On The Possibility of World War III...

Decades of conflict instead of nuclear annihilation?

War is a racket. Image via Quotefancy

Confronting Reality

For many people world war three invokes images of a direct clash between nuclear powers, inevitably ending in a series of bright flashes over all major cities around the globe. The next big war, I argue, will be nothing of the sort. Instead of ending in a nuclear holocaust, the third world war—which is already in the making—will bring about decades of conflict, ending in a new world order. It will be much akin to the Thirty Years’ War (1618–48) fought in Western Europe over domination and coming with immense losses, but ultimately ending in the Treaty of Westphalia. Make no mistake: I’m not arguing for such a bloody conflict. I wish from the bottom of my heart that a diplomatic solution could be found. At the same time, however, I’m also aware that the likelihood of finding a sustainable, peaceful way out of this mess the world found itself is diminishing by the day. Not just vis-a-vis Iran, but in relation to Russia, and ultimately when it comes to China as well. Also, and this equally pains me to write this as I don’t subscribe to conspiracy theories, there are clear financial incentives to push the world into chaos, and to reap the immense profits to be made on war. After all, as Brigadier General Smedley D. Butler wrote in 1937 after fighting decades in servitude to US corporate interests in Latin America: “War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious.”

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With that said, we cannot live in fear and a constant state of low level dread, nor in a state of complete denial either. We must confront the future: take a good hard look what is potentially ahead of us, then plan and act accordingly. Sure, it would be much easier to live in a comfortable lie, thinking that everything is fine, and even though climate change, resource depletion, the economy, geopolitical conflicts etc. are bad enough, they are far off in both time and space. I hate to be the bearer of bad news but I have to say: no, they’re not. And although nothing is set to stone, and many things could still turn out for the better, that’s definitely not the direction I see things moving… And much of world population seems to agree:

Things are definitely not headed in the right direction. Source: Democracy Perception Index, via Geopolitical Economy Report.

Our time is not unique, though, quite to the contrary. This has happened before. Not once, but many times. So much so, that the past eight decades might seem to be a strange anomaly (at least for Western citizens) when viewed from a historical perspective. Many of the writings quoted here were originated in a bruising encounter with war, and were based on either direct participation (Butler) or on witnessing its effect on society (Tolkien, Orwell). See, humanity’s development was never a straight line pointing to the stars, as the myth of progress purports it to be, but an irregular pattern of good times followed by hard times. Thing is: all signs point towards history entering yet another period of turmoil, conflict and strife.

“I wish it need not have happened in my time,” said Frodo.

“So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”

― J.R.R. Tolkien, The Fellowship of the Ring

The OODA lens

Armed with a realist mindset we then must ask: but why war? And why decades of it? In order to answer these question I suggest we take a structured approach in our quest for understanding what the system (and not any given individual or political party) does, following the famous observe, orient, decide, act (or OODA) loop. First, let’s start with what we can observe. Those who read my blog frequently need no introduction to our predicament. In a nutshell: humanity is in the state of absolute ecological overshoot. And that’s not an opinion but a scientific fact: we consume way more resources and release way more pollution than what nature could sustain—hence the crossing of seven out of nine planetary boundaries. On top of that easy-to-extract minerals from copper ore to crude oil are also running low, and increasingly get replaced with harder (read: more energy intensive to get) reserves of the same materials—naturally resulting in their peak production rates. The writing is on the wall. Our economic growth model is being confronted with its ultimate contradiction—the impossibility of infinite growth on a finite planet—both in financial and ecological / resource limit terms.

That doesn’t mean that we are running out of stuff and that there will be nothing to eat tomorrow. No. We are running out of the economic, easy-to-get part, putting an effective cap on our global civilization’s expansion. And there is no replacement, no untapped reserves to draw upon either. The global economy has reached its limits to growth, and contrary to the energy transition myth, it cannot be expected to save itself via electrification either. You see, the extraction of the very materials needed for the “transition” are a) already peaking and b) are still made entirely available by fossil fuels—which are also expected to hit their maximum extraction rate soon (if it hasn’t happened already). Materially growing the economy—with or without electrification—is rapidly becoming impossible.

Quarry in Barossa Valley, SA, Australia. Image via Unsplash

Now comes the most critical step: orientation, or what this means and what the system does with this information. First off we need to understand how industrial scale resource extraction has become essential for humanity’s survival. Food is grown by feeding plants with copious amounts of nitrogen based fertilizer (made from natural gas) and mineral nutrients: phosphorus and potash (extracted from rocks with sulfuric acid—made from sulfur, a byproduct of refining oil). Crops are then protected from pests and weeds by herbicides and pesticides (made from petrochemicals), then harvested and delivered using diesel powered heavy machinery. Food for 4 billion people—half of world population—is made available by this process. Without such a lavish use of fossil fuels we could feed only half as many people we do today.¹ The same goes for mining uranium, copper, nickel, aluminum and many other materials: fossil fuels are everywhere, in every step of their lifecycle from digging up ores, to refining and smelting them into pure metals. A peak, and subsequent decline, in oil and gas production thus means an irreversible and permanent decline in food and metals production—and thus economic activity—not to mention hunger arising as a result in many places around the world.

This is why the closure of the Strait of Hormuz, previously handling 20% of global oil, 50% of sulfur and 33% of seaborne nitrogen fertilizer flows, is an especially big deal. In an era when oil production was already on a high plateau and was expected to peak at or around 2030 due to depletion eventually catching up with extraction, this event is even more consequential. The same goes to copper mining: production was already close to be peaking. Disruption in two major mines (not to mention the lack of sulfuric acid…) has duly pushed prices to record high levels, and will take years to recover from as there is no spare capacity to fill in the void. The war on Iran has brought the onset of a material resource decline at least 4-5 years closer, and made the fall far more brutal and immediate than it otherwise would had to be. The closure of this vital choke point, it seems, is shaping up to be a turning point for the entire globe. A war which was intended to be a quick 3-day skirmish, eliminating a set of leaders in hopes of dismantling the Iranian state at the behest of Israel, has “accidentally” put us on a fast track towards global crisis.

Don’t let the relative calm of the markets fool you, though. So far, reduced overall crude imports into China and soaring exports from the United States have managed to at least partly offset the massive supply disruption due to the closure of the Strait of Hormuz. The US is committed to release 172 million barrels on a loan basis², with single-week releases peaking at nearly 10 million barrels. In China demand has been dampened by 9%, or about 1.5 million barrels per day, “abruptly, unexpectedly, and with remarkably little visible disruption,” according to JPMorgan. At least so far. Meanwhile their seaborne crude imports are now down ~50% or ~6 million barrels from pre-war levels, according to Kpler, indicating an accelerating drawdown of reserves in China as well. No wonder then that analysts at UK-based bank HSBC warn that global inventories, as a result, “may reach critical functional lows, which could see sharper—non-linear—price rises and genuine shortages.” Prices at around $100 a barrel have failed to stop us so far from hitting critical inventory levels later this summer.

Oil storage tanks. Image via Unsplash

Money Talks

In our increasingly resource limited world there is only one thing we suffer no shortage of beyond stupidity: money. First off, what we call money is not a real thing. It’s nothing but a claim on energy and resources: a right to trigger a cascade of energy and raw material consumption on your behalf. If money couldn’t be used to buy products and services it would quickly lose its practical value and become worthless. All the products you purchase, from food and consumer good to services (be it a haircut or legal advice), take energy and raw materials to make and machines, computers etc. to perform. Even raw materials themselves take energy to get — mines use diesel fuel and electricity to dig up the ores, smelters burn coal and natural gas to smelt metals. Energy is the economy—money is not.

Second, and just as importantly, money is created by loaning it into existence. As the Bank of England website explains: “if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. This also means as you pay off the loan, the electronic money your bank created is ‘deleted’ — it no longer exists.” The problem with this system is that banks only create the amount borrowed, but not the interest to be paid on that loan. As a result there is always more debt to be repaid in the system than actual money to repay it with… Consequently newer and newer loans must be issued to cover interest expenses and to avoid a recession and debt defaults. Hence the ever increasing pile of private debt, now reaching 150% of GDP worldwide. As economist Steve Keen, Honorary Professor UCL summed it up:

“Banks aren’t “mere intermediaries” who enable Savers to lend to borrowers. They are creators of both debt and money. Lending is not a “pure redistribution”, but a creation of new money and spending power. When lending turns negative — which happens when debtors are repaying debt, or going bankrupt and being unable to repay it — the economy crashes.

And it’s not just banks who issue new money, but sovereign governments as well. Whenever the government spends a dollar it actually does so by issuing new currency, money which was not part of the circulation before. Just take a look at the faces of these gentlemen when they finally discover this fact (@1:18):

The idea of money creation via spending was long dismissed as a fringe theory (MMT or modern monetary theory) but, as it turns out, it was ‘best practice’ all along. This is why—as Richard J. Murphy explains—governments don’t have to issue bonds to finance their operation: they can just “print” money “out of thin air” whenever they want. The real reason for any government to issue bonds and to tax their citizens is thus to draw money out of the economy and thereby to prevent inflation going through the roof. Bonds are therefore not a way of “financing” the government, but a saving mechanism—a place to store excess cash³—preventing too much money from chasing too few real resources, real materials, real energy and real goods. Things we can’t print infinite amounts of, and things which cannot grow in quantity the way debt with compound interest does.

So what does the system decide to do then? As we have seen from the above the big headache for the system is not how, or from where to get money from (as currency can always be loaned into existence) but how to prevent this flood of liquidity from causing high inflation. One way is to flood the rest of the world with this cash, by demanding that other countries use your currency to buy commodities (not just oil), transact and save (buy bonds). The second way is to inflate massive asset bubbles (not just housing, but stocks as well) to suck in all that excess capital. The third is to let inequality shoot through the roof, lowering the consumption of the 90% of the people and increasing the wealth of the top 10% — people who happen to make the decisions on the economy, politics and wars. Make no mistake: this is no grand master plan laid out in smoke filled rooms by the Illuminati, it’s just how the system works, ultimately leading to a complete divergence between the real and the financial economy.

So is it any wonder then that the biggest beneficiaries of this economic model then go out and start wars—trade or real? When it’s no longer profitable to invest in the real economy (as it can no longer meaningfully grow in the lack of cheap and easy to get resources) it is much more lucrative to invest in surveillance tech., crypto, AI data centers, “defense” and the such—in hopes of winning fat government contracts. When the system begins to implode and crash under the weight of its many internal contradictions these companies will be in pole position to harvest the last remaining resources on Earth. Be it through tokenization or through CBDCs, the financial system will eventually have to leave conventional money and lending behind. Be that as it may the end goal will remain the same: redirecting shrinking resource and energy flows to the wealthy and powerful—even as the rest of the population (and the living world) continues to suffer.

Server rack. Image via Unsplash

Actions, not words

In such a complex system, though, with so many actors and so many interest groups vying for power, there are no masterminds and evil cabals, as none of them can muster enough wealth to buy out or destroy the other. Neither at the home front, nor in the international arena. Companies, lobby groups, think tanks, governments and dictatorships will thus continue to co-evolve under these immense pressures, leading to a kind of dynamic quasi-equilibrium: a state of perpetual war. Is it any wonder then that we’re increasingly subjected to lasting states of hostilities with no clear conditions that would lead to their conclusion? I guess it’s no coincidence. The system, it seems, have decided that the optimal course of action is to fight it out.

From Eastern Europe to the Middle East (and soon in East Asia) the borderline between war and peace is increasingly get smudged and eroded. A constant low-intensity conflict with sudden but short outbursts of violence and burning hot spots seems to be emerging as the ‘new normal.’ Economies around the world are increasingly organized around this permanent state of war, where the end goal is no longer capturing this or that territory or destroying the enemy, but to impose unbearable costs on each other. Be it manpower losses, or the loss of energy supplies, pipelines, shipping choke points, access to certain materials (rare earth magnets, for example) every part of economic life is eventually becoming part of the war effort.

LUCAS, an American reverse-engineered version of the Iranian HESA Shahed 136 one-way attack drone. Image via Wikimedia Commons

Drones and low-cost precision munitions and missiles have arrived with a perfect timing. Or shall I say: evolved to become the prime tools for waging such wars? Drone warfare is the perfect fit to execute the act part of our little OODA loop here. Distributed manufacturing and components—originally designed and mass produced with civilian use in mind—make these weapons indispensable for achieving constant attrition and area denial. A drone made from plastic and consumer grade components uses far fewer resources, and requires far less training and physical fitness to use than fighter jets and tanks of old. On top of that results from the battlefield can be immediately fed back into fresh observations, and thereby restarting the development cycle; with new updates bringing even more disruption to the battlefield than their predecessors. This level of low-cost warfare, capable to hold even the strongest militaries at bay (or at least slow their advance to glacial speeds, especially in densely populated areas) was unimaginable during days of prior world wars. What was pure fiction and political satire for Orwell, it seems, has come within reach:

“The war is not meant to be won, it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance. This new version is the past and no different past can ever have existed. In principle the war effort is always planned to keep society on the brink of starvation. The war is waged by the ruling group against its own subjects and its object is not the victory over either Eurasia or East Asia, but to keep the very structure of society intact.” — George Orwell

A permanent war, where eventually all battlefronts merge into one continuous ring of fire, is the perfect way to destroy what remains of liberal democracies. Checks and balances, opposition parties, critical journalism, freedom of speech are already having a hard time all around the world, and the trends eroding these can only get worse during wartime. As Alexis de Tocqueville observed in 1840 already in Why Democratic Nations Naturally Desire Peace and Democratic Armies, War:

“War does not always give over democratic communities to military government, but it must invariably and immeasurably increase the powers of civil government; it must almost compulsorily concentrate the direction of all men and the management of all things in the hands of the administration. If it does not lead to despotism by sudden violence, it prepares men for it more gently by their habits. All those who seek to destroy the liberties of a democratic nation ought to know that war is the surest and the shortest means to accomplish it.”

What we have seen so far in Europe and the Middle East is just the beginning. Many more years, if not decades, of conflict is still ahead of us and eventually every great power will be involved—either directly, or through proxies to avoid direct confrontation with each other. Old rules are slowly discarded, but the new rules haven’t emerged yet. This is why we see a controlled demolition of the globalized world economy, with all its “rules” upended and international law disregarded in the most blatant way. Not because a secret cabal in a smoked filled room want’s this to happen, but because that’s how a dying system behaves: it struggles to survive against all odds and tries everything it can to live just a day longer.

Until next time,

B

Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.

P.S.: Then what about nukes? You see, the goal here is not to live in a nuclear wasteland (if that’s even possible) but to destroy the other superpower without triggering a nuclear exchange. And the best way to do that is to slow cook it until it either collapses from within, or is forced to give up its independence, sovereignty and most importantly: the control over its resources and weapons. Attacking with “tactical” nuclear weapons (even if the other doesn’t have one) negates the purpose, as it would destroy the concept of deterrence. These weapons were never intended to be detonated, thus a first use would incentivize others to launch theirs on others: use it or lose it would be the name of the game from that point on. And while the initial rounds would be limited to attacking non-nuclear opponents, the incentive to use it against one another would grow exponentially, till someone launches a ‘pre-emptive’ strike on the other superpower—as all military exercises showed how this type of escalation ends.

1. Yes, permaculture and agro-forestry practices can help to alleviate the loss of fossil fuels, but they take time and experience to work with, and require the breakdown of many mental and economic barriers. I’m afraid until we get to a widespread recognition that mechanized agriculture is failing, we won’t start using them at scale… And by the time we get to this point, it might be already far too late for many people (especially in the global south). Considering how global heating and ecosystem degradation will turbocharge the failure of our present food growing practices, the risk of experiencing food scarcity for many will become existential.

2. Loan in this case means that barrels drawn down from the SPR are not sold to oil majors, but provided in exchange for a future refill (plus “interest” in the form of extra barrels sent to the strategic petroleum reserve). This implies that oil majors can book a massive profit now, much of which they can pay out as dividends to shareholders. These investors can then use this windfall millions and billions to invest in other stocks / bonds etc. thereby contributing to the expansion of the everything bubble.

3. This is why it’s vital for the US, the UK, EU and Japanese governments (all having reserve currencies) to keep their bond markets afloat. Problem is, investors are pulling out and thereby force interest rates higher and higher—partially in anticipation of the inflation to come, and partially due to a search for higher yields. The rest of the world is, at the same time, experiencing a shortage of dollars. As oil and other vital input costs rise they must sell their bonds, ban buying gold in dollars etc. to preserve the purchasing power of their currencies and their ability to buy energy and key commodities (still mostly sold in dollars).