Transcript 

Chris Martenson:    Welcome to this Peak Prosperity podcast. I’m Chris Martenson, your host and it is June 15th, 2016. And with all that has been going on in the world and the media’s steadfast insistence in showing you relevant information – you could be forgiven for missing perhaps the biggest developing story of our times. It is one that could end in the complete destruction of the United States and perhaps world civilization. Now that’s a load of hyperbole, right? I’m just engaging in fear baiting, right? Well, what if NATO generally and the US specifically were constantly provoking Russia towards war? And what if that war actually emerged? In fact, it was just Monday of this week on June 13th that NATO announced it will deploy four multi national battalions to Estonia, Latvia, Lithuania and Poland. The justification? Russia’s so-called invasion of Ukraine. It is not hyperbole to say that a war with Russia not only could, but almost certainly would end very badly for all concerned, including the United States. To shine a much needed bright spotlight on this developing situation we have  with us today Dmitry Orlov. He is one of the very best observers and commentators on the US/Russian situation that I know of. I love his work. Dmitry was born and raised in Leningrad in the former Soviet Union, and immigrated to the United States in the mid 70s. So, he was an eyewitness to the Soviet collapse over several extended visits to his Russian homeland between the late 80s and mid 90s. In 2005 he began writing extensively on the subject of the approaching collapse of the United States and the many similarities and differences between the post American and the post-Soviet experiences.

Dmitry argues that the collapse of the US, although inevitable, is survivable given the right attitude and some timely preparation. He is the author of Reinventing Collapse. The Soviet Experience and American Prospects, written in 2011, and he runs the blog Club Orlov at cluborlov.blogspot.com. I am quite excited to have Dmitry on the show today, because of his unique perspective on the US, Russia and if we have time to explore the crazy circumstances of today’s financial system. Welcome, Dmitry.

Dmitry Orlov:    Great to be with you, Chris.

Chris Martenson:    Well let’s begin with the piece titled a Russian warning posted to your site as well as many others and signed by yourself and seven other prominent people with Russian heritage. It was really a warning to Americans generally and American leadership specifically. What was that warning?

Dmitry Orlov:    Well the warning is that the United States is sleepwalking towards a nuclear confrontation with Russia. And its astounding in its stupidity this approach. What is going on really is an effort by  the US military and by NATO officials to extract as much money as possible out of Eastern Europe to continue financing weapons, and generally extract military spending out of Europe. It doesn’t matter what the affect is, they think, because Russia won’t respond, and we get to play around and you know tear up the soil in these poor Baltic states that don’t really matter at all. But the fact is it could be one little mistake to trigger a nuclear confrontation. The danger point is very close, and the other thing that they are missing is that the Russians are looking at this. Not the government officials because the government officials take this all in stride and don’t think it matters all that much, but the Russian population is beginning to prepare for war, and that is a very serious change. That change in public opinion in Russia is palpable.

Chris Martenson:    Let’s put this in context for listeners who maybe don’t understand what is going on here. Let’s imagine that we have put and this has actually happened, hundreds of troops and armored vehicles in Estonia. Right at the border, actually, with Russia. That puts it less than a hundred miles from St. Petersburg second largest city in Russia. Let’s contextualize this. This would be like Russia having an equivalent number of hundreds of vehicles and troops in Sag Harbor, Long Island less than 100 miles from Manhattan. I trust people listening can appreciate that the US might not take a keen view on that. How is Russia interpreting this, do you think?

Dmitry Orlov:    Well Russia has been invaded many, many times throughout its history. The typical ploy when being invaded is to use the terrain to Russia’s advantage. Basically to invite the invaders in. Invite them a few thousand kilometers in and then slaughter them. So the Russians basically are preparing to do that because because that’s the traditional thing. Since the other invasions things have changed. History has moved along and the weapon system now exists so that if Russia were attacked the United States mainland would have been attacked about 30 minutes later, and millions of people would be dead. That is the difference.

Chris Martenson:    As well that is thinking about conventional or even nuclear but a kinetic war and of course as well as other countries we all have different means at our disposal. There could be a cyber warfare. There could be information wars. There is a variety of ways to take down grids, do things. It is a highly complex technological society and there is more than one way to skin this cat, isn’t there?

Dmitry Orlov:    Well yes, and Russia is no slouch when it comes to electronic warfare. It is quite far ahead of the United States in that. Quite far ahead in terms of cruise missile technology. The US really doesn’t have anything comparable to the caliber  that Russians have which can be launched from small craft or submarines anywhere and flies thousands of kilometers and hits a target precisely. And it is super sonic. It can’t be interrupted. And they have a slew of defensive and offensive weapons coming down out of basically production lines are running right now that the United States doesn’t have anything comparable.

Chris Martenson:    This is an important point because I think the neocons and I’d love to get your opinion on those I know you got an acerbic and sharp one on those. I do as well – maybe not as well characterized as yours, but – the neocons seemed to have developed this idea that because we beat up three weaklings in a row on the school yard that we can take on anybody. Let's be clear – Iraq was totally devastated militarily by a couple of decades of sanctions. I don’t think Panama really counts flying over country like NATO and dropping bombs with aircraft when they had no anti-aircraft. These were all the equivalent of really unfair matches. Do you think that the neocons have accidentally thought that maybe Russia is just a similar, maybe slightly larger adversary, but essentially just as easy?

Dmitry Orlov:    Well, I think the neocons they have a very stiff ideology of world domination. Basically they took over the US government because it is the largest and most vulnerable democracy in order to realize their insane dreams of world domination.

It hasn’t gone that well, but there is no convincing them. There isn’t a feedback loop from experience to what they want to do next. One defeat causes them to organize for the next defeat without realizing it. So they don’t realize that what they have done in the Middle East has been completely counter productive. They don’t realize, for instance, that trying to promote democracy and secular regimes in Islamic countries doesn’t produce democracy or secular regimes – what it produces is Jihadism and radicalization and things like ISIS. They can’t process that thought because their ideology says democracy is the weapon we use. We used it successfully against the United States. Look what wonderful shape the US democracy is. It is bought and sold on the open market and we are going to do that to every country in the world.

So, there is no stopping them. They are like zombies. Until somebody shoots them in the head they are going to keep moving.

Chris Martenson:    You made an excellent point in that Russian warning piece which I thought was around this idea that Russia is refusing to cooperate in just bowing before Washington and thinking of Washington as the sole world leader and that everything has to go Washington’s way. Russia is not really towed to that line of course. Your line in there that I love you talk about the string of policy failures. The line was this gradual but apparent loss of power and influence has caused the US leadership to become hysterical, and it is but a small step from hysterical to suicidal. America’s political leaders need to be placed under suicide watch. It seems like you have really lost faith that there is anybody sane left in charge here.

Dmitry Orlov:    I really don’t see anybody sane in charge. It really tells you how much is wrong that really thoughtful people think that Trump is actually a better choice, because at least he has a brain that hasn’t been taken over by some kind of brain parasite. He thinks for himself.

Chris Martenson:    Yeah, well, I among those who go by people’s track records and I have to tell you Hillary’s track record horrifies me as a human. What she did in Libya, inexcusable, Honduras, inexcusable stretching all the way back to when she was a young lawyer taking on a 12 year old girl who was a rape victim and casting the girl as some sort of provocateur in the situation. That level of sociopathy has been with that woman her whole life. It’s her pattern. I for one don’t trust that she wouldn’t be one of the main neocon standard barriers going forward. I think you characterized it well earlier which is that our democratic system has been so co-opted that somehow we are left with Trump and Hillary as our two choices. That’s a pretty heavily damaged system is how I see it.

Dmitry Orlov:    I see it that way too. Such people like Hillary; you know, in a healthy democracy they would be nowhere near the chief executive. They would just be relegated to some function, some destructive function somewhere. You are right about her track record. People like that should just not be allowed to be in charge of other people, never mind countries.

Chris Martenson:    Let’s imagine for a moment that she is in charge. The recent polls would suggest that is not an unthinkable proposition unless there are criminal charges along the way to derail that. Assuming she is in charge how do you think she would deal with Russia, generally, and Putin specifically?

Dmitry Orlov:    I don’t think she is actually capable of rational fear because she basically she surrounds herself with sycophants who tell her what she wants to hear, and it is all a question of some kind of strategy for her. There isn’t really the sort of reflexive thought that is required to understand what the situation is. So, she could actually just very carelessly provoke an incident that then she wouldn’t know what to do about. That moment could arrive very suddenly. So, she is just going through the briefing documents and saying hey that is a good idea, let's execute on that plan whatever and they try executing on that plan and then, oops, they are suddenly in a scenario that they hadn’t planned for, and don’t know what to do. And that would be the most dangerous point of all.

Chris Martenson:    Yea my experience with the neocon so far is that they don’t understand the concept of oops, or when confronted to a challenge to their power all they seem to understand is applying more force to the situation. I haven’t seen negotiating or learning to be much on their skillset list so far. Kind of a flat learning curve so far.

Dmitry Orlov:    That’s right. They look at everything from the point of view of ideology and so if something contradicts their ideology actually looking at the reality of it would cause them psychological trauma of some sort – cognitive dissidence so they just don’t go there.

Chris Martenson:    We do need a degree in psychology I think to understand much of what is happening today. I think that is why many people tune out. You just can’t make sense of it. It is crazy making, so let’s not look at it. I want to get into just how dangerous the situation is today. There have been some recent incidents. Before we get there, though, let’s set the stage. How far back, Dmitry do we have to go to understand why we are at such dangerous situation with Russia? And here is my view – I don’t understand it. We should be like Russians should have been our best friends. They were heavily down the path of engaging in what I would recognize as western style capitalism. They had the rise of oligarchs, things that the westerners all should have understood. We know how to play ball with people like that at the highest levels. Where did this start going off the rails? I am confused.

Dmitry Orlov:    Well, basically the US and the west in general basically thought that Russia was over when the Soviet Union fell apart, and what they really wanted was to – for Russians to move aside so that westerners could go in there and take all of the natural resources and, maybe, export some of the smarter people and just leave the country to slowly die. Everybody was convinced at some point in time that you know the Russians would go extinct within three generations. That was said repeatedly. And that sort of started happening under Yeltsin, who was really a traitor to his people. Things started going downhill very rapidly. The whole country was basically privatized by a bunch of criminals under Yeltsin. He just basically handed out huge parts of the country to his friends. Then things started going very badly and I think he had some recognition of the fact, which is why this very strange thing happened and he resigned and put Putin in his place. And Putin turned out to be a very surprising man. Extremely capable and nobody could have predicted what he would do. But what he basically did was resurrect the country. So now Russia’s demographic problems are solved. Life expectancy is highest it has ever been. It is over 70%. The economy has doubled several times since he became the leader. People are generally quite happy, but there is this recognition that they have run afoul of these westerners who now are pushing towards a war. The Russians are preparing to fight another war.

Chris Martenson:    Now I wonder if the way you phrase that makes me think of Libya and here is why - - before Gaddafi took over Libya was the poorest nation on the planet. By the time he was taken out by a NATO military action, Libya had the highest standard of living in all of Africa and a higher living standard than Russia, than Brazil, other places, but he had some cardinal sins under his belt. Not that he was a strong man. You need that under a fractured tribal area, but what he did was he kept all western banks out. No western companies were allowed to go after the Libyan oil. He took the oil proceeds – if you got married in Libya you started out with a $49,500 one time gift from the government to start yourself – mortgages were limited to 10% of your salary for 20 years. That is how you would get your house. If you had a medical issue that couldn’t be taken care of for free in the country they would pay for you and one other person to fly anywhere in the world and receive that treatment. He really took his oil wealth and spent it on his people. To me that was the cardinal sin. It is almost like the west says listen, if you won’t let us come in and take your stuff for ourselves, we are going to demonize you, and if we have to we will take you out.

Dmitry Orlov:    Well, yes but there is a big difference which is – what you said is absolutely true. Russia is not quite so lavish as Libya. But, on the other hand Russia is not Libya because it has all sorts of things other than oil going on. It’s a very highly developed society that produces a lot of stuff. And also in terms of its role in the world yes, Libya had a role in Africa. It was a regional power. It put up communications satellites that all Africans could use – it brokered a peace process throughout Africa. It was a regional power. Russia is a global power that can project force anywhere in the world.

So - this is – somebody could pick a fight with Libya. There was nothing Libya could do. Nobody could pick a fight with Russia and expect to survive really. That is what it comes down to. That is what makes Americans so utterly delusional.

Chris Martenson:    Let’s talk about that delusion for a second because when I read about Putin in Russia in the US press it is very easy to read the talking points. Somebody went on a big marketing campaign about a year ago to talk about Russia being isolated, Putin losing favor. But whenever I read translated internal documents from Russia it appears to me Putin is quite popular, and that far from being isolated all that has happened is they realigned who Russia will do business with and that all seems to be going not the same as the propaganda would have us believe. What is the situation inside of Russia in terms of Putin’s popularity, and just how isolated are they really?

Dmitry Orlov:    Well, in terms of being isolated, that just never rang true at any point in time. There is really no evidence at all that Russia has been isolated. It is becoming the most important broker in the Middle East right now. It is replacing the United States as the security guaranty of Israel. Basically, the United States is out of there. The United States is out of the Middle East. There is nothing more they can do except maybe cause a little more damage. And Israel needs a new friend, and so that is Russia. That is a big recarving of the world right there. How isolating is that?

And then there is the Shanghai Cooperation Organization that is humming along. There is a huge amount of work partnership with China. There is lots of work going on with India. Lots of trade relationships throughout the world. So, all of that international trade is booming. Also, there is a political dimension to it which is Russia is the one country that has basically said we will stand up to the United States. We will not accept American leadership, and you would not believe how many countries around the world are cheering that and want to jump on the bandwagon.

Chris Martenson:    No. I am not reading about any of those countries in my newspapers.

Dmitry Orlov:    Oh, well, you know you can’t read any of that in the media in the United States. That is just an echo chamber that reverberates with fictional stories.

Chris Martenson:    I’ll tell you some stories that should have reverberated. which was; this actually started a while ago. I was watching carefully and reading your great material around what was going on in Ukraine. Obviously, there was some great disinformation in the west about what really happened there. But it was in the context of that I noticed my hair stood up on end when I saw that Russia tested every single nuclear system in 2014. Put all the successful launches on YouTube. I mean they did everything from ground artillery to ICBM launches from silos. Mobile missile launchers, airplane launches. Every system was tested. The second was that they conducted the largest nuclear readiness drills ever in history in 2015, some 10,000 nuclear specialists went through all the drills. To me they were clearly saying hey, we are ready; our stuff still works. If you thought it rusted during all that uncomfortable period it didn’t. Somehow those barely garnered any media attention over here.

Dmitry Orlov:    Well, yea. There is that. There is also the fact that now in Russia a military drill can be called without warning at any time and everything better work. So, basically the entire military is at a high state of readiness. The US media also missed the fact that what the Russians did in Syria was a really, really small contingent is something that the US couldn’t possibly have done and NATO couldn’t possibly have done. If you look at the number of sorties and the number of strikes per unit time, which is basically ground crews working seamlessly with pilots on rotation, jets landing, getting refueled, getting reloaded, taking off continuously; that is not something that the US is capable of at this point. This is a different military. This is not the US military. This is something completely different. And then there wasn’t really much reporting about the new weapons that Russia has; the S300, S400 now they are rolling out the S500 which will be able to hit targets in near space and that will basically be like a giant impenetrable shield over most of Russia including all of the ballistic weapons that the US has. They also didn’t really report on the supersonic torpedoes and cruise missiles that Russia has developed, because they don’t really mention the fact that Russian nuclear subs lurking all along the western and eastern seaboards all the time on patrol armed with these caliber supersonic cruise missiles that the US has absolutely nothing to detect them or to shoot them down, and they can be nuclear tipped.
All of that is just not being talked about. Everybody is still thinking oh Russia, it is weak but it is aggressive. Both of those are not facts.

Chris Martenson:    She is strong and she will respond, of course, if she needs to. And of course that NATO encirclement which began back in 89 with the fall of the Berlin Wall and just the relentless expansion of NATO; that really actually happened under Bill Clinton, didn’t it mostly?

Dmitry Orlov:    Well, yes. Bill Clinton is the – under George, Sr. – George Bush, Sr. there was some neocons in the White House, but he called them the crazies in the basement. And he didn’t really let them do much. It was a mistake to keep them there at all. But under Bill Clinton, because what did he know about foreign policy? He just basically invited them into the Oval Office and they have been there ever since. That is really what holds the US foreign policy together and, because these people are insane, that is what is causing a continuous series of foreign policy fiascos that is basically freezing the United States out of any participation in anything constructive going on internationally.

Chris Martenson:    On that point you made before about the readiness of Russia it was just yesterday on June 14th that a surprise combat readiness inspection of the command and control organizations and arsenals of the Russian Armed Forces was announced. That was on Tuesday. The Russian Defense Ministry reported – and so, let’s see, they informed the commanders of the eastern, central, southern and western military districts. I guess that is everything but the northern, that they were going to have these surprise inspections where they are to show combat readiness and condition objectives. That to me sounds like a high state of alert. Those are expensive sorts of operations to run and it is expensive to keep your military basically gassed up and on the runway. It sounds like Russia is ready.

Dmitry Orlov:    Russia is ready. What is even more scary is that the Russian people are ready. There are all these groups all over Russia that do stunts like they run marathons off road. The marathons sometimes include some tactical objectives, too. So this is like paramilitary training for lots and lots of young people in the country. Some of them don’t even like the government that much, but that doesn’t mean that they won’t take orders if orders are given. Even if there isn’t a nuclear confrontation and NATO rolls into Russian territory, you know, they will bleed and they will bleed to death just like it has always happened with people who invaded Russia. So, there isn’t really like a happy outcome. There isn’t a face saving outcome for the United States or for NATO. There is just basically the choices between death and humiliation.

Chris Martenson:    Yea, well, we will take death over humiliation every time when it comes to these people in charge, I guess. Now, I want to get to the incidents that have captured my attention and made me nervous. Yes, there are readiness drills and they are showing that nuclear systems work and they are posting all that to YouTube. But recently, the US had a guided missile destroyer in the Black Sea. Had a series of fly overs from Russian jets. As well the USS Donald Cook in the Baltic Sea recently had fly over incidents. Kerry even said “hey rules of engagement said we could have shot those planes down if we wanted to even though they were unarmed at the time” - just showing sort of a display. To me it is showing that first there is increasing irritation between the two parties here. This is the tensions are rationing up. Second, that the chance of an accident happening, the kind of accident or incident you talked about before where all of a sudden there is an incident report on the President’s desk and they have to respond to it, what do they do? The chance of an incident seems pretty high now when we got these fly overs that are happening within meters – several tens of meters or sometimes you know, less than that. It seems to me, anyway, like the chance of an incident is pretty good.

Dmitry Orlov:    Yes, it is unfortunate that such carelessness is being provoked. But basically if you are – if you want to move your military vessel right next to the territorial waters off a sovereign nation, you generally have to contact that nation and tell them what you are doing. And also there should be a transponder on your vessel so that everybody knows who they are. And the Americans haven’t bothered to do that, which is why there are these fly overs. The Russians go out and they go out and they identify the vessel. Same thing with these spy planes that have been encroaching on Russia’s borders. The Russians fly and identify them and accompanied them. This is perfectly normal behavior, but what is provoking it is the refusal of the Americans to cooperate.

Chris Martenson:    Now let’s talk about how Russia and China seem to be cooperating more and more. China also making increasingly unhappy military statements mostly around I guess the South China Sea, Spratley Island area. But more generally unhappy. The United States is also over there on the Pacific Theater engaging in similar activities which is just flexing muscles saying hey we are here we will do what we want to do. In your mind in your experience what is developing between China and Russia. Are they starting to feel like they are on the same side of something at this point?

Dmitry Orlov:    Yes. There isn’t really a whole lot of distance between them psychologically or in terms of overall understanding and policy. Basically, they understand that the world has become sort of bipolar with the United States this ever shrinking one half of it, and China and Russia the ever expanding other half of it. And they want to finesse this process. They want to just basically wait it out. They want to wait the United States out without provoking a major confrontation; and they are doing it together.

Chris Martenson:    Let’s say they read your five stages of collapse - just a brilliant piece of observation synthesis in writing – where do you peg the US on the collapse continuum and do you think China and Russia are sort of watching whatever continuum they are looking at and noting that the United States has a lot of rope and might hang itself one day?

Dmitry Orlov:    When I wrote the book I basically thought of, you know, a rapid process but if you have something as huge as the United States there is quite a bit of a buffer. There is an opportunity to manipulate the situation and deploy all sorts of delaying tactics, which is what we have been seeing in the area of finance. It is just basically taking a really long time for the shoe to drop. The conclusion, you know, is written on the wall in neon letters, but we haven’t reached that point yet. Yea, okay you can look at macro stuff like okay interest rates are below 0 now and the balance sheet of the Fed is bagged out. It stopped growing. It hasn’t grown for a year and a half now. They have basically - they have no more knobs to operate at all. All of these bonds have been like this gigantic bond bubble that has lasted decades. The bond yields are going negative. There is this magic disappearing money that we have. Then you can look at all the statistics that are being faked, but if you realize they are faked and look a little behind it, you realize basically the economy is shrinking – the real economy of goods and services. Shrinking – known financial services.

This place isn’t long for a few stages. The first three stages. In terms of politics you can’t look at this election cycle and say, oh yea things are healthy. This is what democracy looks like. I don’t think anybody in their right mind would say that. And if you look where the place is in terms of social and cultural collapse, well some places are actually fairly healthy and have gotten better, but there are huge parts of the country that are just completely devastated especially closer to the middle of the country socially and culturally just completely hollowed out and devastated. You know, it may take a while yet for things to - -for events to unfold here. The first three stages of financial, commercial and political collapse - we can sort of see the early signs of each one.

Chris Martenson:    Yea, I think it is becoming more apparent to more people. Certainly, the all important class of younger people, many of whom were more solidly in the Bernie camp, watching an entire election just flagrantly stolen with every trick in the book. They didn’t even apologize for it or really do a good job hiding it. It was a blatant episode after episode of raw theft. And for people who have even the slightest math training, understanding statistically how impossible I would say improbably to make it soft but impossible to make results happen – those really get to the next stage of that cultural/societal collapse. The glue that holds us together is if you can’t believe in your justice system, if you can’t believe in the words you read in the newspaper, if you can’t believe in the systems that you are being asked to tax into and maybe even bleed and die for, that is corrosive. That is something, Dmitry, I think is missing in our leadership is they don’t understand just how corrosive what they are doing is. It is not just corrosive to the little people under them, but to the whole edifice. It is almost like they are unable to comprehend, really, what they are up to, but really they keep doing it.

Dmitry Orlov:    They are unable to comprehend. Imagine when you look at yourself in the bathroom mirror - your basic working assumption is what you are seeing is what other people see when they look at you, right? But that is not the case anymore. Okay so in the US there is maybe 50/65 of the people who walk around making animal noises. They don’t really have an opinion. If they have one it doesn’t matter. Then there is maybe 40, 50% of the people who actually pay attention, think about it, get worked up about various things and the question is where do they get their information? They don’t get it from the television or the newspapers anymore. They get it through the internet. They get it through social media. They get it through their online friends. And that has become relatively impenetrable for – well not so much impenetrable it is just that the effects are the wrong ones. There is this basic propaganda onslaught that is ongoing to limit what people know especially about the outside world, to propagate the single coordinated corporate message so that everybody’s brains are aligned, and that is not working. That doesn’t work anymore. So they have lost control. So, they think that – they look at the television. They see their image on it they think that is what everybody is looking at but that is not what everybody is looking at.

Chris Martenson:    Hmm. That echo chamber is pretty profound at this point in time, and this election cycle has clearly shown that to a lot more people. And that’s a good thing.

Before we turn entirely away from this side let’s armchair this for a second. Okay, so let’s say a kinetic war does break out with Russia. You know you mentioned the caliber missiles and subs off the coast and all this – but if missiles and bullets really start flying back and forth, what are the risks here really? The United States has been immune from really any substantial damage, except for Pearl Harbor, and that is debatable as to whether we could have stopped that. So, at any rate – what is really at risk here?

Dmitry Orlov:    At risk here is the inability to stop the progression to nuclear annihilation. Okay, so let’s say NATO invades Russia under whatever pretext, right and gets horrendously bloodied and gets desperate and lobs a missile at one city in Russia and blows it up. The US proportionately responds and blows up I don’t know Chicago. And says okay now are you ready to sue for peace or should we destroy a few more cities on your side because we don’t have to stop. So the question is at that point do the Americans realize that they have lost? Like Chicago is very important. Estonia is not very important. Can the Americans process that calculus in their heads?

Chris Martenson:    Rationally? No. It would be impossible to calculate that rationally. We would be apoplectic. We would be out of our minds.

Dmitry Orlov:    Okay, well you’re apoplectic. Do you want to lose Los Angeles and Dallas tomorrow, or do you want to remain apoplectic?

Chris Martenson:    Well, I can only imagine that the civilian side, the neocons would just be wanting to push every button that said fire on it that they could. I can only hope in that moment I talk to a lot of military people and they are very rational folks. They can perform calculations and they understand risk profiles. My only hope is that there would be a general failure to follow orders in that circumstance.

Dmitry Orlov:    The orders have to sort of filter through. So, it really hinges on whoever makes the ultimate decision and the biggest danger there is if you have this functionary who goes by briefing documents and signs off on things. She will sign off on whatever the crazies tell her to do.

Chris Martenson:    Yes.

Dmitry Orlov:    That is the danger.

Chris Martenson:    Yep. So, to me I got into a fairly decent sized argument with a gentleman in my site, a former sub guy, very highly placed there. He was of the mind that whatever Russia had we had defenses against it and there were a lot of tricks that we could – my point is that ships as modern as they might be today are just large steel boxes looking for a reason to sink. I actually think the Exocet missile in 83’ on the Falklands taught us that the cost of defending a ship is impossibly expensive against the cost of developing a missile system that could overwhelm – even if you got these great phalanx guns and you got these cute little missiles on board - there is only so many of those rounds that can be used in defense. If there is a swarm of incoming some are going to get through. Period. That is just the nature of it all. The United States has not been bloodied in warfare like that in a long time. I honestly don’t know how we would react here in this country at the political leve, the decision level – not the people on the street as you mentioned - largely irrelevant to the process. I don’t know how we would react. I really don’t. That is an open question. Given that if you – well you are you. How are you preparing yourself in whatever dimension – mentally, emotionally, physically, materially; how are you preparing given the risks?

Dmitry Orlov:    Well my family is in Russia. I am still in the United States. I will be going over to Russia, probably – they will come back here. We will spend the winter here. In the spring we will probably go to Russia. We have a country house there. There is adjoining farm land that I am interested in. Actually, it is along the Baltic border. If you think about it, a dangerous place to be, but less dangerous than being in this country. Because the place is basically designed to survive which I can’t say about the United States. So, that is what I am doing. I am going to Russia.

Chris Martenson:    You are? Well that is fascinating. Alright. Well, I see we have spent a good amount of time on Russia. If you have more time I would like to turn now to the craziness in the financial system because you have a fascinating piece on the interest rates, which you just touched on briefly. The fact that we have gone to zero and increasingly negative rates. I love that you tied in my favorite approach. We can’t understand interest rates and growth and all of that outside of the context of resources. We have clearly hit a limit to growth just economically debt has grown to a point on all its own debt has become counter productive irrespective of your external resource situation. But let’s be clear. Oil is not something that you can just go and get out of the ground for an equivalent of $10 a barrel today. You can get more, but you got to spend $80 or more, and on and on down this long list of resources. I think that is part of the story. It is the debt saturation that is part of the story. It is the fact that exponential money systems tend to accumulate preferentially to a smaller and smaller crew of elites. That is part of the story. There are a lot of things impinging on the story. But, I’d love to talk to you about negative interest rates. We have to understand those psychologically even more than we need to understand them financially. First of all, we didn’t have any history to go on to say that is how it worked out last time. So, we are in new territory. To me the psychological dimension of having your system of money go into negative territory I look at that and say it exposes it as a fraud to an increasingly large and important set of people out there. But you had another take on it – talk to me about negative interest rates. I still don’t really understand them.

Dmitry Orlov:    Well, basically there is a money creation process, you know. Bankers do their little mumbo jumbo ritual and money springs forth out of nothing. It is very important that it doesn’t spontaneously disappear again which is what happens when somebody defaults on a loan. You have to basically write it off. And people hate doing that. There are layers of leverage throughout the system. If you knock out a piece it is like one of those Jenga games you knock out a piece and a whole bunch of other pieces tumble. They hate it when that happens. They want to make sure that debt, huge amounts of debt, don’t go bad especially not all at once. But the problem becomes as growth stalls it becomes more and more difficult to repay a debt. Then you have to say well never mind about repaying debt; we will just drop the interest rate to zero so you can just keep that debt. There isn’t even an interest you have to pay for it. Then those people start basically going even more broke where you know everybody has got to eat and people who have lots of debt have to eat, too. You don’t want them starving to death because then what happens to the debt? You have to pay them to hold onto that debt, and that is the negative interest rate.

Either way you know, it is sort of the difference between spontaneous demolition which is everybody defaults or controlled demolition where negative interest rates just eat away at the money until it is all gone. The whole thing is that they have been lowering the interest rate forever, for decades now. Now it has been stuck at zero for a while. And now if you look at it this morning I saw that 16% of bonds, Euro bonds, have gone – bonds in Europe have gone negative. Japan is negative all over the place. So, and that is going to accelerate. That is going to be a little bit negative and a little bit more negative and money will start disappearing faster and faster. That is the logic of it. In order to allow people to continue rolling over their debt, the interest rate has to continue dropping forever. That is the predicament. That is the incredible money disappearing act that is unfolding before our very eyes.

Chris Martenson:    It’s an astonishing thing. If you have access to that what a money machine, right? I could get you to give me a billion dollars and I am only going to give you that minus a percent back or whatever the numbers turn into and I could actually set all that money aside right that second and just take that 1% for myself in this moment and have the rest squirreled away in a way I can funnel it back to you. I’ll do that all day long. This is a money minting machine for people who are on the front end of that to be paid to hold money for somebody is an astonishing thing. Particularly if you are in government. But the intended consequences of all this have been in Japan where they have been playing around with this the longest hey wait a minute this is actually causing people to fret about the future more and not be more wildly animalistic in their consumptive patterns. It is causing people to be more fearful about not having money instead of less. They are actually saving more. It is actually not working out even as remotely as intended and yet we are doing more of it. Of course, that is how we do things in this modern world. Something doesn’t work we just need to do more of it. Go to the Krugman approach. Isn’t it becoming really obvious that negative interest rates aren’t doing it at this point? Don’t you think they must be noticing the data?

Dmitry Orlov:    Well, they will try to ignore the data because what choices do they have? It is sort of like there is nothing else they can do. The big problem with negative interest rates is that once you have negative interest rates what you are talking about isn’t exactly money. It is something, right? But it is not money in the normal sense that people are used to thinking about money as. You know the old adage is you have to have money to make money. Well now it is you have to have money to lose money. Well, you know, you can lose money any way you like. That is not a specialty skill. That is not like – that is not very important to know how to lose money. Anybody can lose money. And so the question becomes, well what do you do with the stuff that isn’t exactly money and the answer is figure out what is more money like. So you know, land is more like money. That is why real estate is called the real. That is the only sort of real wealth. There is land. People will start putting money into land holdings and bid up the price of land. That will have insidious consequences. Or they will bid up the prices of precious metals and other things that could serve as stores of value. Certain European banks are stockpiling freshly minted Euros in vaults, because that is better than keeping money on deposit in the negative rates of interest.

So there are all of these things that happen that are basically erosions of the idea of money, because once you have negative interest rates money is no longer money.

Chris Martenson:    This is really – it is – we are out of the realm of finances and we are into the realm of voodoo at this point in time. Money is an idea. We pretend it is real, but it is an idea. Something we imagine has value and so it does and we create structures around that to pretend it has value and things like taxes and stuff like that that is all well and good. But what you are talking about is the very foundational idea of money that we have all built all of our systems and thinking around is really under attack with this latest wave. And all of that in service to try and keep and perpetuate an unsustainable system going a little bit longer. Hey, we were borrowing at twice the rate of our underlying income. Bad idea? Let’s not talk about that. Let’s just keep that going a little longer. Maybe, cross our fingers, the gods of growth smile kindly on us. They have been missing in action for well over a decade and yet we persist. So, in my mind we persist until something just breaks and people need to be ready for that. Do you share that view - last question – and if so how should people get ready for that?

Dmitry Orlov:    Well, basically if you see the very concept money as the perfectly abstract an universal medium of exchange and stored value if you see it failing doing that then you are back to basically barter arrangements, so get good at that. Understand that barter is really the basis of it; that any kind of – when you buy something with money you are just bartering money for something. And if money is as weak as it is going to become and as conceptually undermined, then you might consider bartering something else.

Chris Martenson:    Alright. Bartering. Absolutely. Great skill to have. We have been talking with Dmitry Orlov. He runs the ever popular and wonderful site at Club Orlov. You can find that at cluborlov that is O R L O V cluborlov.blogspot.com. I would encourage you to go there. Read A Russian Warning. Very well written. We didn’t get to all the excellent points in there. Super piece of writing and wake up call for people. With that, Dmitry, thank you so much for your time today.

Dmitry Orlov:    Thank you very much, Chris.

This article was first published by Peak Prosperity -