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Coronavirus – an occasion to start deglobalization

The spread of coronavirus COVID-19 is nothing but the beginning of the end of the era of globalization. This conclusion was reached by German publicist economists Mark Friedrichfon and Matthias Weik, analyzing the economic and logistical consequences of the outbreak of pneumonia in China and the subsequent introduction of quarantine. Their article was published on on February 28.

Currently, 760 million people in China are under quarantine, that is, in isolation – this is one tenth of the world’s population, the authors write. Since January, 200 thousand flights have been canceled worldwide, hundreds of container ships are in ports. In the second largest economy in Asia – Japan – school classes across the country are canceled before the end of March! In South Korea, the region’s third economy, the epidemic is only gaining momentum, and firms are shutting down one after another. For the first time in post-war Europe, in Italy, there is a ban on leaving the city. Australia, the United States and many other countries have banned travelers from China. An exception is made for citizens and persons with a residence permit, but they are required to withstand two-week quarantine. The virus has been detected in 32 countries, on all continents.

According to Friedrichfon and Weik, the danger of a pandemic with fatal consequences for a globalized global economy is still underestimated. Stock markets decline during the week, but the bottom is not yet visible. Further, the authors consider the example of their native Germany, where industrial production has been steadily falling since 2018, and there are no growth prospects. Especially in the field of steel, automobiles and mechanical engineering. The country is witnessing an ideological struggle with the car as such, but they consider it inappropriate to hit the key industry, which gives 21% of Germany’s GDP. In 2008, the German automotive industry pulled China out of the crisis, but this will not happen again.

The largest car market in the world, China, has been rolling down the past two years. China alone accounts for 18% of global economic production and nearly 50% of global growth in recent years. However, in 2018, the Chinese car market declined for the first time in 20 years.

Almost all European companies doing business in China see themselves as a threat. According to a survey published on February 27 by the European Chamber of Commerce and the German Chamber of Commerce in China, nearly 60% see “serious” and another 30% “moderate” consequences for their business in China. In the first two weeks of February, car sales in China fell by 92% – only 4962 cars were sold! This is a disaster for German manufacturers, as China accounts for 40% of their sales. If this trend continues, VW, Audi, BMW und Daimler, as well as numerous companies from other related industries will suffer.

Now there is an inverse dependence on cheap workers in China, through which European and American companies flourished. Supply chains are broken and the first problems become apparent. Every day, when quarantine continues, people in China do not go to work, ports remain closed, flights are canceled, and the consequences for our globalized economy are growing. Many companies around the world acknowledge that they have become dangerously dependent on China. A new rethinking is coming. This means returning jobs and manufacturing home, creating alternatives to reduce addiction. This will result in a cessation of economic growth for China. We are witnessing the beginning of deglobalization!

Meanwhile, the Chinese authorities are already trying to get people back to work. In large cities, free travel for workers is introduced. Foxconn, which also produces iPhone, seduces its employees with a premium of 7 thousand yuan per month instead of the usual 3 thousand.

The German economy also suffers from an outbreak of coronavirus in northern Italy, in particular in Lombardy, in the industrial center of the country. 1,500 German companies have branches there. To understand the importance of this region for the German economy: the volume of trade with Lombardy is almost equal to the volume of trade between Germany and Japan.

This is what Volker Trier, head of the foreign trade department of the German Chamber of Commerce and Industry, says: 

“Italy, with a trade volume of more than 125 billion euros, is Germany’s fifth largest trading partner, and indispensable goods for wholesale trade in industrial goods, in particular, pass through the Alps in both directions every day . ” This alone shows that coronavirus “is beginning to have a significant impact on world trade.”

In addition, he is deadly for one of the most important industries in Italy – tourism. And the rest of the world, because the Chinese are the most avid tourists in any corner of the world. Tourism in France has already fallen by 35%, and this is only the beginning. Airlines, hotel business, travel agencies, shop and cafe owners, souvenir manufacturers suffer. 4.2 million Italians are employed in this area. If the virus continues to spread, it will have fatal consequences for the economy of Italy and the entire eurozone.

Interest rates in eurozone banks are close to zero, and relatively low interest rates also exist in other countries. During an economic downturn, credit demand will be extremely low, resulting in a further reduction in interest rates will no longer be effective. This means that many central banks can only give out money to their citizens (“helicopter money”) to increase consumption. In Hong Kong, each permanent resident receives about 1300 US dollars (10 thousand Hong Kong dollars). We dare to doubt whether this makes sense, because simply printing money can never be a reliable solution to the problem, Wike and Friedrichfon write.

However, we are likely to see the largest experiment in the history of the central bank: printing presses will pump more money into the system than ever before. Interest rates will continue to fall. In the US, rates will go to zero and then become negative. But the virus will not help stop it.

Today, due to cheap money, companies can continue to work while in debt. This is not a problem as long as the economy grows and develops. But if this system is violated, companies will first encounter problems, not being able to pay interest, and then banks will crash.

The collapse of enterprises will mean a fall in prices. Investors will voluntarily or forcibly throw securities into the market because they are only allowed to have a certain investment level. It is then that the risk arises that the coronavirus will cause trembling of the real and financial economy. Central banks will continue to print money, and we will face the largest capital transfer in history! This means it is advisable to invest in natural values. We are facing a decade of gold!

If the Chinese financial and economic system with its shadow banking side really collapses, it will shock the world much more than the 2008 crisis.



Germany conducted exercises in case of nuclear war

Bundeswehr / Birthe Brechters

The Bundeswehr with partners in the North Atlantic Alliance ( NATO) trained in operations in a nuclear war.

The German army, together with Italian, Belgian and Dutch colleagues, conducted exercises in the event of a conflict with the use of nuclear weapons.

The location of the exercise “Steadfest Noon” was chosen airbase “Nörfenich”, where the tactical squadron of the Luftwaffe 31 “Boelcke” is located. Together with the Luftwaffe of the Bundeswehr, the air forces of other NATO countries, in particular, Italy, the Netherlands and Belgium, took part in the exercises.

According to a report by Bild, the exercise scenario involved training procedures for safely removing nuclear weapons from storage, delivering ammunition and installing them on aircraft. The training flights took place without nuclear weapons, and in parallel with the aviation exercises at the Büchel airbase, where the tactical squadron of the Luftwaffe 51 Immelman is located, the Resilient Guard air defense systems were trained to protect the airfield from air attacks.

The training sites for the Luftwaffe of the Bundeswehr were not chosen by chance, since the Nörfenich airbase is a reserve storage site for the B61, a hydrogen bomb that forms the basis of nuclear weapons of the US strategic nuclear forces. 

Some of this ammunition is stationed at NATO bases in Europe. The exact number of hydrogen bombs that are stored at European sites and which ones are not reported. In Europe, the B61 is carried by Panavia Tornado fighter-bombers (pictured) and General Dynamics F-16 Fighting Falcon fighters.

Recall that the B61 thermonuclear bomb is the main weapon of the US strategic nuclear forces, although it entered service in 1968. Since 2012, a new guided version of the B61-12 has been under development, which will replace all B61 and B83 bombs that have been in service since 1983. It can be used both on strategic bombers and tactical aircraft. About two billion dollars were spent on the development of the 12th modification of the aerial bomb.

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The Pentagon wants to use 5G for military purposes

© Al Drago; George Frey/Reuters

The US military has partnered with more than a dozen companies for “large-scale experiments” with 5G technology, including efforts to increase the “lethality” of certain systems, as part of a $ 600 million project. 

Duplicating 5G technology as the “Founding Tool for Modernizing All US Defense,” the Pentagon announced a massive research initiative on Thursday that will donate hundreds of millions of dollars to 15 private contractors to conduct tests at five US military sites.

 “The Department of Defense today announced a $ 600 million award for 5G experiments and testing at five US military training grounds, representing the world’s largest full-scale 5G trials for dual-use applications,” the Pentagon said in a statement that it will bring together experts from multiple industries and disciplines. 

Projects will include piloting 5G-enabled augmented / virtual reality for mission planning and training, testing 5G-enabled smart warehouses, and evaluating 5G technologies to improve distributed management and control.

Selected for the project include telecommunications companies AT&T, Nokia and Ericsson, exploration and information technology contractor Booz-Allen Hamilton, research arm of General Electric, GE Research and a subsidiary of aerospace giant General Dynamics.

One initiative, led by AT&T at Nellis Air Force Base in Nevada, will apply 5G to its “Distributed Command and Control” system to “Assist in lethality in the air, space and cyberspace”, improving communications for mobile command posts in combat scenarios. At the Lewis-McCord joint base in Washington State, AT&T will also work with Booz-Allen and two other firms to develop 5G-enabled virtual reality technology for training, mission planning, and even Operational Use. 

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Get ready: Ten years of quarantine

The deployment of the “second wave of coronavirus” poses the question of the future for developed countries. In this scenario, too many people will be unemployed and dependent on social assistance. And there will be no one to protest.

We will live in a new way now

Recently, the telegram channel Proeconomics has delighted readers with a report on a sociological study conducted by Accenture. The study focused on long-term consumption trends. 8,800 people were interviewed in 20 countries. The main conclusion of the study:

The coronavirus pandemic and the reorientation of people to local consumption will lead to the so-called “decade of living at home” – the discomfort from being in public places and traveling, combined with a widespread decline in incomes, will force people to spend significantly more time at home and generally localize life within their neighborhood. 69% of respondents expect to spend most of their time at home over the next six months.

53% who did not work from home before would like to work remotely now. 56% of consumers said that the pandemic pushed them to make purchases in stores “in the neighborhood” – they do not intend to travel far to shop. 54% of the respondents admitted that they began to save more when making purchases and will continue to do so.

In general, the results of the research mean that people are mentally prepared to become much poorer and much less mobile. They have come to terms with the fact that the way of life in developed countries is becoming a thing of the past. More control, less freedom, much less opportunity – this is the forecast for the near future.

To be convinced of this, just look at our general sluggish reaction to the latest orders at the majority of countries. They should have caused a surge of misunderstanding and indignation, but, In response, silence. We are already used to it and even seem to take what is happening as normal.

We are afraid and we are very afraid

We don’t know if the Accenture study touched your country, but it’s quite obvious that these figures, perhaps with some corrections, are also true for all countries: a very large number of people during the “strangest pandemic in history” are used to traveling less often to work, not go far away on vacation, spend more time at home, and order the necessary purchases via the Internet. We even get out of the habit of going to the cinema (where there should now be two empty chairs between those sitting) and try to go to our usual shops less often so as not to run into the formidable and boorish: “Put on a mask!”

We listen to what the authorities say about the prospects for introducing new restrictions and with regret we understand that they will close it. They will close again. Despite common sense. 

We look closely at the experience of Western countries and understand that freedom has been sacrificed there for control and the illusion of security. In essence, a sacrifice to emptiness. That people have already agreed to live poorer, much poorer and under much worse and tighter control than ever before in history.

The most important thing that we understand is that all this is now for a long time.

The other day, Israeli Prime Minister Benjamin Netanyahu, completely unwilling to scare his fellow citizens, spoke about a completely ordinary matter as follows:

The exit from quarantine this time will be phased and slow. There is a possibility that the restrictions will be lifted within six months, or even a year. There will no longer be such a way out of isolation, as happened in the first wave.

In parallel, the Israeli government began discussing the tightening of quarantine measures already introduced due to the coronavirus – in particular, a ban on leaving their homes further than 200 meters!

It is clear that the Israeli society will try to protest. But, most likely, unsuccessfully – the authorities have too strong an argument. Now in this small country, 13% of the tests carried out for covid give a positive result, and 9,000 new cases of the disease are recorded per day.

It is also clear that Netanyahu’s words mean that there will be no living small business in Israel after the quarantine. Large companies, the state economy and unemployed recipients of social assistance will remain. How many will there be? Tens of percent of the working-age population.

Brave new world

The prospect of a long quarantine and a complete restructuring of the entire economic and social life is hanging over all developed countries. Humanity, in fact, does not know how to plan ten years in advance. But it is quite possible to look a year ahead. 

If we really are waiting for such a long period of restrictions, then by the end we will have a society of very poor, even catastrophically poor compared to the current state of affairs of the townspeople, for whom it is critically important to receive various benefits from the state – they will no longer be able to live without them. It is not so important what these benefits will be called, it is important that they form the very “basic unconditional income” that has been talked about for so long.

Now people who yesterday counted on their own strength will become recipients of this help simply for lack of anything better. They will not be able to work, will sit at home and quietly drink beer in their small apartments. Neither go out to have fun, nor go to work. A month, another, a third … None of these recluses will feel guilty about their fate – this is an epidemic and the state decided so. No one will feel able to change their destiny.

It’s good for journalists – they can write while sitting on their couch (although the big question is who will be able to pay for their work). Good for teachers, some scientists … And what should a car mechanic do in quarantine?

The end of small and medium-sized businesses, the end of an economy independent of the state – this is how the most pessimistic forecast looks like.

Add to this the sharp division of this future society into those who are critically dependent on the state social policy, since they failed to integrate into the new economy and those who are employed in the real sector – they grow bread, pour steel, generally “forge something iron” or, for example, mines raw materials. 

These people cannot be driven to a distance – and now, in general, they already consider office plankton as parasites. In the new society they will have all the more reasons for this. And the more seriously the state will have to separate the interests of the working class and the recipients of social assistance. Inevitable social conflicts will have to be extinguished by brutal methods. A brave new world will need a truly police state to ensure stability.

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