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Recession. Revolution. Recovery.

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– Saturn Devouring His Son (image above) is the name given to a painting by Spanish artist Francisco Goya. It depicts the Greek myth of the Titan Cronus, who, fearing that he would be overthrown by one of his children, ate each one upon their birth. 

Deny it all you want, but the global economy appears to be headed into recession. It became clear the cycle had started to turn once the FAANG stock bubble popped and the U.S. stock market plunged 20% late last year. The optimists among us insist this is merely a growth scare or blip as we saw in 2016, but that scenario looks increasingly unlikely.

As usual, the bond market tends to give us signals before more obvious evidence emerges. As such, I received a lot of insight from the following tweet.

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Two Roads Diverged in a Digital Wood

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By now it’s no longer restricted to individual companies or even to the internet sector. It has spread across a wide range of products, services, and economic sectors, including insurance, retail, healthcare, finance, entertainment, education, transportation, and more, birthing whole new ecosystems of suppliers, producers, customers, market-makers, and market players. Nearly every product or service that begins with the word “smart” or “personalised”, every internet-enabled device, every “digital assistant”, is simply a supply-chain interface for the unobstructed flow of behavioural data on its way to predicting our futures in a surveillance economy.

– From the must read piece: ‘The Goal Is to Automate Us’: Welcome to the Age of Surveillance Capitalism

A lot of my content over the past couple of years has focused on the momentous geopolitical changes I see on the horizon, and this macro perspective reaches two significant conclusions. First, that the planet is moving away from a unipolar world dominated almost entirely by the U.S. toward a more multi-polar world. Second, that this fundamental shift in geopolitical landscape, coupled with what appears to be a forthcoming reckoning with the largest global debt bubble in human history, will lead to a once in a generation reset of the world economy and the global financial system that keeps it functioning.

As has become increasingly clear in recent months, the two primary protagonists in this major historical shift are the U.S. and China. While I’ve speculated about how increased tensions between these two economic giants will likely usher in the end of globalization as we know it (and possibly a bifurcated global economy), I’ve spent less time talking about what the internal situations will look like within individual countries themselves. This is a major oversight because what really matters to Chinese and U.S. citizens ten years from now isn’t which nation has more military bases abroad, but what will everyday life be like for regular people?

In this regard, China and the U.S. both seem to be headed in similar and very dystopian directions when it comes to the freedom-destroying marriage of overbearing government and ubiquitous surveillance technology. I read a couple of excellent articles on this topic over the past week, which forced the issue to the top of my mind. In other words, does it really matter who wins the geopolitical game of risk if “we the people” end up being controlled, surveilled and completely subjugated by the very technology we so eagerly embraced and assumed would make the world a more liberated place just a few years ago?

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The American Empire Pivots Toward Venezuela

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Many people are coming to quick takes on yesterday’s extraordinary decision by the U.S. government to recognize an unelected opposition leader as interim President of Venezuela based on their view of Maduro and his government. Similar to the emotional responses to those first clips of the Covington students and Nathan Phillips, such superficial opinions feel good and confirm biases, but don’t tell you much about what’s really going on. From my seat, the move by the Trump administration to choose the leader of Venezuela by diktat is just straight up imperial geopolitics. Nothing more, nothing less.

A month ago, I reassessed my geopolitical assumptions in the post, Is U.S. Geopolitical Strategy Experiencing a Monumental Shift? In it, I detailed how U.S. foreign policy seemed to be shifting toward a focus on containing China, which would lead to a far more serious confrontation between the world’s number one and number two economies.

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Can You Time Peak Crazy?

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You don’t need me to tell you how completely crazy and distorted the financial markets have become over the last decade. Anyone reading this already knows that, which is partly why I stopped writing on the topic several years ago. I came to the conclusion there was no point in constantly screaming at the top of my lungs about what a farce the global financial system was. Instead, I decided to step back, let things play out to their predictably tragic end, and then play closer attention as the curtains started to come down. As has been made clear in my recent commentary, I think we’re now reaching that point.

I’ve begun reflecting a little more about the lessons I’ve learned over the past several years of status quo stupidity, and one particular conversation I had a while ago with a friend who was a portfolio manager at a major hedge fund came to mind. I searched my old emails to find exactly what I had written, and the response became the inspiration for the title of today’s post.

The correspondence occurred nearly four years ago, in February 2015. His initial message highlighted a FT article about the fact that Nestlé bond yields had turned negative. This was my response to his email:

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The Final Act in a Terrible Play

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If you don’t follow me on Twitter, you’ve been missing out on some good stuff. With the brith of our third child a couple of months ago, it’s been increasingly hard for me to find the time to sit down and write longer posts, so I’ve been putting more and more content on Twitter. Last Friday, Brent Johnson of Santiago Capital, asked me to provide additional thoughts on my recent turn to being far more bullish gold. Normally I would’ve written it in a piece, but being pressed for time I put together a Twitter thread.

There are 32 posts in there and I suggest you read the whole thing. More important than the thread itself; however, was the unprecedented and totally surprising response I received. As I explain in the tweets, I intentionally avoided talking about markets for nearly half a decade for a variety of reasons, and so I was blindsided by the enthusiastic and exceptionally positive response. It led me to do quite a bit of soul-searching, and ultimately convinced me that the time is ripe for me to start commenting about financial markets again. Not only because I think we’re at or very close to a major inflection point, but because people want to hear it.

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Goodbye 2018

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2018 was a slog, and the more I mention this to friends, the more I realize a lot of other people feel the same way. It wasn’t a bad or terrible year for us, but at the same time nothing came easy. Anything we tried to accomplish came with all sorts of unexpected pitfalls and hurdles, and in many cases success seemed hopeless until the very last moment when things finally came together reasonably well. Stuff that had to get done got done, but not without struggle and headache.

The highlight of the year was the birth of our third child, something that will forever color 2018 positively despite other challenges. Although I knew three kids in three years would be tough, the reality of the situation has been more difficult than I imagined.I forgot just how constantly attached to a newborn a mother is, a reality that’s left me largely in charge of the toddlers.

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Is U.S. Geopolitical Strategy Experiencing a Monumental Shift?

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The defining question about global order for this generation is whether China and the United States can escape Thucydides’s Trap. The Greek historian’s metaphor reminds us of the attendant dangers when a rising power rivals a ruling power—as Athens challenged Sparta in ancient Greece, or as Germany did Britain a century ago. Most such contests have ended badly, often for both nations, a team of mine at the Harvard Belfer Center for Science and International Affairs has concluded after analyzing the historical record. In 12 of 16 cases over the past 500 years, the result was war. When the parties avoided war, it required huge, painful adjustments in attitudes and actions on the part not just of the challenger but also the challenged.

– From Graham Allison’s article: The Thucydides Trap: Are the U.S. and China Headed for War?

For the past two years, my geopolitical assumption has been that the Trump administration would more or less continue along with the reckless, shortsighted, and disastrous neocon/neoliberal interventionist foreign policy of the past two decades focused on undeclared regime change and proxy wars across the world, especially the Middle East. Given his strange obsession with Iran, I figured he’d start a conflict there and that this conflict would end up a bigger disaster than Iraq.

I assumed this mistake would coincide with continued massive deficits, a unwieldy debt load and most likely a recession. In turn, I believed this would lead to an embarrassing and chaotic unraveling of the U.S. empire. At that point, other nations like China would opportunistically take advantage of the huge power vacuum left over. Based on a variety of events over the past few months, I’m no longer convinced this is how it’s going to unfold.

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Can the ‘Yellow Vests’ Protests Go Global?

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When it comes to the relationship of U.S. citizens to the politicians and bureaucrats in Washington D.C., there’s no indication that anything remotely resembling self-government is happening. Rather, the relationship is far more like that of a servant to a master.

From the October post: Americans are Stuck in Abusive Relationships with Power

The gilets jaunes, or “yellow vests” protests, emerged seemingly out of nowhere about a month ago and have in a few short weeks shaken the French political power structure to its core. Just yesterday, the exceedingly unpopular President Macron cried uncle and offered a series of concessions to the protesters. Many commentators have come to the simplistic and erroneous conclusion that violence works, but it wasn’t the burning cars or streets filled with tear gas that really scared Macron and the people around him. It was something much deeper than that.

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‘He’s Barack Obama, but White’ – The Manufacturing of Beto O’Rourke

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Although I haven’t paid close attention to Beto O’Rourke, he’s been on my radar for a couple of years after noticing certain media outlets had anointed him a “rising Democratic star.” One of my principal rules of political analysis is whenever you hear mass media proclaim an obscure politician a “rising star,” it typically means that individual has been deemed acceptable by the entrenched oligarchy and is being groomed as a promising puppet.

In fact, the first time O’Rourke came into my news orbit it felt like I was being sold a box of cereal by Madison Avenue. After reading an illuminating article by Ziad Jilliani earlier today in Current Affairs, it appears my intuition was correct.

The first paragraph tells you a lot about what the sorts of people who like Beto, like about him.

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Liberty Links 12/2/18 – France Fuel Protests: Tear Gas Fired in Clashes in Paris

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As always, if you appreciate my work and want to contribute to independent media, consider becoming a monthly Patron, or visit the Support Page. Top Links France Fuel Protests: Tear Gas Fired in Clashes in Paris (BBC) Google Shut out Privacy and Security Teams from Secret China Project (Must read. Google is so dirty, The Intercept) How a Future Trump … Read more