Moon of Alabama Brecht quote
July 12, 2019

Turkey Announces The Targets Of Its New Air Defense System

Today first parts of the Russian S-400 air defense systems arrived in Turkey. The Russian Ministry of Defense posted a video of the arrival on Facebook. The Turkish Ministry of Defense video showed the unloading of six support vehicles belong to a S-400 set. A complete S-400 set consists of two radars, a command post, eight launch vehicles with four missiles each, and various loader and other support vehicles. Turkey has ordered two complete sets for which it will pay about $2.5 billion.

The U.S. is threatening economic sanctions against Turkey for ordering and receiving the system. It will also kick Turkey out of the F-35 fighter jet program. Turkey was one of the main partners for the F-35 program. It was supposed to receive 100 of the planes and it manufactures parts of the system. Turkey will not receive the ordered planes and those parts will now be made by a U.S. company.

The S-400 system Turkey receives is an export version. It will at first use the 48N6E missiles which have a reach of 250 kilometer. The systems Russia uses include the 40N6E missiles with a reach of 400 kilometers. It will take several months until the first system set in Turkey is complete and operational. So far only 20 Turkish soldiers have been trained on it. 80 more soldiers will arrive in Russia around the end of July to receive their training.

NATO is not amused about the Turkish acquisition:

A NATO official told CNN on Friday that: "It is up to allies to decide what military equipment they buy. However, we are concerned about the potential consequences of Turkey's decision to acquire the S-400 system."

The official added that, "interoperability of our armed forces is fundamental to NATO for the conduct of our operations and missions."

The S-400 in Turkey is not supposed to be interoperable with NATO. The most likely initial deployment area for the new system will be around Ankara to protect the wannabe-Sultan Erdogan from potential U.S. or Israeli attacks.

The government controlled Turkish news agency Anadolu made it abundantly clear what the system is supposed to target. When it announced the news of the arrival it attached the picture below to its tweet:

ANADOLU AGENCY (ENG) @anadoluagency - 12:05 UTC - 12 Jul 2019

#Turkey: Russian #S400 hardware deployment starts


The upper part fo the graphic explains the S-400 system. The lower part says: "The system can eliminate" and then shows the silhouettes and names of U.S. military bomber, fighter and radar planes as well as Tomahawk cruise missiles. The only one missing is the 'invisible' F-35 which the S-400 can of course also detect and eliminate.

The second S-400 set will likely be stationed on Turkey's southern coast from where it can cover Cyprus and protect Turkish oil interests in the eastern Mediterranean sea. Turkey recently started drilling around Cyprus. North Cyprus is occupied by Turkey since 1974. But its claims for exploration rights extend even to the south of the island and recently started drilling there.


The European Union, which does not recognize Turkey's occupation of north Cyprus, signaled that it will sanction Turkey over it.

Turkey's relation with the U.S., NATO and the EU are likely to get worse. Russia's slow but steady strategy to draw Turkey to its side is progressing very well. With the F-35 purchase canceled Turkey will have to look to Russia for acquiring modern fighter planes. An order will depend on the manufacturing share Russia is willing to hand over to Turkey.

The Turkish economy is not well. Its aggressions in Syria and Libya proved to be costly. President Erdogan recently fired the chief of the Turkish central bank who was not willing to lower the interest rate. Erdogan believes that high interest rates cause high inflation while 99% of all economists believe that higher interest rates are the best way to fight inflation. Many Turkish companies and private households took out loans that are denominated in Euro or U.S. Dollar. If the central bank lowers the interest rate the Turkish Lira will sink and repaying the loans will become more expensive. New U.S. and EU sanctions will make these problems worse.

Erdogan may soon have an air defense system that can protect Turkey's capital. But the move will cost the country, and Erdogan, in many other fields. Russia is the country that wins from Turkey's problems. One hopes that it will use the leverage it gains over Turkey to remove the Turkish invasions from Syria.

Posted by b on July 12, 2019 at 16:27 UTC | Permalink

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I reckon this sale and refusal of Turkey to back down to U.S. threats will eventually split the country away from the west. It’s like a fatigue fissure in a high stress component. Once started, the fracture or failure of the piece is inevitable. I wonder how long it will take before NATO starts collapsing because of this weapons procurement?

Posted by: Beibdnn. | Jul 12 2019 17:07 utc | 1

This is par for the course with the Outlaw Empire and its vassal states.

Posted by: KC | Jul 12 2019 17:08 utc | 2


32 Missiles per each set, so they can theoretically down 64 incoming cruise missiles, the US standoff weapon of choice.

One supposes that Turkey has other defences as well, however at $78 million per missile it's an expensive option! Of course resupply of missiles will/would be much less expensive.

Not even close to how expensive it would be for US or Israel to lose a surveillance plane or jet of course.

I'm really interested in the question raised by "high interest rates cause high inflation while 99% of all economists believe that higher interest rates are the best way to fight inflation". It seems that Modern Monetary Theory (MMT) says that a state that creates its own currency (i.e. prints the dinars) can print as much as they want, up to the ability of their economy to supply goods and services that the money can buy. After that, inflation occurs because there is simply more money chasing a finite supply of things to buy, so the things become more expensive. See Michael Hudson and other links in previous threads.

Posted by: jonku | Jul 12 2019 17:42 utc | 3

Thanks for the posting b

Does Turkey still have NATO nukes in its country? I would think that their presence or not is a bigger deal than the F35 boondoggle.

The firing of the leader of the Turkey Central Bank is interesting and I wonder who will be appointed next and what their finance strategy for Turkey will be to stand up against the financial punishment machinations of the West.

Posted by: psychohistorian | Jul 12 2019 17:49 utc | 4

Erdogan believes that high interest rates cause high inflation while 99% of all economists believe that higher interest rates are the best way to fight inflation.

Only because 99% of the economists are bourgeois economists ("vulgar economists")

Yes, higher interest exert downward pressure on the fiat currency. But it doesn't solve the underlying problem of the economy: it just makes your fiat currency more expensive because the Central Bank is the lender of last resort in such system (therefore its interest rate is always the market's base, minimum rate).

Fiat currency is devoid of substance. Technically, it's just a financial asset which has the particularity to act like money. In this context, inflation is merely the ration between the total amount of commodities in circulation on the market and the total mass of a given fiat currency in circulation on this same market. It is just a relation: economists who say inflation is inherently good or bad or that there is a "natural" inflation rate are simply lying.

The really best way to curb inflation is the way China is doing: with high economic growth based on infrastructure ("real economy"). So what it has 4% inflation rate? With an economy growing at a 10-6.5% rate, it is very acceptable. Brazil, with a much more recessive policy since Temer rose through a coup d'État, has a 3,68% inflation rate but at the cost of 4 million + people sent to extreme poverty (the state of poverty where you're literally dying of hunger) plus the decimation of the middle class.

Posted by: vk | Jul 12 2019 17:52 utc | 5

Oops, according to the original post, Turkey bought a total of 64 S-400 missiles, and the support infrastructure, for $2.5 billion USD. So the first 64 missiles they fire cost only $39 million each. Not sure how much additional ammo they received in the initial purchase.

$39 million per shot is still cheaper than fighter jets such as the F22 at $250 million.

Posted by: jonku | Jul 12 2019 17:53 utc | 6

Off-topic, but pretty amusing. I think b would think so.

The Times describes the site as “a slick little piece of disinformation,” but each of the hyperlink citations attached to his political record listed above are featured in that section of Mauldin’s website. See for yourself if Biden didn’t champion the Iraq War, didn’t vote for states’ rights to overturn Roe v. Wade, or didn’t help escalate the war on drugs.

The article itself has embedded links including the above paragraph.

Posted by: KC | Jul 12 2019 18:02 utc | 7

S-400 missile battery includes 120 missiles, so each launcher has a few reloads. The radar and signal processing systems are expensive. The missiles not as much. The missiles are disposable, after all.

Posted by: William Gruff | Jul 12 2019 18:05 utc | 8

Turkey was hardly likely to remain in the Western camp anyway, the way Erdogan's been going. That doesn't mean joining Russia either. The ordering of the F35s was the big mistake. It's going to have cost them a fortune, and they won't get the planes anyway.

The same with Iran ordering Typhoons (?) before the revolution. They paid up front and never received the planes because of the changes, but Britain never refunded the money paid. And now uses the repayment as a weapon to force Iranian compliance.

Posted by: Laguerre | Jul 12 2019 18:06 utc | 9

@jonku 3&7
S400 is for long range defense. Especially for high value targets like AWACS, strategic bombers. It should be accompanied by medium range (e.g. BUK), short range (e.g. Tor) and CIWS (e.g. Pantsir) defense, not to waist the limited ammo on CM. Beside that, every launcher can be (in either combination) fitted with 4 smaller missiles instead of 1 large one. Surely, those smaller missiles are also part of the deal. By this, the S400 can serve also the medium defense role and has much more ammo for this.

Posted by: BG | Jul 12 2019 18:11 utc | 10

Just one more middle finger at the hegemon.

Posted by: arby | Jul 12 2019 18:12 utc | 11

The same with Iran ordering Typhoons (?) before the revolution. They paid up front and never received the planes because of the changes, but Britain never refunded the money paid. And now uses the repayment as a weapon to force Iranian compliance.

You mean of course F-14 Tomcats with US building a factory in Iran prior to Revolution? Typhoons (as in fighter plane)didn't even exist in plans then. Unless you mean WW II Typhoon, but I am sure that is not it.

Turkey was hardly likely to remain in the Western camp anyway, the way Erdogan's been going.

You are obviously mixing here the cause and effect, since it was exactly the other way around, including that teeny-weeny Gulenist coup attempt in 2016. Just a reminder.

Posted by: SmoothieX12 | Jul 12 2019 18:14 utc | 12

Lowering interest rates via central bank action implies, in the absence of other changes, creating more of the currency and using it to buy bonds. When governments create more of a currency, it’s as much a tax on purchasing power — what matters — as an explicit honest tax or an explicit high interest rate.

During the past few decades, politicians all over the world have taken advantage of the sheeple ‘s naivety about (a) tax “cuts” in the absence of spending cuts or (b) interest rate “cuts” to support “growth”. Its purpose is to support government spending with fewer heated discussions about that spending.

People feel richer because “the numbers went up” and “no department’s budget was cut”.

Posted by: oglalla | Jul 12 2019 18:28 utc | 13

vk at 17:52

Well said "inflation is merely the ratio between the total amount of commodities in circulation on the market and the total mass of a given fiat currency in circulation on this same market".

And I believe MMT suggests the state should issue enough currency to absorb the available commodities, importantly including labor, so the economy can benefit from full employment as it does not waste available workers.

The correct amount of currency also allow the state to foster full production in resource extraction, manufacturing, infrastructure creation and services such as doctors and teachers, hospitals and schools. If the private market cannot use the full resources of the economy ("commodities" above) then the state can fund ("purchase") those for the general good.

Unemployment benefits only the employers who buy cheap workers in an oversupplied market, in other words people competing for a small number of jobs, willing to work for less.

Posted by: jonku | Jul 12 2019 18:28 utc | 14

Glad you picked up on this story, b:-)
DW was covering this story half an hour ago. The most delightful aspect of their coverage was the feeling that the DW folks were suppressing an urge to Roll On The Floor Laughing Their Asses Off.
Leaving aside the fact that the Yanks are livid, NATO (whatever that means today) are unhappy as well. Apparently.
AmeriKKKa's ire is quite specific. They're worried that the S-400 radar could "compromise the stealth capabilities of the F-35". i.e. the F-35 isn't just an aeronautical lemon; it's beginning to sound like a stealth lemon too.

Posted by: Hoarsewhisperer | Jul 12 2019 18:29 utc | 15

Perhaps the stealth part we keep getting pounded down our throats, just isn't what it's cracked up to be? Maybe with older radar, but with the strides taken today, it just might turn out to be a flop. Perhaps if the U.S. M.I.C. hadn't taken so long to get to this junction in time, but then, they couldn't milk the taxpayers.

Posted by: Eugene | Jul 12 2019 18:31 utc | 16

Plus there also was EU's pattented "we are definitely letting you in... Next year.... Maybe... If you are lucky... Meantime you also must do this and this or we would not"

For decades Turkey played Ukraine, but finally they had enough

Posted by: Arioch | Jul 12 2019 18:38 utc | 17

Assuming Russian planes/missiles can defeat the export version of the S-400, Erdo's strategy seems contingent on not falling out with Russia: There is now no backstop.

Posted by: Shyaku | Jul 12 2019 18:45 utc | 18

Posted by: Beibdnn. | Jul 12 2019 17:07 utc | 1

I reckon this sale and refusal of Turkey to back down to U.S. threats will eventually split the country away from the west.
Posted by: arby | Jul 12 2019 18:12 utc | 12
Just one more middle finger at the hegemon.

This is just the beginning.

Russia Expects India's Advance Payment for S-400 by End of 2019:

Russia is hoping to receive an advance payment for S-400 air defence systems from India by the end of 2019 so that the deliveries may begin in 2020 and be completed by 2025, Deputy Director of the Federal Service for Military-Technical Cooperation (FSMTC) Vladimir Drozhzhov told reporters.

"The [payment] scheme has been agreed, and I hope that the first payment will soon be transferred by the Indian side", Drozhzhov said. "I think that by the end of 2020 - the beginning of 2021 the first system should be delivered. After the first set, the systems will be delivered under a certain schedule over the next few years, that is, India should get all the systems by 2024-2025", he explained.

In early October 2018, Moscow and New Delhi concluded a contract on the deliveries of Russia's S-400 missile systems to India worth over $5 billion.[...]

Previously, the US State Department gave India a subtle warning that buying weapons from Russia - in particular, S-400 missile defence systems - could compromise further arms deals between New Delhi and Washington, leading to the sanctions against India in line with Countering America's Adversaries Through Sanctions Act (CAATSA).

India Says It's Working with Russia on De-Dollarisation of Bilateral Trade
India says it is working with Russia to overcome payment issues for its strategic imports from that country. Deputy National Security Advisor of India, Ambassador Pankaj Saran said both sides are working on rupee-rouble trade to overcome a crisis caused by US financial sanctions.[...]

India’s plans to acquire S400 air defence missile systems was hit by US financial sanctions and both countries are working on a solution regarding payment issues. This will also help Russia pitch for India’s upcoming defence contracts like submarines and fighter jets.

Posted by: curious man | Jul 12 2019 18:59 utc | 19

Posted by: Beibdnn. | Jul 12 2019 17:07 utc | 1

I reckon this sale and refusal of Turkey to back down to U.S. threats will eventually split the country away from the west.
Posted by: arby | Jul 12 2019 18:12 utc | 12
Just one more middle finger at the hegemon.

This is just the beginning.

Russia Expects India's Advance Payment for S-400 by End of 2019

India Says It's Working with Russia on De-Dollarisation of Bilateral Trade

Posted by: curious man | Jul 12 2019 19:02 utc | 20

>> Unemployment benefits only


It also benefits those workers who saved their money for the day when assets, bid into the stratosphere via prior often-misallocated government spending, should go on sale.

It also benefits upstarts who would like to start a business but can’t because used equipment is still too expensive.

Governments should provide a social safety net via a universal but minimal income. But, I abhor suggestions to maintain or expand any of their programs in which they direct how money is spent, because governments and big businesses are poor stewards of capital.

Posted by: oglalla | Jul 12 2019 19:05 utc | 21

I apologize for the duplication. The first post was not visible for some moment, and I had to try my luck to send another, truncated version of the post.

Posted by: curious man | Jul 12 2019 19:06 utc | 22

Posted by: SmoothieX12 | Jul 12 2019 18:14 utc | 13

Andrei, thank you for your interesting site.

Posted by: curious man | Jul 12 2019 19:08 utc | 23

Posted by: arby | Jul 12 2019 18:12 utc | 12

Just one more middle finger at the hegemon.
The reaction was not long in coming.

Bloomberg: As Russian Missiles Arrive in Turkey, Erdogan Crosses a Rubicon

By taking delivery of Russian air-defense systems, Turkey's risks lasting damage to his country's economy and relationship with the West

Posted by: curious man | Jul 12 2019 19:23 utc | 24

Russia loaned Turkey more than half the cost, $2.5 Billion, for the present system.

With a chattel mortgage on the weapons, Russia probably has a few "switches" on the gear in case Erdogan takes aim at Syrian AF or something unforeseen occurs in the stability of Turkey's politics.

The upside potential is it can be integrated into a wider defensive network. Turkey, Syria, Russian, Iraq (who wants the S-400, also) and Iran (S-300s).

Sooner or later, Israel will be flying only over its own airspace, a ten second ride in those new F-35s.
We know the USAF and Naval Aviation in F-15, F-16 and F-22s want no part of Russian missile defenses.
The blowhard IDF is silent. Bibi does all the bragging and threatening. But his ass won't be in any of the cockpits when those missiles end the flight of his warplanes if he is stupid enough to challenge the defenses.

Posted by: Red Ryder | Jul 12 2019 19:29 utc | 25

The S-400 in Turkey is not supposed to be interoperable with NATO. The most likely initial deployment area for the new system will be around Ankara to protect the wannabe-Sultan Erdogan from potential U.S. or Israeli attacks.

As you know, during the last failed coup in Turkey, the backbone of the coup was part of the command and flight personnel of the Turkish Air Force, and Ankara was defenseless without its air defense. In any case, it is not the mistakes themselves that are important, but the desire and ability to correct them. Erdogan learned a lesson from these mistakes.

Posted by: curious man | Jul 12 2019 19:35 utc | 26

CGTN's version of Turkey's S-400 biff in the nose for the Yanks pointed out that Obama had umpteen excuses for refusing to sell Patriot systems to Turkey. And EU/NATO has been procrastinating over Turkey's application for EU membership for a very long time.
So the white Christian Colonial supremacist spin doctors have only themselves to blame for Turkey's U-turn.

Posted by: Hoarsewhisperer | Jul 12 2019 19:39 utc | 27

This is a good article to read on the significance of the S-400 and sales to China, Turkey, India, ...

Posted by: SteveK9 | Jul 12 2019 19:51 utc | 28

Really smart move for Turkey. Excellent foresight. Saudi's ought to get some s 400's for themselves. Maybe check that crystal ball again.

Posted by: fastfreddy | Jul 12 2019 19:55 utc | 29

Russia has stopped using SWIFT and US dollars in weapon export contracts -- SouthFront

Russia has stopped using SWIFT and US dollars in weapon export contracts, Head of Russian Defence Export firm (Rosoboronexport) Aleksandr Mikheev told journalists during Army-2019 forum.

He said that Rosoboronexport is now using national currencies instead of US dollars and emplyos a “closed system” of payments.

According to Mikheev, in 2019, Russia delivered $6bn worth weapons and equipment and signed $7bn worth contracts. It’s expected that a total of around $13bn contracts will be signed in 2019.

Posted by: curious man | Jul 12 2019 19:57 utc | 30

oglalla 18:28 and 19:05

Very interested in your point of view, not sure this is the right thread for this although b did post on Turkey's current economic issues re: interest rates.

I agree with your statement "Governments should provide a social safety net via a universal but minimal income" at least in the sense that every citizen has income that can purchase affordable food and shelter, or have it provided, and each can contribute what they are able in return for that.

Your point about lower interest rates puts more currency into circulation, and the result is "as much a tax on purchasing power — what matters — as an explicit honest tax or an explicit high interest rate" seems to apply only to savers (the wealthy, as well as careful non-wealthy), not debtors who make up most of the current population.

To bring it back into perspective vis-a-vis Turkey, it sounds like you are saying that lowering interest rates as advocated by the fired finance central bank head, or raising them as advocated by President Erdogan will both remove purchasing power from the Turks.

To get back to Modern Monetary Theory (MMT) my understanding is that inflation is the direct result of more currency being available than the real economy can produce to be purchased with that currency.

It seems like Turkey could benefit from finding a way to up its economy in ways other than the non-productive military (what have they brought recently except death).

Posted by: jonku | Jul 12 2019 20:01 utc | 31

on the significance of the S-400 and sales to China, Turkey, India, ...

Posted by: SteveK9 | Jul 12 2019 19:51 utc | 29

Good list. So, let me again re-iterate, like half a year ago.

By the design, S-400 is inherently connected, networkable weapon.

Look who is recently purchasing S-400: China, India, Turkey, rumours about Pakistan...

This looks to me like all the "southern shore" of the "heartland" will soon be covered by overlapping field of S-400 installations.

Granted, S-400 in Chinese hands does not answer commands from Turkey and so forth. Today.

Then look at the SCO. Even sick enemies India and Pakistan are racing to enter it. Will it be impossible that one day SCO will assume command of all those isolated today S-400 stations and re-network them, creating an international unified air defense of southern Eurasia?

Posted by: Arioch | Jul 12 2019 20:07 utc | 32

@30 Yes KSA, imagine next stop Lebanon? Game over for Israel..

Posted by: Lozion | Jul 12 2019 20:11 utc | 33

@curious man

Thank you for your kind words.

Posted by: SmoothieX12 | Jul 12 2019 20:14 utc | 34

Erdogan only survived that coup attempt because the Russians tipped him off that was coming. No thanks to the U.S., even though the coup was plotted at the Incirlik airbase that the U.S. shares with the Turkish air force.

Posted by: lysias | Jul 12 2019 20:20 utc | 35

Posted by: SmoothieX12 | Jul 12 2019 18:14 utc | 13

You mean of course F-14 Tomcats with US building a factory in Iran prior to Revolution?
No, there was a British order, which Iran paid up front in part, and Britain is now refusing to refund the monies advanced. I could be wrong in thinking it was the Typhoon.

Posted by: Laguerre | Jul 12 2019 20:25 utc | 36

Making America GRATE again. ;-)

Posted by: arby | Jul 12 2019 20:28 utc | 37

I could be wrong in thinking it was the Typhoon.

There was UK-Iran dispute on Chieftain tanks but no aircraft.

Posted by: SmoothieX12 | Jul 12 2019 20:33 utc | 38

It remains to be seen just how "pro-Russia" Turkey really is.
Turkey has, understandably, always acted in what they perceive as their own interest.
In the past, it was balancing EU benefits while blocking Russia's access from the Black Sea.
However, today, Turkey should think it has a very interesting position regarding energy. Pipelines from Central Asia or the ME (for natural gas) have to go through Turkey as the Georgia/Ukraine route is basically blocked off by Crimea being Russian. Secondly, Turkey itself believes there is significant gas in its part (and Cyprus' part) of the Mediterranean. That, plus Turk Stream, means Turkey can look forward to significant economic benefits from supplying gas to Europe - potentially more in cooperation with Russia/Gazprom than going it alone.
Politically, the US has been eroding Turkish domestic interests for decades with its support of the Kurds in Iraq. Incirlik or no, the failure of the US to address Turkish concerns over suppressing the Turkish Kurds and support from Iraqi/Syrian Kurds is likely a whole lot more concerning than Gulen - and Gulen is a significant irritant as well.
Still, hundreds of years of Turkish fan dancing between Russian and European suitors isn't going to end overnight.

Posted by: c1ue | Jul 12 2019 20:35 utc | 39

It's important to put my first post into its correct context: I was only commenting over the specific quoted excerpt.

Of course Erdogan's economic policy will fail. Of course the Lira will collapse. Of course that the "orthodox" thing to do would be to rise, not lower, the interest rate. That's not the important lesson here. The important lesson is that all of this is only true (or an aproximation of the truth) because Turkey is an neoliberal-structured economy.


Now, talking about the geopolitics.

The USA's position in Turkey is still very confortable: the Turkish economy is on the verge of collapse and the country is one election away from going back to NATO's arms. Erdogan's position is not sustainable: his only choice would be open dictatorship. Yes, kids: a liberal dictatorship is possible -- just ask a Latin American.

The Americans need only to wait. Erdogan's fate is already sealed. Russia must either be considering this a long shot, or is betting Erdogan will be able to set up a viable successor.

Posted by: vk | Jul 12 2019 20:44 utc | 40

Jonku @ 32:

"...To bring it back into perspective vis-a-vis Turkey, it sounds like you are saying that lowering interest rates as advocated by the fired finance central bank head, or raising them as advocated by President Erdogan will both remove purchasing power from the Turks...

It is the other way round: Erdogan sacked the head of the central bank for not lowering interest rates.

Low interest rates are consistent with Erdogan's religious beliefs. Islam abhors the practice of usury (charging high interest rates) to exploit people's need for food, clothing and shelter, in an age when most people were poor and indebted to money lenders.

In the present day, when most Western economies are suffering from the consequences of corporations having offshored production of goods and services to overseas countries with cheaper labour, no trade unions and fewer regulatons, economic activity is now low and financial institutions are trying to stimulate that activity by lowering interest rates on loans. Unfortunately that ends up in real estate speculation, which produces no new goods or services, but ties money up in property and inflates its value, or the money is used by corporations to buy back shares and pay bonuses to a small number of senior employees (who usually have no role or understanding of the corporations' main business).

So yes in most capitalist economies where the creation and supply of money is controlled by banks and the people and corporations who own and run the banks, most people are disadvantaged and made poor by both excessively high and excessively low interest rates. In scenarios of both extremely high or extremely low interest rates, people can be forced to carry excessive levels of debt.

Posted by: Jen | Jul 12 2019 21:00 utc | 41

Sorry, in my comment @ 42, the italics should have closed off at the end of the first paragraph.

Posted by: Jen | Jul 12 2019 21:02 utc | 42

Steve K9, 29

Thanks for that great link on the S-400. It's very funny watching Salesman in Chief Trump hawking the super stealthy F-35 that is now obsolete because of the Russian air defense system. Iran has reportedly also received upgrades to its S-300 system making it a S-400 in all but name only. No wonder Trump decided not to retaliate.

The S-400 is a complete game changer. The only tool left for U.S. hegemony is economic sanctions. They are a very blunt tool that can kill thousands of civilians and send the rest fleeing. Trump wants us believe that the Chinese pay the tariffs and those under economic sanction blame their leaders and will overthrow them. In both cases, just the opposite is true.

Posted by: RenoDino | Jul 12 2019 21:07 utc | 43

NATO does have a point about compatibility

What would happen if a NATO tanks had to rely on an S400 for air defense. It would be mayhem. There is a big advantage to having standard NATO equipment. For example, a French Excocet missile was able to sink a British and severely destroy a U.S. naval ship because it was 'compatible'.

Posted by: Christian J Chuba | Jul 12 2019 21:10 utc | 44

Thanks to SmoothieX12 for correcting my point.

Turkey is not about to collapse. It is an agricultural economy, and so resistant to failure.

Posted by: Laguerre | Jul 12 2019 21:21 utc | 45

When the Turks shot down the Russian plane in November of 2015, I remarked that wouldn't stop what I already saw as the Turkish turn to the East to join with its very longstanding Russian adversary since the West had spurned it one too many times. The immediate sanctions placed by Russia was an almost instant KO causing Erdogan to quicken his already altered course, a choice that later saved his life.

Geographically, Turkey belongs to Eurasia, but Russia impeded Ottoman expansion in that direction and instead wrested lands from it in its several centuries long drive to the Black Sea. Since the USSR's fall, the longstanding animosity and adversarial relationship's been rapidly melting. The Outlaw US Empire claims Russia is trying to recoup its former Empire; but as several noted, that's incorrect. Instead, Russia and its Eurasian partners are forming a combination collective security and commercial alliance which will prove to be far larger & stronger than the previous Russian Empire. Many know of the SCO, but fewer are aware of the CSTO( about which more here ); and at the recently concluded SCO Summit, the merging of CSTO with SCO was discussed, while participants denied it meant the creation of an Eurasian NATO. For an idea of the scope of this rising organization and its infrastructure, check out this item with its globe depicting the world's longest truck route from Shanghai to Hamburg. Your Erdogan sitting in Turkey constantly being told No by the West, then you see what's rising in the East. Where does Turkey's natural national interest lie--West or East?

Such things are called No-Brainers. Seems the West's hubris has eroded their brains till nothing remains.

Posted by: karlof1 | Jul 12 2019 21:27 utc | 46

All the posts calculating the relative costs of missile defense for Turkey vs missile offense for the U.S. are absurd. The U.S. military budget is at least $750 billion this year. I don't have the comparable figure for Turkey, but it's safe to say that it is far far less. The U.S. has a virtually unlimited supply of cruise missiles and does not care one whit about how much they cost. Indeed, using them up is good business for the companies that manufacture them. Turkey's defenses and resources are limited. As long as American soldiers are not being killed in significant numbers, the public will merely sniff and look away.

Posted by: Rob | Jul 12 2019 21:28 utc | 47

This is what happens when you disrespect the sovereignty of nations installing vassals as in the case of the tyrant Shah Reza Pahlavi in Iran, Somoza in Nicaragua, Batista in Cuba, Diem in Vietnam, Banzer in Bolivia. Now, the failed coup in Turkey to overthrow Erdogan.

Posted by: El Cid | Jul 12 2019 21:30 utc | 48

Presumably Volcker cured inflation with high interest rates, but those who remember the time, it also drastically slowed the economy and thus the need for money. Inflation really didn't start to come under control until about 82, by which time, the deficits under Reagan topped 200 billion. It's been my contention that government debt actually cured inflation, by drawing surplus money out of the economy and spending it in ways private investors wouldn't, but which supported the private sector, ie, primarily the military under Reagan.
The problem with capitalism is that money functions as a contract, with one side an asset and the other a debt, but we treat it as a commodity, to mine from society, to save and store. Which means that in order to save the enormous amounts everyone feels they need, enormous debt has to be created. If the government were to threaten to tax out what it currently borrows, people would quickly start finding other ways to store wealth. Given the reasons we save, children, housing, healthcare, retirement, etc, used to be social functions of healthy societies, where we were not all atomized pods, with the baking system mediating most exchanges, it might be useful to go back to that general idea.
As it is today, The Matrix offers a good analogy of how our culture really works.

Posted by: John Merryman | Jul 12 2019 21:57 utc | 49

Regarding interest rates:
The dominant issue is what Turkish debt is denominated in. If it is Euro or dollars, the Turkish interest rate is largely irrelevant except with regards to exchange rate
From what I've seen, half of Turkish corporate debt is foreign currency.
Low interest, however, does help an economy. Unfortunately, what matters more is relative rates. Junk EU bonds have negative yields, Turkey can't hope to compete with that anyway.
Lastly, it is highly hypocritical for US and EU bankster to advocate high Turkey interest rates given the very low or negative prime rates in the US, EU and Switzerland.

Posted by: C1ue | Jul 12 2019 22:14 utc | 50

Good stuff, b. Also, Jean Périer has a short sharp piece on the Turkish S-400 issue today at New Eastern Outlook.

Posted by: spudski | Jul 12 2019 22:38 utc | 51

>> It's been my contention that government debt actually cured inflation,

Price of the house across the street jumped 50% in a few years. Same house. 50% more expensive. That’s inflation. And salaries did not increase nearly that rapidly.

We’ve been subjected to more of the same ever since.

>> by drawing surplus money out of the economy

Yes, government spending displaces private spending. I’m skeptical that the crooks in “government” know the best way to spend any “surplus”.

>> and spending it in ways private investors wouldn't, but
>> which supported the private sector, ie, primarily the military under Reagan.

The “military” is part of “private” sector?? No, that’s probably not what you mean. You’re probably referring to the “private” contractors supporting the MIC. Even so, this is exactly what we shouldn’t spend so much money on. We’ve become a nation of mercenaries in search business. I cannot think of better evidence to generally oppose government spending than to look at the MIC.

Posted by: oglalla | Jul 12 2019 22:41 utc | 52

For anyone interested in meaningful speculation I would suggest the S-400 sale to Turkey is very much desired by NATO and their assorted perfidious partners in crime, in the same way First Lord of the Admiralty Sir Winston Churchill very much desired the transfer of the Goeben and Breslau from the German navy to the Ottomans at the outset of WW1, allowing these two superb ships to 'evade' the British and French navies despite being trapped in the relatively narrow Straights of Messina when the war began, in a position from which they could have arguably been easily intercepted.

The two German battle cruisers ultimately escaped to the Dardanelles and were quickly transferred to the Turks (re flagged), ironically in full compensation for two British built battle cruisers which had already been paid for but had yet to be transferred when the war began. In order to accept this theory you must also consider the strong likelihood that World War I was a war staged by European elites conspiring to murder millions of innocent people from the lower classes, by having them pointlessly charge into a hailstorm of metal. The role played by Edward VII is already known to most people and is even essentially admitted by the British themselves:

The two ships transferred to the Ottomans would remain crewed by German sailors throughout the decisive actions that followed. Renamed the Yavuz Sultan Selim and Midili, they subsequently shelled Odessa thus bringing the disintegrating Ottoman Empire into the war on the side of the Central Powers.

By this ploy the British understood they would earn the opportunity to dismember a dying Ottoman Empire on their own terms at the end of the war, grabbing the unimaginably vast oil reserves held by the Turks in 1914. British and German elites had also hoped to destroy Russia at the outset of the war and by the treaty of Brest-Litovsk in 1917, which tripled the size of Germany, it appeared as though they had largely succeeded. It is hardly surprising then that an important segment of the German elite would have accepted a so-called Truce in 1918, believing their British 'partners' in these genocidal crimes would honour promises made to them in the run up to the Great War.

The only logical explanation for recent US and British behaviour towards Turkey, including a real or perhaps much more likely staged coup against Erdogan, arguably designed to fail from the outset and apparently foiled by a broadcast on Turk CNN, is the desire to push Turkey and Russia into an uncomfortable alliance at the beginning of a Third World War, and from there to be torn apart.

If this is so and historically minded Russians are whispering thusly into the wannabe Sultan's ear, the apparent incongruity of Russian and Turkish interests becomes much less apparent.

The Masonic Young Turks who controlled the Ottoman Empire in 1914 were much more favourably disposed to the Entente Powers at the beginning of the Great War. By this maneuver Churchill, most likely with the connivance of German Admiral Wilhelm Souchon, managed to change the course of history and solidified Anglo-American (Elite) hegemony for the remainder of the 20th century. By consciously reopening old wounds they mean to re establish their hegemony, via their control of oil, for the 21st century to follow.

The link below provides some useful information before being twisted into disinformation towards the end, targeting Western Muslims specifically, from a CIA linked organization called

How Britain destroyed the Middle East

Posted by: C I eh? | Jul 12 2019 22:44 utc | 53

Correction to my comment above, the Treaty of Brest-Litovsk was signed March 3, 1918.

Posted by: C I eh? | Jul 12 2019 22:55 utc | 54


Basically public debt is used to support private wealth. Where would those trillions be invested otherwise? The parimutuel wagering of the derivatives market? Running the price of Apple stock up further?
I suspect it goes back to the New Deal, in that Roosevelt wasn't just putting unemployed labor back to work, but unemployed capital, as well.
Econ 101 tells us money is both medium of exchange and store of value, but does it work to confuse them? In the body, blood is the medium and fat is the store. Would a doctor confuse them? For cars, roads are the medium and parking lots are the store. Would a highway engineer confuse them? Do economists have some secret the rest of us don't know?
As a medium, the functionality of money is in its fungibility. We own it like the section of road we are using, or the fluids passing through our body. It is a public utility, like roads. Not that politicians can be left in charge of it, as it is experienced as quantified hope, thus the desire to save it, but politicians live and die on the hope they inspire, so printing money is a cheap high.
People are goal oriented, but nature is circular. As my father used to say, "You can't starve a profit." We have to learn to give back, not just take.

Posted by: John Merryman | Jul 12 2019 23:08 utc | 55

The game the people in charge are playing is one dimensional chess. Always move forward. Only losers step back.

Posted by: John Merryman | Jul 12 2019 23:12 utc | 56

The US MIC want a monopoly on weapons sales to all NATO nations, Frank Nitty [the mob] had the same caper going in Chicago speakeasies way back when, "You buy my hooch or you sleep with the fishes" Trump has the same MO unfortunately for him his bluff is being called by too many sanctioned and threatened nations, unless his threats are effective then the US credibility is shot. The exceptional Nation will be seen as an impotent paper tiger. That would be wonderful.

Posted by: Harry Law | Jul 12 2019 23:15 utc | 57

The game the people in charge are playing is one dimensional chess. Always move forward. Only losers step back.

You wish.

Posted by: C I eh? | Jul 12 2019 23:32 utc | 58

Oglalla @ 53 - the increase in the price of real estate is not inflation, it is asset appreciation (or "asset inflation") which you misconstrue as simpe price inflation. True, it is not positive for society when fewer people can afford to buy homes, except through riskier ("Financially leveraged") debt instruments that make the potential for default more likely while increasing the financialisation of the economy.

However. the downside impacts when the asset appreciation bubble bursts are deflationary and price depressive rather than inflationary. See the 2008 recession for most recent example. The debt writedowns associated with asset depreciation remove money from the economy.

It is true that government spending "displaces" private spending but this also is not necessarily a negatve impact. Government spending on healthcare, pensions and infrastructure have positive, beneficial social and economic impacts.

Spending on military equipment may be bad societally and bad economics when a nation both builds and consumes large amounts of military material which require taxpayers to replace but military spending without consumption generally has the same positive economic impact as any other form of government investment in the economy especially when the products can be sold profitably to foreign governments.

That is why we see the two capitalist nations producing the mostest bestest military equipment, IE Russia and the US, competing so hard today to sell their nifty mass death producing machines to other countries. In fact, one is tempted to view the proxy wars in Syria, Iraq, Afghanistan and elsewhere as commercial marketing advertisements for the sale of more Russia and US death stuff to other countries.

Posted by: donkeytale | Jul 13 2019 0:00 utc | 59

The problem with the neoliberal capitalist economy is the benefits of public spending are inequitable spead through the instruments of financialisation to the elites who own the means of production and appreciable assets (stocks, real estate, collectibles) also known as surplus wealth.

The first step to remedy is an equitable rebalancing of assets and incomes through income taxes, wealth taxes, higher wages, minimum wages.

Posted by: donkeytale | Jul 13 2019 0:06 utc | 60


"You wish."

Like bacteria racing across a petri dish.

Posted by: John Merryman | Jul 13 2019 0:30 utc | 61

>> Econ 101 tells us money is both medium of exchange and store of value,
>> but does it work to confuse them? In the body, blood is the medium and
>> fat is the store. Would a doctor confuse them?

Maybe it’s better, for the sake of trying to make your analogies more analogous, is to think of the *payment systems* as the “blood” or the “road” for money. Payment systems, blood, and roads are the “medium of transport” for money, carbs, or goods, respectively.

>> Basically public debt is used to support private wealth.

Public debt stems from failure to tax enough to cover spending. Progressive taxation was once used to thwart if not erode concentration of wealth and political power. In its absence, an oligarchy re-emerged and bends the government ever closer to serving them instead of the masses.

>> Where would those trillions be invested otherwise?

About these trillions, conjured into existence by debt mostly misspent... I would not dig a deeper hole. Instead, I would place a confiscatory tax on billionaires’ wealth, as it almost all wrongfully accumulated. Where it’s not enough to cover spending, I would cut spending. I would insist on balancing the budget. We never have real arguments over spending any more — no fiscal discipline— because the taxation is done stealthily. So we go 14 years without audits and then fail that, because there are no political consequences to pissing away money.

Taxing the money without spending it makes the money disappear. But, the purchasing power does not disappear. The purchasing power would shift to the masses not subject to the tax, because the purchasing power of their savings would increase.

>> I suspect it goes back to the New Deal, in that Roosevelt
>> wasn't just putting unemployed labor back to work, but unemployed capital, as well.

Back then, AFAIK we built more infrastructure, schools, and dams and less war stuff. Apparently, we had more brains back then.

Posted by: oglalla | Jul 13 2019 0:42 utc | 62

I’ve learned the following from an interview with a man named Mark Sleboda, a Moscow-based security analyst. They are not widely-known facts but play into Turkey’s S-400 purchase.

During the Gulf War with Saddam Hussein, his French-made air defense system was shut down remotely. They can’t do that with a Russian system.

During the Turkish coup, air force pilots in Western fighters tried to shoot Erdogan. The Turkish Western-made air defenses wouldn’t work against their planes. A Russian air system would.

Turkey’s air force is one of its most Westernized parts of the military because it uses a lot Western equipment and receives a lot of training in the West.

The S-400 is a way to help protect against Erdogan’s own military.

Posted by: JOHN CHUCKMAN | Jul 13 2019 0:45 utc | 63


"Apparently, we had more brains back then."

Very true. They understand banking functions as the circulation system of society and only skimmed off enough that didn't do too much damage to the larger organism. Now the ones in charge don't have enough sense to understand that even parasites need a healthy host.
The government doesn't even try to budget. They just put together these enormous bills, add enough pork to get the votes and the president can only pass or veto it.
GHW Bush suggested a line item veto, but that had an ice cube's shot in hell of passing the legislature, as it would have gutted their ability to set priorities.
To budget is to list one's priorities and spend what can be afforded. They could break the bills into all the items, have every legislator assign a percentage value to each one, put them back in order of preference and the president draws the line. "The buck stops here."
That would leave prioritizing with the legislature and leave the president with overall spending responsibility. Since he wouldn't want to be known a spendthrift, a fair amount would fall off the bottom.
Yet what would Wall St do, without the safe refuge of government debt. Then we would really understand what powers military spending and why we need to blow up other countries.

Posted by: John Merryman | Jul 13 2019 0:59 utc | 64

What logic did the 99% economist use when they think higher rates combat inflation ?

Posted by: HW | Jul 13 2019 1:01 utc | 65

FWIW the consensus that interest rates have much to do with inflation at all is starting to crumble. See the enthusiastic bipartisan response to AOC criticising the Phillips curve, for example.

A few other commenters have pointed towards theories that sound like the widely discredited Quantity Theory of Money. A few others have pointed to MMT but done a poor job of explaining the MMT view on inflation. Here is a better reference:

Posted by: UserFriendly | Jul 13 2019 1:16 utc | 66

@John Merryman #50

I think you're dead on. The fact is that there is a lot of money tied up in the assets, bank accounts and tax shelters of the very rich; that money would do a lot more for the economy anyway if it was being spent (even if on illegal wars and spying on the citizenry). Instead it's parked and hoarded, being used to buy yachts, properties from out of under the ostensible middle class, and even to build doomsday bunkers, which is of course a total waste.

Posted by: KC | Jul 13 2019 1:17 utc | 67

Blowing bubbles! When interest rates are reasonable, what they would call "high" in our butt backward times, people tend to save and build capital through interest earnings. Reasonable returns from reasonable investing follows from this environment.When the cost of borrowing is falsified, like we have been doing for many years by keeping interest rates near zero, money flows instead to risk assets and you get bubbles in stocks, commodities, housing...everything. Only the wealthy and connected can benefit from this fake largess....and every bubble pops eventually...always. As these bubbles expand, more and more inflow is needed to keep them inflated and give a return. Money that should be used for infrastructure, hiring, educating a workforce, etc...all is wasted in the maw of the money vortex. Zero rate interest is one of the most insidious scams ever played on civilization.

Posted by: Indrid Cold | Jul 13 2019 1:18 utc | 68

66 - Higher rates, among other things, tighten up the lending market making people (and the rich/corporations) more likely to avoid big expenditures on credit. Demand for things goes down and prices follow. In theory anyway.

Posted by: KC | Jul 13 2019 1:19 utc | 69

@66 The Volcker shock. Which ignores the real cause for the inflation spikes in the 70's, oil price hikes caused by various wars and embargoes in the Middle East.

Posted by: UserFriendly | Jul 13 2019 1:25 utc | 70

@Indrid Cold (Mothman Prophecy reference?) #69 -

You should add/clarify that interest rates are near (or at) zero % for the ginormous banks and investment houses or for very large sums of money. I know there are some gimmick promotions out there for cars and credit cards, but those quickly become 24%+ past the initial term, and 4% is pretty normal for a home. Still, not zero for 'the rest of us' - just Wall Street.

Posted by: KC | Jul 13 2019 1:32 utc | 71

Thanks for pointing that out KC, I should have been more clear.

Posted by: Indrid Cold | Jul 13 2019 1:34 utc | 72

It's like the heart telling the hands and feet they don't need so much blood and should work harder for what they do get.
They can only cheat on the foundations, in order to store more gold in the penthouse, before it does more than just trickle down.
Though a big part of the problem is trying to store value as abstractions, rather than either tangible assets, or stronger social connections. While this does run rather deep into our views of reality, it is exacerbated by those taking advantage of the situation.
Consider our ideology of individualism, as opposed to various forms of everything from communitarianism, to tribalism. As individuals, we do need to relate to those around us, but the more we become isolated, the more the governments and the banks can control us, as well as siphon value out of most of the money based social interactions.
If we really learn to plug into, not just the people around us, but the physical environment, much as a book or a tool becomes an extension of our minds and bodies, then we will see the reality much more clearly.

Posted by: John Merryman | Jul 13 2019 1:46 utc | 73

Keep in mind much of that money Opec was getting out of the economy, went back into Wall St, to invest.

Yet what we had in the 70's was "stagflation," so it wasn't so much an issue of slowing an overheated economy, that is the usual cause of inflation, but simply more money than necessary flowing through it. Volcker's shock only slowed the economy further. That unions wanted more money was as much or more a case of trying to keep up with inflation, than a cause of it.
Given one way they have of raising interest rates is for the Fed to sell bonds it is holding, how different is that then the Treasury simply issuing more bonds? Then the money doesn't just vanish, but gets spent on make work projects, like the military.
If people had healthier social connections, this value could be invested more organically, as those on the local level certainly could find uses for it, than just throwing it out from Washington.

Posted by: John Merryman | Jul 13 2019 1:59 utc | 74

@John Merryman - Amen

Posted by: KC | Jul 13 2019 2:01 utc | 75

Banksters always cry for higher interest rates to "fight inflation." What they really want is more profits. The FED is going to lower rates and has and there has been no huge inflation due to lower rates.

Posted by: Jim Mooney | Jul 13 2019 2:06 utc | 76

that shows you how much 1 us$ will buy of turkish lira over the past 10 years.. as one can see the trend does not favour the turkish lira.. that turkish companies borrow in us$ or euros works for exporters, but not for importers.. generally it sounds like a scary proposition either way and would be best to borrow in lira, but i am not sure if they can for large sums of money.. this is the safest way for a country to not be manipulated by currency raids or the kind george soros pulled on the pound many years ago and of course it was the same deal in the late 90's with the asian and russian currencies..

turkeys central bank is beholden to the bis, imf and etc. etc.. it is hard for them to have independence and to be able to use the systems in place that are being used collectively by many other, but not all countries..

i guess what i am trying to say is i see it as a rigged system that favours the big players with voting rights and sdrs and etc. etc.. it is another way of controlling a country thru a back door - called 'the central bank' which has to abide by an agenda set somewhere else in some other far away land...

Posted by: james | Jul 13 2019 2:29 utc | 77


"The FED is going to lower rates and has and there has been no huge inflation due to lower rates."

The trick has been to keep it out of the Main St economy and in the Wall St bubble. If a loaf of bread goes up 50 cents, people think they are poorer, but if the stock in the bread making company goes up 50 cents, people think they are richer. Where do you think politicians like the inflation?
The medium is the money, but the reality is the tangibles, so it's not so much the tangibles go up and down, but the money fluctuates relative to them. While the effect has been a wild party on Wall St, where the Fed just pours more vodka in the punch bowl, whenever it starts to run low, it seeps out where investment in Main St happens, like real estate, or simply trying to run a business, where the people with the bottomless pockets can just run you over.
It used to be the function of the Fed to take the punch bowl away, when the party got going, because money is the medium that enables a market to function. When it is used to flood the economy, in order to then siphon real value off the top, the system is diseased. It's like high blood pressure compensating for the clogged arteries of a banking system that is stiffing the regular economy. The hands and feet rot off, while the heart bursts.

Posted by: John Merryman | Jul 13 2019 2:54 utc | 78

Turkey tried in vain to join the European Union, to no avail (Muslims need not apple). Yet, it pays with blood and treasury to defend those who exclude and shun Turkey. Poland gets greater respect from the Christian West than Turkey who put itself in danger deploying missiles at the USSR. Turkey's best choice is to integrate itself and become the Eurasian country that she is just like Russia.

Posted by: El Cid | Jul 13 2019 2:59 utc | 79

off topic: (Jen @ 22 from previous post):

I did not, of course, mean to imply that there was a shortage of barbarism on the Western side. But I was not aware of the statements you made in your last paragraph and would appreciate a reference or two on histories that document such assertions. Ta.

"The depravities of Western Christians were enough to turn Orthodox Christians away from Rome and to prefer the rule of the Ottoman Turks when Sultan Mehmet and his forces finally entered Constantinople in 1453 and beheld a city that had long been in decline since the last outbreak of bubonic plague, way back in the mid-1300s."

Posted by: Nuff Sed | Jul 13 2019 3:07 utc | 80

Commenters here are demonstrating why bourgeois economists like to propagandize inflation so much: it makes people run in circles.

Inflation is devoid of meaning: it's just an algebraic relation between two variables -- money vs. commodities.

It's important to clarify here that each country has a methodology in measuring inflation (official inflation); many countries have more than one index for inflation. All the countries have separate indexes for some specific kinds of commodities. Regardless of the differences, all countries will rely on a circa 500 very essential commodities to make up their "main" inflation index (or, to shorten, simply "inflation").

Inflation is always given as a percentage, and always year to year (there are long term, accumulated inflation indexes, but they aren't used in the mainstream media).

If you want to lower inflation, you can do three things only:

1) lower the volume of money in circulation -- in a fiat currency era capitalism, the only way to do it in purely monetary terms (i.e. not using State brute force, a.k.a. "capital controls") is for the Central Bank of the target country to increse its base interest rate. Since a Central Bank, in a fiat currency system, serves as the obligatory lender of last resort, then it is guaranteed all the private financial sector will have also to rise their own interest rates. This will make money more expensive, therefore relatively more rare in the marketplace;

2) increase the volume of commodities. The only way to seriously increase the volume of commodities without imports is thorugh investment in productive capital -- infrastructure, factories and new technology. This is what China is doing. Neoliberals don't even consider this an inflation lowering tool because its neither fiscal nor monetary in nature: in their view, it's up for the "animal spirits" of the individual capitalists to decide when, what and how much will be invested. Seriously, they don't even have a theory on production -- for the simple reason they don't have a theory of value (like Marx has). In fact, contemporary bourgeois economics don't have a profit theory either (the closest they have is the "Return on Investment", R.O.I); the Austrians simply state the abstract passage of time creates wealth by itself (an interest theory of wealth).

3) do both at the same time frame.

The USA is a unique case, because its fiat currency happens to be the world fiat currency: everybody needs Dollars. If a country wants to trade with another country, they have to first buy Dollars (usually, they do it in London) and then, with these Dollars, buy the other country's (the exporter country) fiat currency to complete each transaction. That means that, no matter how much the USA wants to print: the rest of the world is forced to sustain its value, i.e. buy them all.

This "buy them all" is usually done through purchases of debt from the US Treasure. So, printing money doesn't necessarily increases inflation in the USA; however, they will pay with deindustrialization, since that means that, overtime, it becomes cheaper to produce real things out of the country.

Historically, that happened sometime around the mid-1980s. Nowadays, the USA is essentially a financial superpower with isles of manufacturing excellence (mostly in the industrial-military comples and the "Big Tech"). To maintain those isles, the USA is essentially resorting to domesticated socialism (guaranteed contracts by the Pentagon).

But that's not Turkey's case. As a typical Third World country, Turkey is indebted in Dollars, is deindustrialized and at the mercy of short-term, highly speculative capital. The choice is clear: either it raises interest rate and prays the markets are generous or it maintains/lowers the interest rate and see the Lira collapse. Brazil was in the same situation in 1999, and was only saved because the USA forced its main creditors (mainly, big American banks) to keep the soon-to-come Dollars from the IMF in Brazil ("bail in"). The reason the USA did this power move against its own banks was because there was an apocalyptic thesis at the time that Brazil was some kind of last gate to Hell: if it fell, the whole world would end (because of the 1997 crisis was spreading).

Posted by: vk | Jul 13 2019 4:44 utc | 81

With inflation there are a few other factors to consider. During the Wiemar republic in Germany inflation was pushed by the printing of money to pay massive war reparations which lead to WWII. Versailles set up a 20 year cease fire punishing Germany into one of the greatest inflationary debacles in the world history.

vk @ 93
To maintain those isles, the USA is essentially resorting to domesticated socialism (guaranteed contracts by the Pentagon).

In other words, National Socialism. I like to call it what it is, fascism.

All the current inflation in the US appears to directed into the pockets of the highest earning members of society. All the cheap money is borrowed and poured into the stock market. There are islands of inflation in some places of the country. We saw those deflate in 2009 and they have fully reinflated.

Some sectors and areas in the US never really inflated or deflated in that time frame which was mostly in Trump country which helped get him elected. The coastal elites I live around have enjoyed the fruit of their pocket expansion. The newcomers are hard pressed, the young should just move on to as they have no chance, the poor are pushed aside. San Francisco is a fine example with the elites battling the poor in the city. The dynamics there have changed radically as the tech money has ruined the city.

The system is badly manged and broken. It obviously is managed by and for the very few.

Posted by: dltravers | Jul 13 2019 5:14 utc | 82

@Rob 48:

"The U.S. has a virtually unlimited supply of cruise missiles"

Ah, that key argument-demolishing word 'virtually'. Yes, like we used to say that the world has a 'virtually' unlimited supply of oil; or the atmosphere has a 'virtually' unlimited ability to absorb our pollutants safely...

What 'virtually' means in these weasel-word contexts is: We'll be up against those hard limits before too long; but let's not think about that just now... And so for USAmerica and its 'virtually unlimited' - hah! - supply of cruise missiles.

Posted by: Rhisiart Gwilym | Jul 13 2019 7:17 utc | 83

Making America GRATE again. ;-)

Posted by: arby | Jul 12 2019 20:28 utc | 38

Making America GRAZE again. :-D

Posted by: Arioch | Jul 13 2019 7:17 utc | 84

PS to 85:

Also "caring not one whit about how much [things] cost" is precisely what has brought the parasite gangsters-in-charge in USAmerica to the situation that they now face, where their host state is on the verge of economic collapse; which cannot now be delayed for much longer: As with the 1989 collapse of the USSR; but on steroids; any day now. Can't happen too soon. Keep on with the "inept dysfunctionality" (Kim Darroch) Donald! You're doing exactly what fate marked you to do...

Posted by: Rhisiart Gwilym | Jul 13 2019 7:35 utc | 85

Dltravers @ 86
Aah yes ! ‘The grapes of wrath’ Steinbeck?
Bloody good book, very prophetic!
The US should learn by that story now.
If you exploite the land and people, it will come back to bite you !
This lesson is relevant within the US and regards it’s attitude toward the rest of the world.
America has a mistaken definition of wealth and profit.
A mistaken definition of ‘America’s best interests ‘

Posted by: Mark2 | Jul 13 2019 7:41 utc | 86

Spending on military equipment may be

Posted by: donkeytale | Jul 13 2019 0:00 utc | 60

....may also be a driver of hi-tech engineering.

For example internet, which we today take for granted, was conceived as American military project to protect their military communications from Soviet nukes.

I do not think today US MIC is capable of it, but in proper economy any break-through project, be it fossil extraction, or superhighways or skyscrapers constructions, or internationally competitive weapon business, it can create new "public know how".

Or it can not. It seems in USSR transfer of military know how to civic sector was very limited.

Posted by: Arioch | Jul 13 2019 7:45 utc | 87

Banksters always cry for higher interest rates to "fight inflation." What they really want is more profits. The FED is going to lower rates and has and there has been no huge inflation due to lower rates.

Posted by: Jim Mooney | Jul 13 2019 2:06 utc | 77


High interest rates are irrelevant to increasing banks profits. In fact they hurt profits by reducing the number of people eligible for loans. Actual inflation is closer to 9% and banks pay less than 1% on savings deposits. While loans are earning less than real inflation, banks create the money for loans out of thin air and then sell off the mortgages/loan at a sweet profit. There is no risk, they are loaning money that did not exist until they made the loan. Its the volume of loans that count more than the interest rate on the loan.

The Fed is actually decreasing the money supply while cutting rates. Every recession and depression in history is a result of a decreased money supply. Real Household income is declining even with the fudged inflation figures. If realistic inflation figures were used income would be in free fall and GDP would be negative. The effects are already being seen in purchases for goods at the retail level. Essential Services (health, mortgages, insurance, utilities, taxes) generally have to be paid otherwise you end up bankrupt, foreclosed, dead or in jail. This will follow soon.

U6 unemployment is over 7%. Over 20% of people of working age are not working and not counted. This explains why labor participation rates are declining.

Its a sick economy. Fortunately most people are too stupid to know. For younger workers this is normal, they have never known anything else. The decline started in the late 70’s and accelerated when Sir Greenspan took over.

Good times for the elites though as the bottom dwellers are forced to buy their services and pay for them with more debt. At some point it comes to an end. Trump is hoping to delay until after the election. The elites will then have some wonderful buying opportunities as they will be the only ones with cash left to buy the depressed assets. They make a killing off a financial crisis

Posted by: Pft | Jul 13 2019 7:48 utc | 88

The Turkish Lira is not doing that badly really.

1 Turkish Lira (TRY) is now with 1.20 Chinese Yuan (CNY).

This is higher than a year ago when the two currencies were 1:1.

Who is Turkey's biggest trading partner anyway?

Posted by: Julian | Jul 13 2019 9:25 utc | 89

No doubt the Big E will get his cut from Israel, SpartUSA and other EU partners when he lets them get their hands on it to pour over.

Posted by: TFS | Jul 13 2019 10:06 utc | 90


I have major doubts on the US military's ability to sustain even a limited scale war considering they are already having a lot of trouble sourcing materials and manpower despite their $1 trillion/year budget.

Posted by: Jonathan | Jul 13 2019 10:45 utc | 91

One more issue with "cost analysis" is that it assumes "passive defense".

Typical American mindset. We produce assault weaponry at out leisure, transport it across the world at our leisure, shoot it at our leisure and if our mood changes cease it at our leisure.

Mindset of nomads free from cause-and-effect concept.

The point of AD is not winning attrition war, it is preventing sudden and instant devastation, preventing blitzkrieg. Preserving counter-attacking weapons. And turning war into attrition mode.

Now, how can Turkey counter-attack? It can overrun NATO bases like Incirlik with tanks, for example. It can attack Kurds or even Israel. It can attack supply routes to US occupation zones in Syria and maybe Afghanistan. It can attack Saudi from within Qatar.

Americans tend to think about wars like about passing by a trash can. Maybe you throw litter into it, or maybe into next one, or maybe dump onto the ground, or maybe bring home. But except for position of that litter, which is under their control, nothing changes, no any consequences possible.
In this mindset they can reflect "can we casually produce enough litter Tommyhawks to throw them into Turkish trash can?" with Turkey imagined as a totally passive non-entity.

This assumption is very soothing and simplifying, but it is not always true.

Posted by: Arioch | Jul 13 2019 11:24 utc | 92

Nuff Sed @ 81:

The population of Constantinople when Mehmet the Conqueror and his forces entered the city in 1453 was about 50,000, down from 800,000 in the 9th to 10th centuries; 400,000 in the first decade of the 13th century at the beginning of the Latin Empire; and about 70,000 in 1282 when Michael VIII Palaeologus died. The Black Death hit the city in 1347.

After the 1350s, things were pretty much going downhill for the Byzantines once the Ottoman Turks established their capital in Edirne and cut the city off from much of the rest of the Balkans, at the same time cutting Constantinople off from Anatolia. By 1380, the Byzantine Empire consisted of Constantinople and a few enclaves in parts of Greece and northeast Anatolia.

The city was sacked by Fourth Crusade leaders and their armies, and a Latin Empire was proclaimed in 1204. During the period the empire lasted (1204 - 1261), it was badly managed, the population decreased and Constantinople suffered from food shortages even with a reduced population. Because of this history and various conflicts that arose between the Byzantine Empire and western European states over the centuries when the Crusades took place, Orthodox Christian populations did actually prefer Ottoman rule (at least when the Ottoman empire was growing and becoming more prosperous) to western Christian rule. Christian populations at least were not compelled to convert to Islam; it's quite possible that Ottoman rulers preferred that they not convert as they depended on non-Muslims paying jizya tax.

Posted by: Jen | Jul 13 2019 12:09 utc | 93

#93 Thanks for that.

A lot of previous comments make no sense. Taking the cost of an S400 battery and dividing that by the number of missiles supplied with it ... does NOT give you the cost of a missile. The radars and control units are not free. I tried to find the cost of the missiles used with the S400 but could not.

I think you are correct in stating that these systems are designed to preserve your ability to counter-attack in the case of a sudden attack. Generally think offense is a lot cheaper than defense. If Turkey were actually attacked by the US ... seems almost inconceivable, they would need some plan to go on the offensive. It’s even more true for Iran.

In both cases, I think the damage that they could cause would be so great that it would only make some sense in case this was an existential threat to the US (of course there is no such thing, and in fact the US has no enemies, except its own ‘deep state’).

So, it’s more economic warfare. I don’t know how far the attacks on Venezuela, Iran, and maybe Turkey can go before China begins to act. They seem to want to keep their head down, and hope the US comes to its senses. Maybe that will happen. Same strategy seems to apply to Russia, but they are more ‘active’ in opposing the ‘empire’.

Posted by: SteveK9 | Jul 13 2019 12:10 utc | 94

HW @ 66, KC @ 70:

Theoretically higher interest rates also benefit savers. In addition to tightening lending and forcing people and businesses to reduce their spending, higher interest rates encourage people and businesses to save or divert more money into savings accounts or cash or other investments.

However if interest rates are too high, then businesses and households can end up being too conservative in their spending, demand for products and services drops, businesses don't generate work and jobs, and with demand being low, those jobs that do exist might end up being terminated. High levels of unemployment might result.

In most capitalist economies, the basic economic dilemma most politicians face is whether cutting down on inflation by tweaking interest rates and reducing money supply and flow is more important or less important than maintaining employment levels. Whichever seems more important often reflects politicians' ideology and what they value more than what the situation actually needs.

Posted by: Jen | Jul 13 2019 12:24 utc | 95

The US DoD doesn't get much 'bang for the buck' these days. What does an F-35 cost? How much was missing when they tried to do an audit recently? F-35's and A/s carriers and all that look shiny and impressive. But that's US leaflet, flyer and brochure-propaganda at work. If it actually does what it advertises is almost an externality. You know -- the loss is a few years down the road, is a guy from a lower class, and besides -- gets us fresh money for 'new hi-tech developments'. In short: it's a racket, to quote one who saw it up close & personal.

The same goes for Israel's Iron Dome. Iron sieve's more like it.

That's why Israel wants American bodies to do the fighting and the dying. Israel's greatest asset today is the war-mongering UK, and through it, the US. That's my personal opinion. The UK is just totally toxic. Look what they're trying to do vis-a-vis Corbyn. If you do, you know where the interests are, and where the leverage. Also, after all, the Russophobia is very much a UK(London)-originating operation.

Posted by: bjd | Jul 13 2019 12:35 utc | 96

Bjd @ 97
Absalutly bang on with all you say there !
The U.K. has become a clearing house for all the worlds curupt money ! Plundered from the worlds citizens. From London the money is disapered into hidden accounts and used for the most amoral investments we could possibles imagine. This transcends nationality.
A spin-off benifit of this is- - the more poor people that are killed by war, starvation and disease the better the elite like it ! And we know who they are.

Posted by: Mark2 | Jul 13 2019 12:58 utc | 97

@Posted by: Arioch | Jul 13 2019 11:24 utc | 93

Typical American mindset. We produce assault weaponry at out leisure, transport it across the world at our leisure, shoot it at our leisure and if our mood changes cease it at our leisure.

We....Thus you are really American...not Russian, as you were assuring a female commenter at Smoothiex´s time ago, that one who soo after was banned by Smoothiex...

Well, consistency is not yours, one would say....

After they discovered themselves all those US NAVY guys here around the thread of the US spy drone downed by the Iranians, I wonder how many more of you, US military, are part of main commentariat at this one and those associated US military blogs...

Posted by: Sasha | Jul 13 2019 13:24 utc | 98

Sasha@98. Ok you got me-ex U.S. Navy who served on a tin can swabbing decks and chipping paint.

Posted by: morongobill | Jul 13 2019 13:53 utc | 99

@ Posted by: Jen | Jul 13 2019 12:24 utc | 96

Yes, if we isolate all other variables, higher interest rates makes the owners of money richer, because higher interest makes money more expensive. More expensive money means you can buy more commodities with less money than before (relatively). To put it simply, the owner of money now has a more expensive commodity in hands.

However, money's use value is precisely that of being the universal commodity: a commodity that can be exchanged by any other commodity. If you increase interest to the roof for too long, you won't have production anymore: you'll have a lot of money, but nothing to buy with it in the marketplace. This is what happened with the Third World countries after the 1990s, when they adopted neoliberalism (Washington Consensus) -- including Turkey.

As a result, those countries now put themselves in a situation where any currency crisis automatically translates into a fiscal crisis. This is because they believed they could prosper without industrialization, only with the capital accounts. The catch here was that, since they were poor countries, to attract foreign capital you needed stratospheric interests rates on national debt, which meant they became essentially dependent on short-term capital flows just to stay afloat.

In the 1990s, there was the illusion this could work because it was a time there was plenty of money in the world marketplace: Japan and the USA were just beginning to unleash their pension funds money, so there was plenty with which those "emerging economies" (this very term was coined around this time, precisely to sell those pension funds the idea that some Third World countries were profitable to invest). This illusion disappeared with the 1997 crisis, which culminated with the almost bankruptcy of Brazil in January 1999 and Argentina in 2001.

It's only some microcountries such as El Salvador that can (barely) survive with this system. But in the case of El Salvador, the scheme only works because it is a microcountry which has 10% of its adult population living and working in the USA: they remit their salaries (denominated in American Dollars) to their home countries in order to sustain their families, which guarantees a constant flow of Dollars to the country. Since the country is small, this flow is kinda sufficient to sustain the budget. But El Salvador is a very poor country, and this structure essentially sealed their fate: they will be poor forever.

Posted by: vk | Jul 13 2019 14:10 utc | 100

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