Exclusive: Iraqi finance committee deputy calls for diversification away from US dollar

May 10 2023

The Cradle speaks to Iraqi parliamentarian Hussain Mouanes on the various economic, financial, and political challenges facing Sudani’s government.

Photo Credit: The Cradle

By Zaher Mousa

Parliamentarian Hussain Mouanes is a member of the Finance Committee in the publicly-elected Iraqi Council of Representatives. He has been politically active through many different stages of Iraq’s recent history, including the Baathist era, the US occupation, and the war against ISIS.

Before 2003, Mouanes was persecuted and imprisoned multiple times for his political activism by the government of former Iraqi President Saddam Hussein. He joined an Iraqi resistance movement after the illegal US invasion of Iraq and, after the rise of ISIS, initially joined the Iraqi Popular Mobilization Units (PMU) to organize against the terror group.

Despite his past political and military engagements, it is Mouanes’ recent experience as an elected politician, member of the Democratic Political Framework, and leader of the Rights Movement (Harakat Huquq), which has catapulted him into the national spotlight. His political cadres were previously members of Kataib Hezbollah, a faction known for its hostility toward the policies of the US, Israel, and the Gulf Cooperation Council (GCC).

These details are significant in the context of the new Iraqi government – led by Prime Minister Muhammad Shia al-Sudani – the first in two decades that is not packed to the rafters with Iraq’s old political elite.

Today, other figures are emerging in this theater, including Mouanes, who has overnight become a prominent political figure in contemporary Iraqi politics – not least because he filed a high-profile lawsuit against former PM Mustafa al-Kadhimi for his negligence leading up to the January 2020 assassinations of Iranian General Qassem Soleimani and Iraqi PMU Deputy Leader Abu Mahdi al-Muhandis.

Iraq’s parliament just passed its first federal budget under the six-month old Sudani administration, which for the first time covers a three-year period instead of the traditional one year of previous budgets. This is part of a slew of economic and political changes promised by the prime minister, who appears to be tackling all of Iraq’s chronic problems at the same time.

In his interview, from his unique vantage point as a deputy in the parliament’s finance committee, Mouanes addresses those challenges, denounces his country’s enforced dependence on the US dollar, and candidly weighs in on both the good and bad policy directions being undertaken in Iraq today:

The Cradle: Does the federal budget presented in the parliament today actually address the necessary measures to reform Iraq’s economic system?

Mouanes: The Iraqi economic system has been built incorrectly. It has moved away from banks and financial institutions toward the bankers managing it. Iraq has been and continues to be a slave to the US dollar, even though every country’s economic strength depends on the strength of its currency.

Reforming and strengthening the economy starts with the federal budget. However, we face far greater challenges, such as reforming existing financial legislation like the Securities Commission Law, laws for private banks, and the Central Bank.

These laws must be in line with the global economic situation. The Financial Management Law should govern the budget, but instead, it is governed by the budget. The Parliamentary Finance Committee is seeking to establish a real political and economic system built on legislation, not on constant and continuous exceptions. For example, according to the Financial Management Law, the country’s deficit ceiling should be 3 percent, but the current budget allows it to swell to 18 percent.

The Cradle: Introducing a federal budget law covering three years – instead of one year – of government spending is a major change in the way the state deals with the economy, isn’t it?

Mouanes: Yes, but only if it includes actual programs, not a recurring annual budget under the pretext of escaping from political blackmail in a political system built on quotas. As a parliamentary financial committee, it is not clear to us what is meant by the three-year budget because the tables that we received cover only one year, and there is no evidence that it is a three-year budget except for some items related to oil prices.

Prime Minister Muhammad Shia al-Sudani and Minister of Planning Muhammad Tamim justified this by saying that limiting the budget schedules to one year is to ensure that projects do not stop. In this case, I agree with them. But the committee’s point of view is that the budget figures should be updated annually, which means a re-vote on the budget in Parliament.

The Cradle: There is much debate about the government’s attempt to appease protesters by employing them in the public sector. This has led to an increase in the number of public sector employees by about one million people within the first six months of the current Iraqi administration. Is this a correct policy?

Mouanes: No, it was not the right policy, and it stems from the despair of state-building. These measures reflect incorrect state-building practices and must be addressed. The government’s birth was abnormal, forced by the failures of previous administrations and the country’s widespread demonstrations.

However, the public sector cannot employ everyone. We need to explore alternative options, and our committee is working to include legislation in the budget that encourages people to seek jobs in the private sector.

Dependence on employment in the public sector burdens the state: take the operational budget, for instance, where 90 percent of its revenues are spent on salaries. This is not right and must stop. While, in the past, large public sector employment was necessary, continuing to rely on it when our needs have changed is a problem. It is necessary to look at the long-term interest of citizens and diversify their opportunities in various private sector jobs, because today, the public sector is simply unable to absorb anymore.

The Cradle: It is assumed that the measures taken by the current government are the result of a political agreement between the government coalition and the Rights Movement (Harakat Huquq), which you lead. Is there such an agreement?

Mouanes: The Rights Movement is not part of Iraq’s governing coalition or the Coordination Framework, nor is it part of the ministerial composition. Let it be clear that we will continue to criticize government performance, because we believe that improving the political process requires an active opposition bloc that challenges poor policies. The Rights Movement is keen to be the basis for such opposition.

The Cradle: Regarding the national interest in political agreements, should the agreement between Baghdad and the Kurdistan Regional Government (KRG) on oil sales be evaluated based on broader criteria than the decision of the current political forces?

Mouanes: The agreement has not yet been presented to parliament, and it is vague. We support a comprehensive solution to this issue in accordance with the Iraqi constitution. The Rights Movement will not allow the interests of the central, southern, and western governorates to be neglected for the sake of political favors, and I expect that the agreement will not last long if it does not comply with the constitution and existing laws.

The Cradle: Would you consider adopting a law to grant amnesty to those sentenced to prison and abolishing the Accountability and Justice Commission, which denies members of Saddam Hussein’s regime participation in political life and repatriates the displaced?

Mouanes: These demands must be discussed, and if an agreement is reached, we will deal with them in accordance with the constitution and laws. But the way in which the general amnesty is being promoted is incorrect.

Amnesty for those not involved in terrorism must be offered in a way that does not provoke Iraqis who are still suffering from the crimes that befell them. With regard to the Accountability and Justice Commission, it will be transformed into a judicial body after the termination of its work. But we believe that it is necessary to activate and expand the law banning the Baath Party to ensure that this party is not revived.

The Cradle: Is there any push to remove the current speaker of the Iraqi parliament, Mohammed al-Halbousi?

Mouanes: Halbousi’s dismissal requires political will. There is a popular demand within the Sunni political blocs for his dismissal. Among the Shia political blocs, too, there are those who believe that there are Sunni personalities who are excluded from the political arena and should be allowed to play their rightful roles. Let’s be frank, the discussion of Halbousi’s dismissal is related to competition between political blocs, not to public sentiment, and it is clear that there is no real political desire for that. So this is not an issue at this time.

The Cradle: What about the corruption allegations targeting Halbousi and his party in Anbar, such as the seizure of millions of meters of government land? You were involved in this operation, so what is your take on it?

Mouanes: This case is very important. It is more than the theft of money, rather, it represents the establishment of a political project. We are talking here about a crime greater than the “theft of the century” (a corruption scandal involving more than $3 billion).

There is another corruption file related to some areas of Fallujah that we will announce soon. This is not targeting a specific person as much as it is targeting corruption, and we will expose any corruption file, even if it is in our own areas. We are determined to prevent the waste of public money and honor our oath in parliament.

The Cradle: There seems to be a political dispute between PM Sudani and Speaker Halbousi. Do you think that there is a possibility that the latter could be dismissed?

Mouanes: Disagreement is normal, and there are efforts to end it, and it seems that things are going toward reconciliation. But let me make it clear that we are with Sudani in that the executive and legislative branches should not encroach on one another. We will stand in the face of any intrusion from any side.

The Cradle: We have heard about Iraq’s efforts to move away from the domination of the US dollar. How can this be achieved?

Mouanes: The current system of selling oil and transferring 100 percent of those revenues to the US Federal Bank – under the pretext of protecting Iraqi funds – is unsustainable. We need to develop real economic foundations to advance our country and break free from the dollar’s hegemony.

It is clear that Iraq is economically dominated by the US, and our government does not truly control or have access to its own money. This is evident in the new banking restrictions on Iraqi dollar bank accounts, any and all banking transactions in dollars, and America’s imposition of an electronic platform to register all Iraqi currency exchanges. 

Currently, most of Iraq’s foreign investment generation is limited to the lucrative energy sector, ignoring other vital sectors such as agriculture, industry, and tourism. It is time for Iraq to diversify its sources, basket, and storage of currency, especially given that the whole world is moving in this direction.

The Iraqi dinar must be strengthened and consolidated within Iraq as the primary currency used in transactions and ultimately be part of the basket of international currencies. As an oil-rich country that exports about four million barrels daily, we have a strong financial situation that can be leveraged to increase the value of the dinar in the market.

We believe that it is crucial to move away from the hegemony of the dollar, especially as it has become a tool to impose sanctions on countries. It is time for Iraq to rely on its local currency or at least diversify its sources of income.

The Cradle: Do you think Sudani’s efforts to replace ministers, governors, and hundreds of senior positions in the government will be successful?

Mouanes: One advantage of not being tied to any political agreement is that we have the freedom to make decisions without any alliance commitments. Sudani has set standards in his government program and identified shortcomings in the performance of some governors and ministers, and it is his responsibility to make changes.

It is normal for some political blocs to resist these changes as they try to maintain their entitlements. We have always advocated for ministers to be selected by the prime minister and not by their political blocs. Therefore, I believe that Sudani’s efforts to make changes are right, and we support him as long as we know the reasons behind the changes.

Sudani has assured us that he is not restricted by party or sectarian affiliations and that his changes will affect everyone who proves negligent. However, we reject any external international interference in Iraqi affairs or in the process of changing ministers. If such interference occurs, the prime minister should take a firm stance against it, as we entered the political process to lift tutelage and stop its imposition on the country.

The Cradle: Do you think the American delay in inviting Sudani to Washington indicates US suspicion toward him and his political program? Is this good or bad for Iraq?

Mouanes: The prime minister should assert his position in meetings as he represents the face of our country. We do not view the American people as enemies, but we are opposed to reckless US policies that impact Iraq’s interests adversely.

The government has the right to communicate with those it deems to be in the general interest of Iraq. However, the importance of Sudani’s visit to the US depends on its purpose. Is it just a ceremonial visit, or to discuss critical issues facing Iraq? And will Iraq benefit from the discussion of these issues with the Americans?

Given the ongoing US presence in Iraq, we do not see the importance of a Washington visit as much as a visit to Beijing, for example, as strengthening and diversifying relations with China would be more economically beneficial for us. Ultimately, the decision is up to the prime minister for the best interests of Iraq.

The views expressed in this article do not necessarily reflect those of The Cradle.

Ukraine trap; EU stuck in old era as Global South crafts multipolarity

May 2 2023

Source: Al Mayadeen English

By Hussein Assaf 

Europe must accept the fact that the world today is no longer the Western playground and that the growing anti-hegemonic sentiment among nations is irreversible.

It’s important to emphasize that Europe was not a victim in the current world order run by Washington, but rather a participant. Its contributions were destructive, filled with colonialism, theft, dismantling, and murder of nations that directly led to corruption, poverty, and injustice worldwide.

Europe’s bloody history

Despite Europe joining the global financial systems established by the US in the 20th century, such as the IMF and World Bank, the continent has used these tools to deepen its colonialism and expansion policies towards countries worldwide. It has even leveraged its position with bodies like the UN and UNSC to exploit weaker states and enforce its hegemonic agendas, including wealth looting and proxy wars against rivals politically and economically. 

However, the rise of the Global South in recent years has allowed its nations to counter the hegemonic exploitation of international bodies by funneling their resources into their economies to advance in the new world order. By engaging with the Western coalition while shielding themselves from their malicious agendas, these nations can benefit in the long run. 

Post-WW2 world order

After World War II, the United States emerged as an unrivaled superpower, untouched by the catastrophic destruction of the war and claiming a barely earned victory. Between 1944 and 1949, milestone events secured the unipolar order under the US and placed the EU under Washington’s direct influence for decades to come.

Bretton Woods in 1944 established the USD as the global reserve and trade currency, while the Marshall Plan in 1945 provided funding to Western European countries that agreed to follow America’s dictates to rehabilitate and rebuild their infrastructure and industrial capabilities (note that the plan’s funds were used to purchase American goods). 

The establishment of the IMF and World Bank enforced the new world monetary and financial system crafted by Washington. The Truman Doctrine finally ensured that Western Europe became a follower of Washington’s foreign policies. 

Establishing NATO, a war coalition under Washington’s direct control, was the highlight of that period. It served the interests of the United States and ensured that Europe did not attempt to create a sovereign military power but rather relied on the US for protection. 

The final blows to Europe’s industrial complex in the 20th century were the Nixon Shock in 1971, where the bloc’s member states found themselves stuck with paper notes whose value was solely determined by Washington, and in 1974 when the United States and Saudi Arabia agreed to peg oil to the USD – establishing the petrodollar. This meant that Europe’s access to the world’s largest energy reserve was now controlled by Washington. 

The petrodollar required Europe to maintain an abundance of USD reserves for oil purchases, resulting in increased investment in American treasury bonds and currency inflow to US markets. Despite partnering with the US in its bloody crusades over the past decades, the EU’s interests were not taken into consideration by Washington. 

The US has used its European allies as tools in the invasion of Afghanistan and Iraq, the destruction of Libya and Syria, and relations with the Arab world (the world’s richest energy region). Although Europe faced similar political and public backlash, it was the US that acquired the real strategic interests. 

Disregarding the changed world we live in, the EU continues to live under a WW2 mentality. 

Despite warnings against militarily provoking Russia, the EU doubled down on the American-NATO illusion that being the strongest military coalition worldwide guarantees inevitable victory, and using force to impose the West’s worldview remains a viable option. 

Self-destructive tendencies

After years of Russia sending signals and after many world vocal warnings, including from prominent Western figures like Kissinger, regarding NATO’s eastward expansion, European member states made the same mistake and adopted Washington’s doctrine on Moscow, leading to a conflict with Russia. Despite the historic failure of this approach, EU leaders repeatedly attempted to humiliate Russia and publicly claimed that the West aimed to bring Moscow to its knees since the beginning of the war in Ukraine until recently. 

The conflict with Russia has deeper repercussions on the EU than just preventing mutually beneficial trade ties that would put both economies on a trajectory of development and growth. The United States aims to fight against the growing Global South, with China at the top, and to cut off any attempts by its European allies to further integrate with Asia’s rising powers.

Following the start of the war in Ukraine, Europe not only faced energy shortages, while US energy companies continued to extract oil from Iraq, Syria, and Libya but also realized how Washington was profiting from the very war they had incited. They were overcharged for LNG at three to four times the price sold within the domestic US market, which itself impacted their major industry’s capabilities to continue production.

On the other hand, the US led an international campaign to force its European allies mainly to adopt a price cap on Russian oil. But despite Washington’s push for this bill, Americans themselves were not affected nor were they directly part of the pressure campaign in Moscow, mainly since they did not rely on Russian oil, and with the petrodollar in place, it did not matter how much the EU paid for oil, as the currency used would go back to US banks. 

Soon, Europe, left alone after countries such as Japan did not abide by the price cap, found that it still had to buy Russian Urals but with additional middlemen fees through countries such as India.

The EU witnessed firsthand the US tearing down their economies, which are under increased levels of deindustrialization, with industry giants moving to the US for lower energy prices and a more business-friendly environment crafted by Washington to lure companies mainly from its European allies.

As a result, Europe found itself seeking energy from African nations that it had previously colonized and destroyed. EU officials scrambled through countries like Algeria and Libya to secure gas and oil. 

As the world order shifts towards a more multipolar one with a center of gravity shifting towards China, Europe has begun to become aware that the US-led model that has dominated the world order for decades has not brought the desired outcome for the bloc. Despite benefiting immorally from genocidal campaigns and being America’s partner in crime, Europe’s gains were short-lived. 

With a history of self-destructive tendencies and after years of psycho-preparation and media propaganda, Europe was politically and economically prepared to repeat its historic mistakes in its approach to Russia and later to China.

The West quickly convinced its public that the rivalry with Russia was ideological and existential, that joining NATO and dropping neutrality (as with Finland and Sweden) was the only secure way to protect against the demons of the East, and that China is at the core of everything against the neoliberal values of the West.

Inevitable Multipolar world order 

During a speech to the Council of Foreign Relations in New York on April 18, European Central Bank President Christine Lagarde noted that the world is becoming more multipolar, with a fragmentation of the global economy into competing blocs. 

Lagarde stated that this new “global map” would have “first-order implications,” with the possibility of two blocs emerging, led by China and the US.

On many levels, Lagarde’s statement hits the core of the current world state of affairs.

The US reintroduced the political bloc mentality on a wider scale through the proxy war in Ukraine, pulling all its strings and employing all its accumulated influence to focus its power on obstructing a Eurasian uprising and realigning Europe’s foreign policy towards dismantling connections with China and Russia.

The post-WW2 era, characterized by bloc politics pushed by the US, is no longer feasible in the current period of deep integration, interest overlaps, and political complexity established by globalization, advanced trading networks, financial intertwining, and complementary production needs.

The West’s expansion of NATO forces to Russia’s border, followed by Moscow’s campaign to protect its national security, has put the global change on a pedestal.

The fallout of the Western-Russian war in Ukraine and the historic barrage of sanctions against Moscow has led to the fracturing of the financial system, and exposed the fragility of the West’s proclaimed “rules-based international world order”.

During an event hosted at Renmin University’s Chongyang Institute for Financial Studies last January to discuss the current state of world powers, the editor-in-chief of the Beijing Cultural Review (BCR) said that the fallout of the Western-Russian war in Ukraine led to events that could have never been imagined earlier.

“These [events] include the fracturing of the financial system, the expropriation and seizure of Russian private assets, and the freezing of Russian foreign exchange reserves. These are all abominable and unimaginable forms of confrontation,” Yang Ping said in his speech.

“The world is moving inexorably in the direction of decoupling. The phenomenon of politics affecting the economy and the capitalist political order no longer upholding the capitalist economic order is extremely striking.”

If not for the war in Ukraine, Ping’s statement regarding the world taking shape would have been shunned by Western experts as an illusion or merely a forecast, but now, and thanks to the West’s undivided efforts, the world is moving inexorably towards decoupling, and the phenomenon of politics affecting the economy is becoming strikingly apparent; a world with limited Western hegemony is on track to becoming an irreversible reality.

Europe’s amputated foreign policy

In recent months, top EU leaders including German Chancellor Olaf Scholz, French President Emmanuel Macron, President of the European Commission Ursula von der Leyen, and German Foreign Minister Annalena Baerbock have visited China amid rising global tensions.

Their visits aimed to balance relations between the US and China as Washington’s hostility towards Beijing escalated, its sanctions against the Asian giant increased, and its provocative actions in the South China Sea intensified.

Macron’s visit, in particular, was noteworthy, as it seemed to reassure China of Europe’s distinct position from Washington’s policies against Asian giants. Despite announcing that the main reason for his visit was to push Beijing against arming Russia and push Moscow to end the war, behind the scenes, Macron’s visit aimed to assert Europe’s position.

He stated that Europe should not be caught up in a disordering of the world and crises that aren’t ours and that the government must build a “third pole.”

“We must be clear where our views overlap with the US, but whether it’s about Ukraine, relations with China, or sanctions, we have a European strategy,” the French leader said then.

“We don’t want to get into a bloc versus bloc logic.”

At first, many European leaders publicly announced or hinted at their support for Macron’s move, considering it a positive approach to their largest trading partner.

But later, some European leaders expressed their rejection of his statements, the most blatant of which was the finance minister in Scholz’s government, Christian Lindner, who said that Macron’s “Idea of strategic autonomy of the European Union,” is “naïve.” Of course, the statement was not objected to by the German Chancellor, signaling that the minister has also voiced Scholz’s opinion.

Following Lindner’s remarks, and after von der Leyen reaffirmed the bloc’s neutral position on the Taiwan Strait issue provoked by the US during an EU parliamentary hearing on April 18, Manfred Weber, who helms the Parliament’s largest group, the center-right European People’s Party (EPP), accused Macron of “destroying” European unity with his trip to China, and that the French president “weakened the EU” and “made clear the great rift within the European Union in defining a common strategic plan against Beijing.”

To counter Macron’s position that the Taiwan issue is not a European concern, Weber also compared the matter to the war going on in Ukraine from Washington’s perspective.

“We shouldn’t be surprised if Washington starts asking whether Ukraine is a European issue,” Weber said. The question they may ask, he warned: “Why should American taxpayers do so much to defend Ukraine?”

His comments, of course, are nothing but shortsighted and delusional, given that the war in Ukraine was created and pushed forward by the US’ decades-long policies on NATO’s take against Russia.

From an outside observer, the contradicting statements – while also taking into account that the bloc members are dividing roles – can only be described as a political mess, a loss of strategic planning, and entails that the union is currently lacking the tools to form a united framework to establish a basis to approach the Global South as a whole, and especially China.

Is the EU’s policy being molded by an actual comprehensive overview of the world’s geopolitical shifts, or is it being dictated by a handful of US pawns that have served nothing but American hawks since they took office?

Blind Economic outlook as bloc 

The disunity in Europe extends beyond just their political approach to China, as trade policies with their largest business partner also show division. 

In 2020, China and the EU agreed on a trade framework, eliminating Chinese restrictions on European companies and investments in China. However, the deal was put on hold after the bloc sanctioned Beijing for alleged human rights abuses and China responded with sanctions of its own.

Just under two weeks after Macron’s and von der Leyen’s trip to China, the EU leaders said that they consider the deal with China as not applicable anymore, following the events since it was reached in 2020.

“We started negotiations around about 10 years ago and concluded the comprehensive agreement on investment two years ago. A lot has happened since then,” she said, adding that Europe’s “position is that we do have to reassess the Comprehensive Agreement on Investment,” she said earlier in April.

On his part, Macron considered that the agreement today is “less urgent,” and “just not practicable”.

On the other hand, Germany’s Chancellor Olaf Scholz lately has been pushing for “reactivating” the agreement and considered it was time to reinstate the deal and put it back on track.

It is understandable that this dynamic is not unusual between world powers, especially at a time when the globe is witnessing historic geopolitical shifts, and it is definitely not unusual considering that the American influence across Europe and its leaders is still very significant, and Washington’s sanctions sword is constantly raised against its allies.

However, the lack of a united foreign policy within the bloc may negatively impact its position in the emerging multipolar world order and lead to the weakening or collapse of the union. Europe’s incomplete and fragile relations with growing global pillars, especially China and the emerging Global South, may also be observed from Beijing’s perspective.

Losing post-WW2 against Global South 

Europe’s lack of clear foreign policy extends beyond its position on China, as it also pertains to the US’s declared soft war on the Asian giant. 

For decades, Brussels relied on the assumption of a long-term realm by Washington as the unipolar power, which led the bloc to neglect sustainable and strong relations with the Global South.

Since the start of the war in Ukraine, the Global South has made unexpected, unprecedented moves, guided by the goal of forming sovereign policies that are far from Western hegemony led by Washington. They declared historic political shifts, leading to the formation of a new and influential world pillar in the multipolar era.

Protectionist economic policies, accompanied by subsidization, act for vital sectors like electric vehicles and batteries.

More systems (such as BRICS and SCO) and countries are growing monetary bodies and alternative trade frameworks to those dominated and influenced directly by the United States. It has become clear that political global organizations such as the UNSC and the UN, which were long exploited by Washington and its European allies to extend their hegemony and colonialism, are slowly losing more relevance and impact on the global arena.

On April 16, US Treasury Secretary Janet Yellen, in an interview with CNN, said that the United States economic sanctions imposed on Russia and other nations have put the dollar’s hegemony at risk as targeted countries seek out an alternative.

“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” she said then.

Financial global institutions and systems such as the IMF, World Bank, and SWIFT, are gradually declining as de-dollarization proceeds and countries are finding alternatives to bypass the West’s complete influence, including mutual lending and local currency trade, sovereign projects, in addition to domestic SWIFT alternatives such as China’s CIPS, Russia’s SFPS, and Iran’s SEPAM, to name some.

The movement today is driven by Beijing along with other powers including Brazil, India,  Russia, Iran, and South Africa, among others.

Despite all signs in previous years of the emergence of the new geopolitical reality, Europe failed to form appropriate policies and outline a vision to engage and adapt to these drastic global shifts, nor did it take advantage of some of the outcomes that fall into its interest, such as de-dollarization and the end of the petrodollar. Instead, Europe insisted on following Washington’s agenda, further sidelining its world influence.

Sidelined 

On March 10, Iran and Saudi Arabia agreed to restore diplomatic relations and reopen missions after seven years of strained ties. 

Talks were brokered in Beijing under the auspices of Chinese President Xi Jinping. The Western role, especially that of Washington, in inciting dispute and rift between the two nations was criminal, leading to tens of thousands of deaths, mass destruction, displacement of hundreds of thousands, and feelings of hate among the people of the region.

China managed in just a few months to achieve what the United Nations and other international political bodies failed to do, marking Beijing’s first public political approach to the Middle East. The Beijing-brokered rapprochement between Tehran and Riyadh reveals Europe’s falling influence in the region and the growing tendency of countries to sideline the West in bilateral issues. It also highlights China’s rise as a peace-bringing and key power in the region.

Oppressed nations rejoice 

Europe’s centuries-long history of producing global superpowers makes it a hybrid bloc with a combined cultural, political, social, economic, and institutional maturity that can quickly adapt to world geopolitical shifts and overcome emerging challenges. 

However, it can be argued that the current world challenges are unprecedented, especially with the concept of globalization and the world’s interconnectedness.

Europe today has limited options that require a new approach and view of the world, with a humble and realistic policy that acknowledges the end of its hegemony and the adoption of sovereignty and mutual respect in bilateral relations.

The EU must also accept that the world is no longer a Western playground and that anti-hegemonic sentiment among nations is irreversible in a multipolar world. Regardless of Europe’s decisions, oppressed nations are watching the declining global influence of the colonial bloc with joy.

Related Stories

• War in Ukraine: A conflict that will decide the global system’s fate
• War in Ukraine united Europe, yet made EU obedient to US orders: WSJ
• Pentagon intel leak shows NATO forces on the ground in Ukraine

The first China-UAE gas deal in yuan: A new blow to dollar dominance

April 06 2023

Chinese allies control 40 percent of OPEC+ oil reserves, and the GCC controls another 40 percent. With this China-UAE gas trade settled in yuan, the petrodollar today is under serious threat.

Photo Credit: The Cradle

ByA Cradle Correspondent

On 28 March, the Shanghai Petroleum and Natural Gas Exchange (SHPGX) made history by announcing the first-ever deal on importing 65,000 tons of liquefied natural gas (LNG) from the UAE, settled in the Chinese yuan currency. China National Offshore Oil Company (CNOOC) and French TotalEnergies finalized the transaction, and TotalEnergies confirmed that the LNG imported was from the Persian Gulf state.

China’s Global Times in a report the following day, cited the chairman of the SHPGX, Guo Xu as saying that the deal is:

“A meaningful attempt to promote multi-currency pricing, settlement and cross-border payment in international LNG trading. It also provides a new channel for international players to participate in the Chinese market, helping to build a new pattern of dual circulation in China.”

Beijing pushes yuan for energy trade

The yuan settlement of international LNG trading is a “major event in China’s market-oriented oil and gas reform, which will help promote the docking of international and domestic markets,” the report quoted experts as saying.

The development comes after Chinese President Xi Jinping announced in December 2022, during a landmark visit to Riyadh, that his country should make “full use” of the SHPGX as a platform to carry out yuan settlement of oil and gas trade.

This deal represents a departure from the decades-long practice of conducting global oil sales exclusively in US dollars. A prominent economist, who spoke to The Cradle, speculated that “the French either resorted to the yuan due to the acute shortage of Russian gas supplies to the European continent, or they have reserves in the Chinese currency that they want to use.”

The deal came as a surprise, as French President Emmanuel Macron typically does not take such steps without the approval of the US. As for the UAE, the move is part of a larger trend of Persian Gulf countries opening up to China in the aftermath of the US withdrawal from Afghanistan and the Biden administration’s shift in regional policies.

The yuan payment also follows the global polarization taking place over the Ukraine war and further demonstrates the reluctance of Persian Gulf states to align with western hostility toward Russia, China, and other US adversaries. According to the same economist, “The Emirati move cannot be separated from the changes taking place in the world. Abu Dhabi and Riyadh sense the global imbalance of power, and decided to expand the margins of their international relations.”

Yuan’s growing acceptance

Given the current global geopolitical shifts, the yuan is gaining increased acceptance as an international currency. Since President Xi Jinping assumed office, China has settled agreements with several countries in its local currency in an attempt to challenge the dominance of the US dollar in global trade.

As a result, the yuan has become the world’s fifth-largest payment currency, the third-largest currency in trade settlement, and the fifth-largest reserve currency. According to the Global Times, the yuan today accounts for 7 percent of all foreign exchange trades worldwide and has experienced the most significant expansion in currency market share over the past three years.

Experts have noted that “with the recovery of the momentum of China’s economic growth and the further opening of the financial market, the investment and hedging function of the yuan has gradually increased.”

In an article earlier this year for The Cradle, Pakistani analyst F. M. Shakil cited the Currency Composition of Official Foreign Exchange Reserves (COFER) report by the International Monetary Fund (IMF), which shows that:

“The percentage of US dollars in central bank reserves has decreased by 12 percent since 1999, while the percentage of other currencies, particularly the Chinese yuan, have shown an increasing trend with a 9 percent rise during this period.”

Shakil also noted that the “cumulative cross-border yuan settlement handled in Xinjiang (western China), the financial hub between China and Central Asia, exceeded 100 billion yuan ($14 billion) as early as 2013 and reached 260 billion yuan in 2018.”

He concluded that “dollar reserves are dwindling and the influence of the United States of America is receding in the global economy, which represents an opportunity for regional powers’ currencies and alternative payment systems.”

Rise of the petroyuan

Since 2009, Beijing has implemented a policy to reduce its reliance on the US dollar in commercial transactions. This policy includes settling the majority of its goods in foreign markets in its local currency, establishing mutual lines of credit with several central banks worldwide, and negotiating with West Asian and North African countries to conduct trade using the yuan. These efforts have started to show results recently, with a number of Asian governments partially adopting the Chinese currency.

Iraq is one of the countries that have partially adopted the yuan in trade. In February, the Iraqi Central Bank announced plans to allow direct settlement of trade from China in yuan to improve access to foreign currency and compensate for the dollar shortage in local markets, largely due to measures imposed by the Federal Reserve on money transfers leaving Iraq to prevent them from reaching Tehran and Damascus. Egypt also announced its intention to issue yuan bonds last August.

Russia has played a significant role in changing the course of the yuan by signing the Eastern Natural Gas Pipeline Agreement from Russia to China and converting the currencies of gas payments from the US dollar to the Chinese yuan and the Russian ruble.

According to the latest data from the Russian Central Bank, the yuan has become a major player in Russia’s foreign trade, with its share of import settlements increasing from just 4 percent in January 2022 to 23 percent by the end of the year. The yuan’s share of exports rose from 0.5 percent to 16 percent in the same period.

During his trip to Saudi Arabia, the Chinese president encouraged Gulf Cooperation Council (GCC) countries to use the SHPGX for yuan-based energy deals. The visit also saw China and Saudi Arabia sign over $30 billion in trade deals, which some analysts believe marks the rise of the petroyuan.

According to US-based Credit Suisse analyst Zoltan Pozsar, Russia, Iran, and Venezuela – all allies of China – account for 40 percent of OPEC+’s proven oil reserves, with the GCC making up another 40 percent. If these three states alone settle their energy exports in yuan, the petroyuan is here to stay.

A response to US policy 

In a January interview with Bloomberg, during the World Economic Forum in Davos, Saudi Finance Minister Mohammed al-Jadaan said that “the kingdom is open to trading in currencies other than the US dollar in order to improve trade.”

Interestingly, despite being a stalwart US ally for decades, Riyadh is deepening its ties with key trading partners, including Beijing, as China imported over 500 million tons of crude oil and over 100 million tons of natural gas, including 63.44 million tons of LNG, in 2022.

Middle East Briefing suggests that this shift towards national currencies in global trade “is partly due to Washington’s sanctions policy against Russia.” Riyadh is now “following an increasing trend of hedging against US dollar use in trade” amid concerns that the US may use its currency as a weapon for trade and sanctions.

The trend towards using national currencies in global trade chains has continued to mature, with recent developments, including the announcement of two large-scale investment plans in China by Saudi oil giant Aramco.

The first plan involves building an integrated refining and chemicals plant in Liaoning Province, while the second plan involves Aramco’s acquisition of 10 percent of the shares of Rongsheng Petrochemical Company.

Meanwhile, the emirate of Dubai has opened its door to dealing in the Chinese currency in its global financial center, and Brazil and China have agreed to ditch the dollar and use their local currencies in their commercial dealings. In addition, Brazil and Argentina have announced the start of work on launching a common currency in their commercial dealings, dubbed “Sur.”

The petrodollar under threat

Petrodollars refer to US dollars used to purchase crude oil following a 1974 deal struck between Washington and Riyadh. The agreement not only ensured the military defense of the kingdom through US guarantees but also secured a steady stream of foreign purchases of US Treasury bonds and debt, which is a strategy of recycling the petrodollars back to Washington through Saudi Arabia’s reserves.

This transformed the ability of oil-rich Arab states to weaponize their vast energy resources against malign western policies – into a powerful economic weapon for the Americans, who, overnight, became the masters of the oil market. Today, however, with China’s rapid steps to challenge this entrenched system, there is a global spotlight on the rise of the Petroyuan versus the decline of the Petrodollar.

Asia Financial describes China’s deal with TotalEnergies as a “step forward in China’s long-term battle to reduce the power and reach of US dollar hegemony,” adding that “further such moves appear to be in the winds.” Importantly, according to Viktor Katona, lead crude analyst at Kpler:

“While the dollar will likely remain the dominant global currency in the near future, the rise of a so-called petroyuan will gain momentum as China leverages its status as the world’s largest oil importer.”

Saudi Arabia is reportedly considering accepting payment for its oil exports to China in yuan. However, any such shift is likely to be marginal, as most West Asian currencies are pegged to the US dollar, and accepting payments in other currencies increases foreign exchange risk.

Researcher P.S. Srinivas opined last year that oil deals with countries in West Asia “do not constitute a threat to the US dollar,” and the likelihood of the yuan replacing the US dollar as the benchmark currency for pricing is even more remote due to China’s capital controls and the yuan’s lack of convertibility.

While the possibility of the yuan gaining greater prominence in the global oil trade cannot be ruled out, it is unlikely to replace the US dollar as the primary currency for pricing in the oil and gas industry in the short term.

Most West Asian nations continue to maintain a vested interest in preserving the strength of the dollar, and any shift towards accepting payments in other currencies is likely to be minimal, at first. In the next few years, it will be important to keep an eye on China’s slow but steady ascent to global economic dominance and the growing usage of the yuan in international trade.

The views expressed in this article do not necessarily reflect those of The Cradle.

China, Brazil announce de-dollarization of mutual trade

30 Mar 2023

Source: Agencies

By Al Mayadeen English 

The two BRICS partners strike a deal to ditch USD with the aim of easing financial transactions between the two countries and reducing trade costs.

Industry representatives from China and Brazil in a panel discussion at the Brazil-China Business Seminar (CCIIP)

China and Brazil struck a deal to ditch the US dollar in their bilateral transactions, which is expected to reduce investment costs and develop economic ties between the two countries, the Brazilian government stated on Wednesday.

The agreement between the Asian superpower and Latin America’s largest economy – the mutual top trading partners –  is a new financial and political strike against the green banknotes as more countries, with the growing geopolitical and economical influence of the East, are paving the way to distance themselves from the US politically-oriented currency.

Read more: De-dollarization: Slowly but surely

Earlier in January, both nations reached a preliminary deal on the matter that was finalized in a Brazil-China Business Seminar in China on Wednesday, which Brazil’s President Luiz Inacio Lula da Silva was scheduled to take part in but failed to attend due to emergency health issues.

Read more: Future of global economy belongs to SCO, BRICS: Iran Econ Minister

“The expectation is that this will reduce costs… promote even greater bilateral trade and facilitate investment,” Brazil’s Trade and Investment Promotion Agency (ApexBrasil) said.

In 2022, trade volume between the economic giants hit a historic record of over $150.5 billion in bilateral trade.

China’s Bank of Communications BBM (one of the country’s top five banks) and industrial and Commercial Bank of China will oversee the execution of the deal, officials stated.

Earlier this month, US Treasury Secretary Janet Yellen said if the US defaults on its debt, this would result in a massive loss of confidence in the US dollar, eventually leading to the loss of its status as the world’s global reserve currency – striking major market fears over the future of the world’s safe haven currency.

Ditching USD roadmap

China and Brazil are two of the five founders of the BRICS bloc, which accounts for around 30% of the global gross output.

Last January, South African Foreign Minister Naledi Pandor announced that the BRICS club of emerging economies seeks to discover a way of bypassing the dollar to create a fairer payment system that would not be skewed toward wealthy countries.

“We have always been concerned at the fact that there is a dominance of the dollar and that we do need to look at an alternative,” he said then.

Recently, a handful of medium-sized economies aimed to join the bloc: Argentina, Algeria, Iran, Indonesia, Turkey, Saudi Arabia, and Egypt. 

The gigantic bloc announced a few days ago that it will establish a “geological platform” that aims to allow the BRICS member states to coordinate in regard to their mineral reserves and extraction methods in light of the increasing demand for natural resources. 

Related

• New BRICS currency underway: State Duma Deputy Chairman
• UAE, KSA, India, South Korea secretly supplying missiles to Ukraine
• Iran wins ICJ motion against US over illegal seizure of assets
• China, Brazil announce de-dollarization of mutual trade
• Putin urges the BRICS to face exceptional sanctions imposed by West

Douglas Macgregor: “Russia IS WIPING THEM OUT, THIS IS IT” in Exclusive Interview

Mar 29, 2023

Red Pilled TV

Premiered Mar 29, 2023 #douglasmacgregor#interview

“Russia IS WIPING THEM OUT, THIS IS IT” in Exclusive Interview Douglas Macgregor is back on the show to talk about the war in Ukraine. Macgregor gives his assessment of where things stand on the ground. They talk about the astounding casualty numbers and the horrifying nature of the battle over Bakhmut. Macgregor then gives some predictions for the next stages of the war. They talk about the rising tension with China. They agree there is no need to go to war with China but discuss what may explain the sudden attention shift towards Beijing. Lastly, they talk about the effects of cronyism in the weapons industry and the probability of a nuclear war.

Douglas Macgregor: “Ukraine IS LOSING, THIS IS IT” in Exclusive Interview

Douglas Macgregor: “Ukraine IS LOSING, THIS IS IT” in Exclusive Interview Douglas Macgregor is back on the show to talk about the war in Ukraine. Macgregor gives his assessment of where things stand on the ground. They talk about the astounding casualty numbers and the horrifying nature of the battle over Bakhmut. Macgregor then gives some predictions for the next stages of the war. They talk about the rising tension with China. They agree there is no need to go to war with China but discuss what may explain the sudden attention shift towards Beijing. Lastly, they talk about the effects of cronyism in the weapons industry and the probability of a nuclear war.

Premiered 13 hours ago

Discussed on the show: “This Time It’s Different” (The American Conservative) “Ukrainian soldiers in Bakhmut: ‘Our troops are not being protected’” (Kyiv Independent) Douglas Macgregor, Col. (ret.) is a senior fellow with The American Conservative, the former advisor to the Secretary of Defense in the Trump administration, a decorated combat veteran, and the author of five books.

China Declares War On The United States (Gonzalo Lira)

February 22, 2023

Full document:

US Hegemony and Its Perils

2023-02-20 16:28

US Hegemony and Its Perils

February 2023

Contents

Introduction

I. Political Hegemony—Throwing Its Weight Around

II. Military Hegemony—Wanton Use of Force

III. Economic Hegemony—Looting and Exploitation

IV. Technological Hegemony—Monopoly and Suppression

V. Cultural Hegemony—Spreading False Narratives

Conclusion

Introduction

Since becoming the world’s most powerful country after the two world wars and the Cold War, the United States has acted more boldly to interfere in the internal affairs of other countries, pursue, maintain and abuse hegemony, advance subversion and infiltration, and willfully wage wars, bringing harm to the international community.

The United States has developed a hegemonic playbook to stage “color revolutions,” instigate regional disputes, and even directly launch wars under the guise of promoting democracy, freedom and human rights. Clinging to the Cold War mentality, the United States has ramped up bloc politics and stoked conflict and confrontation. It has overstretched the concept of national security, abused export controls and forced unilateral sanctions upon others. It has taken a selective approach to international law and rules, utilizing or discarding them as it sees fit, and has sought to impose rules that serve its own interests in the name of upholding a “rules-based international order.”

This report, by presenting the relevant facts, seeks to expose the U.S. abuse of hegemony in the political, military, economic, financial, technological and cultural fields, and to draw greater international attention to the perils of the U.S. practices to world peace and stability and the well-being of all peoples.

I. Political Hegemony — Throwing Its Weight Around

The United States has long been attempting to mold other countries and the world order with its own values and political system in the name of promoting democracy and human rights.

◆ Instances of U.S. interference in other countries’ internal affairs abound. In the name of “promoting democracy,” the United States practiced a “Neo-Monroe Doctrine” in Latin America, instigated “color revolutions” in Eurasia, and orchestrated the “Arab Spring” in West Asia and North Africa, bringing chaos and disaster to many countries.

In 1823, the United States announced the Monroe Doctrine. While touting an “America for the Americans,” what it truly wanted was an “America for the United States.”

Since then, the policies of successive U.S. governments toward Latin America and the Caribbean Region have been riddled with political interference, military intervention and regime subversion. From its 61-year hostility toward and blockade of Cuba to its overthrow of the Allende government of Chile, U.S. policy on this region has been built on one maxim-those who submit will prosper; those who resist shall perish.

The year 2003 marked the beginning of a succession of “color revolutions” — the “Rose Revolution” in Georgia, the “Orange Revolution” in Ukraine and the “Tulip Revolution” in Kyrgyzstan. The U.S. Department of State openly admitted playing a “central role” in these “regime changes.” The United States also interfered in the internal affairs of the Philippines, ousting President Ferdinand Marcos Sr. in 1986 and President Joseph Estrada in 2001 through the so-called “People Power Revolutions.”

In January 2023, former U.S. Secretary of State Mike Pompeo released his new book Never Give an Inch: Fighting for the America I Love. He revealed in it that the United States had plotted to intervene in Venezuela. The plan was to force the Maduro government to reach an agreement with the opposition, deprive Venezuela of its ability to sell oil and gold for foreign exchange, exert high pressure on its economy, and influence the 2018 presidential election.

◆ The U.S. exercises double standards on international rules. Placing its self-interest first, the United States has walked away from international treaties and organizations, and put its domestic law above international law. In April 2017, the Trump administration announced that it would cut off all U.S. funding to the United Nations Population Fund (UNFPA) with the excuse that the organization “supports, or participates in the management of a programme of coercive abortion or involuntary sterilization.” The United States quit UNESCO twice in 1984 and 2017. In 2017, it announced leaving the Paris Agreement on climate change. In 2018, it announced its exit from the UN Human Rights Council, citing the organization’s “bias” against Israel and failure to protect human rights effectively. In 2019, the United States announced its withdrawal from the Intermediate-Range Nuclear Forces Treaty to seek unfettered development of advanced weapons. In 2020, it announced pulling out of the Treaty on Open Skies.

The United States has also been a stumbling block to biological arms control by opposing negotiations on a verification protocol for the Biological Weapons Convention (BWC) and impeding international verification of countries’ activities relating to biological weapons. As the only country in possession of a chemical weapons stockpile, the United States has repeatedly delayed the destruction of chemical weapons and remained reluctant in fulfilling its obligations. It has become the biggest obstacle to realizing “a world free of chemical weapons.”

◆ The United States is piecing together small blocs through its alliance system. It has been forcing an “Indo-Pacific Strategy” onto the Asia-Pacific region, assembling exclusive clubs like the Five Eyes, the Quad and AUKUS, and forcing regional countries to take sides. Such practices are essentially meant to create division in the region, stoke confrontation and undermine peace.

◆ The U.S. arbitrarily passes judgment on democracy in other countries, and fabricates a false narrative of “democracy versus authoritarianism” to incite estrangement, division, rivalry and confrontation. In December 2021, the United States hosted the first “Summit for Democracy,” which drew criticism and opposition from many countries for making a mockery of the spirit of democracy and dividing the world. In March 2023, the United States will host another “Summit for Democracy,” which remains unwelcome and will again find no support.

II. Military Hegemony — Wanton Use of Force

The history of the United States is characterized by violence and expansion. Since it gained independence in 1776, the United States has constantly sought expansion by force: it slaughtered Indians, invaded Canada, waged a war against Mexico, instigated the American-Spanish War, and annexed Hawaii. After World War II, the wars either provoked or launched by the United States included the Korean War, the Vietnam War, the Gulf War, the Kosovo War, the War in Afghanistan, the Iraq War, the Libyan War and the Syrian War, abusing its military hegemony to pave the way for expansionist objectives. In recent years, the U.S. average annual military budget has exceeded 700 billion U.S. dollars, accounting for 40 percent of the world’s total, more than the 15 countries behind it combined. The United States has about 800 overseas military bases, with 173,000 troops deployed in 159 countries.

According to the book America Invades: How We’ve Invaded or been Militarily Involved with almost Every Country on Earth, the United States has fought or been militarily involved with almost all the 190-odd countries recognized by the United Nations with only three exceptions. The three countries were “spared” because the United States did not find them on the map.

◆ As former U.S. President Jimmy Carter put it, the United States is undoubtedly the most warlike nation in the history of the world. According to a Tufts University report, “Introducing the Military Intervention Project: A new Dataset on U.S. Military Interventions, 1776-2019,” the United States undertook nearly 400 military interventions globally between those years, 34 percent of which were in Latin America and the Caribbean, 23 percent in East Asia and the Pacific, 14 percent in the Middle East and North Africa, and 13 percent in Europe. Currently, its military intervention in the Middle East and North Africa and sub-Saharan Africa is on the rise.

Alex Lo, a South China Morning Post columnist, pointed out that the United States has rarely distinguished between diplomacy and war since its founding. It overthrew democratically elected governments in many developing countries in the 20th century and immediately replaced them with pro-American puppet regimes. Today, in Ukraine, Iraq, Afghanistan, Libya, Syria, Pakistan and Yemen, the United States is repeating its old tactics of waging proxy, low-intensity, and drone wars.

◆ U.S. military hegemony has caused humanitarian tragedies. Since 2001, the wars and military operations launched by the United States in the name of fighting terrorism have claimed over 900,000 lives with some 335,000 of them civilians, injured millions and displaced tens of millions. The 2003 Iraq War resulted in some 200,000 to 250,000 civilian deaths, including over 16,000 directly killed by the U.S. military, and left more than a million homeless.

The United States has created 37 million refugees around the world. Since 2012, the number of Syrian refugees alone has increased tenfold. Between 2016 and 2019, 33,584 civilian deaths were documented in the Syrian fightings, including 3,833 killed by U.S.-led coalition bombings, half of them women and children. The Public Broadcasting Service (PBS) reported on 9 November 2018 that the air strikes launched by U.S. forces on Raqqa alone killed 1,600 Syrian civilians.

The two-decades-long war in Afghanistan devastated the country. A total of 47,000 Afghan civilians and 66,000 to 69,000 Afghan soldiers and police officers unrelated to the September 11 attacks were killed in U.S. military operations, and more than 10 million people were displaced. The war in Afghanistan destroyed the foundation of economic development there and plunged the Afghan people into destitution. After the “Kabul debacle” in 2021, the United States announced that it would freeze some 9.5 billion dollars in assets belonging to the Afghan central bank, a move considered as “pure looting.”

In September 2022, Turkish Interior Minister Suleyman Soylu commented at a rally that the United States has waged a proxy war in Syria, turned Afghanistan into an opium field and heroin factory, thrown Pakistan into turmoil, and left Libya in incessant civil unrest. The United States does whatever it takes to rob and enslave the people of any country with underground resources.

The United States has also adopted appalling methods in war. During the Korean War, the Vietnam War, the Gulf War, the Kosovo War, the War in Afghanistan and the Iraq War, the United States used massive quantities of chemical and biological weapons as well as cluster bombs, fuel-air bombs, graphite bombs and depleted uranium bombs, causing enormous damage on civilian facilities, countless civilian casualties and lasting environmental pollution.

III. Economic Hegemony — Looting and Exploitation

After World War II, the United States led efforts to set up the Bretton Woods System, the International Monetary Fund and the World Bank, which, together with the Marshall Plan, formed the international monetary system centered around the U.S. dollar. In addition, the United States has also established institutional hegemony in the international economic and financial sector by manipulating the weighted voting systems, rules and arrangements of international organizations including “approval by 85 percent majority,” and its domestic trade laws and regulations. By taking advantage of the dollar’s status as the major international reserve currency, the United States is basically collecting “seigniorage” from around the world; and using its control over international organizations, it coerces other countries into serving America’s political and economic strategy.

◆ The United States exploits the world’s wealth with the help of “seigniorage.” It costs only about 17 cents to produce a 100 dollar bill, but other countries had to pony up 100 dollar of actual goods in order to obtain one. It was pointed out more than half a century ago, that the United States enjoyed exorbitant privilege and deficit without tears created by its dollar, and used the worthless paper note to plunder the resources and factories of other nations.

◆ The hegemony of U.S. dollar is the main source of instability and uncertainty in the world economy. During the COVID-19 pandemic, the United States abused its global financial hegemony and injected trillions of dollars into the global market, leaving other countries, especially emerging economies, to pay the price. In 2022, the Fed ended its ultra-easy monetary policy and turned to aggressive interest rate hike, causing turmoil in the international financial market and substantial depreciation of other currencies such as the Euro, many of which dropped to a 20-year low. As a result, a large number of developing countries were challenged by high inflation, currency depreciation and capital outflows. This was exactly what Nixon’s secretary of the treasury John Connally once remarked, with self-satisfaction yet sharp precision, that “the dollar is our currency, but it is your problem.”

◆ With its control over international economic and financial organizations, the United States imposes additional conditions to their assistance to other countries. In order to reduce obstacles to U.S. capital inflow and speculation, the recipient countries are required to advance financial liberalization and open up financial markets so that their economic policies would fall in line with America’s strategy. According to the Review of International Political Economy, along with the 1,550 debt relief programs extended by the IMF to its 131 member countries from 1985 to 2014, as many as 55,465 additional political conditions had been attached.

◆ The United States willfully suppresses its opponents with economic coercion. In the 1980s, to eliminate the economic threat posed by Japan, and to control and use the latter in service of America’s strategic goal of confronting the Soviet Union and dominating the world, the United States leveraged its hegemonic financial power against Japan, and concluded the Plaza Accord. As a result, Yen was pushed up, and Japan was pressed to open up its financial market and reform its financial system. The Plaza Accord dealt a heavy blow to the growth momentum of the Japanese economy, leaving Japan to what was later called “three lost decades.”

◆ America’s economic and financial hegemony has become a geopolitical weapon. Doubling down on unilateral sanctions and “long-arm jurisdiction,” the United States has enacted such domestic laws as the International Emergency Economic Powers Act, the Global Magnitsky Human Rights Accountability Act, and the Countering America’s Adversaries Through Sanctions Act, and introduced a series of executive orders to sanction specific countries, organizations or individuals. Statistics show that U.S. sanctions against foreign entities increased by 933 percent from 2000 to 2021. The Trump administration alone has imposed more than 3,900 sanctions, which means three sanctions per day. So far, the United States had or has imposed economic sanctions on nearly 40 countries across the world, including Cuba, China, Russia, the DPRK, Iran and Venezuela, affecting nearly half of the world’s population. “The United States of America” has turned itself into “the United States of Sanctions.” And “long-arm jurisdiction” has been reduced to nothing but a tool for the United States to use its means of state power to suppress economic competitors and interfere in normal international business. This is a serious departure from the principles of liberal market economy that the United States has long boasted.

IV. Technological Hegemony — Monopoly and Suppression

The United States seeks to deter other countries’ scientific, technological and economic development by wielding monopoly power, suppression measures and technology restrictions in high-tech fields.

◆ The United States monopolizes intellectual property in the name of protection. Taking advantage of the weak position of other countries, especially developing ones, on intellectual property rights and the institutional vacancy in relevant fields, the United States reaps excessive profits through monopoly. In 1994, the United States pushed forward the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), forcing the Americanized process and standards in intellectual property protection in an attempt to solidify its monopoly on technology.

In the 1980s, to contain the development of Japan’s semiconductor industry, the United States launched the “301” investigation, built bargaining power in bilateral negotiations through multilateral agreements, threatened to label Japan as conducting unfair trade, and imposed retaliatory tariffs, forcing Japan to sign the U.S.-Japan Semiconductor Agreement. As a result, Japanese semiconductor enterprises were almost completely driven out of global competition, and their market share dropped from 50 percent to 10 percent. Meanwhile, with the support of the U.S. government, a large number of U.S. semiconductor enterprises took the opportunity and grabbed larger market share.

◆ The United States politicizes, weaponizes technological issues and uses them as ideological tools. Overstretching the concept of national security, the United States mobilized state power to suppress and sanction Chinese company Huawei, restricted the entry of Huawei products into the U.S. market, cut off its supply of chips and operating systems, and coerced other countries to ban Huawei from undertaking local 5G network construction. It even talked Canada into unwarrantedly detaining Huawei’s CFO Meng Wanzhou for nearly three years.

The United States has fabricated a slew of excuses to clamp down on China’s high-tech enterprises with global competitiveness, and has put more than 1,000 Chinese enterprises on sanction lists. In addition, the United States has also imposed controls on biotechnology, artificial intelligence and other high-end technologies, reinforced export restrictions, tightened investment screening, suppressed Chinese social media apps such as TikTok and WeChat, and lobbied the Netherlands and Japan to restrict exports of chips and related equipment or technology to China.

The United States has also practiced double standards in its policy on China-related technological professionals. To sideline and suppress Chinese researchers, since June 2018, visa validity has been shortened for Chinese students majoring in certain high-tech-related disciplines, repeated cases have occurred where Chinese scholars and students going to the United States for exchange programs and study were unjustifiably denied and harassed, and large-scale investigation on Chinese scholars working in the United States was carried out.

◆ The United States solidifies its technological monopoly in the name of protecting democracy. By building small blocs on technology such as the “chips alliance” and “clean network,” the United States has put “democracy” and “human rights” labels on high-technology, and turned technological issues into political and ideological issues, so as to fabricate excuses for its technological blockade against other countries. In May 2019, the United States enlisted 32 countries to the Prague 5G Security Conference in the Czech Republic and issued the Prague Proposal in an attempt to exclude China’s 5G products. In April 2020, then U.S. Secretary of State Mike Pompeo announced the “5G clean path,” a plan designed to build technological alliance in the 5G field with partners bonded by their shared ideology on democracy and the need to protect “cyber security.” The measures, in essence, are the U.S. attempts to maintain its technological hegemony through technological alliances.

◆ The United States abuses its technological hegemony by carrying out cyber attacks and eavesdropping. The United States has long been notorious as an “empire of hackers,” blamed for its rampant acts of cyber theft around the world. It has all kinds of means to enforce pervasive cyber attacks and surveillance, including using analog base station signals to access mobile phones for data theft, manipulating mobile apps, infiltrating cloud servers, and stealing through undersea cables. The list goes on.

U.S. surveillance is indiscriminate. All can be targets of its surveillance, be they rivals or allies, even leaders of allied countries such as former German Chancellor Angela Merkel and several French Presidents. Cyber surveillance and attacks launched by the United States such as “Prism,” “Dirtbox,” “Irritant Horn” and “Telescreen Operation” are all proof that the United States is closely monitoring its allies and partners. Such eavesdropping on allies and partners has already caused worldwide outrage. Julian Assange, the founder of Wikileaks, a website that has exposed U.S. surveillance programs, said that “do not expect a global surveillance superpower to act with honor or respect. There is only one rule: there are no rules.”

V. Cultural Hegemony — Spreading False Narratives

The global expansion of American culture is an important part of its external strategy. The United States has often used cultural tools to strengthen and maintain its hegemony in the world.

◆ The United States embeds American values in its products such as movies. American values and lifestyle are a tied product to its movies and TV shows, publications, media content, and programs by the government-funded non-profit cultural institutions. It thus shapes a cultural and public opinion space in which American culture reigns and maintains cultural hegemony. In his article The Americanization of the World, John Yemma, an American scholar, exposed the real weapons in U.S. cultural expansion: the Hollywood, the image design factories on Madison Avenue and the production lines of Mattel Company and Coca-Cola.

There are various vehicles the United States uses to keep its cultural hegemony. American movies are the most used; they now occupy more than 70 percent of the world’s market share. The United States skilfully exploits its cultural diversity to appeal to various ethnicities. When Hollywood movies descend on the world, they scream the American values tied to them.

◆ American cultural hegemony not only shows itself in “direct intervention,” but also in “media infiltration” and as “a trumpet for the world.” U.S.-dominated Western media has a particularly important role in shaping global public opinion in favor of U.S. meddling in the internal affairs of other countries.

The U.S. government strictly censors all social media companies and demands their obedience. Twitter CEO Elon Musk admitted on 27 December 2022 that all social media platforms work with the U.S. government to censor content, reported Fox Business Network. Public opinion in the United States is subject to government intervention to restrict all unfavorable remarks. Google often makes pages disappear.

U.S. Department of Defense manipulates social media. In December 2022, The Intercept, an independent U.S. investigative website, revealed that in July 2017, U.S. Central Command official Nathaniel Kahler instructed Twitter’s public policy team to augment the presence of 52 Arabic-language accounts on a list he sent, six of which were to be given priority. One of the six was dedicated to justifying U.S. drone attacks in Yemen, such as by claiming that the attacks were precise and killed only terrorists, not civilians. Following Kahler’s directive, Twitter put those Arabic-language accounts on a “white list” to amplify certain messages.

◆The United States practices double standards on the freedom of the press. It brutally suppresses and silences media of other countries by various means. The United States and Europe bar mainstream Russian media such as Russia Today and the Sputnik from their countries. Platforms such as Twitter, Facebook and YouTube openly restrict official accounts of Russia. Netflix, Apple and Google have removed Russian channels and applications from their services and app stores. Unprecedented draconian censorship is imposed on Russia-related contents.

◆The United States abuses its cultural hegemony to instigate “peaceful evolution” in socialist countries. It sets up news media and cultural outfits targeting socialist countries. It pours staggering amounts of public funds into radio and TV networks to support their ideological infiltration, and these mouthpieces bombard socialist countries in dozens of languages with inflammatory propaganda day and night.

The United States uses misinformation as a spear to attack other countries, and has built an industrial chain around it: there are groups and individuals making up stories, and peddling them worldwide to mislead public opinion with the support of nearly limitless financial resources.

Conclusion

While a just cause wins its champion wide support, an unjust one condemns its pursuer to be an outcast. The hegemonic, domineering, and bullying practices of using strength to intimidate the weak, taking from others by force and subterfuge, and playing zero-sum games are exerting grave harm. The historical trends of peace, development, cooperation, and mutual benefit are unstoppable. The United States has been overriding truth with its power and trampling justice to serve self-interest. These unilateral, egoistic and regressive hegemonic practices have drawn growing, intense criticism and opposition from the international community.

Countries need to respect each other and treat each other as equals. Big countries should behave in a manner befitting their status and take the lead in pursuing a new model of state-to-state relations featuring dialogue and partnership, not confrontation or alliance. China opposes all forms of hegemonism and power politics, and rejects interference in other countries’ internal affairs. The United States must conduct serious soul-searching. It must critically examine what it has done, let go of its arrogance and prejudice, and quit its hegemonic, domineering and bullying practices.

The Core Issue

 FEBRUARY 8, 2023

Posted by INTERNATIONALIST 360° 

Bouthaina Shaaban

The wars we are witnessing, whether the military war in Ukraine, or soft wars in the China Sea, or cultural wars in what Neo-Liberalism is distorting and charting for humanity, are all manifestations of a strong opposition by the West to the establishment of this multipolar world.

The core problem humanity is facing nowadays can be summed up as follows:

There is no political or moral leader to this world, as the strongest militarily and financially are pursuing additional military and financial powers, and the system that was produced by the Second World War and established by the agreement of so many countries, is truly collapsing, with no alternative yet in place. The BRICS countries, the Shanghai Cooperation Organization, and many Asian countries are trying to establish a multipolar system in the world, where no opinion can have an absolute veto over the will of so many countries.

The wars we are witnessing, whether the military war in Ukraine, or soft wars in the China Sea, or cultural wars in what Neo-Liberalism is distorting and charting for humanity, are all manifestations of a strong opposition by the West to the establishment of this multipolar world. While Russia, Iran, India, Latin America, and Africa are trying their best to get rid of the hegemony of the Dollar, the hegemony of NATO’s will, the hegemony of the West that had been looting resources from all over the world over decades, the West is absolutely desperate to establish new alliances through which it may prevent the birth of this multipolar system.

From this very perspective, we can understand the persistent efforts the US is exerting with Japan, South Korea, the Philippines, and Taiwan to establish an alliance in the China Sea to threaten China and prevent whatever steps China wants to make in order to ensure the dawn of a multipolar system. The efforts of the US, and what they called an “echo alliance” with Australia and Canada can also be understood in the same context, in order to frighten China from any serious effort in aligning with other countries who might subvert the hegemony of the West in the world.

From the same perspective, we can understand the current competition in Africa between China, Russia, and the old colonialists: France and the United States, and of course the West is not interested in the rise or equality or prosperity of the Africans. All the West is interested in is what these countries have, how they can loot gold and other precious minerals, and how they can loot this wealth without paying anything in return in order to support their economies and build their countries at the expense of the lives and prosperity of Africans.

Latin America is no exception as well. While Chávez, Lula da Silva and other nationalist leaders tried and succeeded in shaking the fetters of the US off their countries, the United States is intensifying its efforts in Latin America to prevent the liberation of the will of all Latin American countries that had been considered for decades as the backyard of the United States.

As for our region, the Middle East, the United States has lately, or last year, added “Israel”, the Zionist entity, as a member of CENTCOM for the first time in history, which means that the US has appointed “Israel” as its military representative in the region in order to do what it sees fit so as to preserve the hegemony of the US, and extend Zionist hegemony over the will of the Arab and Iranian people in the Arab World and Iran. The issue here is not traditional: the Zionist entity is not launching wars on the border with its army and its tanks and airplanes; it is launching intelligence wars inside countries in an attempt to change the political systems in these countries, and turn them into satellite states that echo the will of the Israelis, and by default the will of the Americans and the West.

This, in essence, was the reason for the terrorist war that has been launched against the Syrian people for the last 12 years. This in essence is the reason why NATO countries destroyed Libya and betrayed Russia (and, in fact, did not fulfill their promise to Russia that it was going to be part of their alliance). The result is that Libyan oil is being divided between Italy, France, and the United States; it has been looted by these countries, while the Libyan people remain impoverished, scattered, and unable to secure their subsistence.

This, again, is what has been happening in Iran since last year. “Israel”, the Zionist entity, is using its intelligence to recruit Iranians and others probably, who will be its agents to fulfill its agenda in Iran, without launching a traditional war, and it is within this context that we can observe what is happening in Iran of claims about women’s freedom or other democratic appeals or whatever. If the Israelis and the Americans believe in freedom for women and women’s rights, then tell me what is happening to the 29 Palestinian women prisoners who are being harassed and subjugated in Israeli jails, in an unprecedented way crackdown on women.

The Israeli entity is the most racist occupation in history after South Africa. It is killing Palestinians Point Blank, it is destroying their houses, robbing their property, looting their lands, and perpetrating the worst crimes humanity is witnessing nowadays. Yet “Israel” is the partner of the West in trying to subjugate other countries and undermine the free will of any government and any person that refuses to be an agent of this power that is only interested in military industry, and accumulating more wealth, and bringing more money to the wealthiest in the world who made their wealth by looting other people and other countries.

Hence it is the duty of every truly free person to stand fast and firm against this horrifying process of the West to try and control the will of other countries. And from this perspective, I can certainly say that the war Russia is fighting in Ukraine against NATO is not only a Russian war; it is a world war, and it is not fair to let Russian soldiers and Russian people fight on their own in a war that the entire humanity needs to fight.

NATO has imposed this war on Russia, and it is desperate to defeat Russia in order to terrify any country that may think of standing up against Western hegemony. Russia is leading the way for a different world, and many Western leaders have announced that they are sending trillions of dollars and armaments in order to prevent Russian victory. Russian victory would mean Western defeat, and Western defeat would mean the end of Western hegemony over the world.  This is what the West cannot afford, and this is why the West considers this war an existential war. In fact, it is a war for everyone in the world but for reasons different from those of the West.

RELATED

• Eurasian International Conference Calls for the Establishment of a Multipolar World
• SYRIA TARGETED BY US ADVOCATES OF UNIPOLAR GLOBAL ORDER
• “Taking the Ideas We Believe in to the New Multipolar System”: Interview with Bouthaina Shaaban

Global South: Gold-backed currencies to replace the US dollar

The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade.

January 19 2023

Photo Credit: The Cradle

By Pepe Escobar

Let’s start with three interconnected multipolar-driven facts.

First: One of the key take aways from the World Economic Forum annual shindig in Davos, Switzerland is when Saudi Finance Minister Mohammed al-Jadaan, on a panel on “Saudi Arabia’s Transformation,” made it clear that Riyadh “will consider trading in currencies other than the US dollar.”

So is the petroyuan finally at hand? Possibly, but Al-Jadaan wisely opted for careful hedging: “We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries.”

Second: The Central Banks of Iran and Russia are studying the adoption of a “stable coin” for foreign trade settlements, replacing the US dollar, the ruble and the rial. The crypto crowd is already up in arms, mulling the pros and cons of a gold-backed central bank digital currency (CBDC) for trade that will be in fact impervious to the weaponized US dollar.

A gold-backed digital currency

The really attractive issue here is that this gold-backed digital currency would be particularly effective in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea.

Astrakhan is the key Russian port participating in the International North South Transportation Corridor (INTSC), with Russia processing cargo travelling across Iran in merchant ships all the way to West Asia, Africa, the Indian Ocean and South Asia.

The success of the INSTC – progressively tied to a gold-backed CBDC – will largely hinge on whether scores of Asian, West Asian and African nations refuse to apply US-dictated sanctions on both Russia and Iran.

As it stands, exports are mostly energy and agricultural products; Iranian companies are the third largest importer of Russian grain. Next will be turbines, polymers, medical equipment, and car parts. Only the Russia-Iran section of the INSTC represents a $25 billion business.

And then there’s the crucial energy angle of INSTC – whose main players are the Russia-Iran-India triad.

India’s purchases of Russian crude have increased year-by-year by a whopping factor of 33. India is the world’s third largest importer of oil; in December, it received 1.2 million barrels from Russia, which for several months now is positioned ahead of Iraq and Saudi Arabia as Delhi’s top supplier.

‘A fairer payment system’

Third: South Africa holds this year’s rotating BRICS presidency. And this year will mark the start of BRICS+ expansion, with candidates ranging from Algeria, Iran and Argentina to Turkey, Saudi Arabia and the UAE.

South African Foreign Minister Naledi Pandor has just confirmed that the BRICS do want to find a way to bypass the US dollar and thus create “a fairer payment system not skewed toward wealthier countries.”

For years now, Yaroslav Lissovolik, head of the analytical department of Russian Sberbank’s corporate and investment business has been a proponent of closer BRICS integration and the adoption of a BRICS reserve currency.

Lissovolik reminds us that the first proposal “to create a new reserve currency based on a basket of currencies of BRICS countries was formulated by the Valdai Club back in 2018.”

Are you ready for the R5?

The original idea revolved around a currency basket similar to the Special Drawing Rights (SDR) model, composed of the national currencies of BRICS members – and then, further on down the road, other currencies of the expanded BRICS+ circle.

Lissovolik explains that choosing BRICS national currencies made sense because “these were among the most liquid currencies across emerging markets. The name for the new reserve currency — R5 or R5+ — was based on the first letters of the BRICS currencies all of which begin with the letter R (real, ruble, rupee, renminbi, rand).”

So BRICS already have a platform for their in-depth deliberations in 2023. As Lissovolik notes, “in the longer run, the R5 BRICS currency could start to perform the role of settlements/payments as well as the store of value/reserves for the central banks of emerging market economies.”

It is virtually certain that the Chinese yuan will be prominent right from the start, taking advantage of its “already advanced reserve status.”

Potential candidates that could become part of the R5+ currency basket include the Singapore dollar and the UAE’s dirham.

Quite diplomatically, Lissovolik maintains that, “the R5 project can thus become one of the most important contributions of emerging markets to building a more secure international financial system.”

The R5, or R5+ project does intersect with what is being designed at the Eurasia Economic Union (EAEU), led by the Macro-Economics Minister of the Eurasia Economic Commission, Sergey Glazyev.

A new gold standard

In Golden Ruble 3.0 , his most recent paper, Glazyev makes a direct reference to two by now notorious reports by Credit Suisse strategist Zoltan Pozsar, formerly of the IMF, US Department of Treasury, and New York Federal Reserve: War and Commodity Encumbrance (December 27) and War and Currency Statecraft (December 29).

Pozsar is a staunch supporter of a Bretton Woods III – an idea that has been getting enormous traction among the Fed-skeptical crowd.

What’s quite intriguing is that the American Pozsar now directly quotes Russia’s Glazyev, and vice-versa, implying a fascinating convergence of their ideas.

Let’s start with Glazyev’s emphasis on the importance of gold. He notes the current accumulation of multibillion-dollar cash balances on the accounts of Russian exporters in “soft” currencies in the banks of Russia’s main foreign economic partners: EAEU nations, China, India, Iran, Turkey, and the UAE.

He then proceeds to explain how gold can be a unique tool to fight western sanctions if prices of oil and gas, food and fertilizers, metals and solid minerals are recalculated:

“Fixing the price of oil in gold at the level of 2 barrels per 1g will give a second increase in the price of gold in dollars, calculated Credit Suisse strategist Zoltan Pozsar. This would be an adequate response to the ‘price ceilings’ introduced by the west – a kind of ‘floor,’ a solid foundation. And India and China can take the place of global commodity traders instead of Glencore or Trafigura.”

So here we see Glazyev and Pozsar converging. Quite a few major players in New York will be amazed.

Glazyev then lays down the road toward Gold Ruble 3.0. The first gold standard was lobbied by the Rothschilds in the 19^th century, which “gave them the opportunity to subordinate continental Europe to the British financial system through gold loans.” Golden Ruble 1.0, writes Glazyev, “provided the process of capitalist accumulation.”

Golden Ruble 2.0, after Bretton Woods, “ensured a rapid economic recovery after the war.” But then the “reformer Khrushchev canceled the peg of the ruble to gold, carrying out monetary reform in 1961 with the actual devaluation of the ruble by 2.5 times, forming conditions for the subsequent transformation of the country [Russia] into a “raw material appendage of the Western financial system.”

What Glazyev proposes now is for Russia to boost gold mining to as much as 3 percent of GDP: the basis for fast growth of the entire commodity sector (30 percent of Russian GDP). With the country becoming a world leader in gold production, it gets “a strong ruble, a strong budget and a strong economy.”

All Global South eggs in one basket

Meanwhile, at the heart of the EAEU discussions, Glazyev seems to be designing a new currency not only based on gold, but partly based on the oil and natural gas reserves of participating countries.

Pozsar seems to consider this potentially inflationary: it could be if it results in some excesses, considering the new currency would be linked to such a large base.

Off the record, New York banking sources admit the US dollar would be “wiped out, since it is a valueless fiat currency, should Sergey Glazyev link the new currency to gold. The reason is that the Bretton Woods system no longer has a gold base and has no intrinsic value, like the FTX crypto currency. Sergey’s plan also linking the currency to oil and natural gas seems to be a winner.”

So in fact Glazyev may be creating the whole currency structure for what Pozsar called, half in jest, the “G7 of the East”: the current 5 BRICS plus the next 2 which will be the first new members of BRICS+.

Both Glazyev and Pozsar know better than anyone that when Bretton Woods was created the US possessed most of Central Bank gold and controlled half the world’s GDP. This was the basis for the US to take over the whole global financial system.

Now vast swathes of the non-western world are paying close attention to Glazyev and the drive towards a new non-US dollar currency, complete with a new gold standard which would in time totally replace the US dollar.

Pozsar completely understood how Glazyev is pursuing a formula featuring a basket of currencies (as Lissovolik suggested). As much as he understood the groundbreaking drive towards the petroyuan. He describes the industrial ramifications thus:

“Since as we have just said Russia, Iran, and Venezuela account for about 40 percent of the world’s proven oil reserves, and each of them are currently selling oil to China for renminbi at a steep discount, we find BASF’s decision to permanently downsize its operations at its main plant in Ludwigshafen and instead shift its chemical operations to China was motivated by the fact that China is securing energy at discounts, not markups like Europe.”

The race to replace the dollar

One key takeaway is that energy-intensive major industries are going to be moving to China. Beijing has become a big exporter of Russian liquified natural gas (LNG) to Europe, while India has become a big exporter of Russian oil and refined products such as diesel – also to Europe. Both China and India – BRICS members – buy below market price from fellow BRICS member Russia and resell to Europe with a hefty profit. Sanctions? What sanctions?

Meanwhile, the race to constitute the new currency basket for a new monetary unit is on. This long-distance dialogue between Glazyev and Pozsar will become even more fascinating, as Glazyev will be trying to find a solution to what Pozsar has stated: tapping of natural resources for the creation of the new currency could be inflationary if money supply is increased too quickly.

All that is happening as Ukraine – a huge chasm at a critical junction of the New Silk Road blocking off Europe from Russia/China – slowly but surely disappears into a black void. The Empire may have gobbled up Europe for now, but what really matters geoeconomically, is how the absolute majority of the Global South is deciding to commit to the Russia/China-led block.

Economic dominance of BRICS+ may be no more than 7 years away – whatever toxicities may be concocted by that large, dysfunctional nuclear rogue state on the other side of the Atlantic. But first, let’s get that new currency going.

The views expressed in this article do not necessarily reflect those of The Cradle.

Is Andrei Martyanov right in his criticism of US ruling “elites”?

January 20, 2023

Those of you who, like myself, try not to miss any videos or articles by Andrei Martyanov know that one of his “favorite” topics is the utter incompetence of western elites in general and US ruling elites specifically.  I am sure that his criticisms appear to be over the top to many people and that is normal.  It is completely counter-intuitive to assume that the ruling class (because that is what we are dealing with) of a nuclear superpower and, arguably, the most powerful country on the planet, could be ruled by clueless, ignorant, dishonest imbeciles.

So, is he right or not?  Does he speak because he is “anti-US” or a “Russian propagandist”?

I decided to chime in, because I know from the inside what Martyanov describes from the outside, so I want to share with you my own observations on this topic.

I studied in the USA for five years, from 1986 to 1991 and I got two degrees in this time period: one BA in International Relations from the School of International Service (SIS) at the American University and a MA in Strategic Studies from the Paul H. Nitze School for Advanced International Studies (SAIS) at the Johns Hopkins University. During these same years I also worked for several (very conservative) think tanks.  The following is a summary of observations I made during this time period and after.

First, and I think that this is crucial, I would argue that a generational change took place in the late 80s, but it all truly began with Ronald Reagan’s Presidency.  Let me explain.

It is an undeniable fact that, in the past, US colleges had a very good reputation worldwide.  Just the number of foreign students coming from all over the world is a good indicator of this reality.  And you cannot have a solid university/college/academy without solid, knowledgeable teachers.  During my 5 years in Washington DC, I had the chance to have teachers with very diverse and interesting backgrounds including people with the following backgrounds: (just a few examples I remember best)

• UN Naval Intelligence
• Office of Net Assessment
• DoD (all branches except Marines)
• White House
• CIA
• Northrop/McDonnell Douglas Corporation (YF-23 division)
• PMCs (Israeli)
• GAO

Most of our adjunct teachers, as opposed to tenured academics, had teaching as an “evening job” (literally) while during the day they would work on their “normal/real” jobs.  Even during the Gulf War, we had teachers who were planning strikes in Iraqi targets during the day and came teach classes in the evenings.

I would describe many of them as the “Colonel Macgregor types”  as he is very much of that old, Cold War, generation who had no use for the “crazies in the basement” and whose expertise was indisputable, even when their politics were not.

And yes, we also had the option of taking classes by folks form the CIA and the DoS.  But those are a special category, and here is why: most, but not all, of the folks which came from the agencies I listed above did not have early in their careers strong views about the USSR, Russia or the Russian people.  Instead, they would follow a rather “technical” career path first and then, over time, they would develop views about the Soviet Union and Russians.  Say a guy skilled with radar systems would end up studying Soviet radars and gradually develop a natural interest towards the people operating these Soviet radars.  In most cases, I would sum the views of this generation of people as follows: a strong dislike for Marxism, Communism and even Socialism (which, frankly, most of them were totally ignorant of) but  without any idealization of US tubocapitalism or imperialism which they viewed quite cynically as “we do it because we can” combined with “we take orders”.  They also had a very healthy respect for the professionalism of their Soviet counterparts and, quite often, a real fondness (no, I am not kidding) for the Russian people and culture.  One of my absolute best teachers was a former USN intelligence officer who spoke pretty good Russian and who was of Polish (!) origin.  We became good friends and I can absolutely attest to the fact that this man was a true russophile.  Now, I would not say that all our teachers were necessarily pro-Russian, but most of them saw the Marxist USSR as the ideological enemy and not the Russian people or culture as such.

There was no #cancelRussia in their minds.

Things were quite different with the folks from the CIA or the State Department.  I believe that most (but probably not all) of their members INITIALLY  chose “anti-Soviet” careers because they were motivated by a hatred of Communism/USSR/Russia and so they made their careers by being “hardliners”, i.e. folks who would parrot any kind of cliches about the Soviet Union, no matter how silly.

I should add that the former generation was mostly found in departments like international relations, security studies, strategic studies and the like while the latter typically taught in departments like political science or government studies.  At SIS/SAIS we called them “political science freaks” and they did not interact much with them.  And yes, those with STEM brains would typically come from STEM fields to an appreciation of Russian people and culture, while there were very few STEM types amongst the “political science freaks” (hence their choice of more ideological courses over more technical ones).

But then, as I mentioned above, Ronald Reagan happened, and that had a huge impact on the US political scene.

Before Reagan, you had paleo-liberals and paleo-conservatives, the former would be inclined to get degrees in stuff like “peace studies” while the latter would study get more “geostrategic” degrees or even military academies.  Then Jimmy Carter became president and his many failures and weaknesses secured the triumphant election of Reagan.  At that time, there already was a small and nasty group of ideologues which, over time, became known as the Neocons.  These Neocons, while not bright by any measure, were clever enough to understand that the Democratic Party was crushed by Reagan and that the power now was with the GOP.  So here is what they did:

The (proto-)Neocons began financing (paleo-)conservative think tanks like, say, the Heritage Foundation.  Then, as major sponsors of the many think tanks around DC, they would get their own people elected to the board of directors of these think tanks.  Pretty soon, the typically (paleo-)conservative Presidents/Chairmen/CEOs of these think tanks would be replaced by real, hardcore, Neocons.  After that, it was RIP for any form of real, traditional, US conservatism.

Needless to say, the “old guard” (mostly Anglos) only had disgust and contempt for these ideological freaks, if only because the latter were amazingly ignorant.  But money talks, and over the years, expertise was replaced with “hardliner loyalty” and a very strong ideological alignment on the worst of the worst of what used to be called “the crazies in the basement” (which referred to both the Pentagon’s basement and the White House basement).

Now it is crucial to understand how much the Neocons hate Russia, which is rather difficult and very counter-intuitive for normal people.  The Neocon level of hatred for Russia very much qualifies as crass racism of the worst kind.

[Sidebar: I have been warning about that since at least 2008, see here: “How a medieval concept of ethnicity makes NATO commit yet another a dangerous blunder“.  And now, FIFTEEN years later, I am quite horrified that my predictions are now coming true before our eyes.  I really, sincerely, wish I had been wrong…]

That kind of rabid mindset is something which might have existed amongst some paleo-conservatives, but I personally never met such people (at least in the USA; in the UK the entire British ruling class has been viscerally racist and russophobic for centuries!).  It is thus not surprising at all that in lieu of competence, these Neocons would instead “compete” on “who could be the most anti-Russian” and to achieve this status ANY argument – no matter how self evidently stupid – was uncritically considered as valid and legitimate.

You might wonder why the “old guard” did nothing to stop that infections rot.  And, in fact, some tried, I personally know of two think tank directors who tried, but they were betrayed by the Reagan Administration which seemed quite happen to have rabid russophobic racists even in very high positions.  Finally, this is the US of A, the “best democracy money can buy” and where the dollar is king.  Simply put, the Neocons had A LOT of financial resources, much more than the paleo-conservatives, and they simply “bought their way in” into the US ruling elites.

Then the inevitable happened: when the professionally competent paleo-conservatives saw their institutions and organizations overrun with incompetent ideological freaks, they either kept a low profile and waited to retire or simply resigned.

This triggered a precipitous decline in the competence of the US ruling class.

In the meantime, the liberals began to realize that the Neocons were ridiculing them as “weak on defense” and, basically, as losers.  So they tried to show that they too could be as “hardline” as the next guy.  This is something which affected liberals not only in the USA, but also in all of Zone A (including all of Europe).  Simply put: the liberals did not have the courage, fortitude and honor to fight for their values, so they simply caved in to the trend set by the Neocons and the ugly phenomenon known as “Neolib” increasingly completely replaced old style liberals.

This is why today we see the ugly sight of pseudo-liberals trying to out-Neocon the Neocons.

And, again, just like their paleo-conservative counterparts, the paleo-liberals either kept a low profile and waited for their retirement or resigned.

Some, like the late Professor Stephen Cohen did resist and refused to go with the flow, but he was vilified, ostracized and, eventually, completely ignored.  Yet, to his last breath, Professor Cohen remained a world-class historian and analyst, true to his ideals, and a sincere friend of Russia.

But in the public discourse, the few “Stephen Cohens” were replaced by the many “Eliot Cohens”.

After that, is was all downhill for the US polity.

George H.W. Bush was probably the last “old style” President, then one freak replaced another.  Clinton was a total puppet of the Neocons.  As was Dubya.  Obama, apparently, did not come out of the Neocon camp, but he was so quickly co-opted that it made zero difference.  And, as we all know, while Trump promised to “drain the swamp”, the Neocons got him to heel in less than 1 month (when they made him betray Gen Flynn and got the latter’s head “served on a platter” to them by Trump and Pence).  As for Biden, his administration is pure, genuine, 100% certified Neocons with Neolibs and assorted woke freaks thrown in for “diversity” purposes.

Why does that matter?  Because he who controls the White House controls the money flows which, in the reality of US politics, is the one thing that matters most.

By the way, 9/11 played a crucial role here.

It is quite obvious that 9/11 was a Neocon “inside job” and that is served as a pretext to start the GWOT.  However, it also had another very important role: it forced each public figure in the USA to chose one of two camps:

• Be obedient and accept the (terminally idiotic) conspiracy theory of the White House or
• Lose your job, position, reputation and means of income.

Most, unsurprisingly, caved in and 9/11 ended “binding up together” the entire US ruling class.  That type of bond is the type criminal accomplices have: if one goes down, everybody goes down, hence the omertà around the topic of 9/11 even though it was proven by a preponderance of evidence and even beyond reasonable doubt that 9/11 was, indeed, an inside job.  After 9/11, true dissent was completely removed from the US political discourse.

By the way, something similar happened to Europe, except that the categories were somewhat different.  In Europe (I am talking about the real Europe, not the “enlarged” EU with eastern Europe included) there were real patriots in most countries.  Yes, the USA was the senior partner, but there were enough political leaders which were capable of saying “no” to the US and care for their national interests first (I think of Mitterrand and even Chirac here).  That generation of politicians and decision-makers gradually was replaced by a new generation of actors whose entire career plan was to unconditionally and fervently serve US interests, even at the expense of their own countries (Macron, Scholz).  And while I would not call EU politicians “Neocons”, I will say that they are the faithful, loyal, servants and slaves of the Neocons.

And, just as in the USA, the competent and patriotic decision-makers were replaced with ideological stooges who has zero expertise or honor, but whom the USA would support as “loyal servants”.  Opposition to US imperialism in Europe was relegated to a distant margins of public discourse.

I would argue that the 90s were the years of the absolute triumph of the Neocons who took total control of both the USA and the EU.

So what are Neocons really like?  First and foremost, they are extreme narcissists and, as is often the case with narcissists, their obnoxious self-worship, sense of entitlement and hatred of the “other” all come from a deep seated inferiority complex (believe me, they *knew* the contempt they were held in by the old generation of US decision makers, and they *knew* that they were seen as the “crazies in the basement”).  So besides being self-worshiping racist narcissists, they were also filled with resentment, a desire for revenge and a unbreakable “us vs them” mentality..

Also, and contrary to popular belief, they were not very smart (if only because being truly smart requires both humility and expertise, something the Neocons are totally devoid from).  In reality, the big competitive advantage of the Neocons over the “old guard” was not brains, but drive.  This is something we often observe in history: the folks who actually seize power are rarely the smartest ones, much more often you see folks with a tremendous ideological drive.  A perfect example?  The German Nazis.  Please name me one truly educated and smart Nazi!  Hitler?  Nope.  Himmler?  Nope.  Goering?  Nope. Speer, better, but he was not much of a Nazi to being with.  Hess?  Nope.  Karl Haushofer, Dietrich Eckart or Alfred Rosenberg?  Pheuleeze!  And I won’t even go into the true morons à la Streicher or Strasser.

Yet the Nazis not only took power in Germany, they managed to convert most of Europe (with shamefully little resistance!) to their idiotic ideology or their genocidal policies.  It is quite a testimony to the power of evil stupidity to see how eighty years later(!), the united West is now openly following the exact same policies as the Nazis did in their very short rule (the promised “thousand year Reich” turned out to last 12 years only!).

Finally, I have to mention one more thing: for the US Neocons the election of Trump was quite literally a slave revolt and a slap in the face.  While Trump proved to be sub-pathetic by any measure, the fact that a majority of US citizens were willing to prefer him to the “Neocon & Woke diva” Clinton was absolutely traumatic.  Having the total control of the three branches of government, AND the media, AND academia AND the financial sector gave the Neocons the illusion that they had finally “made it” and then suddenly, and pardon my French, the people of the USA send them a loud and heartfelt “f*ck you!” and voted for the one candidate which the Neocons had absolutely demonized.

This was perceived by the Neocons and their cohorts as a blasphemy, a sacrilege, an absolutely unacceptable “revolt of the serfs” and that is why the Neocons decided never EVER to allow such a thing to happen again (and we all know what they did next).

The bottom line is this: the USA faced a perfect storm:

• A social model in which the Almighty Dollar decides of everything
• The most formidable propaganda machine in history
• A “old guard” ruling class too weak, cowardly, confused and (comparatively) poor to resist
• A terminally corrupt Uniparty system which is easy to suborn
• A society which does not instill the kind of demonic ideological fervor which Neocons are raised in, which makes non-Neocons easy prey for the Neocons.
• A country and society in which the concepts “right” and “wrong” have become meaningless and have been fully replaced by “might makes right”, not just de facto, which already had been the case for centuries, but also de jure.

Add to this the (mistaken) notion that the US had won the Cold War and even the (even more mistaken) notion that the US had won WWII, and you have the narcissistic explosion we witnessed in the 90s.  And here is the irony: the flag-waving “patriots” which “support out troops” never realized that they were (and still are) being used by the Neocons which, in reality, are the *least* patriotic of any political force in the USA.

Again, 9/11 and the subsequent GWOT are a direct consequence of the pseudo-patriotic fervor which overcame the US society like a tsunami (the USA before 9/11 was a very, dramatically different, country form the post 9/11 USA).

This is all relevant to understand the current Neocon stance: while they have been successful in putting down the “revolt of the MAGA serfs”, Russia, which used to be run by arguably the most corrupt ruling class on the planet for decades (imho: from Krushchev on and including Eltsin) suddenly also revolted!

That was categorically unacceptable to the Neocons.

By the way, it is interesting to note that while now we have irrefutable evidence that Russia did not interfere with US elections, the Neocons almost instinctively make a connection between the “revolting MAGA serfs” inside the USA and the “revolting Russian serfs” outside.  And, truth be told, I would argue that the people of the USA and the people of Russia have the exact same enemy.  The difference is that the US political system, a truly totalitarian system, cannot be subverted from the inside, but it can very much be defeated externally (if only because this system is BOTH non-viable – it is based on exploitation and imperialism – AND non-reformable – because it is absolutist in nature).

Fundamentally, the Neocon contempt, hatred and fear of Russia is no different than their contempt, hatred and fear of the “deporables”.  For those who view the world through an “us vs them” ideological prism all the “non-us” are dangerous “thems” which need crushing.

Conclusion: we have what we have

Andrei Martyanov is absolutely correct – the US is run by absolutely ignorant, incompetent and outright evil narcissists.  For such people, expertise is not at all a desirable trait, if anything, it is potentially very dangerous.  Loyalty, which in the Neocon context means “corruptibility”, is much more desirable.  One example to illustrate the point:

It was not enough for the Neocons to take control of US think tanks and academia.  Even RAND, AEI, CSIS & Co. was “too scary” for them, hence their own creation of the so-called “Institute for the Study of War” which is not an institute and which does not study anything, least of all, wars (Neocons have zero military expertise).  And now even Russian (!!!) sources refer to the “studies” of this “institute” as something credible.  Such is the power of the media.

Which is hardly surprising if we think of what kind of expertise modern does a journos have? At best, they are only actors.  At worst, clueless presstitutes.

Again, Martyanov is right, the overwhelming majority of the political commentators and talking heads out there get their “understanding” of war from Tom Clancy books, Hollywood propaganda movies and clever marketing by the US MIC and Pentagon.  At best, these journos can write summaries, find “angles”, including the obligatory “human interest” bull, and they have *access*.  But what  they don’t know, or even care, is that that access is granted only to the doublepluspoliticallycorrect journos.  Mostly, they have no morals at all and they don’t care.  They are in for the money, nothing else.  My only objection to the term “presstitute” is that is is very unfair to prostitutes (who, after all, usually DO deliver what they get paid for!).  Sadly, I can only agree with the French philosopher Alain Soral (who is being viciously persecuted for his views, but not “human rights” organization would ever dare to defend, if anything, they want him lynched!) who said that there are only two type of journos left: prostitutes and unemployed.

That is true of all of Zone A.

So no, as somebody who has seen all this from the inside (I had plenty of journalist friends, by the way, I know that world too), I can only fully confirm what Martyanov repeats over and over again: all of Zone A of 2023 is run by either the Neocons or their loyal servants, and the past 30 years or more have seen an absolutely epic, historical, cataclysmic brain drain form the western ruling classes.

One last thing: it gives me no joy to write the above.  Frankly, if it was just a purely internal US issue, I would not care very much (their country, their problem, their choice).  But that reality is the single biggest threat to our entire planet right now.  And it absolutely terrifies me when I see how few people out there understand and realize that Martyanov is quite correct.  And, for the record, there are plenty of topics in which Martyanov and I disagree, so I am not siding with him because I consider him a friend (which I do) or because he is my “maître à penser” (which I don’t).  No, I fully back him on this issue because for as long as the USA will be the proverbial “monkey with a (nuclear) hand grenade” the Neocons will continue to represent an existential threat to our planet.  And with the Neocons in total control of Zone A, that risk will remain with us until these crazies are sent back to some basement or they blow up the entire northern hemisphere.

Andrei

***

Okay, it still if Friday, so some music is in order (if only to lighten the mood!).  Today I want to share with you what I think was the best rock singer plus best rock guitarist in history, bar none.  I am talking about Ronnie James Dio and Richie Blackmore, of course, who both reached the peak of their creativity when the joined forces in the (alas short-lived) “Rainbow” group.  But, rather than post a few videos as usual, I will post three links:

The first two to their best best albums:

Rainbow Rising: https://www.youtube.com/playlist?list=PL6ogdCG3tAWjZkXZvDRPOfgOLgYU18MaC (playlist)

and

Rainbow On Stage: https://youtu.be/O75GMtgl1l4 (single video)

And, finally, a rare but absolutely amazing concert of Rainbow in 1977: https://www.youtube.com/playlist?list=PLYFAAfhX89-cwT7ejpxzy3AaTgoBS_8uR (playlist)

And, just as there can be no “Pink Floyd” without Roger Waters and there cannot be any “Deep Purple” without Richie Blackmore, there cannot be any real “Rainbow” without Ronnie James Dio.  It is too bad that Blackmore’s ego simply could not stand sharing the stage with a (actually small!) giant like Dio (who was also a very kind and gentle person, quite unlike Blackmore).  Their collaboration was short, but I do believe that it was the talented duo ever seen on a rock stage.  Enjoy!

Recommended

• How Atlantic Integrationists and 5th columnists came to power in Russia
• Russian hockey player refuses to carrry a LGBTQ+ flag
• Probabilities and “Experts”
• Industrial Warfare Thinking (Andrei Martyanov)

By the numbers: The de-dollarization of global trade

Data suggests that US dollar reserves in central banks are dwindling, as is the influence of the US on the world economy. This presents a unique opportunity for regional currencies and alternative payment systems to enter the vacuum.

January 13 2023

Photo Credit: The Cradle

By F.M. Shakil

The imposition of US trade restrictions and sanctions against a number of nations, including Russia, Iran, Cuba, North Korea, Iraq, and Syria have been politically ineffectual and have backfired against western economies. As a result, the US dollar has been losing its role as a major currency for the settlement of international business claims.

Because they do not adhere to the policies of the US and other western powers, over 24 countries have been the target of unilateral or partial trade sanctions. These limitations, nevertheless, have turned out to be detrimental to the economies of the Group of Seven (G7) nations and have begun to impact the US dollar’s hegemony in world trade.

In its space, a “new global commercial bloc” has risen to the fore, while alternatives to the western SWIFT banking messaging system for cross-border payments have also been created.

Geopolitical analyst Andrew Korybko tells The Cradle that the west’s extraordinary penalties and seizure of Russian assets abroad broke faith in the western-centric paradigm of globalization, which had been declining for years but had nonetheless managed to maintain the world standard.

“Rising multipolar countries sped up their plans for de-dollarization and diversification away from the western-centric model of globalization in favor of a more democratic, egalitarian, and just one – centered on non-western countries in response to these economic and financial disturbances,” he adds.

Dwindling dollar reserves  

The International Monetary Fund (IMF) recorded a decline in central bank holdings of US dollar reserves during the fourth quarter of 2020—which went from 71 percent to 59 percent—reflecting the US dollar’s waning influence on the world economy.

And it continues to worsen: Evidence of this can be seen in the fact that the bank’s holdings of dollar claims have decreased from $7 trillion in 2021 to $6.4 trillion at the end of March 2022.

According to the Currency Composition of Official Foreign Exchange Reserves (COFER) report by the IMF, the percentage of US dollars in central bank reserves has decreased by 12 percent since 1999, while the percentage of other currencies, particularly the Chinese yuan, have shown an increasing trend with a 9 percent rise during this period.

The study contends that the role of the dollar is waning due to competition from other currencies held by the bankers’ banks for international transactions – including the introduction of the euro – and reveals that this will have an impact on both the currency and bond markets if dollar reserves continue to shrink.

Alternative currencies and trade routes

To boost global commerce and Indian exports, the Reserve Bank of India (RBI) devised in July last year a rupee-settlement mechanism to fend off pressure on the Indian currency in the wake of Russia’s invasion of Ukraine and US-EU sanctions.

India has recently concluded agreements for currency exchanges of $75.4 billion with the UAE, Japan, and various South Asian nations. New Delhi has also informed South Korea and Turkey of its non-dollar-mediated exchange rates for each country’s currency. Currently, Turkey conducts business utilizing the national currencies of China (yuan) and Russia (ruble).

Iran has also proposed to the Shanghai Cooperation Organization (SCO) a euro-like SCO currency for trade among the Eurasian bloc to check the weaponization of the US dollar-dominated global financial system.

Mehdi Safari, Iran’s deputy foreign minister for economic diplomacy, informed the media earlier in June last year that the SCO received the proposal nearly two months ago.

“They must use multilateral institutions like BRICS and the SCO to this aim – and related ones, such as currency pools and potentially even the establishment of a new currency whose rate is based on a basket of their currencies, to mitigate the effects of trade-related restrictions,” Korybko remarked.

The International North-South Transport Corridor (INSTC) is being revived as a “sanctions-busting” project by Russia and Iran. The INSTC garnered renewed interest following the “sanctions from hell” imposed by the west on Moscow. Russia is now finalizing regulations that will allow Iranian ships free navigation along the Volga and Don rivers.

The INSTC was planned as a 7,200 km long multimodal transportation network including sea, road, and rail lines to carry freight between Russia, Central Asia, and the Caspian regions.

Ruble-Yuan Payment System

On 30 December, 2022, Russian President Vladimir Putin and his Chinese counterpart Xi Jinping held a video conference in which Putin reported that bilateral trade between the two countries had reached an all-time high with a 25 percent growth rate and that trade volumes were on track to reach $200 billion by next year, despite western sanctions and a hostile external environment.

Putin stated that there had been a “substantial growth in trade volumes” between January and November 2022, resulting in a 36 percent increase in trade to $6 billion. It is likely that the $200 billion bilateral trade target, if achieved by next year, will be conducted in Russian rubles and Chinese yuan, even though the details of the bilateral trade settlement were not specified in the video conference broadcast.

This is because Moscow and Beijing have already set up a cross-border interbank payment network similar to SWIFT, increased their gold purchases to give their currencies more stability, and signed agreements to swap national currencies in several regional and bilateral deals.

In addition, both Russia and China appear to have anticipated a potential US seizure of their financial assets, and in 2014 they collaborated on energy-centered treaties to strengthen their strategic trade links.

In 2017, the ruble-yuan “payment against payment” system was implemented along China’s Belt and Road Initiative (BRI). In 2019, the two countries signed an agreement to replace the dollar with national currencies in cross-border transactions and converted their $25 billion worth of trade to yuan (RMB) and rubles.

Independence from the dollar

This shift decreased their mutual reliance on the dollar, and currently, just over half of Russia’s exports are settled in US dollars, down from 80 percent in 2013. The bulk of trade between Russia and China is now conducted in local currencies.

Xinjiang in western China has also established itself as a key cross-border settlement center between China and Central Asia, making it a major financial hub in the region. Cumulative cross-border yuan settlement handled in Xinjiang exceeded 100 billion yuan ($14 billion) as early as 2013 and reached 260 billion yuan in 2018.

According to analyst Korybko, significant progress has been made in reducing reliance on the US dollar in international trade, but there is still much work to be done. He notes that the US is not likely to simply accept the challenges to its financial hegemony and is more likely to act to defend it.

“For this reason, it is expected that the US will try to enlist the support of key players by offering them preferential trade deals or the promise of such deals, while simultaneously stoking tensions between Russia, China, India, and Iran through information warfare and possibly threatening to tighten its secondary sanctions regime as ‘deterrence’.”

Eurasian Economic Union

Russia has been working to establish currency swap agreements with a number of trading partners, comprising the five-member Eurasian Economic Union (EEU), which includes Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan.

These agreements have enabled the Russian Federation to conduct over 70 percent of its trade in rubles and other regional currencies. With a population of 183 million and a GDP over $2.2 trillion, the EEU poses a formidable challenge to western hegemony over global financial transactions.

Iran and the EEU have recently concluded negotiations on the conditions of a free trade agreement covering over 7,500 categories of goods. When the next Iranian year begins on 21 March, 2023, a market with a potential size of 700 billion dollars will become available for Iranian goods and services.

BRICS is driving de-dollarization

The trend towards de-dollarization in international trade, particularly among the BRICS nations, has gained significant momentum in recent years – together they represent 41 percent of the world’s population, 24 percent of its GDP, and 16 percent of its commerce

In 2015, the BRICS New Development Bank, recommended the use of national currencies in trade. Four years later, the bank provided 25 percent of its $15 billion in financial assistance in local currencies, and plans to increase this to 50 percent in the coming years.

This shift towards de-dollarization is an important step for emerging economies as they seek to assert their role in the global economic system and reduce their reliance on the US dollar. While the adoption of de-dollarization may present some challenges and uncertainties, it is an important step towards a more diverse and balanced global economy.

The views expressed in this article do not necessarily reflect those of The Cradle.

The 2023 War – ‘Setting the Theatre’

January 13, 2023

Source

Alastair Crooke

The China-Russia axis are lighting the fires of a structural insurrection against the West across much of the Rest of World. Its fires are aimed at ‘boiling the frog slowly’

A top US Marine General, James Bierman, in a recent interview with the Financial Times, explained in a moment of candour how the US is “setting the theatre” for possible war with China, whilst casually admitting as an aside, how US defence planners had been busy inside Ukraine years ago, “earnestly preparing” for war with Russia — even down to the “pre-positioning of supplies”, identifying sites from which the US might operate support, and sustain operations. Simply put, they were there,readying the battle space for years.

No surprise really, as such military responses flow directly from the core US strategic decision to actuate the 1992 ‘WolfowitzDoctrine’ that the US must plan and preemptively act, to disable any potential Great Power — well before it reaches the point at which it can rival or impair US hegemony.

NATO today has progressed to war with Russia in a battlespace, which in 2023, may or may not stay limited to Ukraine. Simply put the point is that the shift to ‘War’ (whether incremental or not) marks a fundamental transition from which there is no going back to ab initio — ‘war economies’ in essence, are structurally different to the ‘normal’ from which the West began, and to which it has grown accustomed over recent decades. A war society — even if only partly mobilised — thinks and acts structurally differently from peacetime society.

War is not about gentlemanly conduct… either. Empathy for others is its first casualty — the latter being a requirement for sustaining a fighting spirit.

Yet, the carefully curated fiction in Europe and the US continues that nothing really has, or will ‘change’: we are in a temporary ‘blip’. That’s all.

Zoltan Pozsar, the influential finance ‘oracle’ at Credit Suisse, has already made the point in his latest War and Peace essay (subscription only) that War is well underway – by simply listing the events of 2022:

• The G7’s financial blockade of Russia (The West setting the battle space)
• Russia’s energy blockade of the EU (Russia begins setting its theatre)
• The U.S.’s technology blockade of China (America pre-positioning of sites to sustain operations)
• China’s naval blockade of Taiwan, (China demonstrating preparedness)
• The U.S.’s “blockade” of the EU’s EV sector with the Inflation Reduction Act. (The US defence planners preparing for future ‘supply-lines)
• China’s “pincer movement” around all of OPEC+ with the growing trend of invoicing oil and gas sales in renminbi. (The Russia-China ‘Commodity Battlespace’).

This list amounts to one major geo-political ‘upset’ occurring, on average, every two months — moving the world decisively away from the so-called ‘normal’ (for which so many in the Consuming Class ardently yearn) to an intermediate state of War.

Pozsar’s list shows that the tectonic plates of geo-politics are seriously ‘on the move’ — shifts, which are accelerating and becoming ever more intertwined, yet that still remain far from arriving at any settled place. ‘War’ will likely be a major disruptor (at the very least), until some equilibrium is established. And that may take some years.

Ultimately, ‘War’ does make its impact on the conventional public mindset — albeit slowly. It seems to be fear of the impact on an unprepared mindset that is behind the decision to prolong Ukraine’s suffering, and thus trigger the War of 2023: An admission of failure in Ukraine is seen to risk spooking volatile western markets (i.e. higher interest rates for longer). And frank-talking represents a hard option for a western world — used to ‘easy decisions’, and ‘can kicking’ — to take.

Pozsar, being a finance guru, understandably is focussed in his essay on finance. But conceivably, the reference to Kindleberger’s Manias, Panics and Crashes is therefore not whimsical, but included as a hint to the possible ‘hit’ to the conventional psyche.

In any event, Pozsar leaves us four key economic takeaways (with brief comments added):

1. War is history’s principle driver of inflation, and the bankruptcy for states. (Comment: war-driven inflation and Quantitative Tightening (QT) enacted to fight inflation, are policies working in radical opposition to each other. Central Banks’ role attenuates to supporting war needs — at the expense of other variables – in wartime.
2. War implies an effective and expandable industrial capacity for producing weapons (rapidly), which, in itself, requires secure supply-lines to feed that capacity. (A quality which the West no longer possesses, and which is costly to recreate);
3. Commodities which often serve as collateral to loans become scarce – and with that scarcity, show up as commodity ‘inflation’;
4. And finally, War cuts new financial channels i.e. “the m-CBDC Bridge project” (see here).

The point needs underlining again: War creates different financial dynamics and shapes a different psyche. More importantly, ‘War’ is not a stable phenomenon. It can start with petty tit-for-tat strikes on a rival’s infrastructure and then — with every incremental ‘mission creep’ — slip along the curve towards full war. NATO is not just mission creeping in its war on Russia, it is mission jogging — fearing a Ukraine humiliation in the wake of the earlier Afghanistan débacle.

The EU hopes to halt that slide well short of full war. It is nonetheless a very slippery slope. The point of War is to inflict pain and attrit your enemy. To this extent it is open to mutation. Formal sanctions and caps on energy quickly metamorphose into the sabotage of pipelines or the seizure of tankers.

Russia and China however, are certainly not naïve, and have been busy setting their own theatre, ahead of a potential wider clash with NATO.

China and Russia can now claim to have built a strategic relationship, not only with OPEC+, but with Iran and key gas producers.

Russia, Iran, and Venezuela account for about 40% of the world’s proven oil reserves, and each of them are currently selling oil to China for renminbi at a steep discount. GCC countries account for another 40% of proven oil reserves — and are being courted by China to accept renminbi for their oil — in exchange for transformative investments.

This is a significant new battlespace being readied — ending Dollar hegemony through boiling the frog slowly.

The contesting party made the initial strike, sanctioning half of OPEC with those 40% of the world’s oil reserves. That thrust failed: the Russian economy survived — and unsurprisingly — the sanctions ‘lost’ those states to Europe, ‘handing them’ over instead to China.

China meanwhile is courting the other half of OPEC with an offer that is hard to refuse: “Over the next “three to five years”, China will not only pay for more oil in renminbi – but more significantly, ‘will pay’ with new investments in downstream petrochemical industries in Iran, Saudi Arabia, and the GCC more broadly. It will, in other words, build out the successor generation economy” for these fossil fuel exporters whose energy sell-by date approaches.

The key point here is that in the future, much more ‘value-added’ (in the course of production) will be captured locally — at the expense of industries in the West. Pozsar cheekily calls this: “Our commodity, your problem… Our commodity, our emancipation”. Or, in other words, the China-Russia axis are lighting the fires of a structural insurrection against the West across much of the Rest of World.

Its fires are aimed at ‘boiling the frog slowly’ — not just that of the dollar hegemony, but also that of a now uncompetitive western economy.

Emancipation? Yes! Here is the crux: China is receiving Russian, Iranian and Venezuelan energy at a big 30% discount.Meanwhile, Europe still gets energy for its industry — but only at a big mark-up. In short, more, and occasionally all, product added-value will be captured by cheap-energy ‘friendly’ states, at the expense of the uncompetitive ‘unfriendlies’.

“China – the nemesis – paradoxically has been a big exporter of high mark-up Russian LNG to Europe, and India a big exporter of high mark-up Russian oil and refined products such as diesel – to Europe. We should expect more [of this in the future] across more products – and invoiced not just in euros and dollars, but also renminbi, dirhams, and rupees’ ‘, Poszar suggests.

It may not look so obvious, but it is a financial war. If the EU is content to take the ‘easy way’ out of its fall into uncompetitiveness (via subsidies to allow for high-mark-up imports), then as Napoleon once remarked when observing an enemy making a mistake: Observe silence!

For Europe, this means much less domestic production – and more inflation — as price inflating alternatives are imported from the East. The West taking the ‘easy decision’ (since its renewable strategy has not been well thought through), likely will find the arrangement to be at the expense of growth in the West — a course prefiguring a weaker West, in the near future.

The EU will be particularly hard-hit. It has elected to become dependent on US LNG, just at the moment that production from US shale fields has peaked, with what output there is likely ear-marked to the US domestic market.

Thus, as general Bierman outlined how the US prepared the battlespace in Ukraine, Russia and China and the BRICS planners have been busy setting their own ‘theater’.

Of course, it doesn’t have to be like it ‘is’: Europe’s stumble towards calamity reflects an embedded psychology of the Western ruling élite. There is no strategic reasoning, nor ‘hard-decisions’ being taken in the West at all. It is all narcissistic Merkelism (hard decisions postponed, and then ‘fudged’ through subsidy handouts). Merkelism is so called after Angela Merkel’s reign at the EU, where fundamental reform was invariably postponed.

There is no need for thinking-things-through, or for hard decisions, when leaders are held by the unshakable conviction that the West IS the centre of the Universe. It is sufficient to postpone, awaiting the inexorable to unfold itself.

The recent history of US-led forever-wars is further evidence of this western lacuna: These zombie wars drag on for years with no plausible justification, only to be unceremoniously dropped. The strategic dynamics were easier suppressed and forgotten however, when fighting insurgency wars — as opposed to fighting two well-armed, peer competitor-states.

The same dysfunctionality has been apparent in many slow-rolling western crises: Nevertheless, we persist… because protecting the fragile psychology of our leaders — and an influential sector of the public — takes precedence. The inability to countenance losing drives our élites to prefer sacrifice by their own people, rather than see their delusions exposed.

Hence, reality has to be abjured. So, we live a nebulous between-times — so much happening, but so little movement. Only when the outbreak of crisis can no longer be ignored — by even the MSM and Tech censors — might some real effort be made to address root causes.

This conundrum however, places a huge burden on the shoulders of Moscow and Beijing to manage the War escalation in a careful fashion — in face of a West for whom losing is intolerable.

De-dollarization: Slowly but surely

1 Jan 2023

Source: Agencies

By Al Mayadeen English 

What unites China and Russia in a trade/currency warfare against the US is the fact that they both oppose a unipolar world over a multipolar world.

It has been almost a year since the war in Ukraine began. Since then, talk of de-dollarization has picked up speed. Even prominent mainstream economists Galbraith (2022) and Eichengreen (2022) have joined the bandwagon, but they do not see an avalanche that could unseat the dollar yet, and rightly so, but as argued here, they do so for the wrong reasons.

Across the board, the mainstream peddles the point that the US financial market has depth that no other market has, and therefore, the dollar is irreplaceable. That is true for the moment. Where else can financial wealth be placed safely, traded and cashed in quickly other than the US market. I emphasized safely because such a market was not safe for confiscated Russian assets and it is proving to be unsafe for any would-be customer whose politics do not align with US imperial designs. Thus, the issue of depth and safety have subjective twists to them. Moreso, the occurrence of Russian asset seizure by Europe and the US begs the question: the financial market is deep for whom? 

Money, it ought to be remembered, is a social convention. It serves a function as a medium of exchange/reserve, as well as a savings medium. Money is also an idea (a form) with an aura whose very allure is to reproduce the social conditions for the creation of more money, through credit of course. Like all conventions, money also holds by some form of consensus. Any currency has to be recognized as value and it attains a status as a symbolic power by the knowledge people hold about it as both means of transaction and a social form. Of all the monies in circulation around the world, the dollar is unusual in the sense that it derives its legitimacy from the knowledge that the dollar is secure from many people of different nationalities around the globe.

The dollar and dollar instruments, like treasuries and bonds, are assumed risk-free. Pension funds for instance, which ensure against old age poverty, scramble to lodge in dollar assets that are set to grow and not lose but gain much value over time. People acknowledge that the dollar is a universal medium of exchange and savings, and such acknowledgment is the source of the power of the dollar. However, such common knowledge, which is the substance of dollar power, must also be constantly produced and reproduced. For that, there are theories that fit the bill.

For instance, instead of theorizing that money depends on real production capabilities, fiat money is said to depend on a capitalism of futurity and a tradability of debt. Although the US accounts for less than 20 percent of world output (production’s worth’, faith in the depth of its financial market and its credibility in the future as a state account for it covering the credit necessary for much of global transactions and savings.

Still, theories are pretty much ideological tools that show or hide some desired aspects of reality in order to serve the interests of different social groups. So, while it is true that the US nominally holds less than 20 percent of global output, much of global output depends on the US’ control of strategic resources and global chokepoints. These are delivered by the demonstrative power of its many military bases and capacity to destruct its foes.

As one can readily see, if the capacity to destruct and to infuse instability abroad are counted as production, then it is obvious that the US accounts for much more in production than the merely 20 percent it registers in its national accounts as GDP. Such a megalithic process is the true substance of the knowledge that upholds the dollar as the world reserve currency. It is this knowledge, reproduced on a global scale by the capacity to destruct, which is the real reason for the deep knowledge that props up the deep US financial market, as opposed to some hallucinatory moneyed economy whose debts are tradable, and it is the erosion of that capacity that is heralded by the rise of the multipolar world when Russia began its de-Nazification of Ukraine campaign. Changing that power structure behind the depth of US finance changes the acknowledgment that the US dollar is the sole undisputed universal currency on account of the universal power of the US. How so?

The resilience of Russia’s economy

When the Central Bank of Russia announced it pegged its national currency to gold, just a month after the conflict erupted, many saw the move as a blow to the dollar status quo – especially for the EU bloc, which heavily relied on Russia for supplies of cheap LNG. For them, it was out of the question to pay for oil in rubles. “We will not be blackmailed by Russia” to pay for gas in rubles, said Germany’s Finance Minister, Robert Habeck. In March 2022, US lawmakers introduced a bill to sanction Russian gold and then the EU followed suit. By June 2022, the Group of 7 agreed to implement a full-scale ban on the Russian gold market, completely sanctioning Moscow from exporting gold. By placing an embargo on Russia’s gold exports, freezing Russian assets and blocking Russian banks from using SWIFT, the West believed it could pressure Moscow. These sanctions against Russia threw Russia out of the dollar loop and were de-dollarizing Russia. The West was partially de-dollarizing the world by imposing more sanctions.  

Even though the sanctions did weaken the ruble at first, it did not take too long for the currency to rebound since many of the commodities Russia produces such as gas, wheat and fertilizers are priced in the ruble. In the span of ten months, the Ruble went from a volatile position in March to a stable currency by September. The ruble still stands stronger than pre-war levels, and as Russia keeps carrying out trade activities with third countries via new monetary channels, the situation of the ruble only serves to forecast that the crisis in Europe will exacerbate further and further. If anything, the fact that Russia still manages despite the sanctions proves that there is more to production estimated in dollar GDP to measure the real worth of an economy and its currency. It has become apparent that the commodity control-based standard of the dollar equally applies to the Ruble, which accounts for significant shares of wheat and oil. 

Furthermore, Russia’s new MIR payment system, which parallels SWIFT and MasterCard, said that by the end of September it issued more than 161 cards worldwide. By November, Russia decided to take a step further and called on all state members of the BRICS+ alliance to consider the possibility of establishing a single gold trade system. And just very recently, reports revealed that Russia was beginning to test international payments in digital currencies with companies. Unlike Iraq and Libya, and Venezuela, Russia is bigger and has proven resilient, especially with support from China. 

Getting ‘at’ China

Besides the vast amounts of money spent on financing Kiev, Ukrainian President Volodymyr Zelensky himself admitted that the war in Ukraine was a war ‘for’ the US. When he delivered an address at a joint session at the US Congress in December, he warned that if Russia were to win the war, the world order established by the US post-WWII would inevitably crumble – with it, the hegemony of the dollar. With China’s economy surpassing the US in real terms and commanding much of global production and trade, the possibility of an alternative financial system is around the corner – unless of course the balance of forces tilts in favor of the US as it defeats Russia in Ukraine and extends its hegemony to the Eurasian corridor.  

So what does the US really want with Russia? It wants Russia fragmented and China choked. China, Russia’s de facto ally, has been de-dollarizing its economy over the past decade. But that doesn’t necessarily imply both countries form ‘a bloc’ per se. Both Russia and China remain distinct governments with distinct policies and distinct ideologies. What really unites them in this trade/currency warfare is the fact that they both oppose a unipolar world over a multipolar world. They both want to develop at their own pace, their own way, without the interference of neoliberal or imperialist elements. In that sense, the conflict in Ukraine has a lot to do with China.

Even the most recent Pentagon defense strategy admits that Russia is not as threatening as China is, which it dubs as “the greatest security challenge for the US.” When that report was issued in October 2022, US Defense Secretary Lloyd Austin said that China “is the only competitor out there with both the intent to reshape the international order, and increasingly, the power to do so, while Russia on the other hand “can’t systematically challenge the US over the long term. But Russian aggression does pose an immediate and sharp threat to our interests and values.” Unlike the West, it took only seven decades for China to establish itself as a global superpower that has carried out the biggest poverty alleviation project in history.  It established such a record without enslaving or geocoding the planet and the environment.

Another important feature of the Chinese economy is the fact that it easily absorbs technologies from abroad and it’s good at meeting the standards of foreign markets. It’s a leading pioneer in a panoply of sectors which include space exploration, financial developments, medical advances, green technologies, urban construction, and military innovations. China’s economy is also relatively insulated from external shocks and capital flight by its non-convertible currency. It draws down on its massive currency reserves denominated in dollars – mainly US government debt – and invested in US treasury bonds, to protect against any short-term capital flow and to preserve the competitiveness of its own currency at times of crises. 

What really bothers the West is the fact that China was not only able to propel its entire population to higher standards of living, but it also assisted others in doing so. Through its Belt and Road Initiative (BRI), China promoted infrastructural ventures in some of the world’s poorest economies in a way that complemented their productive assets in facilitating productivity, growth, and economic mobility. The Asian country has defied neoliberalism both as an ideology and as an economic policy by upholding its own brand of socialism based on “Chinese characteristics”.

As part of its commitment to the internationalism of Mao Zedong, China through the demonstration effect, exported that model based on an anti-imperialist and nationalist mode of development to countries of the Global South. Being the world’s largest trading country, the world’s largest exporter, and one of the world’s largest holders of US debt, China never forced anyone to borrow from it in order to financially enslave them and/or to finance its war effort. Adding all this to China’s defiance of abiding to western sanctions against Russia, and you will have Sino-Western relations hitting an all-time low – particularly in light of accusations that China helped Russia circumvent the effects of sanctions. 

Given the developmental trajectory of China’s growth, which is detached from militarism and built on a working-class-led resistance, it is rather an arithmetic certainty that China will never morph into a war-mongering nation. It simply does not depend on war to grow. Moreover, having itself been the target of imperialism for centuries is enough to suggest that China in no way intends to pursue such an agenda – but rather strives to resist it, as it always did. Its very existence as a powerful socialist nation is antithetical to the ideological, financial, and military dominance of the post-WW2 Western order.

This only adds to the reasons why the US has been recently waging a series of provocations against China, both economically and politically. On the economic front, the US constrained China from exporting semiconductors to western markets and suspended the transfer of chip technologies to China. It also plans to cut Huawei’s access to US banks over allegations that the company is engaged in “economic espionage” against the US. On the political front, there was the whole Taiwan fiasco which was short-lived after Tsai Ing-wen was humiliatingly defeated in Taiwan’s last election. 

China retaliates

At some point, it is only natural for China to retaliate. To strike back at the financial hegemon by decreasing the global demand for US dollars is one such measure of retaliation. China’s de-dollarization strategy can basically be summed up as follows: creating trade payment systems based on the national currencies of trading partners, dumping US treasuries, and breaking the petrodollar system while buying massive amounts of gold. 

It may be recalled that China stores a considerable portion of its surplus in US Bonds. The standard idea of weaponizing bonds is often reiterated in what pundits dub the ‘nuclear option’, a theory that supposes China could sell off all of its treasuries in an attempt to destabilize the American economy. But then again that seems like a mythical alternative, which is likely to harm everyone including China. The potential flooding of the global exchange market with billions of dollars of American debt may cause the price of US treasury bonds to decrease and reciprocally interest rates to increase. The interest rates on US treasury bonds are the benchmark for borrowing throughout the global economy. So, in case they are abruptly raised, this may precipitate another global slowdown. 

China, as well as others, seek a reasonable solution to the US debt problem and a transfer to a more representative multi-polar currency and world-saving medium. At some point in the past, China held $3 trillion in US debt. In October 2022, it recorded treasury holdings to a 12-year low below the $1 trillion mark. It has been slowly ridding itself of being indebted to the US in the US’s own currency.

Over fears that china will endure a fate similar to that of Russia, that it will lose all its assets and dollars in case tensions increase, China has resorted to converting its bonds into real assets and proceeded by investing them in the third world as a counter-hegemonical strategy. China’s Belt and Road Initiative is the gateway to transform US-denominated money capital into real capital. Whereas US imperialism is about the incapacitation and disempowerment of the developing world, the Chinese funded BRI, which turns Chinese saved US dollars into third world plans and equipment, turns US bonds into weapons against the US. 

Breaking the petrodollar system

While reducing transactions in dollars diminishes global demand for the dollar, China and others with trade surpluses need to save in US treasuries for lack of alternatives. Analytically, an alternative to the US savings instruments from a multi-currency saving bond is not difficult to envisage. In fact that is what John Maynard Keynes proposed at Bretton-wood in 1944, but the proposal was declined by the US. The alternative muti-national savings instrument would come as natural outcome of shifting balance of forces globally, especially as the principal strategic commodity, oil, becomes denominated in currencies other than dollars.

Xi’s recent visit to Saudi Arabia is one step towards provisioning an alternative oil payment system. The visit amounted to a diplomatic offensive and was hailed as a landmark event on the strengthening of Sino-Arab ties as on December 20, 2022, the Chinese head of state attended the first ever China-Arab state summit and delivered a key speech “underscoring the importance of carrying forward the spirit of China-Arab friendship featuring solidarity and mutual assistance, equality and mutual benefit, inclusiveness and mutual learning, and jointly building a China-Arab community with a shared future in the new era.”

The move is clearly aimed at disrupting the petrodollar system, which has for the past 50 years upheld the US dollar as the sole currency to purchase oil. As is already known, the dollar-priced oil system is what redeemed the departure of the US from the gold standard in 1971. Being a source of energy upon which life depends, and a strategic commodity that accounts for about 20% of the global trade volume, having dollars is a prerequisite for an economy’s survival, and pricing the oil in dollars keeps the dollar high in demand. The more the US prints dollars to meet expanding trade demand, the more it could live off the rents of dollar seigniorage, or the ability to buy real assets from abroad with the credit it issues. No other empire in history enjoyed such privilege.

The modern imperial tributary system is that the US lends money in its own currency, and in return, it usurps the wealth produced by other nations. So when China says it wants to purchase oil using the Yuan and initiate separate deals, this means it is planning to lessen the global demand for the dollar, therefore lessen the capacity of the US to issue global credit, and hence, lessen its imperial rents.  

Gold is ok, but only partially

China has been hoarding much gold. It now has the highest gold reserves. For the first time since 2019, the central bank of China announced it increased its gold reserves with the purchase of 32 tons of gold in November, bringing the total up to 1980 tons amounting to $111.65 billion. Needless to say, the gold standard cannot supplant a fiat money system already based on commodities and production capabilities. However, having gold in addition to developing its own development bank and international lending institutions and payment system, China further securitizes its finance.  

Thus, gold demand in China is high because traders and investors consider the commodity as a buffer against extreme fluctuations and an effective store of value. The Chinese government monitors carefully the amount of gold that is brought in and out of the country. Being the biggest gold producer, China safeguards much of its gold production for itself. In addition, China intentionally uses the price arbitrage to get traders to purchase more gold from abroad. Most of that gold was purchased from the West, particularly the UK and the US, where gold is traded at a cheaper price. However, gold primacy alone is insufficient to create the acknowledgment of depth similar to that enjoyed by the US market.

Once more, that confidence in the dollar market is reproduced daily by the power of the US over strategic commodity channels around the world. The US is heir to the European colonial system and its control emerges from the transference between its physical and ideological powers. Therefore, gold alone is possibly only a gateway to dislodging a dollar system based on strategic commodity control.

The alternative to the US financial market is in the making

China has inked separate agreements, especially with Russia, with the aim of purchasing energy with a non-dollar currency. Though the de-dollarization of trade channels may achieve some results, one cannot deny the fact that the world still needs an alternative universal savings medium. On paper, designing a bond whose guarantors are the major powers is not a difficult task; however, such a task, if it were to materialize, undercuts the financial rents of US and US-associated elites.

A real de-dollarization requires a shift in the geopolitical context and an erosion of the consensus around the dollar. The war in Ukraine and the collapse of Europe augur the loss of the US and its dollar primacy. Unlike twentieth-century wars that caused the retreats of Europe to the benefit of the US, the current regression of Europe vis-à-vis Russia and China, also weakens the US. The case may be that the European working class, being more so a clone of capital than its antithesis, continues to self-harm at the behest of its bourgeoisie. It is then that the alternatives to the dollar and, more importantly, its bonds begin to take shape.

With 65 trillion dollars in off-balance sheet debts, and a CDO and Repo market rife with moral hazard, the chances of a major collapse are all too ominous. The transition will be gruesome given the fragile financial architecture. A smooth US debt workout is a must since the US is a huge net debtor in its own currency, which happens to be the world’s savings medium. Yet, the world must part with a system that pawns the future of man and nature by the power of the gun for the interests of so few. China and Russia have taken the bold decision to de-dollarize, to de-financialize wars and pollution and such must be the alternative for humanity.

Related Stories

• Iran official: China, Russia dump of US dollar is ‘very good progress’
• First episode of The Heroes: How was the liberation idea conceived?
• Palestinian heroism in 2022: operations, resistance, martyrdom
• Martyrdom of Nasser Abu Hamid condemned by Resistance factions

Michael Hudson gives an interview to a German magazine

December 16, 2022

Posted with the author’s permission

Boos German interview Dec 15 2022

Dear Prof Hudson,

Once again: Herzliche Grüße aus Berlin!

Last time we spoke for German print magazine “Four” in June. Right now I also work for MEGA Radio, a radio news station for Germany, Austria and Switzerland. We broadcast from Vienna and are located in Berlin, Bavaria and Austria.

Hereby I would like to invite you to another interview via ZOOM to record it for our radio program. It would be an update on our last interview. Maybe around 20-30 Minutes long.

See also our last talk: https://www.vierte.online/2022/06/03/ukraine-a-trojan-for-germanys-us-dependence/

I don’t know if that’s too short notice, but would you have time for such a conversation next week or the week after?

Otherwise, also at the beginning of January.

Here are my questions:

(1.) You made some predictions in our last interview for “Four” magazine which became true.

You talked about crisis for German companies in the production of fertilizer. This just hit the headlines weeks after our interview.

You also said: “What you characterize as “blocking Nord Stream 2” is really a Buy-American policy.” This now also became more than clear after the destroyed Nord Stream pipelines.

Could you comment that?

MH: U.S. foreign policy has long concentrated on control of the international oil trade. This trade is a leading contributor to the U.S. balance of payments, and its control gives U.S. diplomats the ability to impose a chokehold on other countries.

Oil is the key supplier of energy, and the rise in labor productivity and GDP for the leading economies tends to reflect the rise in energy use per worker. Oil and gas are not only for burning for energy, but are also a basic chemical input for fertilizers, and hence for agricultural productivity, as well as for much plastic and other chemical production.

So U.S. strategists recognize that cutting countries off from oil and its derivatives will stifle their industry and agriculture. The ability to impose such sanctions enables the U.S. to make countries dependent on compliance with U.S. policy so as not to be “excommunicated” from the oil trade.

U.S. diplomats have been telling Europe for many years not to rely on Russian oil and gas. The aim is twofold: to deprive Russia of its major trade surplus, and to capture the vast European market for U.S. oil producers. U.S. diplomats convinced German leaders not to approve the Nord Stream 2 pipeline, and finally used the excuse of the NATO war with Russia in Ukraine to act unilaterally to arrange the destruction of both Nord Stream 1 and 2 pipelines.

(2.) For our audience, our listeners: In your new book “The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism”

You state that the world economy is now fracturing between two parts, the United States and Europe is the dollarized part.

And this Western neoliberal unit is driving Eurasia and most of the Global South into a separate group. You just stated this in an interview from November.

The Rentier Economy is a Free Lunch

Could you explain this for our outlet?

MH: The split is not only geographic but above all reflects the conflict between Western neoliberalism and the traditional logic of industrial capitalism. The West has deindustrialized its economies by replacing industrial capitalism with finance capitalism, initially in an attempt to keep its wages down by moving abroad to employ foreign labor, and then to try and establish monopoly privileges and captive markets or arms (and now oil) and high-technology essentials, becoming rentier economies.

A century ago, industrial capitalism was expected to evolve into industrial socialism, with governments providing subsidized basic infrastructure services (such as health care, education, communication, research and development) to minimize their cost of living and doing business. That is how the United States, Germany and other countries built up their industrial power, and it also is how China and other Eurasian countries have done so more recently.

But the West’s choice to privatize and financialize its basic infrastructure, dismantling the role of government and shifting planning to Wall Street, London and other financial centers, has left it with little to offer other countries – except or the promise not to bomb them or treat them as enemies if they seek to keep their wealth in their own hands instead of transferring it to U.S. investors and corporations.

The result is that when China and other countries build up their economies in the same way that the United States did from the end of its Civil War to World War II, they are treated as enemies. It is as if U.S. diplomats see that the game is lost, and that their economy has become so debt-ridden, privatized and high-cost that it cannot compete, that it simply hopes to keep making other countries dependent tributaries for as long as it can until the game finally is over.

If the U.S. succeeds in imposing financial neoliberalism on the world, then other countries will end up with the same problems that the United States is experiencing.

(3.) Now the first terminals for LNG from the US are opened in Germany. How will this effect trade and interdependence / dependency between Germany and United States?

MH: The U.S. sanctions and destruction of Nord Stream 1 and 2 have made Europe dependent on U.S. supplies, at so high a cost of LNG gas (about six times what Americans and Asians have to pay) that Germany and other countries have lost their ability to compete in steel making, glass making, aluminum and many other sectors. This creates a vacuum which U.S. affiliates home to fill from their investments in other countries or even from the U.S. itself.

The expectation is that German and other European heavy industry, chemical and other manufacturing will have to move to the United States to obtain oil and other essentials that they are told not to buy from Russia, Iran or other alternatives. The assumption is that they can be blocked from relocating in Russia or Asia by imposing sanctions, fines and political meddling European politics by U.S. NGOs and National Endowment for Democracy satellites in, as has been the case since 1945. We can expect a new Operation Gladio to promote politicians willing to sustain this Global Fracture and the shift of European industry to the United States.

One question is whether Germany’s skilled labor will follow. That typically is what occurs in such situations. This kind of demographic shrinkage is what the Baltic states have experienced. It is a byproduct of neoliberal policies.

(4.) What is your view on the current military situation in the Russian/Ukrainian war?

MH: It looks like Russia will easily win in February or March. It probably will create a Demiliarized Zone to protect the Russian-speaking areas (probably incorporated into Russia) from the pro-NATO West in order to prevent sabotage and terrorism.

Europe will be told to continue to boycott Russia and its allies instead of seeking mutual gains by reciprocal trade and investment. The U.S. may urge Poland and other countries to “fight to the last Pole” or Lithuanian, emulating Ukraine. It will put pressure on Hungary. But most of all, it will insist that Europe spend an immense sum to re-arm, mainly with U.S. arms. This expense will crowd out social spending to help Europe cope with its spreading industrial depression or subsidies to revive its industry. So a militarized economy will become a rising overhead – while consumer and industrial debt increase, along with government debt.

As this occurs, Russia may demand that NATO roll back its borders to pre-1991 boundaries. That is the most likely flash point of conflict.

(5.) What is your view on the current financial situation in this war. The G7 and EU governments talk already about rebuilding and reconstruction of Ukraine after the war. What does this mean for Western businesses and finance capitalism?

MH: Ukraine hardly can be rebuilt. First of all, much of its population has left, and is unlikely to return, given the destruction of housing and infrastructure – and husbands.

Second, Ukraine is owned mainly by a narrow group of kleptocrats – who are trying to sell out to Western agricultural investors and other vultures. (I think you know who they are.)

Ukraine is already debt-ridden, and has become a fiefdom of the IMF (meaning in practice, of NATO). Europe will be asked to “contribute,” and the foreign reserves seized from Russia may be spent on hiring U.S. companies to make a financial killing rebuilding a pretense of an economy in Ukraine – leaving the country even more debt ridden.

A new Democratic Party secretary of state will echo Madeline Albright and say that the killing of Ukraine’s economy, children and soldiers “was all worth it” as the cost of spreading democracy U.S.-style.

(6.) I’ve read lots of background reports on the sanctions against Russia. It seems more and more the sanctions hit Russia hard, because they cannot produce all products, esp. technology, by themselves. On the other hand Russia have now more stable business and buyers with and in China, India.

What real effect do the sanctions have according to your analysis?

MH: The U.S. sanctions have turned out to be an unanticipated godsend for Russia. In agriculture, for instance, sanctions against Lithuanian and other Baltic dairy exports has led to a flowering of a domestic Russian cheese and dairy sector. Russia is now the world’s largest grain exporter, thanks to the Western sanctions that have had much the same effect as protective tariffs and import quotas of the sort that the United States used in the 1930s to modernize its agricultural sector.

If President Biden were a secret Russian agent, he hardly could have helped Russia more. Russia needed the economic isolation of protectionism, but was still too entranced by neoliberal free-trade policy to do this by itself. So the U.S. did it for it.

Sanctions oblige countries to become more self-reliant, at least in basic needs such as food and energy. This self-reliance is the best defense against U.S. economic destabilization to force regime change and similar compliance.

One effect is that Russia will need to buy much less from Europe even after the fighting in Ukraine ends. So there will be less need for Russia to export raw materials to Europe. It can work these up themselves. The industrial core that was Europe may end up more in Russia and its Asian allies than in the United States.

That is the ironic result of NATO’s new Iron Curtain.

(7.) How would you describe China, Russia and India: Do you see Industrial Capitalism or Socialism there?

MH: RIC was the original core of the BRICS, now greatly extended to include Iran and much of Central Asia and the roads involved with China’s Belt and Road initiative. The goal is for Eurasia no longer to have to rely on Europe or North America.

Secretary of Defense Donald Rumsfeld often referred to “Old Europe” as a shrinking dead zone. It failed to follow its plans a century ago to evolve into an increasingly socialized economy with government subsidy of rising living standards and labor productivity, science and industry. Europe rejected not only Marxism but the basis of Marxist analysis in the classical economics of Adam Smith, John Stuart Mill and their contemporaries. That path has been followed in Eurasia, while the right-wing anti-government liberalism of the Austrian and Chicago Schools has destroyed the NATO economies from within.

As the locus of industrial and technological leadership moves eastward, European investment and labor probably will follow.

The Eurasian countries will still visit Europe as tourists, as Americans like to visit England as a kind of theme park of post-feudal gentry, the posting of the palace guards and other quaint memories of the days of knights and dragons. European countries will look more like that of Jamaica and the Caribbean, with hotels and hospitality becoming the main growth sectors, with Frenchmen and German waiters dressed in their quaint quasi-Hollywood costumes. Museums will do a thriving business as Europe itself turns into a kind of museum of post-industrialism.

(8.) Currently we saw the collapse and bankruptcy of the crypto exchange FXT. The management of this company seems to be highly criminal. How do you judge that?

MH: Crime is what made crypto a growth sector for the past few years. Investors bought crypto because it is a vehicle for the fortunes being made in international drug dealing, the arms trade, other crime and tax evasion. These are the great post-industrial growth sectors in Western economies.

Ponzi schemes often are good investment vehicles in their take-off stage – the pump-and-dump stage. It was inevitable that criminals would not only use crypto to transfer funds, but actually set up their own currencies “free of oppressive government regulation.” Criminals are the ultimate Chicago School free market libertarians.

Anyone can create their own currency, much as U.S. wild-west banks did in the mid-19^th century, printing currency at will. When one went shopping in the early 20^th century, the stores still had lists of the shifting valuations of various bank notes. The best designed ones tended to be the most successful.

(9.) Do you have any knowledge about business relations between FTX and Ukraine, the government in Kyiv? There were some rumours and press articles in the alternative media about it?

MH: The IMF and Congress have paid large amounts of money to the Ukraine government and its kleptocrats in charge. Newspapers report that much of this money has been turned over to FTX – which has become the second largest funder of the Democratic Party (behind George Soros, who also is said to be trying to buy up Ukrainian assets). So a circular flow seems to be at work: U.S. Congress votes for funding for Ukraine, which puts some of this money in FTX crypto to pay or the political campaign of pro-Ukrainian politicians.

(10.) Some months ago there were articles in the US press about plans by the FED: They are planning to establish a digital Dollar, a Central Bank Digitcal Currency (CBDC). Also in Europe ECB president Madame Lagarde and the German minister for finance, Lindner, talk about an introduction of the digital Euro.

Here in Germany some critical experts are warning this will only push the total surveillance of the population and customers.

What is your take on digital currencies?

MH: It’s not my department. All banking is electronic, so what does “digital” mean? To libertarians, it means no government oversight, but in government hands, the government will have a record of everything that anyone spends.

(11.) What is your view on the current weakness or strength of the US dollar, the Euro, the British Pound, Gold and Silver?

MH: The dollar will remain in demand, thanks to its success in making the Eurozone dependent on it. The British pound has little means of support, and little reason for foreigners to invest in it. The euro is a junior satellite currency to the dollar.

Without a dollar or other currency to hold their monetary reserves in, governments will continue to increase the proportion held in gold, because it doesn’t have government liabilities attached to it – so U.S. officials can’t simply grab it, as they did with Russia’s foreign reserves. Eurozone countries cannot be trusted not to follow U.S. orders to grab foreign countries’ reserves, so it will be shunned.

As the euro’s exchange rate declines against the dollar, foreign investment will decline, because investors will not want to invest in (1) a shrinking market, and (2) companies that earn domestic euros that are worth fewer and fewer dollars or other hard currency for head offices.

Of course, gold will have to be kept at home, so that it can’t simply be grabbed, as the Bank of England grabbed Venezuela’s gold and gave it to the right-wing U.S. proxy. Germany would be wise to accelerate its airlift of its own gold supply from the U.S. Federal Reserve Bank vaults in New York City.

(12.) What is your current analysis of the energy and financial crises in the world?

MH: No real crisis as much as a slow crash. Rising prices paid for what America exports: oil, food and IT monopoly goods, with living costs for consumers rising faster than wages. So there will be a tightening squeeze or most families. The middle class will discover that it really is the wage-earning class after all, and will go deeper into debt – especially if it tries to protect itself by taking out a mortgage to buy a home.

I’ve been studying the 11^th and 12^th centuries for my history of debt, and I came across a story that may have relevance to the questions that you’ve asked. NATO keeps claiming that it is a defensive alliance. But Russia has no desire to invade Europe. The reason is obvious: No army can invade a major country. More important, Russia does not even have a motive to destroy Europe as a U.S.-puppet adversary. Europe already is self-destructing.

I am reminded of the battle of Manzikert in 1071, when the Byzantine Empire lost to the Seljuk Turks (largely because its general on whom the emperor had depended, Andronikos Doukas, defected, and then overthrew the Emperor. Crusade of Kings, a game supplement, covers the battle extensively, and claims the following conversation took place between Alp Arslan and Romanos:^[52]

Alp Arslan: “What would you do if I were brought before you as a prisoner?”

Romanos: “Perhaps I’d kill you, or exhibit you in the streets of Constantinople.”

Alp Arslan: “My punishment is far heavier. I forgive you, and set you free.”

That is the punishment that Europe will receive from Eurasia. Its leaders have made their choice: to be a U.S. satellite.

The Global South births a new game-changing payment system

November 30, 2022

by Pepe Escobar, first published at The Cradle and posted with the author’s permission

Challenging the western monetary system, the Eurasia Economic Union is leading the Global South toward a new common payment system to bypass the US Dollar.

The Eurasia Economic Union (EAEU) is speeding up its design of a common payment system, which has been closely discussed for nearly a year with the Chinese under the stewardship of Sergei Glazyev, the EAEU’s minister in charge of Integration and Macro-economy.

Through its regulatory body, the Eurasian Economic Commission (EEC), the EAEU has just extended a very serious proposal to the BRICS nations (Brazil, Russia, India, China and South Africa) which, crucially, are already on the way to turning into BRICS+: a sort of G20 of the Global South.

The system will include a single payment card – in direct competition with Visa and Mastercard – merging the already existing Russian MIR, China’s UnionPay, India’s RuPay, Brazil’s Elo, and others.

That will represent a direct challenge to the western-designed (and enforced) monetary system, head on. And it comes on the heels of BRICS members already transacting their bilateral trade in local currencies, and bypassing the US dollar.

This EAEU-BRICS union was long in the making – and will now also move toward prefiguring a further geoeconomic merger with the member nations of the Shanghai Cooperation Organization (SCO).

The EAEU was established in 2015 as a customs union of Russia, Kazakhstan and Belarus, joined a year later by Armenia and Kyrgyzstan. Vietnam is already an EAEU free trade partner, and recently enshrined SCO member Iran is also clinching a deal.

The EAEU is designed to implement free movement of goods, services, capital, and workers between member countries. Ukraine would have been an EAEU member if not for the Maidan coup in 2014 masterminded by the Barack Obama administration.

Vladimir Kovalyov, adviser to the chairman of the EEC, summed it all up to Russian newspaper Izvestia. The focus is to establish a joint financial market, and the priority is to develop a common “exchange space:” “We’ve made substantial progress and now the work is focused on such sectors as banking, insurance, and the stock market.”

A new regulatory body for the proposed joint EEU-BRICS financial system will soon be established.

Meanwhile, trade and economic cooperation between the EAEU and BRICS have increased 1.5 times in the first half of 2022 alone.

The BRICS share in the total external trade turnover of the EAEU has reached 30 percent, Kovalyov revealed at the BRICS International Business Forum this past Monday in Moscow:

“It is advisable to combine the potentials of the BRICS and EAEU macro-financial development institutions, in particular the BRICS New Development Bank, the Asian Infrastructure Investment Bank (AIIB), as well as national development institutions. This will make it possible to achieve a synergistic effect and ensure synchronous investments in sustainable infrastructure, innovative production, and renewable energy sources.”

Here we once again see the advancing convergence of not only BRICS and EAEU but also the financial institutions deeply involved in projects under the China-led New Silk Roads, or Belt and Road Initiative (BRI).

Halting the Age of Plunder

As if all that was not game-changing enough, Russian President Vladimir Putin is raising the stakes by calling for a new international payment system based on blockchain and digital currencies.

The project for such a system was recently presented at the 1st Eurasian Economic Forum in Bishkek.

At the forum, the EAEU approved a draft agreement on cross-border placement and circulation of securities in member states, and amended technical regulations.

The next big step is to organize the agenda of a crucial meeting of the Supreme Eurasian Economic Council on 14 December in Moscow. Putin will be there – in person. And there’s nothing he would love more than to make a game-changing announcement.

All of these moves acquire even more importance as they connect to fast increasing, interlocking trade between Russia, China, India, and Iran: from Russia’s drive to build new pipelines serving its Chinese market – to Russia, Kazakhstan, and Uzbekistan discussing a gas union for both domestic supplies and exports, especially to main client China.

Slowly but surely, what is emerging is the Big Picture of an irretrievably fractured world featuring a dual trade/circulation system: one will be revolving around the remnants of the dollar system, the other is being built centered on the association of BRICS, EAEU, and SCO.

Pushing further on down the road, the recent pathetic metaphor coined by a tawdry Eurocrat boss: the “jungle” is breaking away from the “garden” with a vengeance. May the fracture persist, as a new international payment system – and then a new currency – will aim to halt for good the western-centric Age of Plunder.

The Middle East and US global power: Fossil Fuel- Lifeblood of the American Empire

November 22, 2022

Source

by Phillyguy

Summary

Among all of the events shaping post-civil war US economic development, one of the most prominent was the establishment of Standard Oil by John D. Rockefeller in 1870. Working with other US industrialists, along with domestic and international financial and banking interests, including the Rothschild’s London banking cartel, Standard oil decedents have dominated the fossil fuel industry and shaped US economic and social development and foreign policy to the present day.

Introduction

The current world security architecture arose following WWII, which established the US as the dominant global power. Since that time, US global supremacy has rested on unrivaled military and economic power, control of world’s energy reserves (primarily in the Middle East), and maintaining the dollar as the world’s reserve currency [1]. There has been much current discussion about promoting ‘green’ policies, including sustainable development and increasing the use of renewable energy sources, clearly articulated during the UN Conference on Environment and Development (aka ‘Rio Conference’; ‘Earth Summit’), held in Rio de Janeiro, Brazil (Jun 3-14, 1992) [2], and Greta Thunberg’s speech to the UN on Sept 23, 2019 [3], where she accused world leaders of failing younger generations by not taking more aggressive actions to stop climate change. Despite this push for Green policies, fossil fuels (coal, oil and natural gas) are still the dominant source of energy, currently supply over 80% of the world’s energy [4]. In addition, the dollar (aka ‘petrodollar’) is the primary reserve currency held by foreign central banks [5] and main currency used for commercial energy transactions [6] [7].

In 1863 John D. Rockefeller joined Maurice B. Clark and Samuel Andrews in an oil-refining business in Cleveland, Ohio, which was subsequently expanded and incorporated as Standard Oil of Ohio in 1870. Rockefeller was a shrewd and aggressive industrialist, acquiring additional refining capacity by “buying up and squeezing out of rivals by every device at hand—legal or illegal’ and as a result, Standard Oil would soon control over 90% of American oil refining capacity. Facing increasing resistance from the business community and the Ohio legislature, Rockefeller incorporated the Standard Oil Trust in New Jersey in 1982. This Trust consisted of seven subsidiaries- Standard Oil of Kentucky, Standard Oil of California, Standard Oil of New York, Standard Oil of New Jersey, Standard Oil of Indiana, The Standard Oil Co (Ohio) and The Ohio Oil Company. In Standard Oil Co. of New Jersey v. United States (1911), the US Supreme Court found the Standard Oil Trust guilty of engaging in anti-competitive practices, a violation of the Sherman Antitrust Act, breaking the company up into 34 separate entities, some of which the Rockefellers held major stakes [8] [9]. Ironically, decades after the Standard Oil Trust was ‘broken up’, these separate firms would subsequently merge into Chevron [10], ExxonMobil [11], British Petroleum (BP) [12] and Marathon [13], which are currently among the top 10 global energy companies [14]. The Rockefellers reach was vast- David Rockefeller, grandson of John D. Rockefeller, was Chairman of the Council on Foreign Relations (1970-1985) and Chairman and CEO of Chase Manhattan Bank (1969–1981) [15] [16].

The geographic location of the US, circa 8000 km (5000 miles) from major war theaters in Europe and 9700 km (6000 miles) in Japan shielded the US from the massive devastation that took place in Europe and Asia during WWII. As a result, many large US corporations were able to profit handsomely by supplying the War Department with fuel, aircraft, ships, motor vehicles, armaments and ammunition to equip American soldiers and allied forces. Some of these firms were working both sides of the conflict, supplying Nazi Germany with financial backing and war material; some of these firms include Alcoa, Brown Brothers Harriman, Coca-Cola, Dupont, Kodak, Chase Bank, Dow Chemical, Ford, IBM, General Electric, General Motors, Woolworth, Random House and Standard Oil [17]. Prescott Bush, father of George HW Bush (41^st President) and grandfather of George W. Bush’s (43^st President), was a partner of A. Harriman & Co Investment bank and later served as Senator from Connecticut (1952-1963). Prescott Bush was directly involved with companies that profited from their commercial involvement with Nazi Germany [18] [19]. It should be pointed out the WWII is the most expensive war in American history, costing taxpayers more than $4 trillion, adjusted for inflation [20].

To the victor go the spoils

The US emerged from WWII as the world’s foremost military and economic power, the dollar was anointed the status of world reserve currency at the Bretton Woods Conference (1944) and established as the primary currency used for energy transactions following the meeting between US President Franklin D. Roosevelt and Saudi King Abdul Aziz Ibn Saud, aboard the USS Quincy, in the Suez Canal on Valentine’s Day, 1945 [21].

Post-WWII US economic development saw the continued rise of the American economy which translated into robust corporate profits and better living standards for many working people. In 1956, President Eisenhower signed the Federal-Aid Highway Act (aka National Interstate and Defense Highways Act of 1956) described as the ‘Greatest Public Works Project in History’, allocating $25 billion (circa $274 billion in inflation- adjusted dollars) from taxpayers to develop a 41,000-mile system of interstate highways that Eisenhower promised would eliminate unsafe roads, inefficient routes and all of the other things that got in the way of “speedy, safe transcontinental travel.” [22] [23]. The Highway act would enrich the ‘pro-highway coalition of energy companies, automobile manufactures, truckers, bus operators, tiremakers, insurance companies, auto clubs, etc. It directly led to increased use of private automobiles for transportation and the systematic dismantling of energy- efficient public transportation, creation of suburbs, shopping centers, ‘strip malls’, and proliferation of McDonald’s and other ‘fast-food’ outlets, which have led to the current health crisis in the US- increased obesity, type II diabetes and related health problems [24] [25]. In addition, some of these highways were literally built through urban neighborhoods and frequently minority communities [26] [27], such as the Cypress Freeway in Oakland, CA, I95 in Chester, PA and the Cross Bronx Expressway in NYC [28] [29].

As a result, the functioning of the American economy and society has become very dependent on fossil fuel consumption (for more detail see [30]).

1. Energy consumption & generation– the US has 4.25% of world’s population (339 million people) but consumes ~17% of the world’s energy and has the highest per capita energy consumption and is the largest total energy consumer. In 2021, approximately 60% of US electricity was generated from fossil fuels- coal, natural gas and oil [31].

2. Suburban development– as described above, passage of the Highway act of 1956 [22], accelerated the development of low-density housing suburbs, which were only accessible by automobiles using fossil fuel.

3. Transportation– The average American relies on energy-inefficient automobiles and jet airplanes for transportation. Most US cities lack a comprehensive, energy-efficient public transportation system. Indeed, the US does not have 1 mile of high-speed rail lines. By contrast, China has 40,000 km (24,855 mi), Spain has 3,100 km (1,926 mi) and Japan has 2,830 km (1758 mi) of high-speed rail.

4. American agriculture is very energy-intensive, requiring 15 calories of energy to produce 1 calorie of food. The average food commodity transits 1500 miles from production to consumption point- e.g., California-grown produce, shipped to the US east coast, usually via diesel fueled trucks.

5. Information technology– US society is heavily reliant on information flow. This system encompasses local computers, the internet and fiber optic cables serving as data pipelines, computer server farms and “cloud” storage facilities, all of which consume lots of electricity.

6. Military– The Pentagon is the largest single consumer of fossil fuel and polluter in the world. To give this some perspective, on average, the US military consumes 12,600,000 gallons (48,000,000 L) of fuel per day. One F-16 fighter jet consumes over 20K gallons of Kerosene per hour (333 gal/min) [32].

American capitalism is dependent on fossil fuel consumption to function and serves as the lubricant for American power projection around the world. The Middle East and North Africa (MENA) have approximately 57% and 41% of proven oil and natural gas reserves, respectively (see Table 1 and [33]). Thus, it is not surprising that the US ruling elite have a major interest in this region and the energy reserves therein [34]. US attempts to control oil in the MENA region has been carried out in several ways. This has involved setting up client regimes in countries with vast energy deposits, such as the Gulf monarchies in the Persian Gulf (Figure 1), attacking and/or invading countries who attempt to follow an independent energy policy, such as Iraq and Libya or issuing frequent verbal threats, seizing assets and imposing economic sanctions on countries that the US has been unable to achieve regime change or are capable of defending themselves, such as the Islamic Republic of Iran [35] and Venezuela.

As part of this effort, the US has set up military bases in multiple ME countries including Bahrain, Iraq, Jordan, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia (KSA), Turkey (Türkiye), UAE and Syria (See Figure 1 and Table 2) [36]. Due to its geographic location, Israel is crucial to US foreign policy goals. The ‘state’ of Israel/Zionist project was the creation of British imperialism (Balfour Declaration, 1918) [37], was driven, at least in part, by the desire of the British ruling elite to establish a reliable (read non-Muslim) proxy force that would assist the UK in controlling the region and its abundant hydrocarbon reserves [38]. The US emerged from WWII as the world’s leading military and economic power and assumed the role of Israel’s benefactor, providing $152 billion since 1949; $3.8 billion in 2020 [39] [40]. While Israel does not host a formal US base, she is a de facto appendage of the Pentagon, is fully integrated into NATO and serves as a reliable and well-armed US proxy in the region [41] [42], ranking 18th in global military power [43]. Israel conducts regular attacks on Syria [44] and estimated to have a stockpile of circa 90 nuclear weapons (likely a low estimate).

This effort has become all the more urgent as: the Russia-China-Iran axis has attained economic and military parity with the West, Iran is now a member of the Shanghai Cooperation Organization (SCO) [45], has applied for membership to the BRICS [46] and recently announced that it has developed a hypersonic missile, that is ‘capable of penetrating all defense systems’ [47]. One would infer that Iran received technical help developing this weapon system. As Iran’s ties with Russia and China continue solidifying, they are becoming increasingly ambivalent about rejoining the Joint Comprehensive Plan of Action (JCPOA; aka Iran nuclear deal) [46], which was negotiated during the Obama Administration [48]. Trump unilaterally exited the JCPOA in 2018, stating ‘We cannot prevent an Iranian bomb under the decaying and rotten structure of the current agreement’ [49].

We hear a lot about ‘Green’ energy, the ‘Green new deal’, reducing our ‘carbon footprint’ and ‘sustainable development’, policies which are being promoted by a wide range of extremely committed environmental and conservation groups such as the Sierra Club, National Resources Defense Council (NRDC) and Clean Air Council in the US and many international organizations and prominent politicians. ‘Green’ polices have been promoted by US Vice President Kamala Harris, encouraging Americans to purchase [expensive] electric cars and endorsed by the paper of record (NYT) and other corporate media outlets. Any policy that reduces the production of ‘greenhouse’ gasses, such as CO₂, is certainly a noble and worthwhile objective, that should be supported. Unfortunately, most of these groups, at least in the US, where I live, are missing the proverbial ‘elephant in the room’. This includes:

1. The entire structure of American society has been built around fossil fuel consumption. This includes the use of automobiles and jet airplanes for transportation. The profits of very powerful corporate interests, including energy corporations, automobile manufactures and their suppliers, banks and insurance companies and law firms to name a few, are highly dependent on fossil fuel consumption and ‘greenhouse’ gas production. They are not about to give this up without a big fight, including going to war.

2. The military is a key pillar of a [declining] American empire, with the Pentagon serving as the ‘enforcer’ of US global power, but is also the largest of consumer of fossil fuels and largest polluter in the world [32]. The Pentagon is supported by all factions of the ruling elite, readily apparent from the near-unanimous bipartisan support for every military appropriation in Congress (appropriation for 2023 is $773 billion). Not surprisingly, most environmental groups, which are dependent on funding from corporate-backed foundations, such as the Ford Foundation, Home Depot Foundation, etc. [50] are not going to ‘bite the hand’ that feeds them. Likewise, US corporate media is controlled by 6 large corporations whose class interests reflect those of the petrochemical companies and other large corporations [51] [52] [53]. Any reporter who steps out of line- i.e., criticizes the functioning of the US empire, including fossil fuel consumption, is immediately reprimanded and/or fired. 1) Reporter Emily Wilder was fired from AP because she had posted pro-Palestinian material on social media [54]. 2) In 1996, investigative reporter Gary Webb published a series of articles entitled ‘Dark Alliance’ in the San Jose Mercury News, linking the crack cocaine trade in Los Angeles with the Nicaraguan Contra rebels and the CIA. Not surprisingly, Webb’s story was met with outrage by MSM outlets such as the LA Times and Washington Post. Webb committed suicide in 2004 [55].

Concluding remarks

The survival of the American Empire is highly dependent on fossil fuel consumption and control of global energy reserves. This dependency has created irresolvable problems and led to a chaotic and at times, contradictory foreign policy. While there has been a lot of ‘whining’ about energy prices in the US and EU, the oil industry is reaping record profits. In 1980, President Jimmy Carter levied a “windfall” profits tax on the American oil industry in response to increasing gas prices and corporate profits [56]. While these taxes have had mixed results, no doubt a result of aggressive industry lobbying, there has been little discussion of taxing high corporate profits at the present time. Indeed, petrochemical industry profits were barely addressed in the recent US ‘midterm’ elections, as many candidates receive campaign contributions from energy companies. Fossil fuels still dominate US foreign policy. This can be seen from the enduring presence of military bases throughout the ME and maintaining generous financial support for Israel and the ruling families of Gulf Monarchies [57]. At the same time, these ruling families have watched the US/UK/NATO ferment coups in Iran (1953) [58] [59] and steal resources, invade and/or destroy Afghanistan, Iraq, Libya, Syria and Yemen; impose crippling economic sanctions and/or confiscate the assets of countries deemed a threat to US global power such as Iran, Venezuela and Russia and sabotage energy infrastructure (see below). Not surprisingly, KSA and other Gulf Monarchies have been reaching out to Russia and China; multiple reports indicate that KSA is ‘eager’ to join the BRICS Bloc [60]. No doubt, this was a motivation for President Biden’s trip to KSA in July of this year, meeting with Saudi Crown Prince Mohammed bin Salman (MBS) at Al-Salam Palace in the Red Sea port of Jeddah. On Nov 18, the State Department recommended that MBS be granted ‘legal immunity’ for the brutal assassination of Washington Post columnist, Jamal Khashoggi at the Saudi consulate in Istanbul, Turkey on Oct 2, 2018 [62] [63]. It should be noted that while campaigning for President, then candidate Joe Biden stated: he would “cancel the blank check” the Trump administration had given Saudi Arabia during its war in Yemen and during a speech at the Council on Foreign Relations (CFR) that “America’s priorities in the Middle East should be set in Washington, not Riyadh” and advocated making Saudi Arabia an international “pariah” for butchering Jamal Khashoggi [61]. Rhetoric notwithstanding, Biden’s polices towards the MENA region are largely a continuation of those of Trump and the ruling elite they represent. Biden has not rejoined the JCPOA and has continued Trump’s bellicose position towards the Islamic Republic of Iran. The US continues supporting Israel, the US Embassy in Israel remains in Jerusalem (Al-Quds in Arabic), which is not Israeli land and thus, a blatant violation of International law [64], US troops remain in Iraq and Syria while the Pentagon continues assisting KSA in their genocidal war on Yemen [65]. Trump continues his financial dealings with KSA, recently signing a $1.6 billion deal with a Saudi real estate developer [66]. It will be interesting to see how the US reacts when KSA joins BRICS [67].

On Sept 26, 2022, Nord Stream 1 and Nord Stream 2 pipelines, carrying natural gas from Russia to Germany, under the Baltic Sea were blown up [68] [69]. Shortly after the explosions, erstwhile British Prime Minister Liz Truss allegedly sent a message to US Sec of State Anthony Blinken stating ‘it’s done’ [70]. While the actual perpetrators of this attack have not been identified, it is likely that the US at a very minimum was aware of this action, as pointed out by Professor Jeffrey Sachs (Columbia University) during a Bloomberg interview [71]. The end result is that Germany and other countries in the EU will no longer have access to cheap and plentiful Russian energy, but will now be forced to purchase much more expensive liquified natural gas from the US or other countries. It should also be noted that nearly 8 decades following the conclusion of WWII, the Pentagon maintains circa 900 foreign military bases worldwide [72] [73]. Europe is still occupied by circa 100K troops [74], 35K in Germany alone [75]. Thus, Germany is not really a US ‘ally’ but rather a subordinate. This begs the question; will Germany and other countries in the EU continue serving as de facto US vassals or begin following a more independent foreign policy? One could argue their very survival as functional states depends on this.

Notes

1. US economic decline and global instability. The Saker Blog Jan 19, 2021; https://thesaker.is/us-economic-decline-and-global-instability/

2. UN Conference on Environment and Development (aka ‘Rio Conference’, ‘Earth Summit’), held in Rio de Janeiro, Brazil (Jun 3-14, 1992); https://www.un.org/en/conferences/environment/rio1992

3. Read climate activist Greta Thunberg’s speech to the UN By Gretchen Frazee PBS News Hour Sep 23, 2019; https://www.pbs.org/newshour/world/read-climate-activist-greta-thunbergs-speech-to-the-un

4. World Energy Balances: Overview (2020); https://www.iea.org/reports/world-energy-balances-overview/world

5. The International Role of the U.S. Dollar by Carol Bertaut, Bastian von Beschwitz and Stephanie Curcuru US Fed Reserve Oct 6, 2021; https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-u-s-dollar-20211006.html

6. What Is the Petrodollar? Petrodollar Explained in Less Than 5 Minutes By Kimberly Amadeo. the balance June 4, 2022; https://www.thebalancemoney.com/what-is-a-petrodollar-3306358

7. US economic decline and global instability Part 3: Money printing, debt and increasing international isolation. The Saker Blog Oct 31, 2022; https://thesaker.is/us-economic-decline-and-global-instability-part-3-money-printing-debt-and-increasing-international-isolation/

8. How Rockefeller Built His Trillion Dollar Oil Empire. By Jeremy Dyck Oct 8, 2019;

View at Medium.com

9. John D. Rockefeller and the Oil Industry- John D. Rockefeller changed the oil industry forever with his company Standard Oil. but that was by no means the only interesting thing about him. By Burton W. Folsom Foundation for Economic Education Sat Oct 1, 1988; https://fee.org/articles/john-d-rockefeller-and-the-oil-industry/

10. Chevron; https://www.chevron.com

11. ExxonMobil; https://corporate.exxonmobil.com

12. British Petroleum (BP); https://www.bp.com

13. Marathon Oil; https://www.marathonoil.com

14. Top 20 Oil and Gas Companies in the World in 2021; https://www.visualcapitalist.com/ranked-the-largest-oil-and-gas-companies-in-the-world

15. David Rockefeller Sr., steward of family fortune and Chase Manhattan Bank, dies at 101 By Timothy R. Smith Washington Post Mar 20, 2017; https://www.washingtonpost.com/national/david-rockefeller-sr-steward-of-family-fortune-and-chase-manhattan-bank-dies-at-101/2017/03/20/f2385f8a-0d7c-11e7-ab07-07d9f521f6b5_story.html

16. JPMorgan Chase & Co: Who We Are/History Of Our Firm; https://www.jpmorganchase.com/about/our-history

17. Top 10 American Companies that Aided the Nazis. By Dustin Koski Feb 18, 2016; https://www.toptenz.net/top-10-american-companies-that-aided-the-nazis.php

18. How Bush’s grandfather helped Hitler’s rise to power- Rumors of a link between the US first family and the Nazi war machine have circulated for decades. Now the Guardian can reveal how repercussions of events that culminated in action under the Trading with the Enemy Act are still being felt by today’s president By Ben Aris and Duncan Campbell The Guardian Sat Sep 25, 2004; https://www.theguardian.com/world/2004/sep/25/usa.secondworldwar

19. The Holocaust and the Bush family fortune Bill Van Auken Dec 5, 2018; https://www.wsws.org/en/articles/2018/12/05/intr-d05.html

20. The Cost of U.S. Wars then and now. By Norwich University Online Oct 20th, 2020; https://online.norwich.edu/academic-programs/resources/cost-us-wars-then-and-now

21. ORDER FROM CHAOS- 75 years after a historic meeting on the USS Quincy, US-Saudi relations are in need of a true re-think By Bruce Riedel Brookings Mon Feb 10, 2020; https://www.brookings.edu/blog/order-from-chaos/2020/02/10/75-years-after-a-historic-meeting-on-the-uss-quincy-us-saudi-relations-are-in-need-of-a-true-re-think/

22. History of the Interstate Highway System; https://www.fhwa.dot.gov/interstate/history.cfm

23. The Interstate Highway System History.Com Jum 7, 2019; https://www.history.com/topics/us-states/interstate-highway-system

24. Tabish SA. Is Diabetes Becoming the Biggest Epidemic of the Twenty-first Century? Int J Health Sci (Qassim). 2007 Jul;1(2): V-VIII;

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3068646/

25. Obesity? Diabetes? We’ve been set up By Alvin Powell Harvard Gazette Mar 7, 2012; https://news.harvard.edu/gazette/story/2012/03/the-big-setup/

26. A Brief History of How Racism Shaped Interstate Highways By Noel King NPR Apr 7, 2021; https://www.npr.org/2021/04/07/984784455/a-brief-history-of-how-racism-shaped-interstate-highways

27. How Interstate Highways Gutted Communities—and Reinforced Segregation

America’s interstate highway system cut through the heart of dozens of urban neighborhoods. By Farrell Evans History.com Oct 20, 2021; https://www.history.com/news/interstate-highway-system-infrastructure-construction-segregation

28. Robert Moses’s Negative Impacts By SAFAA Feb 7, 2018 BY SAFAA; https://eportfolios.macaulay.cuny.edu/alonso2018/2018/02/07/robert-mosess-negative-impacts/

29. The Cross Bronx Expressway and the Ruination of the Bronx By lbennett Nov 10, 2019; https://pages.vassar.edu/realarchaeology/2019/11/10/the-cross-bronx-expressway-and-the-ruination-of-the-bronx/

30. War Essay- The consequences of nuclear war on US society The Saker Blog Jan 13, 2019; https://thesaker.is/war-essay-the-consequences-of-nuclear-war-on-us-society/

31. Electricity in the United States US Energy Information Administration;

https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php

32. Pentagon Fuel Use, Climate Change and the Costs of War By Neta Crawford Watson Institute June 12, 2019; https://watson.brown.edu/costsofwar/files/cow/imce/papers/2019/Pentagon%20Fuel%20Use,%20Climate%20Change%20and%20the%20Costs%20of%20War%20Final.pdf

33. How Much Oil in the Middle East? By Rasoul Sorkhabi, Ph.D. GoExPro Vol. 11, No. 1 – 2014; https://www.geoexpro.com/articles/2014/02/how-much-oil-in-the-middle-east; iea; https://www.iea.org/regions/middle-east

34. Michael Hudson: A New Bipolar World. US finance capitalism vs. China’s mixed public/ private economy Nov 7, 2022; https://www.youtube.com/watch?v=E_zY44YClCY

35. Missiles of Iran- Iran possesses the largest and most diverse missile arsenal in the Middle East, with thousands of ballistic and cruise missiles, some capable of striking as far as Israel and southeast Europe. CSIS Aug 10, 2021; https://missilethreat.csis.org/country/iran/

36. US military bases and facilities in the Middle East. American Security Project https://www.americansecurityproject.org/wp-content/uploads/2018/06/Ref-0213-US-Military-Bases-and-Facilities-Middle-East.pdf

37. Balfour Declaration History.Com Aug 21, 2018; https://www.history.com/topics/middle-east/balfour-declaration

38. More than a century on: The Balfour Declaration explained. More than 100 years since Britain’s controversial pledge, here is everything you need to know about it. By Zena Al Tahhan Aljazeera Nov 2, 2018; https://www.aljazeera.com/features/2018/11/2/more-than-a-century-on-the-balfour-declaration-explained

39. Israel-Gaza: How much money does Israel get from the US? BBC May 24, 2021; https://www.bbc.com/news/57170576

40. U.S. Foreign Aid to Israel: Total Aid (1949 – Present) Jewish Virtual Library;

https://www.jewishvirtuallibrary.org/total-u-s-foreign-aid-to-israel-1949-present

41. Towards a World War III Scenario? The Role of Israel in Triggering an Attack on Iran? Part II The Military Road Map By Prof Michel Chossudovsky Global Research, July 30, 2018; http://www.globalresearch.ca/towards-a-world-war-iii-scenario-the-role-of-israel-in-triggering-an-attack-on-iran-2/20584

42. Understanding NATO- Ending War By Robert J. Burrowes Economy and Politics June 8, 2019; https://www.meer.com/en/54967-understanding-nato

43. 2022 Military Strength Ranking; https://www.globalfirepower.com/countries-listing.php

44. Israeli Attacks Continue to Kill Syrians, Iranians. Southfront Nov 16, 2022; https://southfront.org/israeli-attacks-continue-to-kill-syrians/

45. Iran signs memorandum to join Shanghai Cooperation Organization. As leaders meet in Uzbekistan, the eight-member regional body is poised to add Iran to its ranks. Aljazeera Sept 15, 2022; https://www.aljazeera.com/news/2022/9/15/iran-signs-memorandum-join-shanghai-cooperation-organisation

46. India, China, Iran: the Quad that really matters By Pepe Escobar Nov 15, 2022; https://thesaker.is/russia-india-china-iran-the-quad-that-really-matters/

47. Iran claims it has developed a hypersonic missile CBS News Nov 10, 2022;

https://www.cbsnews.com/news/iran-claims-it-has-developed-a-hypersonic-missile/

48. The Joint Comprehensive Plan of Action (JCPOA) at a Glance. Kelsey Davenport, Director of Nonproliferation Policy, Arms Control Association Mar, 2022;

https://www.armscontrol.org/factsheets/JCPOA-at-a-glance

49. Trump’s withdrawal from the Iran nuclear deal, explained. The Iran nuclear deal isn’t dead — yet. By Zack Beauchamp Vox May 8, 2018;

https://www.vox.com/world/2018/5/8/17328520/iran-nuclear-deal-trump-withdraw

50. Society for Nonprofits; https://www.snpo.org/publications/fundingalert_bycategory.php?cs=ENVI

51. The 6 Companies That Own (Almost) All Media [INFOGRAPHIC]; https://www.webfx.com/blog/internet/the-6-companies-that-own-almost-all-media-infographic/

52. These 6 corporations control 90% of the media outlets in America- The illusion of choice and objectivity. By Nickie Louise Tech Startups Sept 18, 2020;

https://techstartups.com/2020/09/18/6-corporations-control-90-media-america-illusion-choice-objectivity-2020/embed/#?secret=bL4ldPvDPR

53. Index of US Mainstream Media Ownership- The Future of Media Project, Harvard University; https://projects.iq.harvard.edu/futureofmedia/index-us-mainstream-media-ownership

54. The Real Problem with the AP’s Firing of Emily Wilder- When one young journalist was fired, the incident revealed a problem deeper than bad social media policies. By Janine Zacharia May 26, 2021; https://www.politico.com/news/magazine/2021/05/26/emily-wilder-fired-ap-490892

55. How the CIA Watched Over the Destruction of Gary Webb- Freshly-released CIA documents show how the largest U.S. newspapers helped the agency contain a groundbreaking exposé. By Ryan Devereaux The Intercept Sept 25, 2014; https://theintercept.com/2014/09/25/managing-nightmare-cia-media-destruction-gary-webb/

56. Windfall profit taxes have benefits. But the devil is in the details. In times of crisis, the U.S. government has taxed excess profits — with mixed results Perspective by Ajay K. Mehrotra Washington Post Oct 24, 2022; https://www.washingtonpost.com/made-by-history/2022/10/24/windfall-profit-taxes/

57. List of current monarchs of the Arabian Peninsula; https://en.wikipedia.org/wiki/List_of_current_monarchs_of_the_Arabian_Peninsula

58. The Collapse Narrative: The United States, Mohammed Mossadegh, and the Coup Decision of 1953. By Gregory Brew Texas National Security Review. Vol 2, Issue 4 Nov 2019 | 38–59; https://tnsr.org/2019/11/the-collapse-narrative-the-united-states-mohammed-mossadegh-and-the-coup-decision-of-1953

Stable URL: http://dx.doi.org/10.26153/tsw/6666

59. The CIA in Iran- Key Events in the 1953 Coup; https://archive.nytimes.com/www.nytimes.com/library/world/mideast/041600iran-coup-timeline.html?scp=1&sq=mossadegh%252520coup&st=cse

60. BRICS to expand soon, Saudi Arabia keen to join. BRICS represents more than 40 percent of the global population and nearly a quarter of the world’s GDP and if it is expanded it will help in bolstering the BRICS bloc’s global influence. By Huma Siddiqui Oct 27, 2022; https://www.financialexpress.com/defence/brics-to-expand-soon-saudi-arabia-keen-to-join/2737102/

61. Biden’s visit to Saudi Arabia is the right thing to do, even if it feels wrong

The U.S. president has rightly come to the conclusion that a strategy of isolating the crown prince isn’t feasible. By Daniel R. DePetris NBC News July 15, 2022;

https://www.nbcnews.com/think/opinion/joe-biden-visits-saudi-arabia-bow-reality-rcna38419

62. U.S. declares Saudi crown prince immune from Khashoggi killing lawsuit

Biden administration cites executive powers, international law in shielding Mohammed bin Salman from legal responsibility. By Karen DeYoung and Missy Ryan Washington Post Nov 18, 2022; https://www.washingtonpost.com/national-security/2022/11/18/saudi-crown-prince-immunity-khashoggi-murder/

63. WaPo slams Biden’s move to shield MBS in Khashoggi killing suit. By Rebecca Falconer and Shawna Chen Nov 18, 2022; https://www.axios.com/2022/11/18/biden-admin-saudi-prince-immunity-khashoggi-killing-lawsuit

64. The Status of Jerusalem United Nations 1997; https://www.un.org/unispal/wp-content/uploads/2016/07/The-Status-of-Jerusalem-Engish-199708.pdf

65. Strategic Importance of the Indian Ocean, Yemen and Bab-el-Mandeb Strait Saker Blog Aug 5, 2020; https://thesaker.is/strategic-importance-of-the-indian-ocean-yemen-and-bab-el-mandeb-strait/

66. Trump family signs $1.6bn branding deal with Saudi real estate developer. Wed, Nov 16, 2022; https://www.presstv.ir/Detail/2022/11/16/692846/US-Donald-Trump-Saudi-Arabia-Dar-Al-Arkan-deal-Oman-MbS-Biden-

67. The Roundtable #34 The Kherson Withdrawal with Gonzalo Lira, Brian Berletic and Andrei Martyanov Thurs, Nov 10, 2022; https://smoothiex12.blogspot.com/2022/11/roundtable.html

68. Who Attacked Nord Stream 2? Maybe it was Russia, though that doesn’t make much sense. There are better candidates. By Doug Bandow Cato Institute Oct 14,

2022; https://www.cato.org/commentary/who-attacked-nord-stream-2

69. A journey to the site of the Nord Stream explosions- Prosecutors in Sweden say explosions on a gas pipeline between Russia and Europe were the result of sabotage. The explosions in the Baltic Sea targeted pipelines carrying natural gas from Russia to Europe. Russia denies any involvement. Before the announcement, Katya Adler travelled to the site, and was separately told by Nato chief Jens Stoltenberg that the west could go to war if Russia attacked infrastructure providing critical energy supplies. By Katya Adler BBC News Nov 18, 2022; https://www.bbc.com/news/world-63636181

70. ‘It’s done’: Putin fumes after Liz Truss ‘message’ to Blinken over Nord Stream attack ‘revealed’ Hindustan Times Nov 4, 2022; https://www.youtube.com/watch?v=GxzBqghRs5k

71. Jeffrey Sachs: Rest of the World Thinks the U.S. Probably Sabotaged the Nord Stream Pipeline, But it Doesn’t Show up in our Media By Tim Hains Real Clear Politics Oct 3, 2022; https://www.realclearpolitics.com/video/2022/10/03/jeffrey_sachs_most_of_the_world_doesnt_view_the_ukraine_war_the_way_the_us_media_does.html

72. A List of All 900 U.S. Foreign Military Bases. By Eric Zuesse Nov 18, 2022; https://theduran.com/a-list-of-all-900-u-s-foreign-military-bases/

73. USA’s Military Empire: A Visual Database. World Beyond War;

https://worldbeyondwar.org/no-bases/

74. US likely to keep 100,000 troops in Europe for foreseeable future in face of Russian threat, US officials say By Ellie Kaufman and Barbara Starr, CNN Fri May 20, 2022; https://www.cnn.com/2022/05/20/politics/us-troops-in-europe/index.html

75. Where 100,000 U.S. troops are stationed in Europe. By Zachary Basu Axios Mar 22, 2022; https://www.axios.com/2022/03/23/where-100000-us-troops-are-stationed-europe

Figure 1. Map of the Middle East

Source: https://commons.wikimedia.org/wiki/Category:Maps_of_the_Middle_East#/media/File:%22Political_Middle_East%22_CIA_World_Factbook.jpg

Table 1. Middle East Energy Reserves by Country

(TJ, tera joules; 1 TJ= 163 barrels of oil)

Source: iea; https://www.iea.org/regions/middle-east

Country	Oil (TJ)	Natural Gas (TJ)
Iran	3,497,347	7,738,423
KSA	5,624,350	3,357,725
Iraq	1,626,278	626,792
UAE	190,400	2,302,508
Qatar	131,259	1,599,572
Kuwait	705,461	846,450
Oman	23,864	957,632
Bahrain	81,132	563,867
Total	12,477,033	18,260,133

Table 2. US Military Bases and Facilities in Middle East [36]

*Numbers in parenthesis, estimated total number of US troops (thousands) deployed in each country; ** Estimated number of US troops (thousands)

Country*	Base	Troops**
Bahrain (9K)	US Naval Forces Central Command/ US 5th Fleet	4.7
	Shaikh Isa Air Base
	Muharraq Air Base (Navy)
Iraq (2.5K)	Al Asad Air Base
Israel	Dimona Radar Facility
	Mashabim Air Base / Bisl’a Aerial Defense School
Jordan	Muwaffaq Salti Air Base (Azraq)
Kuwait (13.5)	Ali Al Salem Air Base	1.5
	Camp Arifjan	9
	Camp Spearhead Army Base
	Camp Buehring
	Camp Patriot	3
Oman (<1K)	RAFO Masirah
	Muscat International Airport
	RAFO Thumrait
	Al-Musannah Air Base
	Port of Duqm
	Port of Salalah
Qatar (10K)	Al Udeid Air Base- Special Operations Command Central	10
	Camp As Sayliyah
KSA (3K)	Eskan Village
Turkey (5K)	Incirlik Air Base	5
	Izmir Air Station
UAE (2K)	Al Dhafra Air Base	2
	Port of Jebel Ali
	Fujairah Naval Base
Syria (<0.2K)	Al-Tanf garrison (ATG)

The collective West might be losing the war with Eurasia

November 10, 2022

Source

by Francis Lee

‘’You can’t always get what you want.’’
Courtesy of the Rolling Stones

This aptly sums up the Eurozone/East-Asian/US relationship: In short US hegemony. Suffice it to say that – of all people, Leon Trotsky writing in, (War – In the International 1933) – opined … ‘’That prior to WW2 the US was Europe’s debtor but now Europe was relegated to the background. The United States is the principal factory, the principal depot and the Central Bank of the world.’’

US Ascendency in the 20^th Century.

This much was self-evident, and true enough, but in any case, America’s hegemony over Europe long pre-dated WW2 and actually later grew larger with the addition of ex Eastern European states which had been formerly part of the Soviet sphere of influence. Western Europe had willy-nilly long since been subordinated to the USA. A while later (1946) the Americans gave the British short shrift reminding them that they would have to adjust to the post-war realities and take the medicine – the American loan, as Michael Hudson explains.

‘’In effect the Sterling Area was to be absorbed into the Dollar Area, which would be extended throughout the world. Britain was to remain in a weak position in which it found itself at the end of WW2, with barely any free monetary reserves and dependent on dollar borrowings to meet its current obligations. The United States would gain access to Britain’s pre-war markets in Latin America, Africa, the Middle East and Far East. This first loan on the post-war agenda – which President Truman announced in forwarding it to Congress would set the course of American and British economic relations for many years to come. Truman was well aware of the change of fortunes for the UK, for the Anglo-American Loan Agreement spelled the end of Britain as a great power.’’(1)

Sometime later and under the changed geopolitical and economic conditions President Richard Nixon and his economist acolytes placed their chief diplomat, Henry Kissinger, in charge of arrangements to put in place a policy to keep the Europeans subordinate and while they were at it to simultaneously endeavor to put a limit on Japanese expansion.

Then came the big game-changer: Gold was officially delinked from the US$ in August 1971. Nixon’s currency reforms – were designed among various other decisions and also generally aimed at European and Japanese interests. It should be noted that Japan did not play any political role at all but simply followed in America’s wake, as she invariably did in economic and even political matters since.

This unilateral decision by the Americans to deprive paper money from convertibility into gold was enough to tip the Europeans into disorder and turbulence. For all their protestations of loyalty in Europe, the leaders of each country feverishly groped for an outcome that answered their own interests. However still licking their wounds, and for all their weakness, the Europeans still constituted a new and serious – although declining – rival for God’s own People, American capitalism-imperialism, which says a lot about how far the former had slid down the slippery-slope.

Nixon conferred the job of curbing his ‘partners’ newly aroused appetites and steering them towards their own backyard to his man (and enforcer) Henry Kissinger. Kissinger was to read the riot act and inform these uppity Euro-elites that it was the US which was taking centre stage whilst the Europeans were just the supporting artists. Kissinger didn’t mince words with his global minions.

‘’The US has global interests and global responsibilities ‘’ the enforcer-strategist declared, ‘’Our allies have regional interests’’. Having thus put the Europeans in their place, Kissinger acknowledged that the US interests diverged ‘’with the new weight and strength of our allies …’’ But he firmly advised these allies: ‘’ That the gradual accumulation of sometimes petty, sometimes major economic disputes must be ended … A new equilibrium must be achieved in trade and monetary relations.’ Then he called upon the leaders of both Europe and Japan to subordinate their economic interests to these political considerations, organized and directed, of course, by the USA. Under the pressure of these scarcely veiled American threats, the Europeans were meant not just to bury the hatchet over a potential trade-war, but were in addition, and above all, expected to share the ballooning costs of global hegemony.’’ (2) In the popular vernacular of the time, Kissinger ‘socked it’ to the Europeans.

Suffice it to say the Europeans and, a fortiori, both the Japanese and South Koreans had since become thoroughly Americanized and house-trained. Most pathetically in the case of Japan’s geographical position which successfully made it into a long-term prisoner of the United States. The success of Japan’s industrial development and export drive so impressive at the time of comparison with competition with Europe and the United States, did not in any way guarantee that it would move into a hegemonic position. Investment in Japan’s trade surplus in the US always struck the reader as being rather overvalued and in a somewhat geopolitical weak position. Japan, economic giant, political pigmy.

Certainly, the East Asian producers and to a lesser degree the EU are still in a position of American dominance, both politically and strategically, to the United States. And most everyone knows this. In point of fact:

‘’The US economy lives like a parasite on its ‘partners’ in the global system, with virtually no national savings of its own. The World produces whilst North America consumes. The advantage of the United States is that of a predator whose deficit is covered by what others agree or are forced to contribute. Washington uses various means to make up for its deficiencies: for example, repeated violations of the principles of liberalism, arms exports, and the hunting down of oil super-profits (which involves the periodic felling of the producers: one of the real motives of the real war in Central Asia and Iraq). But the fact is that the bulk of the American deficit is covered by capital inputs from Europe and Japan, (and even) China and the global South including rich oil-producing countries and comprador classes from all regions, including the poorest, in the Third World – to which should be added the debt-service levy that is imposed on nearly every country in the periphery of the global system. The American super-power depends from day to day on the flow of capital which sustains the parasitism of its economy and society. The vulnerability of the US therefore represents a serious danger to the American project. (3)

It should be understood that the American possession of the US$ can enable them to simply finance their imports by issuing US paper dollars, or US Treasuries – not gold. That job goes to the man at the gold window of the Fed, who will simply give you more ‘paper assets’ -Treasuries and dollar bills – when you trade in your surplus dollars or gold. A neat trick, and very successful. This ‘exorbitant privilege’ as was articulated by the French politician Valery Giscard D’Estaing was a rent-free arrangement between the US and its ‘allies’ (sic).

This ‘long century’ has been a period of a long-term geo-political dominance by the Atlanticist bloc led by the United States and its global institutions – the International Monetary Fund (IMF) and World Bank (WB) which has been a fait accompli. These two institutions were initially set up during the Bretton Woods Conference in 1944, principally by the US but with the UK in tow. These two world economic pillars were to serve as vehicles to open up trade and financial markets to US exporters, and to enable US investors to buy control of natural resources and industry. This set the rules for Europe and other regions to subsequently join these two institutions, leaving no practical alternative means of organizing world trade and investment. The World Bank’s policies included opposing land reform and organizing loans mainly to create infrastructure linked largely to exports, not to create self-sufficiency. The aim was to lock in foreign dependency on US farm exports and other essentials.

The role of the IMF has been to all intents and purposes a financial vehicle – which due to its organizational structure and an inbuilt voting system which guarantees a majority on every occasion – has been a stranglehold of voting power over its allies and also is able to withhold credits from recalcitrant countries. Dollar credit is used as a lever to indebt foreign countries and force them to adopt ‘’free market’’ deregulation and tax policies which serve US interests.

‘’The broadest step in this strategy of underdevelopment is to use IMF pressure to turn public infrastructure into privatized monopolies by forcing their sell-off to raise money to settle trade and balance of payments deficits. (4) This was broadly in step with the classical phase of imperialism (1800-1950) based upon the division between industrialized cores and non-industrialized peripheries and a related tendency to reduce the latter to a colonial or semi-colonial status, and (5) the post-war phase (1950-1980) involved the victory of national liberation movements – China, Vietnam – in south east Asia and the middle-east – still ongoing – enabled the peripheries to impose a revision of the old asymmetrical terms of the global system and to enter into the industrial age. This period of negotiated globalization was exceptional, and it is interesting to note that the world then experienced growth that was the strongest known in history as well as the least uneven in terms of the distribution of what was produced and distributed

But whisper it softly there has occurred a slow geopolitical burn which is now not easily snuffed out and which goes from strength to strength. This emerging bloc of independent Eurasian states led in the main by Russia and China and organized in the BRICS (Brazil-Russia-China-India-SouthAfrica) and Shanghai Corporation Organization (SCO) represent an alternative system to the glaring global level of inequality and stands out like a beacon of light against the parasitism and orthodoxies of laissez-faire extractive capitalism/imperialism.

In more general terms Michael Hudson lays out a precis of a choice between the two alternatives. As follows:

‘’Finance capitalism is de-industrializing the US economy and that of its allied NATO satellites. The Destiny of Civilization explains that the resulting international diplomacy is not a competition for markets (as the Western Economies are already deindustrializing as a byproduct of financialization and capital’s war against wage labour), nor a conflict between democratic freedom and authoritarianism, but rather a conflict of economic systems juxtaposing the rentier economics of debt-deflation and austerity to socialist state-subsidized growth protecting the 99% by keeping the 1% in check.’’ (6)

APPENDIX

I would go further into the work of Freidrich Engels in his description of ‘Condition of the Working Class in England 1844’. Where he writes his journey particularly in Manchester in the north of England as well as other cities.

‘’A horde of ragged women and children swarm about here, as filthy as the swine, they thrive upon the garbage heaps and in the puddles. In short, the whole rookery (slum housing) furnishes such a hateful and repulsive spectacle as can hardly be equaled in the worst court of the Irk. The sub-human race that lives in these ruinous cottages, behind broken windows, mended with oilskin, sprung doors, and rotten door posts, or in the dark, wet, cellars, in measureless filth and stench, in this atmosphere penned in as if with a purpose, this race must have nearly reached the lowest stage of humanity … But what must one think when he hears in at each of these pens, containing at most 2 rooms, a garret and perhaps a cellar, where on the average twenty human beings live; that in the whole region for which 120 persons one usually inaccessible privy (toilet); and that in spite of all the preaching’s of the physicians, and also in spite of the wretched conditions into which the cholera epidemic which plunged the sanitary police …

Engels goes on and on until it becomes virtually impossible and painful to read further. Yet this is the condition of those poor wretches in today’s third world who live among the conditions in Bangladesh or the Cameroons or Bolivia or Liberia, or Senegal! Or wherever. The World has a long way to go.

(1) Super-Imperialism – Michael Hudson – Quoted in Gardner Ibid. p.208

(2) The text of Kissinger’s speech on US relations in Europe was published in the New York Times – 24/04/1973

(3) Beyond US Hegemony – 2006 – Samir Amin – p.12

(4) The Destiny of Civilization 2022– Michael Hudson – p.53

(5) Ibid. – Samir Amin 2006 – p.12

(6) The Destiny of Civilization – Michael Hudson – p.283.

The Real Progressive interview of Michael Hudson (with transcript!)

November 08, 2022

RP Live with Michael Hudson: The Destiny of Civilization

Real Progressive webinar Sept 2022

Intro

[00:00:06] Luke Parcher: All right. For those who might not know me, I’m Luke Parcher, I’m a student and activist. I volunteer with Real Progressives. I’m on our leadership team and I also do a show on Sundays covering politics and current events, and I do some interviews throughout the week and things which you guys can find on Real Progress in Action.

I want to quickly talk about Real Progressives. If you’re interested in learning more about us, you can go to realprogressives.org. We have articles, content, podcasts, all sorts of things. And if you’re interested in helping us out, we are a nonprofit. You can go to realprogressives.org/donate. I also want to plug our founder and CEO, Steve Grumbine’s shows. He does the Rogue Scholar on YouTube on Real Progress in Action. He also does the Macro N Cheese podcast, where you can find our guest today, Michael Hudson, as one of many fantastic guests on that podcast.

So without further ado, I’d like to introduce our guest today. Michael is an economist, a professor of economics at the University of Missouri, Kansas City. He’s also a researcher at the Levy Institute at Bard College. He’s a former Wall Street analyst, political consultant, and commentator and author. Michael, thank you so much for taking the time.

[00:01:06] Michael Hudson: Well, thanks for inviting me.

Question | Luke Parcher

[00:01:08] Luke Parcher: I wanted to kick things off for the first question. The title of your book is The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism.

Can you just explain how you came to such an all-encompassing title?

[00:01:20] Michael Hudson: Well, the world economy is now fracturing between two parts, the United States and Europe is the dollarized part. And this Western neoliberal unit is driving Eurasia and most of the Global South into a separate group. The conflict really is between finance capitalism in the United States and Europe against other countries – China, Russia, Iran, India – that are following the more traditional ethic and strategy of industrial capitalism.

The question is: how are countries going to be economically planned? Because every economy is planned by somebody. In the United States, the central planning has been taken out of the hands of government and put in Wall Street. In the City of London. A very rightwing philosophy. In other countries, there is a mixed economy – China and the rest of Eurasia – and their objective of planning and money creation and credit is to create industrial capital to create the means of production.

Obviously, also environmental cleanup now, not merely the means of production but an overall economic system, not simply to make fictitious capital, finance capital, without any reference to the industrial capital base, the earning of labor and industry together.

So there are two economic philosophies and I began the book by contrasting the dynamics of industrial capitalism with finance capitalism. And industrial capitalism in the United States, Germany, England, and every country where it took off, was to promote a public investment in basic infrastructure monopolies in transportation, communication, education, healthcare.

The idea is that if the government would provide these basic services and basic human rights at subsidized rates – or freely, as in the case of education and healthcare – then employers would not have to pay labor a high enough basic wage to make labor pay for healthcare – as in the United States where 18% of GDP is for healthcare – or to pay for education, the 1.7 trillion that goes for student debt in the United States, not mentioning the education that is not debt-financed.

Finance capitalism basically sought to break away all of the public infrastructure. Most financial fortunes and financial fortunes in history were made just in the way that Zola had described, by prying thefts from the public domain.

But the financial capitalism doesn’t say… You don’t have to steal it; you actually make it your policy, giving away the financial domain in the way that President Yeltsin gave away all of Russia’s natural resources, public utilities, electric companies, anything that yields an economic rent that can be just easy income without any investment. And you financialize it.

You’ve had, for the last – really since the 1980s, but even since World War 1 – this movement to prevent industrial economies from being low cost. But the objective of finance capitalism, contrary to what’s taught in the textbooks, is to make economies high cost, to raise the cost every year.

That actually is the explicit policy of the Federal Reserve in the United States. Turn over the central planning to the banking system to essentially inflate the price of housing, with government guaranteed mortgages, up to the point where buying a home is federally guaranteed up to absorbing 43% of the borrower’s income.

Well, you take that 43%, you take the wage withholding for social security and healthcare, you take the taxes; the domestic market shrinks and shrinks. And the finance capital strategy is exactly what it is in the United States today, in Europe. Shift all of the money away from the profits of industrial capital that are reinvested in making new means of production. To expand capital into a shrinking economy where the financial sector intrudes more and more into the economy of production and consumption and shrinks the economy.

The rest of the book all spells out how this transformation from industrial capitalism to finance capitalism occurred and how the fight between the United States and Russia, China, Iraq, Iran, and India – it’s really a conflict of economic systems. There’s no rivalry because they’re not trying to do the same thing. The objectives of the U.S. and Europe are completely different from the economic objectives of Eurasia. It’s a war of economic systems. And that’s why the United States is trying to prevent other countries from following the same path to industrial prosperity that made the United States, Germany and other countries originally rich.

So you have on the one hand a high productivity, high standard of living economy that used to be in the West and is now in Eurasia, as opposed to an economy of austerity planned by the IMF and central banks, as you’re finding in Europe.

Question | Virginia Cotts

[00:06:38] Luke Parcher: Fantastic. Thank you for that. First here we have Virginia Cotts, one of the people helping us backstage, has a question – if Virginia wants to come on screen and ask.

[00:06:47] Virginia Cotts: Michael, I’m not an economist. Can you explain debt deflation – but also how debt siphons money away from the real economy.

I once heard you say that the finance sector is the overhead of the real economy. I think these questions are related? If you could explain that.

[00:07:09] Michael Hudson: Well, the classic discussion of debt deflation was in Volume 3 of Capital, by Marx. And Marx said that debts tend to grow by compound interest.

He gave a citation of everybody from Martin Luther onwards about how any interest rate is a doubling time, it doubles in a given number of years. And it grows exponentially in an up-curve, like X equals Y squared. But the economy grows in the shape of an S-curve; it tapers off.

And one of the reasons that it tapers off in the business cycle is that as the cycle gains momentum, people go further and further into debt. And if you have to pay debt to a banker, if you have to pay student loans, if you have to pay credit card debt, if you have to pay mortgages on rising house prices, then the money you pay to the banker is not available to be spent on goods and services.

So as you have the debt ratio growing in every economy, that crowds out the ability to spend your income on goods and services. So right now many graduate students – you graduate from school, you have a student debt, and you have to live at home with your parents because you can’t get a mortgage to buy a house because the banks say, “Well, you’re already paying so much of your income for student debt that you don’t have any money left over to buy a mortgage, so you can’t buy a mortgage.”

Right now, you’re having the debt-ridden American economy being squeezed. More and more money is paid, not only for debt, but also for other overhead, like healthcare and various monopoly services that are not available to buy goods and services.

Debt deflation is when the growth of debt exceeds the rate of growth of the economy. And that’s true of every economy. The most sophisticated mathematical models that I’ve seen were the ones that were taught to every student in Babylon in 1750 BC.

We have the models that they were told. They say, how fast does a debt at the going rate of interest, at 20%, double? Well, it’s five years. How long does it take to redouble? Well, that’s 10 years. How long to quadruple? Well, that’s 15 years. You see how fast it is. They also would have students calculate the growth of a herd of sheep for instance, and it would all taper off. And when Assyriologists began to translate these cuneiform tablets, they thought, well, this must be an actual report of how the herd actually grew.

But then they found out that the Sumerians already in the third millennium had quadratic equations and very sophisticated mathematics. The mathematics that they used 5,000 years ago were far in advance of what the National Bureau of Economic Research uses.

The National Bureau here is officially in charge of explaining when there’s a recession, when there’s a boom, and explaining the business cycle. The basic theory was outlined and traced by Joseph Schumpeter. It’s a sign curve going up and down regularly, up and down. And the whole philosophy of the National Bureau is a right wing anti-government philosophy saying the economy has automatic stabilizers.

It can never get out of balance because the free market is always going to prevent any kind of chronic downturn. If you have a boom, well, prices will rise and that will cut into profits and that’ll slow investment. And that’ll means that wages will fall until it’s more profitable to begin employing labor again. And you’ll have a recovery, and things go on and on and on, like a sign curve, at a given frequency, forever and ever.

Well, what this deliberately leaves out of account, deliberately expurgates, is the fact that every recovery in the United States and every other Western economy since 1945, has occurred with a rising level of debt. And as debt grows each time, each recovery has been slower. And the reason it’s slower is because as the volume of debt rises, this leaves less and less income available to spend on goods and services. And so, the so-called recovery is weaker until finally it grinds to a halt.

Well, Ricardo anticipated something like that in 1817 in his Principles of Political Economy. He said: well, look at what’s going to happen to land rent. If we don’t prevent the landlords from being the planners of the economy, then the more and more population increases, the price of food will rise, the rents to the landlords will rise more and more until the entire economic surplus is paid for rent and there won’t be any opportunities available to industrial employers. And Marx said, well, this was the Armageddon of capitalism.

In Ricardo’s day, people didn’t borrow to buy housing. It was still hereditary landlords. If your ancestors conquered England and killed enough Englishmen to become aristocrats, you’d inherit it and you didn’t have to borrow. But now that real estate has been democratized in the United States, England and Europe, you have to go into debt in order to buy a house.

And the largest amount of debt in every economy is for real estate, which accounts for 80% of bank loans in the United States and England. Essentially, if you want to buy a house you go to a bank they’ll calculate — well, here’s the rental value of that house. The winner, if you’re trying to bid for a house or an apartment against somebody else, the winner is the buyer who promises to pay the most for the property by taking out a bank loan that absorbs most of the rent as interest. So today, the rent that Ricardo said was going to drive industrial capitalism to a halt, is turned into interest. So it’s the rise in interest that is the Armageddon of industrial capitalism driving the economy to a halt.

I chart most of these in my book Killing the Host, where I give a history of compound interest. But basically the Western economies are all subject to debt deflation today.

And that’s why they’re shrinking. And living standards here are not rising and the economy is not growing, in contrast to China, Russia, Iran, India, and the other countries that don’t have this kind of financial sector doing their planning.

Question | Luke Parcher

[00:13:47] Luke Parcher: I was hoping you could expand on a point you actually mentioned just before we went live, distinguishing between different kinds of debt and which kinds of debt are parasitic and need to be rid of and which ones do not. Can you just quickly distinguish between different types of debt?

[00:14:00] Michael Hudson: Well, in textbooks that students read, corporations will borrow from a bank and they will use this borrowing to build a factory, and to buy machinery, and to produce something.

And the profits will be paid – shared 50/50 or so – with the creditor. So a productive debt is debt which, actually, enables the creditor to repay the loan with the interest and still keep something for himself. Banks don’t lend money to build factories. The stock market does that. The money the banks lend is unproductive debt.

Unproductive debt is when the debt doesn’t enable you to earn more money to pay the creditor. In an unproductive debt, you have to earn the money elsewhere and take money that you may earn as wages or profits and pay the bank. And it’s your loss. It’s a zero sum game, not a positive sum game.

Now this distinction between productive and unproductive debt was built into Sumerian and Babylonian laws. Only unproductive debts were canceled under the Jubilee year the rulers announced. Their word was, andurarum and, the Hebrew, cognate was deror and that was the word used for the Jubilee year.

It meant the rural debts – that when there was a crop failure, and the borrower could not pay the advance of the land rent and the other means of production. Obviously, if the borrower couldn’t repay because there was a crop failure, or a drought, or a disease, or a flood, then the debts were wiped out because that debt did not enable anyone to repay.

And if you didn’t cancel the debt, then the poor cultivator would be forced into a debt bondage to the creditor. And if he did that, then his labor would belong to the creditor and he couldn’t serve in the army. He couldn’t go to work on building public infrastructure. The business debts were all left in place. Debt denominated in silver were left in place and not canceled. The debts denominated in grain were canceled.

Well, in the 12th and 13th century, crusades flooded Europe with money. The Christian Church saw that commerce was reviving. You needed credit. The church theorists said, okay, there’s a productive debt. You’ll make loans to a merchant to trade. He’ll have the money to repay you, that’s productive. But, a debt to a consumer who can’t, is usury. And so ancient languages had no words to distinguish interest from usury.

But the churchmen said, okay, usury is unproductive debt. Interest is a productive debt. Those two words, those were the original meanings of the distinction between interest and usury. That’s been eradicated today when everything is considered productive and part of the free market. And, if it makes the billionaire class rich, it’s productive. That’s basically the thing today.

And the only debts that are supposed to be canceled are debts that the financial sector owns. The banks don’t have to pay the billionaires. Only people with less than a billion dollars have to pay debt. The poorer you are, the more debt you have to pay. They’ve reversed the whole last thousand years of Christian morality as the church has become privatized and financialized.

Question | L Lewis

[00:17:21] Luke Parcher: Fantastic. We have a question here in the chat. This is from L Lewis. It says China has opted for industrialization and the U.S. corporate class clearly has not. Why is the U.S. so belligerent if it doesn’t even want an industrial system?

[00:17:35] Michael Hudson: Because it doesn’t want any other country to have an industrial system. Just like the West fought against communism threatening a new social system after the 1917 revolution, America’s terrified that if China can succeed by following the exact same policy that the United States got rich on in the late 19th century, then they might try to make America rich. And, oh my God, if they do that then there’s no more free lunch for the billionaires.

This is life and death for the billionaires. They make their money by exploiting the economy without producing. The Chinese billionaires make their money by producing and exploiting the economy. But they also produce a lot. And then they have to give up much of what they exploit. So the United States doesn’t want there to be any success in any country achieving prosperity in a way that doesn’t siphon off all of the income to the 1%.

Question | Andy Kennedy

[00:18:28] Luke Parcher: And we have a question here from Andy Kennedy.

[00:18:32] Andy Kennedy: Michael, I believe that you coined the phrase monetary hegemony. I believe it was in Super Imperialism, a book that you wrote a while back. But I think that’s something that a lot of people really have a hard time grasping what that even means. Can you talk a little bit about how the U.S. dollar hegemony has been a large part of why the U.S. became de-industrialized.

[00:19:01] Michael Hudson: Well, that is what my book, Super Imperialism, was all about, that I published in 1972. Dollar hegemony really began in 1972. Hegemony is a word that I can never really work into conversation very easily. It was actually Henry Liu that emphasized that term. He’s a friend of mine and we were colleagues for many years. The dollar hegemony means the United States can issue dollar bonds, IOUs, and it never has to repay them. If we run a balance of payments deficit in the United States, the dollars end up in the foreign central banks. Most of the U.S. balance of payments deficits since the Korean war have been for military spending.

While America is spending money on creating military bases all over the world, these countries will end up with the dollars that we spend to build the bases and buy off client oligarchies. And these dollars are turned over to the local central bank for domestic currency. And the central bank is going to say, “What do we do with the dollars?” Well, they will tend to hold the dollars in the form of buying a U.S. Treasury bond because central banks aren’t supposed to take risks.

So they will essentially buy the Treasury bonds and the United States has no intention of ever paying the Treasury bonds. How is it going to pay? It was paying in gold until 1971. So when the United States would spend money in Vietnam, the dollars that were spent in Southeast Asia, in Japan, in other countries, would be sent from Vietnam to their head office in Paris.

And General de Gaulle would say, “Well, here are these dollars. Now give us gold.” And the U.S. gold stock was going down and down and down. The American strategists worried that this was going to really hurt the country’s ability to dominate the world. So when they went off gold in 1971, everybody thought that this was going to end American financial leadership.

Instead, it was a great increase. It created dollar hegemony because there was nothing for foreign central banks to hold their reserves in except U.S. Treasury bills, Treasury bonds. In other words, Treasury IOUs. So the more money that America would spend abroad in a balance of payments deficit, this money would end up being recycled to the United States in the form of Treasury securities. And so it was actually the balance of payments deficit by military spending that helped finance the U.S. domestic budget deficit. Other countries really didn’t have an alternative. And so when the United States took the lead in creating the Eurozone, it made sure that the Eurozone would never make the Euro an alternative currency to the U.S. dollar because it limited the Eurozone’s ability to run a budget deficit to just 3% of GDP.

Well, what that means is that when Europe goes into a recession and needs to increase government spending like the United States does when it’s in a recession, or like the United States is doing today, running a budget deficit way in excess of 3% of the GDP, Europe is not. So there are not enough Euro bonds by the central bank to ever become a rival for the United States dollar.

Well, all of this is now being changed by Russia and China that they have discussed for the last few years. “In order to stop U.S. hegemony, we have to avoid financing our own military encirclement by lending to the U.S. Treasury that turns it over to the military industrial complex and Pentagon to build bases here.So we’re going to have an alternative to the U.S. dollar.”

Well, they were talking about it – Russia, China, other countries – really for five years. And amazingly enough, the end of dollar hegemony occurred last year when the United States itself said if any country pursues a policy that we don’t like, we can grab all of the dollar reserves that they hold in the United States.

We can grab all of the Treasury bonds they hold. We can just take them. All the bank deposits they have, we can grab. They grabbed that of Venezuela first. They grabbed that of Iran. They grabbed that of Afghanistan. And then they grabbed the $300 billion of Russia. So now the United States has told any country, if you do anything that we don’t like, if you do not let our companies buy control of your economy, or if you try to sue one of our oil companies that pollutes your land, we will grab all of your money and you’ll be isolated.

Well, this ends other countries’ ability to finance the American empire anymore. Other countries are terrified now. If they’re all saying “Let’s not denominate our trade in dollars. Let’s not use the dollars. Let’s use each other’s currencies. We will finance other governments’ treasuries.”

And these treasuries that they’re financing – between China, Russia, Iran, India, and their neighboring countries – are loans to help their treasuries build infrastructure and internal improvements to actually increase the economy growing. Well, the United States itself has brought this about by all the sanctions that it’s imposing. It’s an example of the self-defeating character of the U.S. strategists.

Fortunately, none of them understand how an economy actually works anymore than they understand how military strategy really works. So we’re having armchair amateurs essentially ending a whole system that was giving America a free lunch for the last 50 years.

Question | Jordan S

[00:24:54] Luke Parcher: So we have one here in the chat from Jordan Soreff. He asks, how do you see the interaction between major shareholders of large financial institutions and major shareholders of industrial enterprises? Do you see a lot of common ownership between these kinds of institutions? And if so, wouldn’t they collaborate in order to avoid starving industrial enterprises of access to credit and guarantee some basic form of growth, not only for financial institutions, but also for industrial enterprises.

[00:25:20] Michael Hudson: Not at all. They’re collaborating in destroying the industrial sector. They collaborate in turning industrial corporations into financial firms. and when you turn the management of a corporation away from the engineers and turn it over to the chief financial officer, the chief financial officer says, “Our job is not to increase our industrial production. Our job is to increase the stock’s price. And we can maximize the stock’s price by, instead of spending on research and development that’ll take years to pay off, we can spend our income on buying the shares.”

92% of the profits of the Fortune 500 are spent on share buybacks and dividend payouts, not on new investment. Once you financialize an industrial corporation, you’re trying to make money by financial engineering, not industrial engineering. And you do this by essentially using your income to buy up the share price. This is short term – and finance lives in the short term. The reason finance has no interest in building up industrial power is that that takes years and years to actually plan a factory, plan the production. You have to develop a whole marketing system.

How are we going to sell the product once we produce it? How are we going to distribute it? It takes a lot of planning. It’s beyond the ability of the financiers. You don’t need brains to be a financier. All you need is greed. And you really don’t need a business school. All you need is greed.

And greed is short term. I want it now. Greed is not long term planning. And so, you have a completely different mentality of a financial corporate leader, as opposed to an industrial leader. Someone like, let’s say, Henry Ford, or like the old type of industrial leaders that would try to increase the overall profits to expand production more and more. Today the objective is to shrink production more and more.

Question | Jonathan Kadmon

[00:27:18] Luke Parcher: And we have a question here from Jonathan.

[00:27:21] Jonathan Kadmon: There’s a concept you mentioned in the book that’s also very near and dear to my heart. The commodification of essential goods and services, and extortionist incentives that come when you…

[00:27:32] Michael Hudson: Is that the title of a book?

[00:27:33] Jonathan Kadmon: No, it’s definitely a theme you touch on a bunch of times in your book.

[00:27:37] Michael Hudson: Oh, okay.

[00:27:37] Jonathan Kadmon: And I was hoping you could talk a little bit about how the hostage situation created by commodifying things like housing, healthcare, food, transportation, fuel, things like that – that people need rather than want – is used to extract rents and siphon wealth out of the productive economy to service the wealth demand of the FIRE sector [Finance, Insurance, Real Estate]

[00:28:00] Michael Hudson: Well, the free trade ideology that backs monopolies says that all markets are a function of choice. But the way to control a market is not to give the consumers a choice. And when you say hostage, what that means is people don’t have a choice between whether to eat or to pay a bank.

If they have to buy food or if they have to buy medical care, they have to pay whatever the going price is. Anatole France said that the rich person was as free as the poor person to sleep under the bridge when he didn’t have a house. So the objective of rent seeking is to essentially create a situation where people have no alternative but to buy the service or the good that you’re producing.

If they have no alternative, then you can charge whatever you want. This is the case with most public infrastructure. If you want to mail a letter, you have to pay whatever the going postage is, or whatever parcel service costs. Well, this is why, for about a thousand years leading up to the late 20th century, all governments kept basic services in the public domain – the post office, education, healthcare. You don’t want to privatize them and leave them to the market because if you leave them to the market, then it really isn’t a matter of choice at all.

It’s a matter of letting a monopolist take something that everybody needs, no matter what the price, and charge as much as the market will bear. And that’s a rent-seeking monopoly. That basically is the philosophy that Margaret Thatcher, Ronald Reagan, and the free marketers developed since the 1980s, when you had a privatization of basic needs, especially in housing. And the most important utility that’s been privatized of course has been money and credit creation – the banking system. What has enabled China to avoid the financialization that’s occurred in the United States is because the Central Bank of China is run by the government, not by a financial oligarchy of bankers that get together to run the credit system for their own benefit. But if the government treats money as a public utility, everybody needs money, everybody needs credit, and the government will provide the credit as needed for the economy to grow.

And if the economy has a slowdown, or if a company runs into a financial problem, if you’re the government as a creditor, you can write down the debt. In the United States, if you’ve made loans to a company like General Electric and all of a sudden it can’t pay, the company either goes bankrupt or begins to sell off its assets piece by piece to other people and you have industry being turned into gentrified luxury housing.

So the same thing with healthcare. If you privatize healthcare, everybody needs to go to the hospital. Everybody needs doctor care. If you privatize it then in the United States, 18% of your GDP is going to go to healthcare. The objective is to make healthcare as inefficient and cheap as possible to maximize the profits of the health insurance companies. And the sicker you get, the more money they make.

Also, by the way, the sicker you get, the more GDP goes up. GDP goes up because you have to spend more money healing yourself. So, that’s, a growing part of the American GDP – along with rent and debt service and interest. Well, if you keep healthcare in the public sector, the public sector is going to try to actually keep people healthy instead of sick. And they’re trying to minimize the expense of getting sick so that you leave more money in the hands of households to spend on the real economy of production and consumption, not on giving money to the monopolies.

But in the United States the main utility beside money that’s been privatized is government. Under the Citizens United ruling, the government is now really up for sale and auctioned off to the highest campaign contributors. In the Democratic Party, for instance, every Democratic representative has to raise a given amount of money from campaign contributors to give to the Democrat National Committee.

So whoever can raise the most money gets to be the committee heads. Well, you’ll have the pharmaceuticals industry giving a lot of money to some representative they want to be head of the health committee. You’ll have the bankers giving money to whoever they want to be the head of the banking committee and so on. So, the function of government itself once it’s privatized is to make money for the donor class, which basically is the financial class and the monopoly class that finance creates. Banks have always been the mother of monopolies and the financial sector’s largest business market is in creating monopolies. So, you have basically the privatization of monopolies.

And the monopoly rent of these monopolies is used for paying interest to the banks that finance the corporate raiders, or whoever wants to take over and buy these monopoly privileges.

Question | Luke Parcher

[00:33:14] Luke Parcher: We have a question here from Paul Birtwell. Paul, go ahead.

[00:33:18] Paul B: Hi, Dr. Hudson. Could you briefly touch on the concept of economic rent and unearned income as well as how the establishment became established by conquering Europe, privatizing the commons all the way up through colonialism, and how they use all these little privileges through copyrights, patents, formula, and it’s not really through effort or innovation, but it’s through rake off.

I remember you in an interview, I’m paraphrasing, saying something like: For the crime of being conquered, the 99% and all of the descendants are obligated to take care of the 1% and all of their descendants into perpetuity.

But it would be great if you could touch on those historical elements because most folks think, “Hey, these folks that are really rich are smarter, they worked harder.” And as we know, it’s not based on effort or individual contribution but rather just milking society.

[00:34:16] Michael Hudson: Well, it’s very hard to answer that question very briefly in a question and answer. I’ve written two chapters of the Destiny of Civilization describing exactly what you’ve asked: economic rent. All classical economics – from Adam Smith through Ricardo, John Stuart Mill, Marx, Alfred Marshall – was all about value and price theory in order to segregate how much of the price is not reflected by a real cost of production. Economic rent is unnecessary income.

Economic rent is what you’re able to charge more than just the cost of producing goods and service with a profit. It’s “What is a free lunch?” And the free marketers say, “There’s no such thing as a free lunch.” That’s what Milton Friedman said. But a rentier economy is all about a free lunch. The concept of economic rent in the 19th century was aimed at landlords because they inherited the land. The land does not have a cost of production. And yet, if you have an ownership right to the land, a privilege of legal ownership of the land, you have a legal boundary and you can charge rent without any effort of your own.

John Stuart Mill said economic rent is what landlords make in their sleep. They don’t have to make a productive effort. Well, actually a theory of rent went way back to the churchmen in the 13th century describing what is a fair return to bankers. The economy needs credit, all economies work on credit, traders need credit. They need the money exchange from one currency to another. The value of banking services is the cost of living, the cost of doing business, the cost to have a certain lifestyle that’s becoming of a banker.

But everything that’s over and above normal living prosperity and costs is called usury. That’s not a valid cost. And so that was deemed illegal already in the 13th century. Well, Ricardo in the 19th century used the landlords as the main rent recipients of the hereditary landed aristocracy. Rent is what a landlord would get just for the ownership privilege of having a land. And so if you go out and buy a house today and the price of land goes up because the city will increase bus service or a transportation service. For instance, in New York City, a few years ago, they extended and built the Second Avenue subway that went uptown, along Second Avenue. Real estate prices all soared for real estate on Second Avenue. That was a free lunch.

The landlords didn’t do anything at all to increase the real estate rents that they were charging. Rents went way up. If you lived on Second Avenue or First Avenue, even Third Avenue, you had to pay much higher rent because you no longer had to walk half a mile to get to the Lexington subway that was very overcrowded. You could have the nice uncrowded, Second Avenue subway.

And yet, this rent increased not by the expenditure of any cost. It was rent without value. It was the price of housing without cost value. So rent is the unnecessary element of price over and above what it actually costs to produce something. And rentier income is the income that is unnecessary.

To actually pay a industrialist for building a factory… industrialists would be happy with making the normal rate of profit. But if you have a special technology monopoly like the drug companies, then you can make super-profits. So rents are super-profits, basically. That’s the difference. Anyway, that’s to your question.

Question | Roxanne D

[00:37:58] Luke Parcher: Right on. We have, a question here from Roxanne Devereaux. She says, if you’ve answered this, maybe just elaborate on your answer, but in a perfect world where government actually served the people, what would a debt jubilee look like and how could it reverberate through society?

Most examples I’m familiar with happened before the industrial revolution.

[00:38:14] Michael Hudson: Well, the best example is the German financial miracle of 1947, 1948, the allied monetary reform. All internal debts were canceled except for people’s bank accounts up to a given amount and except for the money that employers owed their employees.

And the reason is that most of the wealth, most of the bank deposits, most of the creditors’ claims, were by the Nazis. And the American occupation said, well, we don’t want the Nazis to get rich. So the good thing about canceling debts is you cancel the savings of bad guys. In 1947 it was the Nazis; today it’s the 1%.

If you cancel the debts that I’ve said should be canceled – the sort of bad debts that are not necessarily production – then you cancel all of this vast accumulation of savings by the 1%. For instance, if you cancel student debts, that would free income for spending on democracy.

If you cancel all the debts that US banks owe to the offshore banking centers in the Caribbean, Panama, Liberia. All of this is flight capital. This is criminal capital. Cancel out all the debt of criminal capital and fraud. When Greece was running into its financial crisis seven years ago, Greece owed 50 billion euros of debt that it was trying to write down.

And the IMF produced a list called the Lagarde List that had deposits of Greek crooks and tax evaders in Switzerland were $50 billion. That 50 billion could have been wiped out. One of the first debt cancellations that went wrong was in Sparta in the third century, BC, under Agis and Cleomenes. When they canceled the debts, the people who wanted to cancel the debts were people who’d bought land on credit and they wanted their debt.

They wanted to own the land free and clear and cancel the mortgages. So some debts you don’t want to write down. If you were to write down mortgage debts, Donald Trump and real estate speculators would be the richest people in the country. So you don’t want to write down their debts.

Their debts will remain on the books. But if they were written down, well, first of all then, their debts are the banking systems assets. So Citibank would be even more insolvent than it is already and the banks would go under. They would be taken over by the public sector because if you have the mortgage debt wiped out, there’s still economic rent. Because people are willing to pay more money for a well-situated property that would, uh, in place of the banks getting the rental value as mortgage debt, the government would get the same rental value in the form of a land tax. That was what classical economics was all about. That was Adam Smith. That was John Stuart Mill. That was the whole reform movement of the late 19th century. So you want to cancel the bad debts, but you don’t want to make debtors who are just speculators rich in the process.

You want to make sure that you only cancel the bad debts and you don’t create a new rentier class. The idea is to look at the economy as a system and see what should the government receive as economic rent. And it can decide what is it going to receive for healthcare. The government… if the government took over the healthcare industry, it probably would not charge the prices that healthcare charges today. It would charge less. Same thing for housing. If housing were run like England ran its council housing before Margaret Thatcher, it would be very low. In Germany, Germany pays only 10% of its average family income for rent, not 30 or 40% as in the case of the United States.

That’s what used to make Germany, until last month, so competitive an economy. So, you’d restructure the economy so that it would only have debts that were socially necessary to keep the economy operating. Debts will begin to grow all over again.

Debts will always begin to grow over and over again. If you don’t ban interest, you permit debts to grow, but when they get so problematic that they threaten economic growth, then you have to write them down to a level where they will no longer prevent economic growth from occurring as they’re doing today.

Question | Doug G

[00:42:45] Luke Parcher: So we have one from Doug Greer here. He says many people seem to confuse the lessons of MMT with the super imperialism of the US dollar being the reserve currency of the world. Is the ability to create dollars to finance domestic needs of the US, like healthcare and infrastructure, dependent on the US dollar being the reserve currency?

Can you clarify?

[00:43:05] Michael Hudson: They’re completely separate. Any country can use its credit creation, either by the central bank or by commercial banks, to create credit. It doesn’t have to be linked to the balance of payments, except that if a country’s running a balance of payments deficit its currency will fall, unless it can balance the payments somehow.

So they are different questions.

Question | Fabiano D

[00:43:30] Luke Parcher: We have one from Fabiano D. Being that politicians, therefore government, are in the pockets of the rentier class, how do you think we could get rid of such rentier influence in order to implement socially oriented policies?

[00:43:43] Michael Hudson: That has never happened without a revolution. That’s the problem. How do you get rid of them? Well, I don’t see any way for the United States to get rid of them. It took a revolution in China. It took a revolution in Russia. That’s the problem right there.

You did have the beginning of a peaceful revolution in England in the 19th century and, leading to a constitutional crisis in 1909 and 1910, when the House of Commons actually passed the land tax and the House of Lords, being the landed aristocracy, canceled it. That caused a crisis.

And the upshot was the House of Lords was never, again, going to be able to negate a revenue act passed by the House of Commons. So that was actually a peaceful resolution of a constitutional crisis. Then World War I came and changed everything. But today I don’t see that kind of a peaceful resolution occurring in the United States.

They’re not going to repeal the Citizens United act, and, from what it looks like to me, the economy is going to get more and more highly squeezed and more polarized between the 1% and the 99%. I would say it’s a class war except finance isn’t really a class because everybody is a creditor as well as a debtor in some sense or another. So it’s really a financial dynamic against the rest of the economy. One of the points that Marx made in Volume 3 of Capital was that finance grows by purely mathematical laws of its own, having no relation to the growth of the economy. It’s an autonomous economic system.

And I think that autonomous economic system is independent of the government here and yet, unless you have a study of economics as an economic system – understanding what’s causing the polarization and the poverty in the United States – you’re not going to be able to have a reform movement to change the system.

The role of economics departments is to dumb down the understanding of the economy. You’re not going to have any kind of a peaceful reform movement here.

Question | Cristina

[00:45:47] Luke Parcher: We have a question here from Cristina who asks, what are the steps we can take to fix the housing crisis? Kind of a broad question, but if you have any policy prescriptions there, that would be great.

[00:45:57] Michael Hudson: There’s very little that individuals can do. The 19th century dealt with this question increasingly. And their solution was if you have a calculation of the land rent, as opposed to what it costs to build a building – we all know that if you build a building the contractor and the builder or developer have to make a profit, but if the government will tax the land rent, then it will not be available to the banks to charge as interest.

So, if you tax the land rent, then the land rent is not going to be capitalized into a bank loan, and housing prices will be kept down to the actual cost of construction plus normal profits. And as housing becomes more desirable, or as the economy becomes more profitable, or as cities build more Second Avenue subways and the rental value goes up, the taxes will go up. That will prevent this increased rent from taking a financial form and will simply be the source of a government revenue. It requires a tax system to tax away the economic rent, so that housing does not reflect the speculation and the economic rent that is caused by the privatization that’s been occurring. Especially since 2008.

Question | Tim

[00:47:11] Luke Parcher: So this one is from Tim. Tim says one argument against de-dollarization is the liquidity and stability of the US dollar. For example, oil is based in dollars and many OPEC countries have their currencies pegged to the dollar, such that they benefit from a strong dollar. At this age, the transition into trade in local currency pairs against these advantages of dollar as reserve currency.

[00:47:32] Michael Hudson: Well, that’s exactly what this last weekend’s Shanghai cooperation meetings were all about. Any country that holds its central bank reserves in dollars has a stake and in wanting to lose the money. China has the largest dollar holdings of any government and its currency has gone down and down and down.

China’s willing to take a loss on this by moving out of the dollars. The solution is, as both President Xi and President Putin pointed out, we’re going to move out of the dollar so we don’t have a stake in the dollar. It can go up or down. It is not going to bother us. They’re not buying or selling to us anymore.

Anyway, they’re sanctioning us. So let’s go with what president Biden wants. He says, you go your way, we’ll go our way. Fine. Let’s go our own ways and use each other’s currency, and that way, it won’t matter. So, it won’t matter to them. If moving out of the dollar means that there’s less demand for the dollars and it goes down, what they’re gaining is freedom.

So, this is the price of their economic liberty from dollar diplomacy.

[00:48:34] Luke Parcher: We have another question here from Virginia Cotts.

Question | Virginia Cotts

[00:48:36] Virginia Cotts: Michael, I feel like we have… some people have a lot of nostalgia for the post World War II social democracies of Europe. I can’t remember if it was in your book or in an interview you described Thatcher’s process of privatizing in England. Could you talk about that? Because I didn’t know a lot of that.

[00:49:00] Michael Hudson: Well, Margaret Thatcher said that her greatest contribution was Tony Blair. And Tony Blair was an opportunist who got enough support from the United States to move the British Labour party to the right of the Conservative Party and do what Margaret Thatcher never could have done. By even privatizing the railroads, by being more viciously anti-labor, the social democratic parties in every country have been so pushed by what the CIA called “the mighty Wurlitzer of public opinion” – meaning bribes to the politicians – that they’ve financed the campaigns of neoliberals to pretend to be pro-labor, to pretend to be socialist, while actually they’re the far right wing of the political spectrum. I won’t call them fascist. But let’s just say there’s nothing the fascists would not like in the social democratic parties. So, here you have the most right wing parties in Europe are the social democratic parties. Way to the right.

I guess the most right wing neofascist party is, of course, the Greens in Germany that are the pro-war party. And anti-labor. But basically, there is no longer a real labor party representing the interests of labor. They’ve all been co-opted by demagogues. The social democratic parties in a way have been like the peace parties.

The first thing that every peace party does when there’s a war is they’re at the head of the pro-war patriotism parade. That was what Trotsky noted about World War One. The peace parties jumped on the bandwagon in Germany, Austria, England, America. Social democratic parties have done the same thing when there’s a neoliberal right wing corporatist financialization. They’ve all been persuaded to do it.

The equivalent was like what the Clintons did to the United States since the 1990s. In the United States, the Democratic Party is the far right wing party now. And I guess when I answered the question about what can Americans do to help the housing crisis… You cannot solve the housing crisis until you end the Democratic Party. You cannot solve the labor problem without ending the Democratic Party. Because that is the party of Wall Street. That is the party of the 1%. Its function is to make sure that there cannot be any left wing opposition to block the Republican Party’s program.

What Bill Clinton did, the Republicans never could have done. Backing Alan Greenspan and the right wingers in getting rid of the acts preventing banks from owning insurance companies and brokerage houses. Getting rid of the Glass Steagall Act. And no Republican could have done anything as viciously anti-black and anti-Hispanic as President Obama, whose policies are basically identical with those of the Ku Klux Klan.

Obama’s role was essentially to reverse the attempt by blacks and hispanics to become homeowners. His objective was to replace black home ownership and hispanic home ownership with ownership by private capital companies. His role in 2009 was to bail out the banks – the fraudulent banks that had written the junk mortgages – and to keep the junk mortgages on the hook to evict almost 10 million American families. And not fine the banks, not throw a single crooked banker in jail. This ended the hopes of the low income Americans – and especially the minorities – to have housing.

If you say, what can we do about housing? Well, if you’re black or Hispanic, you must avoid the Democratic Party like the plague. And you must come to terms with the fact that it was Obama that was the most anti-black president of the 20th century, except of course for Woodrow Wilson. The damage that he’s done has not been widely recognized here.

And, he has put in place a Democratic Party leadership that is so anti-labor, so white racist. and so pro-Wall Street that I don’t think it is reformable.

Question | Luke Parcher

[00:53:18] Luke Parcher: And just to build on what you were just talking about there, Michael, I’m kind of stunned by the extent to which people buy into the partisan false dichotomy in this country and seem to think there are all these massive differences between the parties.

And that obviously is an issue-by-issue thing, but I’m curious where you think that buy-in comes from and how we might be able to cut into it. The fear mongering about Trump is I think overstating the differences between Trump and Biden on these issues. Can you talk a little bit about that?

[00:53:43] Michael Hudson: Yes. The Republican Party’s role is to say to Wall Street, “Yes, please.” And the Democratic Party’s policy is to say “Yes, thank you.” But that’s basically it. You’ll notice, like in Ohio, the Democratic National Committee is backing a right-winger who is going to play the role of West Virginia Senator Manchin or Arizona’s Sinema. The Democrats want to make sure that it has enough Republicans running as Democrats, that if there’s ever a danger of promoting a bill that is good for the working class or the racial minorities or ethnic minorities, that you’ll have the Republicans running as Democrat to cancel it, to play the role.

There’ll always be many senators right behind Manchin and Sinema in the wings to prevent the Democrats from doing anything that does not serve the short-term immediate interests of their Wall Street bankers… Backers.

Question | Bruce W

[00:54:39] Luke Parcher: Rotating villain is a very real concept for sure. We have a question here from Bruce Wall who asks, which of the public banking and monetary reform movements do you support, if any? I have in mind Public Banking Institute, American Monetary Institute, the Alliance of Just Money, Christine Desan’s Just Money. What about figures like Robert Hockett?

[00:54:58] Michael Hudson: Well, I’m on the board of directors of the Public Banking Institute. Steve Zarlenga was a good friend of mine.

I was at all of his early conferences. So they both have very good ideas. And… I’m blocking out the name. Who’s the head of the public banking?

[00:55:15] Virginia Cotts: That’s not Ellen Brown, is it?

[00:55:17] Michael Hudson: Yeah. Ellen Brown. Ellen would be all in favor of many of the things I’ve talked about, but she doesn’t think that a debt cancellation is politically feasible right now. And of course, she’s right. So she’s said that, well, public banks can provide the model for what could be. The result of what happens if Obama would have let Citibank go bankrupt.

The Republican head of the FDIC [Federal Deposit Insurance Corporation] urged that Citibank, being run by crooks… but, Obama put an even bigger crook in charge. Geithner, who was working for his banker Robert Rubin, basically did not let Citibank go bankrupt because that would’ve wiped out the stockholders.

And as Sheila Bair, the head of FDIC, said, well, it was all about the bond holders. And Sheila said, if Citigroup would’ve gone under, then that meant the government would’ve had the biggest bank in the country, and it could actually run a commercial bank along making good loans instead of making loans to corporate raiders. Instead of making crooked mortgage loans and fake loans, it could actually make loans to help the economy grow. Well, she’s quite right. That would’ve been a good idea.

So she’s concentrated.on public banks for what they can do. And she said, at least by having a public bank, you’ll keep the deposits of the public sector – the government, the state agencies, and hopefully the local city agencies – in the public domain, out of the hands of, the commercial bankers and Wall Street, so that you can use the money for a good purpose.

So, I’m all in favor of what she’s doing. Steve Zarlenga at American monetary Institute was for the hundred percent reserve plan that was proposed in the 1930s. And that is, commercial banks would actually be reduced to the status of savings banks.

A hundred percent reserves. Could not create credit. They could only make loans from deposits. Of course, if they had a productive loan made, the government, the Treasury, would act as the depositor – simply increase the deposits in the bank to enable them to make productive loans.

And that also, in principle, is a very good idea. That’s why I supported that. And of course that was the program that was introduced by Dennis Kusinich in his presidential run. I was Kusinich’s economic advisor. So those are the two groups that I’m most familiar with and the most in favor of.

Question | Rasha 

[00:57:41] Luke Parcher: We have a question here from Rasha. What role does defining money play in shaping the economy? How do you define money? Is it a record of value transferred between economic actors or is it a commodity? If you agree that money is a record of value transferred between two or more economic actors, isn’t it possible to create money on demand by any two or more economic actors in a decentralized manner, as opposed to central private banks providing there is a scientific formula by which value of goods and services is assigned.

[00:58:10] Michael Hudson: Oh, my God. I can’t even begin to answer that. The jargon is so misleading. Money has nothing to do with value. Money is debt. That’s the opposite of value. It’s a transfer of debt among people, it’s not a transfer of value. You’re using a very right wing, quite frankly, a fascist economic terminology, maybe without meaning to. But it’s not value, it’s debt created out of thin air. It’s credit.

When you go into a bank and you take out a loan the bank doesn’t say let me see how much money I have on deposit to lend you. They will just write you a loan. They’ll create a bank deposit and in exchange you’ll give them an IOU. It’s debt, loans, that create deposits, not the other way around. Anyone who talks about money and value, you want to stop talking to them immediately. Because you know that it’s just going to be patter talk for propaganda.

Question | Tom

[00:59:03] Luke Parcher: So we have one here from Tom. Tom asks: all prices of all things for sale are not rising. Therefore, the term inflation is not what we are experiencing. For example, the market is working. Money is moving from those without oil to those with oil.

Why does no trained economist understand and label this a normal market redistribution period or some term listed in textbooks for reference? And why is the concept called inflation, which scares unknowing economists and today’s consumers who needlessly suffer from money famine, so poorly taught and so poorly understood?

[00:59:33] Michael Hudson: The question is so bizarre, I cannot answer it. It’s just how do you, how do you answer a swamp and straighten out what they’re saying to give them an answer? It’s a swamp. I can’t answer that.

[00:59:42] Luke Parcher: I suppose in general, what would you prescribe the price increases that we’ve seen today to?

[00:59:47] Michael Hudson: Very largely monopoly positions. The reason oil prices are going up is not because there’s an oil shortage. It’s because the oil companies find an excuse to use the newspaper reports that there will be an oil shortage at some point to raise the prices right now. Adam Tooze wrote a good article a few days ago, comparing the inflation in Europe to the inflation in the United States. In Europe, the price inflation is almost exclusively for energy and for oil and gas derivatives. In the United States, the inflation is much broader – it’s over the whole course.

Again, you want to look at the economy as a system. You don’t want to reduce everything to one-dimensional “here’s the price level”. You want to look at the multi-layered economy. What are the cost prices? What are the economic rents? What are the monopoly prices? What’s the tax system? You have to look at the economy as a system, not in a one-dimensional way. So, I can’t untangle all of the jumble any clearer than that.

Question | Paul B

[01:00:55] Luke Parcher: We have one here from Paul Birtwell again. Could Dr. Hudson touch on and acknowledge the validity of MMT? What do you think is the importance of MMT and how does it apply to this discussion?

[01:01:04] Michael Hudson: Well, I was on the faculty of the UMKC, which is MMT center for many years. I’m all in favor of MMT. The point of MMT is that just as banks create endogenous credit on their own computers, the government can create credit. The government doesn’t have to borrow money from the 1% or from bond holders in order to spend it; the government can simply print it as it did under the greenbacks.

The government can create its own credit. And there’s nothing wrong with running a budget deficit because a budget deficit does not have to be paid by taxpayers paying taxes. A government deficit can be funded by simply creating the money on your own computer – not by taxes. That’s the point that Stephanie Kelton has been making again and again in what she writes.

And that really is the essence of MMT. But of course the leading exponent of MMT was Donald.Trump, when he said deficits don’t matter, we can just create whatever we want. And I think, Vice President Cheney also said we can spend whatever we want. It doesn’t matter. George Bush said, you know, it’s all really fictitious anyway; we can do it.

The difference between Donald Trump and the Republicans and the MMTers is, we want the government to run deficits to actually spend into the economy. We do not want deficits to be run for $9 trillion to subsidize quantitative easing for the 1% to promote real estate prices and stock and bond prices.

We want them to actually employ workers and to promote full employment. So the difference is that the MMTers are basically in favor of tangible economic growth, not creating money bad MMT of Cheney and Donald Trump style.

Question | Luke Parcher

[01:02:51] Luke Parcher: Can you talk a little bit about how the IMF [International Monetary Fund] and financialization have contributed to what’s going on right now in Ukraine? I know that’s a little bit broad, but if you could tie in what we’ve been talking about here to the situation in Ukraine.

[01:03:02] Michael Hudson: The IMF’s job is to make sure that the economy is impoverished and that all the money that it gives is to support the currency – to enable the kleptocrats, Kolomoyskyi and others, to take the Ukrainian currency they have and transfer it into dollars and pound sterling at a high exchange rate.

So they will lend Ukraine the dollars – essentially to support the hryvnia, however you pronounce its currency – and enable the kleptocrats to make money and then pull the rug out from under them if any alternatives to the Nazis take power. They want.to make sure that, once the kleptocrats have emptied out the economy, they can let the economy collapse.

They’re of course backing the new labor law president Zelensky has pushed, abolishing labor unions, abolishing the rights of labor to negotiate, and making basically the most fascist labor law in any country’s history. So the role of the IMF is to support client oligarchy, to get their money out of a country before there is a possibility of a leftwing government coming in, and then to deny all credit and organize a currency raid on the leftwing government, to say, “You see, socialism doesn’t work”.

The IMF is one of the institutions that is the arm of American hegemony, preventing economic growth occurring outside of the United States. Essentially the IMF is a… it’s a small office in the basement of the Pentagon, run by the neocons, to make sure that other countries cannot have any policy that would not let American firms come in and buy their raw materials and their natural resources and their monopolies.

So, think of the IMF as a tool of the military, but much more right wing than any general would dare to be.

[01:04:55] Luke Parcher: Thank you so much, Michael. We really appreciate you taking the time today.

I also, once again, want to remind people to please go to realprogressives.org to learn more about us, or find our podcasts and articles, including again, Michael, as a guest on Macro N Cheese. With that, we will go ahead and call it a discussion here. Virginia, did you have anything you wanted to add?

[01:05:12] Virginia Cotts: Yes. I wanted to ask Michael where people can find his work.

[01:05:17] Michael Hudson: Well, Amazon, I guess, is the easiest place to go. It’s all available there.

On my website, michael-hudson.com. And you can go to that and join me on Patreon. I do have a Patreon group, and if you’re a contributor at a given level, then you get to talk to me directly every few months.

[01:05:36] Virginia Cotts: Well, we can all use support. Real Progressives also has a Patreon. So, support us all, please.

I just want to say, Michael, you wrote an article with the greatest title I’ve ever seen, which was something like the US Defeats Germany for the Third Time in a Century. I just thought that was such a perfect title. I think you wrote it right when the Ukraine war was beginning.

[01:06:02] Michael Hudson: Right. It was apparent what was going to happen at the very beginning. And I’m amazed that nobody else was writing about that. I’m not very good on military analysis. I can follow what Andrei Raevsky at the Saker says, and Moon of Alabama, and Andrei Martyanov. The one thing I can tell about military operations is the balance of payments aspects and how it all is spelled out.

[01:06:24] Virginia Cotts: Well… and you talked about how the three main sectors benefited.

[01:06:30] Michael Hudson: Yes. Oil is the key to American diplomacy. And I guess if we’re talking about American hegemony, it comes from America’s control of the oil trade. That was one of the reasons that America wanted to isolate first Venezuela, and then Russia, because if the only source of oil are companies controlled by the American oil majors, then…

Every economy needs energy to grow. And in every economy since the beginning of the industrial revolution, there’s a connection between the growth of GDP and energy use per capita. So I talk about the monopoly rent and the victim economy. If you can control oil then you can control, basically, the world economy.

That has been a key to the American policy. The Americans realized that if Europe cannot buy Russian oil anymore, or Venezuelan oil, then it’ll have to spend 10 times as much buying American liquified natural gas. This means the sanctions against Russia have ended German industrial supremacy. It has ended the German steel industry. It has ended German heavy industry.

They’re now going to be dependent thoroughly on the United States. And the euro is going to become a weakening satellite currency of the US dollar as a result of killing off the German economic and industrial leadership of the European economy, along with that of Italy and France.

[01:07:53] Virginia Cotts: Oh, thank you. I hope we didn’t abuse your generosity with your time.

[01:07:59] Michael Hudson: No. I assume if I said anything controversial, you’ll just take it out.

[01:08:03] Virginia Cotts: Oh, no, we like it. We will actually clip it and plaster it all over the internet.

[01:08:12] Luke Parcher: Oh… [laughs]

[01:08:13] Virginia Cotts: Michael Hudson isn’t controversial, is he?

[01:08:18] Luke Parcher: Well, you certainly don’t mince words, and we very much appreciate that about you. Michael, thanks again for giving us so much time today. And I want to give a brief shout out to Jonathan Kadmon, Andy Kennedy, and Virginia Cotts, who’ve been helping behind the scenes today to make this happen.

Thanks to all involved. Great.

[01:08:31] Michael Hudson: Thanks for having me. I liked the discussion.

How bright are EUropeans ?

November 05, 2022

Source

by Jorge Vilches

no contract

Several indications lead to the conclusion that EUropeans at large — exceptions aside — should not be very bright. Or at least not brighter than anyone else as they claim to be. The fact is that – despite their undeniably copious amounts of individual and collective achievements – they have not yet been able to articulate a peacefull co-existence strategy amongst themselves and with third parties. Having failed at that implies that EUropeans are not really that bright, how could they be ? True enough, EUrope´s macro-economic and consumer society development has been ´successful´… but still under a highly unstable political co-existence. IMNSHO the main reason for such disqualifying historical flaw is that – contrary to their own self-image frequently preached sanctimoniously onto others – in political EUrope a “deal” is never a deal. It´s rather an expression of possible temporary abidance always subject to their own interpretation and circumstances yet un-defined. Basically, there is no valid contract, social or political or otherwise in EUrope. Humpty Dumptyness at its best. And the EU governance experiment made things worse with all the key decisions imposed by un-elected officials very clearly in the case of Greece, Italy, Ireland, Portugal, Spain, Poland, and Hungary. The argument could possibly be made that other societies today also struggle along equivalent lines, but then again this would swiftly confirm that EUropeans cannot be considered to be brighter than others… as they bloody insist they are.

EUropean ´superiority´ (not)

Dr. Josep Borrell is the EU´s topmost senior diplomat as High Representative for Foreign Affairs and Security Policy.

Recently joined by another un-elected official namely the EU Commission President Ursula von den Leyen both now roughly insist that EUrope´s problems stem from its addictiveness to excellent and cheap Russian energy and resources, to China´s humongous export markets and high productivity dependency, and to the military ´security´ that the US today supposedly renders to them. So, accordingly their solution for EUrope would be to (a) get itself up in arms yet again and (b) to double-down on the ‘battle of narratives´ which should be interpreted to be just some more effective EU propaganda. So from this perspective rather than being bright EUropeans would just appear to be aggressive, manipulative, and conceited… and not superior to anyone else. So why be so proud about it all ?.

the EU thorny garden

Objectively searching into the EUropean political soul it´s easy to find EUrope´s self-EUthanization vis-á-vis its sheer lack of any ´affectio societatis´. This makes EUrope an un-viable business associate to and for anyone, even amongst themselves in view of the current widespread infighting. But JB´s ´brightness´ does not stop there, now proclaiming that “the world needs Europe” and that EUrope is a “garden” and the rest a mere ”jungle” ready to encroach upon it… So at this rate it would be wise to copernically acknowledge that EUrope is not any “global super-power” and that God Almighty has not appointed the un-elected European Commission as the rule-maker for the rest of the world to follow. Furthermore, the “international community”(sic) is not headquartered at Davos or Brussels and 85% of planet Earth does not even wake up in the West every morning. Making that clear would focus EU politics better than complaining about “too many abstentions” in the UN votes regarding this conflict which EU officials fail to understand and accept.

Ref #1 https://www.eeas.europa.eu/eeas/foreign-affairs-council-remarks-high-representative-josep-borrell-upon-arrival-1_en

Ref #2 http://www.euronews.com/my-europe/2022/10/19/josep-borrell-apologises-for-controversial-garden-vs-jungle-metaphor-but-stands-his-ground

Ref #3 https://news.cgtn.com/news/2022-10-12/Josep-Borrell-looks-backwards-on-China-Russia-and-U-S–1e3XRtUKOJy/index.html

Ref #4 https://www.eeas.europa.eu/eeas/european-diplomatic-academy-opening-remarks-high-representative-josep-borrell-inauguration_en

7 historical catastrophes 7

During the past one hundred years (approx.) aided or not by its supposed “superiority” collective Europe fostered 7 major historical vintage TM® failures, namely (1) enthusiastically fostered World War I – the Great War – “the war to end all wars” amongst themselves + (2) cradled and fully developed Nazism + (3) instigated and deployed World War II + (4) allowed for the firm establishment of ruinous “King Dollar” by calmly and willingly accepting the 1971 US unilateral default on the Bretton Woods Agreement thus perpetuating until today a highly detrimental “exhorbitant privilege” for a thus fiat US dollar + (5) established the currently ticking Euro currency time bomb + (6) fully accepted and even participated with impunity in many dozens of US military unsolicited interventions worldwide as the sole un-elected “world cop” thru its 800+ military bases in 80 countries (7) in 2022 unilaterally provoked an unnecessary and stupid self-harming divorce from Russia which has led the world closer than ever to a nuclear war. Readers may have different opinion regarding the individual interpretation of related events but still all of the above are categorically accepted historical facts. And a society that lies so much – onto itself and third parties — cannot be too bright, can it ?

Ref #5 http://www.theepochtimes.com/on-the-path-to-hyperinflation_4782143.html

Ref #6 http://www.zerohedge.com/markets/path-hyperinflation

no ´Greater Europe´

Forget any and all dreams about forging a Greater Europe from Lisbon to Vladivostok. Russia tried it, worked very hard at it, and invested tons in such century-milestone project, to no avail. Fact #1: Russia focused on Greater Europe for 30 years. Fact #2: Russia failed miserably in such endeavor. Under deep ´political hypnosis´ — for want of a better term — EUropean leaders supported by complicit constituents ended up deploying their self-harming strategy. For starters, no Referendum on the NATO-imposed, suicidal “let´s divorce Russia” initiative was ever proposed even though many dozens referenda have been held in the EU´s recent past. It´s simple: there is no valid contract in the EU

Russophia was also firmly established as a national cross-border regional sport of sorts spear-headed by complicit Western MSM and loudly outspoken and highly payed for EU officials. Of course, if challenged, Russians have the advantage of becoming quite stubborn when circumstances so require it, so they insisted in the Greater Europe project success and strictly followed the required EUropean Market & Financial Rules. But, yet again, there was no contract compliance. So led by the G-7 leadership, the collective West just plain took effective advantage of Russia in every way it possibly could provoke … and so the Minsk Accords were conveniently extended, postponed… and duly forgotten despite being squarely – and deceitfully — brokered by both Germany and France. The EU´s supposed Ostpolitik was betrayed with every trace of ´affectio societatis´ absent thus DE-stabilising the area and using third parties as pawns. Because, of course, EUropean flagrant unilateralism dictates that there is no room for anything close to having willingness and interest to engage and relate constructively with high-quality business partners beyond the EU´s – and NATO´s — full control. So Russia finally got fed up sick and tired of the West´s lack of “agreement capability” and will thus fully pivot to thriving Eurasia. Meanwhile Europe will immolate itself thru its NATO-induced suicide with shamefull colonialistic sins hovering its soul for the last 500 years until today. Is any of this “bright” ?

NATO´s ´hypnotic´ spell

British Gral. Hastings Ismay — the first Secretary General of NATO — defined that the purpose of the North Atlantic Treaty Organization was “to keep Russians out, Americans in, and Germans down” which has since become the common way to describe its dynamics and goals. Ismay also proposed that NATO “must grow until the whole free world gets under one umbrella.” So EUrope today and per its own fault, in more than one way and through not-publicized non-sanctum mechanisms, is actually ruled and governed directly by the US. Accordingly, the inclusion of Russia in the Greater Europe project was to be boycotted to death – most specially its association with Germany — and it certainly was. The European leadership thus offered and deployed highly pro-active support to provoke the Ukraine conflict, be it “militarily, financially or politically” thus confirming yet again its direct and unequivocal commitment and participation. During 8 years the Ukraine Armed Forces were trained by NATO to meet NATO combat standards while the Eastern Russian-speaking areas were systematically intimidated and bombed . NATO members proudly admitted to constantly supply the UAF with heavy modern weapons, military advisers and intel.

Ref #7 https://en.wikipedia.org/wiki/Hastings_Ismay,_1st_Baron_Ismay

Ref #8 https://www.azerbaycan24.com/en/eu-again-urged-to-open-wallet-for-kiev/

To weaken Germany and simultaneously strengthen the US required pitting Russia against Germany in a mutually destructive conflict so that the two countries could not re-establish normal relations for decades to come. The collapse of the EUropean economy would come about by denying cheap Russian energy to Germany. Thus, trillions of dollars of European resources would supposedly relocate to the US jointly with their best and brightest. According to the Rand Report, the main obstacle to Europe´s plundering on a scale which rivaled the Jewish looting of Russia in the 1990s was “the growing independence of Germany” which followed Britain’s exit from the European Union (Brexit) which gave “Germany greater independence and decreased the US influence upon European governments.”

the EU ´bright´ new oil & gas markets

No matter how diced or sliced, under the planned nat-gas EU ´capped-price´ purchase policy Western markets would be missing access to some 50% (approx.) of the 2021 effectively traded and consumed natural gas volumes. Besides, serious doubts remain on (a) the technical quality of such new possible “capped” price nat-gas (b) its delivery terms and conditions and (c) the reliability of such type of possible nat-gas suppliers. But at any rate when EUrope soon necessarily runs out of all possible nat-gas vendors willing to comply with its new capped-price policy — which would never fulfill its physical needs — then Russia and others will be able to charge whatever they want for the remaining nat-gas which EUrope will require in order to function ASWKI. Unless, of course, the deliberate ruinous EUropean plan were exactly THAT …which is an ever larger possibility. High quality nat-gas is high quality nat-gas, markets are markets, and business is business. An equivalent “absurd” sourcing conundrum would also be triggered by the soon-coming EU ban on Russian sea-borne oil with serious refinability problems (diesel !!!) vis-á-vis the different quality and quantity of the replacements yet to be found and the un-vetted reliability of the yet non-existent suppliers. Tom Kloza, Global Head of Energy Analysis says “Without new inventory, by the end of November the wolf will be at the door. And it will look like a big ugly wolf if it’s a cold winter” Ref #9 http://www.nakedcapitalism.com/2022/11/the-u-s-diesel-shortage-is-worsening.html

not-so-bright useful green idiots ?

The reference below describes the green parties in Europe “as being particularly easy to manipulate into running the errands of American imperialism. The prerequisite for Germany to fall into this trap is the dominant role of Green Parties and European ideologies. The German environmental movement is a highly dogmatic, if not fanatical, movement, which makes it quite easy to get them to ignore economic argument.”

Ref #10 https://fair.org/home/us-medias-intellectual-no-fly-zone-on-us-culpability-in-nord-stream-attack/

Ref #11 https://www.veteranstoday.com/2022/10/08/the-attack-on-the-pipeline-and-the-resurrection-of-the-morgenthau-plan-as-the-long-arm-of-jewish-vengeance/ Ref #12 https://nyadagbladet.se/utrikes/shocking-document-how-the-us-planned-the-war-and-energy-crisis-in-europe/

Eurasian pivot

On their part, the Russians — many still astonished by suicidal EUrope – seem to basically be thinking (approx.) …

“EUropeans, you didn´t have to love us or even be friends you know… but why hate us ? Always, systematically, by default. Why are you Russophobic ? We only wanted to continue being your vetted trade partners as repeatedly proven with flying colors for 30 years. So just what is wrong with you ? Why do you allow your leaders to lie to you, cheat and mislead you so much ? If you actually wished to scare us away consider it done, good job and good bye EUrope. Now, despite your fully un-necessary EUthanization of our relationship, we still welcome you to set up your investments as our business associates here in Russia. Just consider that your only gateway to the world´s next all-time winner anyway you dice it or slice it — namely Mackinder´s Eurasia — is by relocating to Russia with all our known advantages. Otherwise – per WEF logic — you will not have any worthwhile fuels or natural resources left ( just hyperinflation…and no markets ) and you will not be happy”. So the remaining bright Germans – and other bright minds still in EUrope — would finally understand that 85% of the world´s population is not Western let alone part of today´s non-sensical NATO, fully “brain dead” per French President Emmanuel Macron. And once that the NS1 & NS2 sabotage perpetrators are proven and known, EUropean public opinion – most specially Germans – will see things very differently from today understanding how they have been mis-led into an entirely un-justified Russophobia.

EUropean RE-location

Development requires cheap and excellent all-around energy and natural resources which Germany and others do not have and that Russia has plenty of. It also requires markets with which to trade. So the alternatives are (a) “NATO out” which does not seem feasible right now, meaning “to revolt en masse against the NATO-imposed trade/financial sanctions against Russia, and force Berlin to repair NS1 and commission Nord Stream 2”…or… (b) relocate to the US, meaning total vassalization of the EUropean industrial burgeoisie a-la Werner von Braun…or… (c) relocate to Russia and be part of Eurasia´s new bright future, jointly with China & BRICS & SCO & Global South. Of course, sooner or later some of (b) will surely take place but chances are that (c) — per the assumed Russian offering proposed — will at least be the German predominant choice. Obviously, this would probably mean the sudden demise of the EUro and, soon after, of the US dollar ASWKI. The smarter part of the remaining EUrope would also follow the relocation of bright Germans to Russia. Unexpectedly, along these lines events may pick up unusual speed and EUrope as we know it today would cease to exist. And this would be the final evidence proving that EUropeans at large are not as bright as they think they are. They would all act differently if they were, with no room for cannibalism.

the Overton window

Bright Europeans do exist, but in EUropean politics they are very few and far between. So most today focus on (1) ruining Russia per NATO mandate to supposedly uphold ´democracy everywhere´ even corrupt kleptocracies… and while they are at it…(2) also saving planet Earth. Still, a handfull are finally understanding that this is too high a price to pay as EUropeans would not be willing to accept the MAGNITUDE and DEPTH of the hardships soon to come in what up until today was a flourishing consumer society with an enviable standard of living. Hypothetically, what some few political leaders were waiting and jockeying for was an Overton window large enough to get their heads in, their bets made, and their feet wet. The Overton window defines what is politically possible per the existing public opinion at a given point in time. So it is a very convenient tool to apply in view of the EU Commissariat Master Plan.

Ref #13 https://thesaker.is/natos-green-masochistic-euthanasia/

Ref #14 https://thesaker.is/europe-hypnotized-into-war-economy/

Ref #15 https://oilprice.com/Energy/Energy-General/Europes-Energy-Crisis-Will-Not-Be-A-One-Winter-Story.html

the German oath

All members of the elected government of the German Federal Republic have necessarily taken an oath of office details of which are explicit below. That is the basis for the social and political contract between German leadership and their constituents. But apparently many / all have decided to conveniently dismiss such sworn obligations until the Overton window – Main Street´s hidden weapon — forces them to act accordingly, not before.

“ I swear that I will devote my energies to the well-being of the German people, increase their benefit, protect them from harm, uphold and defend the Basic Law and the laws of the Federation, perform my duties conscientiously and do justice to everyone. So help me God.” Not a single word is ever mentioned relating directly or indirectly to the EU, its governance impact, its interests and/or its goals.

the “most stupid” government in EUrope

Recently Sahra Wagenknecht has defined Germany’s government as the “most stupid” in EUrope for managing to embroil itself in a full-blown economic war with its top – and thus un-replaceable — energy supplier, namely Russia. Speaking at the Bundestag, the former co-chair of the party Die Linke (“The Left”) urged for an immediate end to the anti-Russian sanctions and also for the resignation of German Vice Chancellor and Minister of the Economy, the now infamous ´Herr Green´ Robert Habeck. While still describing the ongoing conflict in Ukraine as a “crime” Wagenknecht insisted that the anti-Russian sanctions are “fatal” for Germany itself. She told her fellow Bundestag leaders in-their-face that “The biggest problem is your grandiose idea of launching an unprecedented economic war against our most important energy supplier. The idea that we are punishing Putin by impoverishing millions of families in Germany and destroying our industry while Gazprom is making record profits – how stupid is that?” she wondered out loud. So, an important German at an important German venue publically told many other important Germans how stupid they were. Not me, she did. “The promise of NATO membership did not help any. Militarily, this war cannot be won”. Of course, this has meant that some Left Party members now demand the expulsion of Sahra Wagenknecht for good.

Ref #16 https://www.wsws.org/en/articles/2022/09/19/qunz-s19.html

Ref #17 https://www.rt.com/business/563382-high-energy-costs-eu-companies/

Ref #18 https://www.rt.com/business/563490-thousands-firms-italy-closure/

Ref #19 https://www.reuters.com/article/ukraine-crisis-eu-energy-smes-idAFL8N30E4WV

Ref #20 https://oilprice.com/Energy/Natural-Gas/Europe-Faces-An-Exodus-Of-Energy-Intensive-Industries.html

´the grandiose idea´ …

Firms in the metal and chemical industries, among others, are trying to relocate to the US, The Wall Street Journal reports: “High energy costs drive companies away from EU”. This means obvious consequences only fools would not foresee: DEpression & UN-employment. German producers warn of food shortages. Die Welt now reports that “There are significant supply gaps in the daily food supply for people in Germany. The situation is “more than serious” an open letter from the industry said. “Companies now fear that production lines will soon come to a standstill and that refrigerated logistics centers for food distribution will be closed. Some are even preparing for possible insolvency.”

Manufacturers of both frozen and fresh products say they cannot cope with soaring energy costs. “The food industry is currently experiencing the worst crisis since the end of the Second World War… It’s a minute to twelve. Act now – otherwise the refrigerators and freezers of the German population will soon be empty” the letter urges. Germany, along with the broader EU, is facing a sharp rise in energy prices and a record inflation surge amid the intensifying anti-Russian sanctions and a policy of abandoning all possible Russian fuels. The situation could also soon lead to energy rationing and shortages, also meaning NO energy, NO fuels at ANY price, period. And forget LNG from whomever or wherever. Too little, too late, too cumbersome, too risky, way dirtier, and way too expensive. Germany needs Russian pipelined nat-gas for many good reasons that they cannot ignore and will necessarily live by soon.

The frozen food industry is particularly susceptible to energy supply problems, due to its strong reliance on electricity for freezers. The EU risks a ‘Wild West’ scenario says IEA head Fatih Birol warning that member states could possibly abandon solidarity to secure their own gas supplies. Many dozens of thousands of small and medium-size businesses (SMEs) in Italy can’t cope with soaring energy bills, ´Corriere della Sera´ reports. Italy is badly dependant on Russian pipelined nat-gas, no substitutes are possible in practice. Supposed “stored” reserves cannot be extracted from sub-surface unless Russian pipelines are also flowing thus allowing to add-on such stored reserves to the main flow. By themselves, underground nat-gas reserves can hardly be produced on surface and still with lots of negative impact.

Ref #21 https://thesaker.is/germanys-failing-stored-nat-gas-lng-experiment/

Larger companies will also add to the un-employed. According to a recent survey, over 70% of Italians are having difficulty or are simply unable to pay their energy bills. SMEs represent 99% of all businesses in the 27-nation EU. SMEs employ around 100 million people, or two thirds of all employed and account for 53% of Europe’s GDP.

Nearly one in six people over 65 in Germany is at risk of poverty, meaning they have less than 60% of the median income at their disposal according to the Federal Statistical Office and published by the German media group Funke. Europe maybe could have articulated a far better and softer transition and slower pathway into “some” renewables under excellent quality and already available + pipeline delivered, cheap Russian nat-gas. But they chose otherwise and now Europe must pay the piper. And with only a fraction of the EU imploding generalized chaos will prevail.

True enough, Hungarian Prime Minister Viktor Orbán led the pack weeks ago by saying “the approach has clearly failed — sanctions have backfired — and our car now has 4 four flat tires”. Just as a reminder, vehicles carry only one spare tire (maybe two) but never four and more to come… Now, also Greek Prime Minister Kyriakos Mitsotaki proposes to lift sanctions on Russia by December at the latest. But the questions remains: beyond some optics, the audio and the visual… just where precisely is the ACTION ? Are these two Heads of State bright enough per the circumstances ? Or are they just better sounding than the overwhelming EUropean political mediocrity ? Oh, you say they aren´t allowed to do any more than that ? If that´s the established system then EUropeans were not very bright…

Ref #22 https://www.euractiv.com/section/global-europe/news/orban-urges-new-eu-strategy-on-ukraine-says-sanctions-have-failed/

Michael Kretschmer

“Germany needs Russian gas” – says Michael Kretschmer, Saxony’s Minister-President. Okay, that´s a good starting point to acknowledge don´t you think ? A valid diagnosis is necessarily behind any reasonable therapy and at least in this case – besides being bloody obvious – it´s still reconforting to see that a spanking new “common denominator” is being put together by some in Germany. Herr Kretschmer added that the current exorbitant prices for the fuel are “ruining Germany’s industry”. Okay, sorry to hear that. So that means that Russian energy matters lots, correct ?

“Russian gas supplies are critical for Germany, and will remain so in the foreseeable future”. In an interview with Germany’s Funke Mediengruppe Michael Kretschmer also added: “We are already witnessing that we can’t do without Russian gas.” Hmmm….. But then Kretschmer went on to say that now Berlin should try to make sure that it keeps receiving Russian gas after the armed conflict is over. But would that be soon, please tell us ? Because saying that implies ignoring that the end of the armed conflict will most probably not be decided in the battlefield and just come about by a NATO-EU surrender. Why so you may ask ? Well precisely because NATO & the EU leadership provoked and sustained Russian gas to be cut off, so that can be reverted only by them, not the other way around. So whatever happens militarily in the battlefield does not actually matter that much any more unless it were 101% decisive. But many months have elapsed and it does not seem to be anywhere close to that, does it ? So finally EU politicians on their own will have to end this unnecessary war that they started simply because the Overton window for European public opinion will not stand it and they will have to admit they were dead wrong and plain go home, if not to jail.

Ref #23 https://www.rt.com/news/563458-saxony-governor-germany-needs-russian-gas/

Clare Daly (Irish MEP)

Clare Daly is a Member of the European Parliament (MEP) and from the very beginning in March 2022 she has voted against its Resolutions on this matter basically considering them to be “a recipe for prolonging war with escalation”. She believes that “ignoring the role played by the US and NATO in destabilising the area for the past decade,using Ukraine as a pawn in its battles with Russia, only serves to prevent an understanding of the measures necessary to secure peace”. Per Clare Daly, the EP Resolutions “accelerate the provision of military equipment and weapons to Ukraine, strengthen NATO’s forward presence, increase defence spending…and strengthen the European pillar within NATO” while also ”opportunistically call for opening the European energy market to fracked American liquefied natural gas (LNG)…which is far more polluting and terribly far more expensive”. Clare Daly believes that ”there is no military solution to this crisis as the policy of flooding Ukraine with weapons will, at worst, lead to a permanent condition of conflict, as has happened in Afghanistan, Libya and Syria, at best, a greater loss of life and destruction in Ukraine”. Furthermore, Clare Daly believes that the EP Resolutions on this topic do not sufficiently “take into account the impact of the war on workers,their working conditions, and the recognition of the hardship that this entails”.

Ref #24 https://www.europarl.europa.eu/meps/en/197731/CLARE_DALY/other-activities/written-explanations

Ref #25 https://rmx.news/article/shock-eu-commission-president-threatens-italy-on-eve-of-election-says-brussels-has-tools-if-wrong-parties-win/ Ref #26 https://tomluongo.me/2022/09/23/as-democracy-dies-eu-its-sins-are-revealed/

Ref #27 https://oilprice.com/Latest-Energy-News/World-News/London-Banks-Prepare-For-Possible-Blackouts.html

Saint Greta of Thunberg

Days ago Greta Thunberg at the London’s Royal Festival Hall left on record that there is no going “back to normal” as it would mean returning to the Global North climate crisis “system” i.e. “colonialism, imperialism, oppression, genocide and racist, oppressive extractionism”. So only the overthrow of “the whole capitalistic system” will suffice, says Greta. No explanation was given — or even a mild attempt made — to describe how the required transition could possibly be made to get from our current evil point A to future greatly-improved point B. Apparently, there’s no GDP growth — especially of the capitalist sort — without increasing carbon emissions. Supposedly the only solution to this state of emergency is “for rich countries to immediately abandon economic expansion as a social goal.” Full interview credit to Nicholas Harris at Ref #28 https://unherd.com/thepost/greta-thunberg-throws-her-lot-in-with-the-anti-capitalist-left/

entitlements & cakeism vs. the chicken and the egg & DE-globalization economics: FIRE vs real STUFF

If really interested in reducing greenhouse gas emissions mankind worldwide would need to drastically change its way of life in many important ways already very firmly considered by the collective mind-set as genuinely valid entitlements So, politically speaking such proposal is a non-starter waaaay outside any current Overton window we may come up with. In turn, we also can´t have our own cake and eat it too. So which will it be ? On top of it, let´s add that “All service industries (– including FIRE finances –) remain completely dependent on the raw materials and manufactured goods sectors to function… So DE-globalization will increasingly favor those who produce and control the STUFF which underpins everything else…(of course necessarily) leading to devastating closures of (almost all ?) energy and/or resource-intensive industrial operations in Europe due to high energy prices that make their products uncompetitive.” Ref #29 https://oilprice.com/Energy/Energy-General/East-vs-West-Stuff-vs-Finance.html . Full credit to Kurt Cobb via OilPrice.com.

• Love Letter to Ireland! (and to ALL the Debt-Enslaved Nations of the World)
• NATO and the Kh-32 missile
• Pyrrhic victory or strategic defeat?
• NATO escalates (again) and achieves nothing (again)
• The New Cuban Missile Crisis That Isn’t

American Diplomacy as a Tragic Drama

July 29, 2022

By Michael Hudson and posted with the author’s permission

As in a Greek tragedy whose protagonist brings about precisely the fate that he has sought to avoid, the US/NATO confrontation with Russia in Ukraine is achieving just the opposite of America’s aim of preventing China, Russia and their allies from acting independently of U.S. control over their trade and investment policy. Naming China as America’s main long-term adversary, the Biden Administration’s plan was to split Russia away from China and then cripple China’s own military and economic viability. But the effect of American diplomacy has been to drive Russia and China together, joining with Iran, India and other allies. For the first time since the Bandung Conference of Non-Aligned Nations in 1955, a critical mass is able to be mutually self-sufficient to start the process of achieving independence from Dollar Diplomacy.

Confronted with China’s industrial prosperity based on self-financed public investment in socialized markets, U.S. officials acknowledge that resolving this fight will take a number of decades to play out. Arming a proxy Ukrainian regime is merely an opening move in turning Cold War 2 (and potentially/or indeed World War III) into a fight to divide the world into allies and enemies with regard to whether governments or the financial sector will plan the world economy and society.

What is euphemized as U.S.-style democracy is a financial oligarchy privatizing basic infrastructure, health and education. The alternative is what President Biden calls autocracy, a hostile label for governments strong enough to block a global rent-seeking oligarchy from taking control. China is deemed autocratic for providing basic needs at subsidized prices instead of charging whatever the market can bear. Making its mixed economy lower-cost is called “market manipulation,” as if that is a bad thing that was not done by the United States, Germany and every other industrial nation during their economic takeoff in the 19^th and early 20^th century.

Clausewitz popularized the axiom that war is an extension of national interests – mainly economic. The United States views its economic interest to lie in seeking to spread its neoliberal ideology globally. The evangelistic aim is to financialize and privatize economies by shifting planning away from national governments to a cosmopolitan financial sector. There would be little need for politics in such a world. Economic planning would shift from political capitals to financial centers, from Washington to Wall Street, with satellites in the City of London, the Paris Bourse, Frankfurt and Tokyo. Board meetings for the new oligarchy would be held at Davos’s World Economic Forum. Hitherto public infrastructure services would be privatized and priced high enough to include profits (and indeed, monopoly rents), debt financing and management fees rather than being publicly subsidized. Debt service and rent would become the major overhead costs for families, industry and governments.

The U.S. drive to retain its unipolar power to impose “America First” financial, trade and military policies on the world involves an inherent hostility toward all countries seeking to follow their own national interests. Having less and less to offer in the form of mutual economic gains, U.S. policy makes threats of sanctions and covert meddling in foreign politics. The U.S. dream envisions a Chinese version of Boris Yeltsin replacing the nation’s Communist Party leadership and selling off its public domain to the highest bidder – presumably after a monetary crisis wipes out domestic purchasing power much as occurred in post-Soviet Russia, leaving the international financial community as buyers.

Russia and President Putin cannot be forgiven for having fought back against the Harvard Boys’ “reforms.” That is why U.S. officials planned how to create Russian economic disruption to (they hope) orchestrate a “color revolution” to recapture Russia for the world’s neoliberal camp. That is the character of the “democracy” and “free markets” being juxtaposed to the “autocracy” of state-subsidized growth. As Russian Foreign minister Sergey Lavrov explained in a press conference on July 20, 2022 regarding Ukraine’s violent coup in 2014, U.S. and other Western officials define military coups as democratic if they are sponsored by the United States in the hope of promoting neoliberal policies.

Do you remember how events developed after the coup? The putschists spat in the face of Germany, France and Poland that were the guarantors of the agreement with Viktor Yanukovych. It was trampled underfoot the next morning. These European countries didn’t make a peep – they reconciled themselves to this. A couple of years ago I asked the Germans and French what they thought about the coup. What was it all about if they didn’t demand that the putschists fulfil the agreements? They replied: “This is the cost of the democratic process.” I am not kidding. Amazing – these were adults holding the post of foreign ministers.^[1]

This Doublethink vocabulary reflects how far mainstream ideology has evolved from Rosa Luxemburg’s description a century ago of the civilizational choice being posed: barbarism or socialism.

The contradictory U.S. and European interests and burdens of the war in Ukraine

To return to Clausewitz’s view of war as an extension of national policy, U.S. national interests are diverging sharply from those of its NATO satellites. America’s military-industrial complex, oil and agriculture sectors are benefiting, while European industrial interests are suffering. That is especially the case in Germany and Italy as a result of their governments blocking North Stream 2 gas imports and other Russian raw materials.

The interruption of world energy, food and minerals supply chains and the resulting price inflation (providing an umbrella for monopoly rents by non-Russian suppliers) has imposed enormous economic strains on U.S. allies in Europe and the Global South. Yet the U.S. economy is benefiting from this, or at least specific sectors of the U.S. economy are benefiting. As Sergey Lavrov, pointed out in his above-cited press conference: “The European economy is impacted more than anything else. The stats show that 40 percent of the damage caused by sanctions is borne by the EU whereas the damage to the United States is less than 1 percent.” The dollar’s exchange rate has soared against the euro, which has plunged to parity with the dollar and looks set to fall further down toward the $0.80 that it was a generation ago. U.S. dominance over Europe is further strengthened by the trade sanctions against Russian oil and gas. The U.S. is an LNG exporter, U.S. companies control the world oil trade, and U.S. firms are the world’s major grain marketers and exporters now that Russia is excluded from many foreign markets.

A revival of European military spending – for offense, not defense

U.S. arms-makers are looking forward to making profits off arms sales to Western Europe, which has almost literally disarmed itself by sending its tanks and howitzers, ammunition and missiles to Ukraine. U.S. politicians support a bellicose foreign policy to promote arms factories that employ labor in their voting districts. And the neocons who dominate the State Department and CIA see the war as a means of asserting American dominance over the world economy, starting with its own NATO partners.

The problem with this view is that although America’s military-industrial, oil and agricultural monopolies are benefitting, the rest of the U.S. economy is being squeezed by the inflationary pressures resulting from boycotting Russian gas, grain and other raw-materials exports, and the enormous rise in the military budget will be used as an excuse to cut back social spending programs. That also is a problem for Eurozone members. They have promised NATO to raise their military spending to the stipulated 2 percent of their GDP, and the Americans are urging much higher levels to upgrade to the most recent array of weaponry. All but forgotten is the Peace Dividend that was promised in 1991 when the Soviet Union dissolved the Warsaw Pact alliance, expecting that NATO likewise would have little reason to exist.

Russia has no discernable economic interest in mounting a new occupation of Central Europe. That would offer no gain to Russia, as its leaders realized when they dissolved the old Soviet Union. In fact, no industrial country in today’s world can afford to field an infantry to occupy an enemy. All that NATO can do is bomb from a distance. It can destroy, but not occupy. The United States found that out in Serbia, Iraq, Libya, Syria and Afghanistan. And just as the assassination Archduke Ferdinand in Sarajevo (now Bosnia-Herzegovina) triggered World War I in 1914, NATO’s bombing of adjoining Serbia may be viewed as throwing down the gauntlet to turn Cold War 2 into a veritable World War III. That marked the point at which NATO became an offensive alliance, not a defensive one.

How does this reflect European interests? Why should Europe re-arm, if the only effect is to make it a target of retaliation in the event of further attacks on Russia? What does Europe have to gain in becoming a larger customer for America’s military-industrial complex? Diverting spending to rebuild an offensive army – that can never be used without triggering an atomic response that would wipe out Europe – will limit the social spending needed to cope with today’s Covid problems and economic recession.

The only lasting leverage a nation can offer in today’s world is trade and technology transfer. Europe has more of this to offer than the United States. Yet the only opposition to renewed military spending is coming from right-wing parties and the German Linke party. Europe’s Social Democratic, Socialist and Labour parties share American neoliberal ideology.

Sanctions against Russian gas makes coal “the fuel of the future”

The carbon footprint of bombing, arms manufacturing and military bases is strikingly absent from today’s discussion about global warming and the need to cut back on carbon emissions. The German party that calls itself Green is leading the campaign for sanctions against importing Russian oil and gas, which electric utilities are replacing with Polish coal and even German lignite. Coal is becoming the “fuel of the future.” Its price also is soaring in the United States, benefitting American coal companies.

In contrast to the Paris Club agreements to reduce carbon emissions, the United States has neither the political capability nor the intention to join the conservation effort. The Supreme Court recently ruled that the Executive Branch has no authority to issue nation-wide energy rules; only individual states can do that, unless Congress passes a national law to cut back on fossil fuels.

That seems unlikely in view of the fact that becoming head of a Democratic Senate and Congressional committee requires being a leader in raising campaign contributions for the party. Joe Manchin, a coal-company billionaire, leads all senators in campaign support from the oil and coal industries, enabling him to win his party’s auction for the Senate Energy and Natural Resources committee chairmanship and block any seriously restrictive environmental legislation.

Next to oil, agriculture is a major contributor to the U.S. balance of payments. Blocking Russian grain and fertilizer shipping threatens to create a Global South food crisis as well as a European crisis as gas is unavailable to make domestic fertilizer. Russia is the world’s largest exporter of grain and also of fertilizer, and its exports of these products have been exempted from NATO sanctions. But Russian shipping was blocked by Ukraine placing mines in the sea lanes through the Black Sea to close off access to Odessa’s harbor, hoping that the world would blame the world’s imminent grain and energy crisis on Russia instead of the US/NATO trade sanctions imposed on Russia.^[2] At his July 20, 2022 press conference Sergey Lavrov showed the hypocrisy of the public relations attempt to distort matters:

For many months, they told us that Russia was to blame for the food crisis because the sanctions don’t cover food and fertiliser. Therefore, Russia doesn’t need to find ways to avoid the sanctions and so it should trade because nobody stands in its way. It took us a lot of time to explain to them that, although food and fertiliser are not subject to sanctions, the first and second packages of Western restrictions affected freight costs, insurance premiums, permissions for Russian ships carrying these goods to dock at foreign ports and those for foreign ships taking on the same consignments at Russian harbours. They are openly lying to us that this is not true, and that it is up to Russia alone. This is foul play.

Black Sea grain transport has begun to resume, but NATO countries have blocked payments to Russia in dollars, euros or currencies of other countries in the U.S. orbit. Food-deficit countries that cannot afford to pay distress-level food prices face drastic shortages, which will be exacerbated when they are compelled to pay their foreign debts denominated in the appreciating U.S. dollar. The looming fuel and food crisis promises to drive a new wave of immigrants to Europe seeking survival. Europe already has been flooded with refugees from NATO’s bombing and backing of jihadist attacks on Libya and Near Eastern oil-producing countries. This year’s proxy war in Ukraine and imposition of anti-Russian sanctions is a perfect illustration of Henry Kissinger’s quip: “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.”

Blowback from the US/NATO miscalculations

America’s international diplomacy aims to dictate financial, trade and military policies that will lock other countries into dollar debt and trade dependency by preventing them from developing alternatives. If this fails, America seeks to isolate the recalcitrants from the U.S.-centered Western sphere.

America’s foreign diplomacy no longer is based on offering mutual gain. Such could be claimed in the aftermath of World War II when the United States was in a position to offer loans, foreign-aid and military protection against occupation – as well as manufactures to rebuild war-torn economies – to governments in exchange for their accepting trade and monetary policies favorable to American exporters and investors. But today there is only the belligerent diplomacy of threatening to hurt nations whose socialist governments reject America’s neoliberal drive to privatize and sell off their natural resources and public infrastructure.

The first aim is to prevent Russia and China from helping each other. This is the old imperial divide-and-conquer strategy. Minimizing Russia’s ability to support China would pave the way for the United States and NATO Europe to impose new trade sanctions on China, and to send jihadists to its western Xinjiang Uighur region. The aim is to bleed Russia’s armaments inventory, kill enough of its soldiers, and create enough Russian shortages and suffering to not only weaken its ability to help China, but to spur its population to support a regime change, an American-sponsored “color revolution.” The dream is to promote a Yeltsin-like leader friendly to the neoliberal “therapy” that dismantled Russia’s economy in the 1990s.

Amazing as it may seem, U.S. strategists did not anticipate the obvious response by countries finding themselves together in the crosshairs of US/NATO military and economic threats. On July 19, 2022, the presidents of Russia and Iran met to announce their cooperation in the face of the sanctions war against them. That followed Russia’s earlier meeting with India’s Prime Minister Modi. In what has been characterized as “shooting itself in its own foot,” U.S. diplomacy is driving Russia, China, India and Iran together, and indeed to reach out to Argentina and other countries to join the BRICS-plus bank to protect themselves.

The U.S. itself is ending the Dollar Standard of international finance

The Trump Administration took a major step to drive countries out of the dollar orbit in November 2018, by confiscating nearly $2 billion of Venezuela’s official gold stock held in London. The Bank of England put these reserves at the disposal of Juan Guaidó, the marginal right-wing politician selected by the United States to replace Venezuela’s elected president as head of state. This was defined as being democratic, because the regime change promised to introduce the neoliberal “free market” that is deemed to be the essence of America’s definition of democracy for today’s world.

This gold theft actually was not the first such confiscation. On November 14, 1979, the Carter Administration paralyzed Iran’s bank deposits in New York after the Shah was overthrown. This act blocked Iran from paying its scheduled foreign debt service, forcing it into default. That was viewed as an exceptional one-time action as far as all other financial markets were concerned. But now that the United States is the self-proclaimed “exceptional nation,” such confiscations are becoming a new norm in U.S. diplomacy. Nobody yet knows what happened to Libya’s gold reserves that Muammar Gadafi had intended to be used to back an African alternative to the dollar. And Afghanistan’s gold and other reserves were simply taken by Washington as payment for the cost of “freeing” that country from Russian control by backing the Taliban. But when the Biden Administration and its NATO allies made a much larger asset grab of some $300 billion of Russia’s foreign bank reserves and currency holdings in March 2022, it made official a radical new epoch in Dollar Diplomacy. Any nation that follows policies not deemed to be in the interests of the U.S. Government runs the risk of U.S. authorities confiscating its holdings of foreign reserves in U.S. banks or securities.

This was a red flag leading countries to fear denominating their trade, savings and foreign debt in dollars, and to avoid using dollar or euro bank deposits and securities as a means of payment. By prompting other countries to think about how to free themselves from the U.S.-centered world trade and monetary system that was established in 1945 with the IMF, World Bank and subsequently the World Trade Organization, the U.S. confiscations have accelerated the end of the U.S. Treasury-bill standard that has governed world finance since the United States went off gold in 1971.^[3]

Since dollar convertibility into gold ended in August 1971, dollarization of the world’s trade and investment has created a need for other countries to hold most of their new international monetary reserves in U.S. Treasury securities and bank deposits. As already noted, that enables the United States to seize foreign bank deposits and bonds denominated in U.S. dollars.

Most important, the United States can create and spend dollar IOUs into the world economy at will, without limit. It doesn’t have to earn international spending power by running a trade surplus, as other countries have to do. The U.S. Treasury can simply print dollars electronically to finance its foreign military spending and purchases of foreign resources and companies. And being the “exceptional country,” it doesn’t have to pay these debts – which are recognized as being far too large to be paid. Foreign dollar holdings are free U.S. credit to the Unites States, not requiring repayment any more than the paper dollars in our wallets are expected to be paid off (by retiring them from circulation). What seems to be so self-destructive about America’s economic sanctions and confiscations of Russian and other foreign reserves is that they are accelerating the demise of this free ride.

Blowback resulting from US/NATO isolating their economic and monetary systems

It is hard to see how driving countries out of the U.S. economic orbit serves long-term U.S. national interests. Dividing the world into two monetary blocs will limit Dollar Diplomacy to its NATO allies and satellites.

The blowback now unfolding in the wake of U.S. diplomacy begins with its anti-Russia policy. Imposing trade and monetary sanctions was expected to block Russian consumers and businesses from buying the US/NATO imports to which they had become accustomed. Confiscating Russia’s foreign currency reserves was supposed to crash the ruble, “turning it into rubble,” as President Biden promised. Imposing sanctions against importing Russian oil and gas to Europe was supposed to deprive Russia of export earnings, causing the ruble to collapse and raising import prices (and hence, living costs) for the Russian public. Instead, blocking Russian exports has created a worldwide price inflation for oil and gas, sharply increasing Russian export earnings. It exported less gas but earned more – and with dollars and euros blocked, Russia demanded payment for its exports in rubles. Its exchange rate soared instead of collapsing, enabling Russia to reduce its interest rates.

Goading Russia to send its soldiers to eastern Ukraine to defend Russian speakers under attack in Luhansk and Donetsk, along with the expected impact of the ensuing Western sanctions, was supposed to make Russian voters press for regime change. But as almost always happens when a country or ethnicity is attacked, Russians were appalled at the Ukrainian hatred of Russian-language speakers and Russian culture, and at the Russophobia of the West. The effect of Western countries banning music by Russian composers and Russian novels from libraries – capped by England banning Russian tennis players from the Wimbledon tournament – was to make Russians feel under attack simply for being Russian. They rallied around President Putin.

NATO’s trade sanctions have catalyzed helped Russian agriculture and industry to become more self-sufficient by obliging Russia to invest in import substitution. One well-publicized farming success was to develop its own cheese production to replace that of Lithuania and other European suppliers. Its automotive and other industrial production is being forced to shift away from German and other European brands to its own and Chinese producers. The result is a loss of markets for Western exporters.

In the field of financial services, NATO’s exclusion of Russia from the SWIFT bank-clearing system failed to create the anticipated payments chaos. The threat had been so loudly for so long that Russia and China had plenty of time to develop their own payments system. This provided them with one of the preconditions for their plans to split their economies away from those of the US/NATO West.

As matters have turned out, the trade and monetary sanctions against Russia are imposing the heaviest costs on Western Europe, and are likely to spread to the Global South, driving them to think about whether their economic interests lie in joining U.S. confrontational Dollar Diplomacy. The disruption is being felt most seriously in Germany, causing many companies to close down as a result of gas and other raw-materials shortages. Germany’s refusal to authorize the North Stream 2 pipeline has pushed its energy crisis to a head. This has raised the question of how long Germany’s political parties can remain subordinate to NATO’s Cold War policies at the cost of German industry and households facing sharp rises in heating and electricity costs.

The longer it takes to restore trade with Russia, the more European economies will suffer, along with the citizenry at large, and the further the euro’s exchange rate will fall, spurring inflation throughout its member countries. European NATO countries are losing not only their export markets but their investment opportunities to gain from the much more rapid growth of Eurasian countries whose government planning and resistance to financialization has proved much more productive than the US/NATO neoliberal model.

It is difficult to see how any diplomatic strategy can do more than play for time. That involves living in the short run, not the long run. Time seems to be on the side of Russia, China and the trade and investment alliances that they are negotiating to replace the neoliberal Western economic order.

America’s ultimate problem is its neoliberal post-industrial economy

The failure and blowbacks of U.S. diplomacy are the result of problems that go beyond diplomacy itself. The underlying problem is the West’s commitment to neoliberalism, financialization and privatization. Instead of government subsidy of basic living costs needed by labor, all social life is being made part of “the market” – a uniquely Thatcherite deregulated “Chicago Boys” market in which industry, agriculture, housing and financing are deregulated and increasingly predatory, while heavily subsidizing the valuation of financial and rent-seeking assets – mainly the wealth of the richest One Percent. Income is obtained increasingly by financial and monopoly rent-seeking, and fortunes are made by debt-leveraged “capital” gains for stocks, bonds and real estate.

U.S. industrial companies have aimed more at “creating wealth” by increasing the price of their stocks by using over 90 percent of their profits for stock buybacks and dividend payouts instead of investing in new production facilities and hiring more labor. The result of slower capital investment is to dismantle and financially cannibalize corporate industry in order to produce financial gains. And to the extent that companies do employ labor and set up new production, it is done abroad where labor is cheaper.

Most Asian labor can afford to work for lower wages because it has much lower housing costs and does not have to pay education debt. Health care is a public right, not a financialized market transaction, and pensions are not paid for in advance by wage-earners and employers but are public. The aim in China in particular is to prevent the rentier Finance, Insurance and Real Estate (FIRE) sector from becoming a burdensome overhead whose economic interests differ from those of a socialist government.

China treats money and banking as a public utility, to be created, spent and lent for purposes that help increase productivity and living standards (and increasingly to preserve the environment). It rejects the U.S.-sponsored neoliberal model imposed by the IMF, World Bank and World Trade Organization.

The global economic fracturing goes far beyond NATO’s conflict with Russia in Ukraine. By the time the Biden administration took office at the start of 2021, Russia and China already had been discussing the need to de-dollarize their foreign trade and investment, using their own currencies.^[4] That involves the quantum leap of organizing a new payments-clearing institution. Planning had not progressed beyond broad outlines of how such a system would work, but the U.S. confiscation of Russia’s foreign reserves made such planning urgent, starting with a BRICS-plus bank. A Eurasian alternative to the IMF will remove its ability to impose neoliberal austerity “conditionalities” to force countries to lower payments to labor and give priority to paying their foreign creditors above feeding themselves and developing their own economies. Instead of new international credit being extended mainly to pay dollar debts, it will be part of a process of new mutual investment in basic infrastructure designed to accelerate economic growth and living standards. Other institutions are being designed as China, Russia, Iran, India and their prospective allies represent a large enough critical mass to “go it alone,” based on their own mineral wealth and manufacturing power.

The basic U.S. policy has been to threaten to destabilize countries and perhaps bomb them until they agree to adopt neoliberal policies and privatize their public domain. But taking on Russia, China and Iran is a much higher order of magnitude. NATO has disarmed itself of the ability to wage conventional warfare by handing over its supply of weaponry – admittedly largely outdated – to be devoured in Ukraine. In any case, no democracy in today’s world can impose a military draft to wage a conventional land warfare against a significant/major adversary. The protests against the Vietnam War in the late 1960s ended the U.S. military draft, and the only way to really conquer a country is to occupy it in land warfare. This logic also implies that Russia is no more in a position to invade Western Europe than NATO countries are to send conscripts to fight Russia.

That leaves Western democracies with the ability to fight only one kind of war: atomic war – or at least, bombing at a distance, as was done in Afghanistan and the Near East, without requiring Western manpower. This is not diplomacy at all. It is merely acting the role of wrecker. But that is the only tactic that remains available to the United States and NATO Europe. It is strikingly like the dynamic of Greek tragedy, where power leads to hubris that is injurious to others and therefore ultimately anti-social – and self-destructive in the end.

How then can the United States maintain its world dominance? It has deindustrialized and run up foreign official debt far beyond any foreseeable way to be paid. Meanwhile, its banks and bondholders are demanding that the Global South and other countries pay foreign dollar bondholders in the face of their own trade crisis resulting from the soaring energy and food prices caused by America’s anti-Russian and anti-China belligerence. This double standard is a basic internal contradiction that goes to the core of today’s neoliberal Western worldview.

I have described the possible scenarios to resolve this conflict in my recent book The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism. It has now also been issued in e-book form by Counterpunch Books.

1. “Foreign Minister Sergey Lavrov’s interview with RT television, Sputnik agency and Rossiya Segodnya International Information Agency, Moscow, July 20, 2022,” Russian Foreign Affairs Ministry, July 20, 2022. https://mid.ru/en/foreign_policy/news/1822901/. From Johnson’s Russia List, July 21, 2022, #5. ↑
2. International Maritime Organization, “Maritime Security and Safety in the Black Sea and Sea of Azov,” https://www.imo.org/en/MediaCentre/HotTopics/Pages/MaritimeSecurityandSafetyintheBlackSeaandSeaofAzov.aspx. See Yves Smith, Some Implications of the UN’s Ukraine Grain and Russia Fertilizer/Food Agreements,” Naked Capitalism, July 25, 2022, and Lavrov’s July 24 speech to the Arab League. ↑
3. My Super Imperialism: The Economic Strategy of American Empire (3^rd ed., 2021) describes how the Treasury-bill standard has provided America with a free ride and enabled it to run balance-of-payments deficits without constraint, including the costs of its overseas military spending. ↑
4. Radhika Desai and Michael Hudson (2021), “Beyond Dollar Creditocracy: A Geopolitical Economy,” Valdai Club Paper No. 116. Moscow: Valdai Club, 7 July, reprinted in Real World Economic Review (97), https://rwer.wordpress.com/2021/09/23. ↑

Going to Samarkand

July 31, 2022

By Pepe Escobar, posted with the author’s permission and widely cross-posted

The SCO and other pan-Eurasian organizations play a completely different – respectful, consensual – ball game. And that’s why they are catching the full attention of most of the Global South.

The meeting of the SCO Ministerial Council  in Tashkent this past Friday involved some very serious business. That was the key preparatory reunion previous to the SCO summit in mid-September in fabled Samarkand, where the SCO will release a much-awaited “Declaration of Samarkand”.

What happened in Tashkent was predictably unreported across the collective West and still not digested across great swathes of the East.

So once again it’s up to Russian Foreign Minister Sergei Lavrov to cut to the chase. The world’s foremost diplomat – amidst the tragic drama of the American-concocted Era of Non-Diplomacy, Threats and Sanctions – has singled out the two overlapping main themes propelling the SCO as one of the key organizations on the path towards Eurasia integration.

1. Interconnectivity and “the creation of efficient transport corridors”. The War of Economic Corridors is one of the key features of the 21st
2. Drawing “the roadmap for the gradual increase in the share of national currencies in mutual settlements.”

Yet it was in the Q@A session that Lavrov for all practical purposes detailed all the major trends in the current, incandescent state of international relations. These are the key takeaways.

How comfortable are you with the US dollar?

Africa: “We agreed that we will submit to the leaders for consideration proposals on specific actions to switch to settlements in national currencies. I think that everyone will now think about it. Africa already has a similar experience: common currencies in some sub-regional structures, which, nevertheless, by and large, are pegged to Western ones. From 2023, a continental free trade zone will start functioning on the African continent. A logical step would be to reinforce it with currency agreements.”

Belarus – and many others – eager to join the SCO: “There is a broad consensus on the Belarusian candidacy (…) I felt it today. There are a number of contenders for the status of observer, dialogue partner. Some Arab countries show such interest, as do Armenia, Azerbaijan and a number of Asian states.”

Grain diplomacy: “In regard to the issue of Russian grain, it was the American sanctions that did not allow the full implementation of the signed contracts due to the restrictions imposed: Russian ships are prohibited from entering a number of ports, there is a ban on foreign ships entering Russian ports to pick up export cargo, and insurance rates have gone up (…) Financial chains are also interrupted by illegitimate US and EU sanctions. In particular, Rosselkhozbank, through which all the main settlements for food exports pass, was one of the first to be included in the sanctions list. UN Secretary General A. Guterres has committed to removing these barriers to addressing the global food crisis. Let’s see.”

Taiwan: “We do not discuss this with our Chinese colleague. Russia’s position on having only one China remains unchanged. The United States periodically confirms the same line in words, but in practice their ‘deeds’ do not always coincide with words. We have no problem upholding the principle of Chinese sovereignty.”

Should the SCO abandon the US dollar? “Each SCO country must decide for itself how comfortable it feels to rely on the dollar, taking into account the absolute unreliability of this currency for possible abuses. The Americans have used this more than once in relation to a number of states.”

Why the SCO matters: “There are no leaders and followers in the SCO. There are no situations in the organization like in NATO, when the US and its closest allies impose one line or another on all other members of the alliance. In the Shanghai Cooperation Organization, the situation that we are currently seeing in the EU does not arise: sovereign countries are literally being ‘knocked out’, demanding that they either stop buying gas or reduce its consumption in violation of national plans and interests.”

Lavrov was also keen to stress how “other structures in the Eurasian space, for example, the EAEU and BRICS, are based and operate on the same principles” of the SCO. And he referred to the crucial cooperation with the 10 member-nations of ASEAN.

Thus he set the stage for the clincher: “All these processes, in interconnection, help to form the Greater Eurasian Partnership, which President Vladimir Putin has repeatedly spoken about. We see in them a benefit for the entire population of the Eurasian continent.”

Those Afghan and Arab lives

The real big story of the Raging Twenties  is how the special military operation (SMO) in Ukraine de facto kick-started “all these processes”, as Lavrov mentioned, simultaneously leading towards inexorable Eurasia integration.

Once again he had to recall two basic facts that continue to escape any serious analysis across the collective West:

Fact 1: “All our proposals for their removal [referring to NATO-expansion assets] on the basis of the principle of mutual respect for security interests were ignored by the US, the EU, and NATO.”

Fact 2: “When the Russian language was banned in Ukraine, and the Ukrainian government promoted neo-Nazi theories and practices, the West did not oppose, but, on the contrary, encouraged the actions of the Kyiv regime and admired Ukraine as a ‘stronghold of democracy.’ Western countries supplied the Kyiv regime with weapons and planned the construction of naval bases on Ukrainian territory. All these actions were openly aimed at containing the Russian Federation. We have been warning for 10 years that this is unacceptable.”

It’s also fitting that Lavrov would once again put Afghanistan, Iraq and Libya in context: “Let us recall the example of Afghanistan, when even wedding ceremonies were subjected to air strikes, or Iraq and Libya, where statehood was completely destroyed, and many human lives were sacrificed. When states that easily pursued such a policy are now making a fuss about Ukraine, I can conclude that the lives of Afghans and Arabs mean nothing to Western governments. It’s unfortunate. Double standards, these racist and colonial instincts must be eliminated.”

Putin, Lavrov, Patrushev, Madvedev have all been stressing lately the racist, neocolonial character of the NATOstan matrix. The SCO and other pan-Eurasian organizations play a completely different – respectful, consensual – ball game. And that’s why they are catching the full attention of most of the Global South. Next stop: Samarkand.