The Dollar and the Deep State

If we consider the Fed’s policies (tapering, etc.) solely within the narrow confines of the corporatocracy or a strictly financial context, we are in effect touching the foot of the elephant and declaring the creature to be short and roundish.

I have been studying the Deep State for 40 years, before it had gained the nifty name “deep state.” What others describe as the Deep State I term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power–military, diplomatic, intelligence, finance, commercial, energy, media, higher education–in a system of global domination and influence.

Back in 2007 I drew a simplified chart of the Imperial structure, what I called the Elite Maintaining and Extending Global Dominance (EMEGD):

At a very superficial level, some pundits have sought a Master Control in the Trilateral Commission or similar elite gatherings. Such groups are certainly one cell within the Empire, but each is no more important than other parts, just as killer T-cells are just one of dozens of cell types in the immune system.

One key feature of the Deep State is that it makes decisions behind closed doors and the surface government simply ratifies or approves the decisions. A second key feature is that the Deep State decision-makers have access to an entire world of secret intelligence.

Here is an example from the late 1960s, when the mere existence of the National Security Agency (NSA) was a state secret. Though the Soviet Union made every effort to hide its failures in space, it was an ill-kept secret that a number of their manned flights failed in space and the astronauts died.

The NSA had tapped the main undersea cables, and may have already had other collection capabilities in place, for the U.S. intercepted a tearful phone call from Soviet Leader Brezhnev to the doomed astronauts, a call made once it had become clear there was no hope of their capsule returning to Earth.

Former congressional staff member Mike Lofgren described the Deep State in his recent essay Anatomy of the Deep State:

There is another, more shadowy, more indefinable government that is not explained in Civics 101 or observable to tourists at the White House or the Capitol. The subsurface part of the iceberg I shall call the Deep State, which operates according to its own compass heading regardless of who is formally in power.The term “Deep State” was coined in Turkey and is said to be a system composed of high-level elements within the intelligence services, military, security, judiciary and organized crime.

I use the term to mean a hybrid association of elements of government and parts of top-level finance and industry that is effectively able to govern the United States without reference to the consent of the governed as expressed through the formal political process.

I would say that only senior military or intelligence officers have any realistic grasp of the true scope, power and complexity of the Deep State and its Empire.Those with no grasp of military matters cannot possibly understand the Deep State. If you don’t have any real sense of the scope of the National Security State, you are in effect touching the foot of the elephant and declaring the creature is perhaps two feet tall.

The Deep State arose in World War II, as the mechanisms of electoral governance had failed to prepare the nation for global war. The goal of winning the war relegated the conventional electoral government to rubber-stamping Deep State decisions and policies.

After the war, the need to stabilize (if not “win”) the Cold War actually extended the Deep State. Now, the global war on terror (GWOT) is the justification.

One way to understand the Deep State is to trace the vectors of dependency. The Deep State needs the nation to survive, but the nation does not need the Deep State to survive (despite the groupthink within the Deep State that “we are the only thing keeping this thing together.”)

The nation would survive without the Federal Reserve, but the Federal Reserve would not survive without the Deep State. The Fed is not the Deep State; it is merely a tool of the Deep State.

This brings us to the U.S. dollar and the Deep State. The Deep State doesn’t really care about the signal noise of the economy–mortgage rates, minimum wages, unemployment, etc., any more that it cares about the political circus (“step right up to the Clinton sideshow, folks”) or the bickering over regulations by various camps.

What the Deep State cares about are the U.S. dollar, water, energy, minerals and access to those commodities (alliances, sea lanes, etc.). As I have mentioned before, consider the trade enabled by the reserve currency (the dollar): we print/create money out of thin air and exchange this for oil, commodities, electronics, etc.

If this isn’t the greatest trade on Earth–exchanging paper for real stuff– what is?While I am sympathetic to the strictly financial arguments that predict hyper-inflation and the destruction of the U.S. dollar, they are in effect touching the toe of the elephant.

The financial argument is this: we can print money but we can’t print more oil, coal, ground water, etc., and so eventually the claims on real wealth (i.e. dollars) will so far exceed the real wealth that the claims on wealth will collapse.

So far as this goes, it makes perfect sense. But let’s approach this from the geopolitical-strategic perspective of the Deep State: why would the Deep State allow policies that would bring about the destruction of its key global asset, the U.S. dollar?

There is simply no way the Deep State is going to support policies that would fatally weaken the dollar, or passively watch a subsidiary of the Deep State (the Fed) damage the Deep State itself.

The strictly financial arguments for hyper-inflation and the destruction of the U.S. dollar implicitly assume a system that operates like a line of dominoes: if the Fed prints money, that will inevitably start the dominoes falling, with the final domino being the reserve currency.

Setting aside the complexity of Triffin’s Paradox and other key dynamics within the reserve currency, we can safely predict that the Deep State will do whatever is necessary to maintain the dollar’s reserve status and purchasing power.

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)

Recall Triffin’s primary point: countries like China that run trade surpluses cannot host reserve currencies, as that requires running large structural trade deficits.

In my view, the euro currency is a regional experiment in the “bancor” model,where a supra-national currency supposedly eliminates Triffin’s Paradox. It has failed, partly because supra-national currencies don’t resolve Triffin’s dilemma, they simply obfuscate it with sovereign credit imbalances that eventually moot the currency’s ability to function as intended.

Many people assume the corporatocracy rules the nation, but the corporatocracy is simply another tool of the Deep State. Many pundits declare that the Powers That Be want a weaker dollar to boost exports, but this sort of strictly financial concern is only of passing interest to the Deep State.

The corporatocracy (banking/financialization, etc.) has captured the machinery of regulation and governance, but these are surface effects of the electoral government that rubber-stamps policies set by the Deep State.

The corporatocracy is a useful global tool of the Deep State, but its lobbying of the visible government is mostly signal noise to the Deep State. The only sectors that matter are the defense, energy, agriculture and international financial sectors that supply the Imperial Project and project power.

What would best serve the Deep State is a dollar that increases in purchasing power and extends the Deep State’s power. It is widely assumed that the Fed creating a few trillion dollars has created a massive surplus of dollars that will guarantee a slide in the dollar’s purchasing power and its demise as the reserve currency.

Those who believe the Fed’s expansion of its balance sheet will weaken the dollar are forgetting that from the point of view of the outside world, the Fed’s actions are not so much expanding the supply of dollars as offsetting the contraction caused by deleveraging.

I would argue that the dollar will soon be scarce, and the simple but profound laws of supply and demand will push the dollar’s value not just higher but much higher. The problem going forward for exporting nations will be the scarcity of dollars.

If we consider the Fed’s policies (tapering, etc.) solely within the narrow confines of the corporatocracy or a strictly financial context, we are in effect touching the foot of the elephant and declaring the creature to be short and roundish. The elephant is the Deep State and its Imperial Project.

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  • awesome

    This deep level Ghost In The Shell territory. Excellent write up.

  • mmckinl

    Excellent piece … it is all indeed about the petrodollar reserve currency status of the paper printed and digits entered by the Federal Reserve.

    The US_NATO military cooperation is the enforcement arm of the “Deep State” … They will try to use the Ukraine as a base in the soft underbelly of Russia.

    The problem the deep state is now having is their overuse of force in Afghanistan and Iraq . These wars and others have shown the limitations of military intervention.

    They are now using their preferred method of conquest … destabilization best described by Naomi Klein and John Perkins in “Disaster Capitalism” and “Confessions of an Economic Hit Man”.

    Through these various forms of control the US can encumber the world to debt only serviceable with US Dollars which they can manipulate through Fed programs, open market operations, CIA – State Dept operations or as a last resort sanctions.

    • Southernfink

      Excellent article indeed, it confirms my theory how the War or terror is directly related to introducing puppet regimes who will sign the particular trade deal for their area, all related to creating the conditions for global dominance via the ISDS in the trade deals and perpetual economic growth for the plutocracy.

      • mmckinl

        I see the plutocrats have misjudged the politics of the Ukraine. George Soros and his Human Rights Watch may just helped birth a fascist state.

        One prominent Ukrainian Rabbi has already warned Jews to get ready to flee. The fascists have control of Kiev and most of western Ukraine.

        Yet again the actors of the “Deep State” have implemented a seriously flawed agenda as they have in Syria, South Sudan, Yemen, Libya, Afghanistan and Iraq.

        Alternet , the “Soros filter”, has finally begun discussing the Ukraine now that their schemes are revealing significant “blowback”.

        Good to hear from you Southernfink.

        • “Everything you know about Ukraine is wrong

          BY MARK AMES” – http://pando.com/2014/02/24/everything-you-know-about-ukraine-is-wrong/

          • Southernfink

            Interesting article, that confirms my initial fears that yes,no one wishes for a return to Moscow rules, a union with the EU would be preferred, either way they will be reduced to being submissive to outside forces.

          • Crimea wants to go Russian, and that would possibly be a fiasco for the EU and US interests.

            The Russian Federation would keep Odessa and Sevastopol, and the EU would be stuck with huge debt and freak, right-wing, nationalists and dreamers looking to the west for a life the west does not intend to deliver. Quite the contrary.

            The 15 Billion Putin offered Yanukovych will be pumped into eastern Ukraine instead.. the emerging economic contrast will simply make the neoliberal west look like shit.

            Democracy in Haiti, in Afghanistan, in Bosnia Herzogovina, Iraq, Egypt, etc….

            We have a totally corrupt and/or abjectly incompetent bipartisan government, and pathological elites, in thrall of insanity; pursuing the same failed policies, over and over again…

            And the partisan public sees no trans-partisan continuity of policy, belying all the partisan posturing.

            If anything, the Republican’s obstinacy in not allowing the realization of their own wet-dreams by a Dem. Administration, is the only break from a full out neoliberal austerity/privatization/ corporatization and TBTF monopolization and concentration of wealth, treatment, we’d otherwise, be laboring under. Were it not for the power struggle of two government mafia families, as it were, we’d be getting screwed raw in this Dem Administration.

            World over “left” and right parties have joined in implementing right wing, neoliberal policies. The US, in that respect, is not only no different, but is actually setting the tone.

            You know it, others know it, but the partisans, left and right, like the Ukrainians are ripping out their eyes in mindless bouts of partisan fealty…

            Ugh…

          • Southernfink

            The US is definitely setting the standard that other nation’s can decide to either ‘voluntarily’ follow or face it’s wrath, it’s become a predictable pattern that’s repeating itself right around the globe, while some have learned to recognize the meddling, the masses remain perfectly ignorant.

            The poor people in the Ukraine will continue to struggle to meet their gas bill for them nothing will change, the history with Moscow own missed opportunity for creating a true socialist state leaves the EU looking all shiny and bright for people of a certain ambition, finally the Ukraine will also miss out on creating a socialist state.

          • anti_republocrat

            “pursuing the same failed policies, over and over again…”

            Sorry, Apres, have to disagree. These are not failed policies. They must not be evaluated based on publicly stated goals such as the spread of democracy, human rights, stability or even control of resources and hegemony. Those publicly stated goals are actually quite low priority. The policies are wildly successful when measured against the National Security State’s institutional imperatives, which are 1) career advancement for military brass and civilian employees of State, CIA, NSA and Homeland Security, 2) increased profits for weapons manufacturers and military contractors, 3) pork to win elections and 4) sensational news stories to enhance the careers of journalists and distract the US public from increasing misery at home.

            The level of depravity is mind-boggling.

          • By “failed” I had in mind a picture of the vast global public getting shafted, coming and going. So, of course, you are absolutely correct.

            But all “good things” invariably come to an end… Let’s hope theirs will whimper out, rather than blow up – won’t hold my breath, though.

            I think that the political class is starting to lose control of their hubris driven, best laid, but increasingly unpredictable, chaotic and fragile, self serving plans for a unipolar New World Order. But while theirs may ingloriously flame out soon enough, I hope, the then-after does not inspire confidence of “good times” either.

            Perhaps mankind should just off itself, and let the world be…

          • purveyor1

            Well,
            The Mongols came and went through the Ukraine, so did the ‘Grand Armee”, then the NAZI’s came and went with the Russian’s chasing them back through the Ukraine…

            Sheesh, this time the Ukrainians seem to be the victims of their own devise?

            Purveyor

          • So what’s your “analysis?”

          • purveyor1

            Respectfully,
            Connect the philosophical dots: Is/are there connections between Ukraine’s inability to relate the past to the present and America’s analogous dilemmas?

            “Internecine conflict” with the scavengers lurking nearby. Civil war is NEVER pretty and our Founders provided us with a solution to our internal conflicts, thus avoidance of the internecine. However, now the fight is over the “philosophy” of our kind!

            Are we to remain the children of Washington and Jefferson, or become the spawn of Marx and Lenin?

            Purveyor

          • How about carving out a new and better path?

            Did either of the Americans envision the US as a global hall monitor, cop, judge and jury, at a huge expanse to the taxpayers?

            Did they envision the FED? Corporate personhood? The CIA, NSA, etc? And their service to the “Deep State?”

            There is some brush we will not be able to cleanly clear away, but there’s got to be some important and costly shit we could agree to cut down to size, or entirely do away with. No?

          • purveyor1

            Point(s) taken.

            Note: In my second paragraph I recognize that the “Founders” provided for the mechanism(s) of change. Effectively, the judiciary and certainly the amendment process, thus we can begin to “cut down to size,” the mess we’ve got?

            Furthermore, I believe it was Washington who warned us of “foreign entanglements.” Hence, we need to a healthy America, FIRST?

            Well done!
            Purv

          • The Blue Tail Gadfly

            Re: “Effectively, the judiciary and certainly the amendment process, thus we can begin to “cut down to size,” the mess we’ve got?”

            Considering that most of the spending by the federal government is already unconstitutional, why do we need additional amendments to “cut down to size” this bloated government?

            In other words, why will they obey a new amendment when they are not obeying the current Constitution?

            ~BTG

            “Machiavelli discoursing of these matters, finds virtue to be so
            essentially necessary to the establishment and preservation of liberty,
            that he thinks it impossible for a corrupted people to set up a good
            government, or for a tyranny to be introduced if they be virtuous; and
            makes this conclusion, That where the matter (that is, the body of the people) is not corrupted, tumults and disorders do no hurt; and where it is corrupted, good laws do no good:2 Which being confirmed by reason and experience, I think no wise man has ever contradicted him.” ~Algernon Sidney, Discourses Concerning Government

          • purveyor1

            “He removes the greatest ornament of friendship, who takes away from it respect”
            (Cicero)

            Ergo, you could offer to me the ultimate treatise on human interaction and I would be a foole to consider such.

          • The Blue Tail Gadfly

            What does respect have to do with the truth? That doesn’t sound very rational to me…

            What are you trying to say, you are governed by emotion and not reason?

            ~BTG

          • purveyor1

            NEVER MIND

          • mmckinl

            Read it … very interesting for a top down analysis. The fact of the matter is that events are not being controlled from the top down but from the bottom up … it is chaos.

            Should the “self defense brigades” get arms there will be unimaginable uncontrolled violence. Should this occur I see a split of the country between east and west.

        • Southernfink

          But didn’t they back the Orange revolution as well, it’s safe for them to be hedging their bets, you never know who will emerge as the victor.

          The US has been rather busy installing and maintaining, and paying attention to it’s muppets scattered around the globe, all new muppets are submissively signing on, that is their entire purpose nothing more as that way the next democratically elected government can be dealt with in a private tribunal.

          If Jewish people need to flee the Ukraine than that soon proves how wrong the west was in throwing their support behind the wrong side ”once more”.

          Likewise, it’s always nice to hear your opinion.