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The ‘de-Americanized’ World
Congress is in a game of chicken over minor domestics political issues with both sides holding the world economy as hostage. With this and its generally reckless behavior in international policies, including spying on everyone, the U.S. has displeased too many other countries to keep its position as a leading nation. As the moment of one sole superpower ends new alliances will have to be formed and new arrangements for a stable international system will have to be found.
Pepe Escobar picks up this extraordinary Xinhua editorial which I also had planned to write about.
Long gone are the Deng Xiaoping days of "keeping a low profile". The Xinhua editorial summarizes the straw that broke the dragon's back – the current US shutdown. After the Wall Street-provoked financial crisis, after the war on Iraq, a "befuddled world", and not only China, wants change.
This paragraph couldn't be more graphic:
Instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.
The solution, for Beijing, is to "de-Americanize" the current geopolitical equation – starting with more say in the International Monetary Fund and World Bank for emerging economies and the developing world, leading to a "new international reserve currency that is to be created to replace the dominant US dollar".
That is exactly what I see coming over the next decade.
One big change will come in the Persian Gulf where China is now a bigger customer than the U.S. is. One day it will inevitably pay with Yuan instead of dollars for the oil it buys. As we foresaw, the "extraordinary privilege" of the U.S. being able to print the global reserve currency and therefore petro-dollars at will is coming to an end. Saudi Arabia, also disgruntled about the United States policies, already bought its old strategic missile force in China. Negotiations about a newer generation are rumored to be ongoing. Other weapon orders may follow. China will deliver but will be smart enough to not interfere in Gulf politics like U.S. is doing day by day.
Even the British admit that in international foreign politics the Russian foreign minister Lavrov is now the most grown up and leading voice.
The EU and the European monetary union will probably fall apart over Merkel's insane and destructive deflationary policies which destroys the southern European countries' and even the French economy. We soon may see the Frexit and a new French franc. The lunatic Transatlantic Trade and Investment Partnership (TTIP), a race to the lowest possible common regulation level, is unlikely to ever get signed. The U.S. will have to look for growth elsewhere as the European countries have had enough of its predatory financial behavior.
Africa will, unfortunately, become a new ground for competition by proxy as China, the U.S. and Europe will try to grab resources as well as market shares there.
In South America those leaders who oppose U.S. influence have high popular ratings while those who work with the U.S. are disliked by their populations. There is a lesson in that.
Obama has missed the recent international Asian meetings and will have lost some face over it. It was also the third time that he canceled an announced visit to Indonesia, a country with a population of some 250 million people. While the U.S. may continue to have some control over Japan and South Korea even these two countries will see the bigger potential in good relations with China.
A deeper connection with China and Asia in general will also be good for European countries. The new currency swap agreement over some 50 billion Euro/Yuan is only a start. What is now needed is the "beer express", one of my long time dreams. An all new fast freight railroad to connect Hamburg with Qingdao ("Beer express" because the Holsten and Tsingtao breweries are sisters). Using that railroad the transport from East South Asia to Europe and on to the U.S. east coast would be faster than by any other sea and land route. There are already some rudimentary plans for such a project.
Since the demise of the Soviet Union the U.S. has been the uncontested global leader. Its behavior over the last decades has shown that it is not suited for such a role. The coming decade will see a new era arise.
“China has never had a reputation of intervening actively in the outside world; their last intervention was a fleet of junks in the Gulf in the 14th century…”
You mean C15th. Alexno, I suspect.
At any rate, while it was true that most Chinese dynasties felt that they had plenty to do at home and that overseas adventures were unprofitable, China was far from being a “hermit” empire. China was so far advanced, so wealthy and so populous that it had little need to go abroad: other countries came to it, some to trade, some to plunder, all to wonder. At the size of its cities, the fertility of its agriculture, the ingenuity of its craftsmen, the living standards of its people. And the power of its government.
The Yuan dynasty sent a vast fleet to conquer Japan. And the Qing dynasty, in the C17th and C18th, conquered most of central Asia, incorporating vast regions into the Empire. Gains which it still has to a large extent.
As to that “fleet of junks” it was enormous, as were the large warships and treasure ships, which were safer, faster and better navigated than any in Europe. And carried an army, on board, of thousands armed with gunpowder weaponry.
In a word you couldn’t be more wrong. China, throughout most of the past two thousand years has dominated much of the world, collected tribute, traded commodities-highly prized luxuries such as porcelain and silks- and swallowed vast amounts of silver bullion, largely because its trading partners, including Europe, had few goods that it did not produce more cheaply itself. Hence, in the end opium, and the Opium wars.
Don’t be misled by what happened in the C19th and the years before 1949, China has a very long tradition of political intervention and was counting its armies in the millions in eras when European armies rarely involved more than a few thousands.
Mind you China’s government is very happy that it is regarded as historically pacific and reserved.
“I think debt could easily be renewed and repaid, with a little help from devaluation and inflation; of course they should start taxing people and corporations in the US like in the rest of the world.”
Many European countries, Claudio, actually have tax rates and breaks comparable to those in the US. I agree with b about the TTIP, and with Pepe about the very similar Trans Pacific negotiations. The days of the unequal treaties imposed under the guns (and bombers) of the Empire with bought and paid for quislings agreeing with the big boss, are over.
As to the possibility of repaying the debt, you seem to agree with me. The question is how much currency depreciation and how much inflation. And, given them, is it not likely that other adjustments will be made, with much debt being written off as odious, which, in a legal sense it most certainly is.
Posted by: bevin | Oct 17 2013 1:59 utc | 53
The reality is that the debt can never be repaid – bevin at 38 (about the US)
Yes, considered in isolation. No, because defaults are common (and the US has ‘defaulted’ in some ways before see link) and debt can be cancelled by swaps of IOUs … With collaboration and willingness to stabilize, strides forward could be made (see e.g. claudio at 39.) In theory. Don’t think this line is worth pursuing really but it is a point I like to make, to overcome the ‘inevitability’ associated with the mess.
Debt is a bet on the future, an allocation by banks to the economy as judged to be safe for future revenues, mostly earning money for themselves which has supported ersatz growth, paper, financial growth, as ‘real’ growth was AWOL.
It was a mechanism to compensate steadily lowering GDP per capita (industry, exports, agri, etc.) and went out of hand, awarding ‘growth’ gains to financial experts and bots, who are just scammers, not to mention bubbles that one can ride to the top and then crash. (e.g. MERs scandal -sub prime mortgages -, today Cameron supporting house buying.) Without even going into derivatives and shadow banking. The accounting mechanism is faulty, and purposely so, keeping ppl asleep, willing to believe that money has a mysterious source, or rather springs from connections, savvy deals, hard work, fame, high social status, legislation, re-distribution, all correct, but all resting on politics and power relations. One might also call it a form of new colonialism and / or a spur to globalisation – slave labor is but one tiny insignificant piece of extracting resources, other methods (debt among them, see IMF) are more efficient.
The ‘debt ceiling’ flap in the US will not go away. Right now I expect that the bond market will crash in less than 1.5 years. (I might change my mind about that in the following months.)
The underlying demon is rising population, lack of energy, or high energy costs that don’t furnish a return that permits survival of the biz whatever it is. Something has to give, but nobody knows quite what. War is a common response. This is Act II of the Financial Crisis, and it ain’t over. Or possibly Act III, if one is willing to call 9/11 Act I.
Enforcing slave labor may lead to revolution, which is dangerous for the powerful. Mind you, the US has kept it’s pop. quiet with heavy re-distribution, if ppl can’t produce or work (there is nothing for them to do) it is perhaps best to pay them a bare minimum for survival or imprison them. High earners pay thru taxes to imprison low or zero earners, one ridiculous non-solution amongst many…
http://www.informationclearinghouse.info/article36523.htm
Posted by: Noirette | Oct 18 2013 13:57 utc | 74
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