Russia is likely to be able to sustain a considerable level of military expenditure, posing an enduring challenge to the United States for the foreseeable decades. While ours is an exploratory analysis, it suggests that Russian defense spending is not prone to wild swings, nor has it been dramatically affected by changes in oil prices or U.S. sanctions. Given the disparity in national budget allocations, even as European allies increase their defense spending, Moscow is not going to struggle in keeping pace. 

Their piece is a good indicator of Kofman doing at least some homework, unlike it was earlier, when I criticized Kofman, and that is a movement in a right direction. Russia doesn't need to be loved or appreciated, Russians already made their civilizational choice, Russia needs some overly hot-shots in the West to get a shot of the reality for avoiding the confrontation in which the West cannot win militarily. After all, Russia's military history speaks for itself. But do not forget, however, that IMF (which is run by the US) doesn't even include Russia into the list of a countries with Advanced Economies, while Lithuania and San-Marino are there. Good grief.

P.S. I thank the guys from Colonel Lang's forum who pointed me to this piece by Kofman and Connolly. 

Real Economies.

A superb demonstrator, and a "predictor" of the size of REAL economy globally through real tangible indicator--electricity generation. It gives a good framework and order of magnitude of what each nation is capable of and it explains why Russia is realistically 5th or 4th economy globally. 

Here is another video of an enormous significance, from yesterday: 

Here you can see the assembly of first MS-21 which starts test-flying with PD-14 engine in the nearest future. Well, that, plus Russia finishing final tests of GTD-110M, which is first fully Russian gas-turbine of very large (between 110 to 500 MWT) power (in Russian). That means one thing: bye-bye, Siemens (and GE as a very remote second). The serial production of GTD-110M starts in 2020. Meanwhile this shows that modern Russia, especially when one accounts for energy-saving technologies, in terms of electricity production begins to surpass that of the...Soviet Union.

But that brings me to the point of getting into a very "dangerous" field of the actual standard of living. Sergei Brekotin of Aftershock News went there (in Russian) yesterday:

But I have my own, down to earth, observations which I will share on the account of actual living standard in Russia and in the West, especially the United States. I'll give you a hint: Russia's ownership of personal automobiles grew tremendously, plus enormous number of Russians OWN some real estate which doesn't need to be mortgaged and paid off. And, you can easily buy antibiotics over counter which spares you visit to a doctor, which, most of the time, is free anyway. I'll elaborate on that later.    

So, Michael Hudson Calls It.

Hudson, who, by my primitive criteria, is one of the best (true) economics and economic history brains of our time doesn't mince the words and calls it as he sees it (correctly): Trump’s Trade Threats Are Really Cold War 2.0. Hudson correctly identifies the issue:

He opens negotiations with a threat. That costs nothing, and you never know (or at least, he never knows) whether he can get a freebee. His threat is that the U.S. can hurt its adversary unless that country agrees to abide by America’s wish-list. But in this case the list is so unrealistic that the media are embarrassed to talk about it. The US is making impossible demands for economic surrender – that no country could accept. What appears on the surface to be only a trade war is really a full-fledged Cold War 2.0.

Let's see: by now Trump and his gang of misfits and chicken-hawks headed by knightly Bolton and sophisticated Pompeo threatened pretty much most of the economically viable world. The issue here (for Trump and, by implication, the United States) is that nobody really is quaking, as Pat Buchanan put it, in their boots. Here, Hudson gives some really good rationale for this lack of quaking:

Trump’s trade tantrum is that other countries are simply following the same economic strategy that once made America great, but which neoliberals have destroyed here and in much of Europe. U.S. negotiators are unwilling to acknowledge that the United States has lost its competitive industrial advantage and become a high-cost rentier economy. Its GDP is “empty,” consisting mainly of the Finance, Insurance and Real Estate (FIRE) rents, profits and capital gains while the nation’s infrastructure decays and its labor is reduced to a part-time “gig” economy. Under these conditions the effect of trade threats can only be to speed up the drive by other countries to become economically self-reliant.  

I am sincerely happy that my diagnosis of the United States, of which I am writing  for years now, follows so closely  Michael Hudson's. In fact, we still do not know the true scale of the loss of the key enclosed technological cycles in the US. We all know it is bad, as this terrifying report to this very same Donald Trump testifies to. Did Trump even read it? Did he get the gist of it? I am beginning to believe he didn't. Someone in his Administration did, but not him. With each passing day I only reinforce my opinion on him as one trick pony fed on a steady diet of American exceptionalism and values of New York's shady real estate business--this is not enough for trying to save such country as the United States, let alone declare and win Cold War 2.0. One really has to know the real battlefield, be that economic or, which is a whole other story in the US, military one. 

The trick, however, is to explain it to the cabal of "political scientists", sociologists and other foreign relations "experts" infesting fat remuneration greased  corridors of Establishment, that they know shit about either battlefields. Those who know, or understood  finally, however few of them, they are out of ideas precisely for being those proverbial one trick ponies--US establishment can not produce anymore someone different. Delusion still abounds, though, with professors in basically nothing continuing to wax strategic and military when having zero qualifications for that. The world is complex, it is getting even more complex with astonishing acceleration and new ideas are needed to preserve it peaceful, even if relatively, and with some hope for the future. Current American political class cannot do it and will increasingly find itself at the curb of the humanity's highway. So, it will be left with only one thing to do, as one trick ponies know, to threaten until, as Hudson points out, they self-destruct and take the country with them. I have no problem with this cabal going down, the country? We may need to discuss that separately--I know some prescriptions are out there, the main question--WHO is going to implement them. 

P.S. In a wonderful news: sue their asses into utter financial destruction! Somebody started doing this. Read excellent piece by real left-wing American:

Campus Wokesters with boundary problems got “woke” for real on Thursday when an Ohio jury laid an additional $33-million for punitive damages on top of $11-million in compensatory damages already awarded against Oberlin College for running a “social justice” campaign to ruin the business of a four-generation small-town bakery that followed the shoplifting arrest of three black Oberlin College students there in 2016.

About fvcking time. 

Small Bypass.

Since the issue of actual size of economies was raised in previous post, I might as well remind everybody that production and consumption of energy is one of those very real metrics which testifies to the size of actual economy. Since it is not easy, at least for me, to find latest free data on energy consumption and production, we may as well use Wiki here with data for 2014. Obviously it is still not precise metric but it, nonetheless, is very indicative one. Here is some data in British Thermal Units (BTU).

United States: produces 82 quadrillion BTUs, consumes 98.3;

Russia: produces 55.3 quadrillion, consumes  30.7;

China: produces 91.97 quadrillion, consumes 119.5;

Germany: produces 4.44, consumes 13.1;

India: produces 15,52, consumes 24.3;

Saudi Arabia: produces 27.6, consumes 10.3. 

So, one can make some very approximate (number of times or folds) economies roughly correlate (or have ratio) with, of course, adjustments for climate (e.g. air conditioning is very expensive in hot countries, while heating varies dramatically with climate zone), industry's energy efficiency (some nations still use old traditional melting technology in steel industry etc.). But generally, if you take a look at US energy consumption dynamics here, you will notice a peculiar thing--industrial consumption remains basically unchanged in the last 4+ years. Nations that realistically grow they do increasingly consume energy in their manufacturing sectors--it is an axiom, even when adjusted for modern energy-saving technologies--not the case here. Do the spread, say, from 2007 to 2018 (there is a function for that) and see for yourself. 

So, here is a rough estimate, if we count PPP of Russia and Germany the same (they are virtually the same--roughly 4,1 trillion) and adjust them for energy consumption it becomes clear that (very-very roughly) US and Russian consumption relate as 98 to 31 which is roughly 3.3 to 1, which, accounting for the US being slightly more than two times larger in terms of population than Russia, one gets Russia's PPP GDP of 4.1 Trillion multiplied by 3.3 = 13.53 trillion which gets us in the very rough vicinity of US real GDP. This number is what the US actually produces and it is funny how this very rough ratio of something 3.0-3.5-4.0 pops up periodically in the costs of many weapon systems. Forestalling the argument of US, indeed, having higher wages it has to be also stated that life in Russia, in the same time, is much much cheaper. So, here is a fast, one of very many, adjuster, which doesn't fit Western economic "science" but which allows to get a slightly sharper picture of the world. More precise picture? Well, read my Why Math Models Fail posts and, hopefully, new book when it comes out.

Real Economy.

I spent years trying to convey a simple thought of Western "economics" being nothing more than a creative bookkeeping having nothing to do with the real state of the affairs. In fact, this economic delusion is in the foundation of many other West's delusions be it military, technological or social. In military parlance this is known as the loss of situational awareness.

Now, Vladimir Putin during his press-conference in China yesterday started to speak only within the framework of Purchase Power Parity when dealing with real GDPs of SCO nations. It is, of course, understandable that the whole notion of developed manufacturing (especially hi-tech machine building sector) being the foundation of national power is completely alien to most US economic "scholars" but that is how world goes about. In fact, even PPP is not precise, granted it is much better metric than preposterous "nominal" GDPs based on US Dollar alone--a number no serious analyst will pay attention to. 

But PPP or even adjusters derived from the "Big Mac" index do not reflect a complex reality of modern economics because, as I stated non-stop for many years, to even grasp what the real depth and size of economy are one has to look at actual industrial output of tangibles. Moreover, looking at weapons--their complexity, quality, quantity and effectiveness--is even better adjuster than anything else. It is a truism--only extremely developed economies can produce state-of-the-art nuclear power submarines, complex fighter planes and very complex C4ISR "infrastructure". No amount of financial data-twisting can obfuscate a simple fact--to make and run something like GLONASS or deploy weapons the likes of Kinzhal or Avanguard, requires way more that just "sophisticated" economy, it requires a massive one. In fact, this is very intuitive--something so complex (in fact they are most complex man-made things) as Virginia-class or Yasen-class nuclear submarines require and incredible network of industries, from metallurgy to electronics, to name a few, which, unlike fake papers produced by the Wall Street, do constitute a great index of national power. So, yes, it is very gratifying to hear President Putin setting an appropriate, much more realistic, framework for economic discussions than some convoluted pseudo-economic BS produced by Western "analysts". In the end, it is their "economic analysis" which is in the foundation of Russophrenia--a condition where the sufferer believes Russia is both about to collapse, and take over the world. Since 2013, instances of this ailment have reached epidemic-like proportions in certain parts of Washington, London and Brussels. 

 

But then again, try to explain to some Ivy League-trained "investment" bankster (most of whom never worked on a real job in their life) what is the difference between selling some financial "product" (aka snake oil) and manufacturing, say, something like blades of jet engine. The experience could be fascinating. So, Mr. Putin--good to hear from you on this issue. Moreover, even in the foundation of a recent G-7 snafu is actual economy, things produced and needed to be sold--from cars to aircraft--not some BS "capitalization" of markets. 

Military Power (Cont'd 6)

Incomparable Corelli Barnett wrote in his "The Collapse Of British Power": "As Adam Smith, the founder of liberal economics, put in 1776:"By pursuing his own interest (an individual) frequently promotes that of society the more effectually than when he really intends to promote it." It was Adam Smith who formulated the doctrine of Free Trade, the keystone of liberalism, which was to exercise a long-lived and as baneful effect on British power as Wesley and Whitefield's preaching. Adam Smith attacked the traditional "mercantilist" belief that a nation should be generally self-supporting.... According to liberal thinking, a nation was no more than so many human atoms who happened to live under the same set of laws.."

It is not an accident, that liberal economics has its origins in the Anglo-Saxon world, the world for centuries protected by water and insulated from the horrors of the continental warfare. We will touch upon what real nation actually is later, but for now we have to define, if to follow Barnett's thought, what is self-supporting, especially so in terms of military power? Well, I already gave an idea. The greater the number of the enclosed (or complete) technological cycles nation has, more independent it is and more claim it has to the title of a true military power. Consider this example: in previous post it was pointed out that Brazil has a very respectable output of steel. This means several things:

1. Brazil has a serious extraction industry, which extracts all components, including, of course, iron ore itself, required for production of steel;

2. Most likely, Brazil has a fairly advanced chemical industry, since steel production requires a number of chemical elements and products;

3. Brazil, certainly, has a respectable (especially considering this nation's mostly tropical and subtropical climate) energy production;

4. Brazil, certainly, has a substantial machine-building sector (the bells should be ringing now) which produces some of the industrial machinery, cars and even airplanes, such as globally renown Embraer. 

Now, let's imagine that Brazil wants to become not just regional, which she is, but major military power. Could she? After all, Brazil fits CINC criteria. The answer is not as clear cut but still, most likely, it will be no. In modern world, Brazil lacks what really defines a true military power--a genuine (that is enclosed or complete) Military Industrial Complex. Modern military industrial complexes are built on the foundation of almost complete industrial-technological autarky. What does it mean? It means, first and foremost, a full spectrum machine building complex. While the United States is not as huge military power as it constantly claims, it is true military superpower none the less. US claim to military superpowerdom is not in its Armed Forces, however impressive they are. No. It is in the fact, that the United States produces completely on its own practically the whole spectrum of weapon systems, ranging from fairly simple (M-4 rifles or laser range finders) to very complex (Strategic Missile Submarines or BE-3 Sentry AWACS aircraft). United States can produce all of that WITHOUT any assistance from abroad. This is the country, mind you, which declares Free Trade to be one of the pillars of its economic policy. Yet, in the weapons' production, the US remains very autarkic as... it should, if it wants to remain globally militarily relevant well into the 21st Century. But then again, Free Trade and economic liberalism are the figments of imagination of economic schools of thought, which almost always originated in places which never experienced a good carpet bombing or being ravaged by the invasions. Accident? I don't think so, in fact--it is a pattern. 

So, Military Industrial Complex, which is a euphemism for advanced machine building complex, is Alpha and Omega of any serious military power, it is also a euphemism for a complete (or enclosed) technological cycle. Brazil may produce some industrial machines but, in the end, Embraer still flies with Pratt And Whitney, Rolls-Royce or any other engines produced not in Brazil. In fact, nobody in their own mind will share this technology with Brazil. 

Embraer Selects Pratt & Whitney’s PurePower Engines for Second Generation of E-Jets   

Enter Russia. Russia's GDP (PPP), as reported by IMF, is slightly (by about quarter of a trillion of US Dollars) larger than that of Brazil and yet, Russia's "recent" passenger jet Sukhoi SSJ-100, which competes directly with Embraer E-Jets, while benefiting from international cooperation has its engines SAM-146 developed by the JV between Snecma and legendary NPO Saturn. What is most important, Russia, which produces a range of aircraft, produces own engines--some of them decent, others--excellent. Moreover, the trials of PD-14 engine, which is very competitive against the best Western analogues, is proceeding with success. And here is some really strategic hyperlink--Aviadvigatel, which developed this engine, shows cooperation:

PD-14 Cooperation    

As you can see--not a single foreign participant. And here is the difference. Brazil and Russia may have relatively insignificant difference in GDP, but Russia not only produces the whole line of jet engines, but develops new ones (both civilian and military) which not only compete but, in military aviation, can, and very often do, surpass their western analogues. In fact, Russia produces some of the best helicopters in the world, both military and civilian, and leads the world in the number of cutting edge aerospace technologies--be it super-maneuverability or ECM (ECCM). That opens another can of worms in this comparison business. Radio-electronics. Russia, which sells its SSJ-100 internationally and is expected to start flight testing of her MC-21 jet soon, is capable on its own to provide avionics to her aircraft. Concern KRET does this kind of things.  

KRET to Upgrade Russia’s Tu-160 Strategic Bomber Avionics

And it did. 

TU-160 upgraded (In Russian) 

And while Brazil is renown for many fine things, including, of course, real football, producing for decades one of the finest artisans in this sport (Socrates is my favorite of all time) radio-electronics or electric generating equipment of Brazil are not that famous. You can take a look at Brazil's exports in this field here:

Statistical Data Electrical and Electronic Industry 

In the same time, when comparing Russia's exports in power generating equipment, which is as high tech as it comes, the portfolio of orders of Rosatom reaches $300 billion. 

ROSATOM’s overseas orders worth $ 300 billion and growing – Kirienko 

If that is what Obama meant by proclaiming Russia's economy to be "shredded" to pieces and Senator McCain calling Russia a "gas station", then they better check their facts. So, for humanities "educated" "experts" of all kind, who think that iPhone is a pinnacle of high tech, it could be a very rude awakening to recognize that real high tech is a bit different thing. World can live, and, in fact, like me, lives just fine without "smart" phones (good ol' basic, still "smart", phone is just fine), but it can not live without energy generating equipment. Obviously, unlike Brazil or, for that matter, India, whose GDP is much larger than that of Russia, in fact, it almost double that, it is Russia who hauls everybody to the International Space Station and back to Earth. Plus, of course, Russia is the one who, together with NASA, built said ISS. And then comes this OTHER issue--weapons' trade. To sell those weapons, one has to produce those and, like the US, Russia doesn't sell just AK-74s (those, too, of course), she sells full spectrum of weapon systems, from small firearms to the most complex conventional weapons ever created on Earth. Not only Russia is the second weapons' trader in the world, right behind the US, but she is also a direct competitor to self-proclaimed sole superpower of the world. Here is some statistics from famous Stockholm International Peace Research Institute. 

10 Countries That Export the Most Weapons 

The key word here is export, as in produce in own country and sell it abroad. This is possible only for the nations which have a complete industry capable of extraction all necessary raw materials, processing them and then turning them into the most complex finished product humanity knows--a weapon. There is a reason why Russia, who has much smaller GDP than China, sells five and a half times more weapons than PRC, who likes to sell them too. In fact, China is one of the major customers for Russian-made weapons. The reason is--Russia has one of the most advanced military industrial complexes in the world, capable of turning out some of the best, if not the best, weapons in the world. 

     

Is Going To Help To Waste Your Life Away

 

Is Going To Save Your Nation From "Democratization"

Or, as India's Navy knows, this is worth a lot, much more than money. 
        

Now ask yourself a question. What is going to happen if even France, who claims GDP very close to Russia's (short by about $800 billions) will try to have the whole fleet of these:

         

3 completed, 4 building. 

 Or these: 
     

Completed 2, building 4

Yes, the bottom of the French economy will fall off. Why doesn't it in Russia? Remember, in the last post--strategic positioning of the weapons in the house? It is back to the expenses--how much you are willing to pay for your and those dear to you freedom, independence and life? This calculus is beyond the grasp of those who never held anything, other than own satisfaction and ambition, dear and sacred in life. 

To Be Continued.......