EU/Germany parting of the ways?

EU/Germany parting of the ways?

February 12, 2021

By Francis Lee for the Saker Blog

From its inception the European Union was an ambitious strategy to build an economic bloc which would serve as a counter-weight to the US’s global economic dominance. (1) One of the primary conditions of this overall construction involved the creation of a single strong currency, the euro, that could become the rival to the US$. This was not just a political question, it also involved financial, economic and possibly even geopolitical dimensions. The Germans in particular were involved in the EU blueprint ever since the initial Treaty of Rome or EEC Treaty, as it was called, brought about the creation of the European Economic Community (the EEC). The treaty was signed on 25 March 1957 by Belgium, France, Italy, Luxembourg, the Netherlands and (West) Germany, and it came into force on 1 January 1958. At the outset Germany was on board the launch and prepared to give up her much beloved Deutschmark (DM) in order to eventually adopt the euro. A European super-state was envisioned complete with its own currency and act as a counterweight to the US Leviathan.

EXORBITANT PRIVILEGE

Since the end of the Bretton Woods system in 1971 the US dollar had become the global currency – a pure fiat currency without any gold backing – and had been used widely and routinely by other states as international reserves; as monies circulating in the dollarized countries; and as a means of payment in international trade. Ever since the US had allowed its currency to float freely the US trade balance has been negative. Surplus European countries, but which also included Japan, had earned US dollars which at one time had only been redeemable in gold payments by the US. But this arrangement ended when Nixon took the dollar off the gold standard in August 1971. From this time on the surplus countries could only swap their dollars for US Treasury Bills, that is to say, American debt.

In this way the US has appropriated real goods and services from the surplus countries and exported debt back to those same countries.

In the trade this is called seigniorage.

‘’This term was used to describe the right of the medieval lord, or seigneur, to coin money and keep for himself some of the precious metals from which it was made. About $500 billion of US currency circulated outside of the United States, for which foreigners have had to provide the United States with $500 billion for real goods and services.’’ (2) This was an exchange of real value as embodied in goods and services, for fictitious value contained in little green paper substitutes. Nice little racket. Who says you can’t get something for nothing! This didn’t go down at all well in the European mainland and was described by the French politician Valery Giscard D’Estaing as being an ‘exorbitant privilege’. Monsieur D’Estaing certainly had a point.

The evolution of the euro has emerged as the only real challenger to the US$’s seigniorage. The preconditions to any such challenge rested on a dual criteria: The euro had to represent a real currency on the same scale as that of the United States, and, in addition, it had to be a strong currency, it needed to be strong even at its design stage. The birth-pangs of the euro underwent a long pregnancy, and it was not until 1999 that the EU monetary authorities announced the birth of the new currency. It should be pointed out that not every country in the European Union was/is a member of this currency union; some countries kept their own national currencies – e.g. the UK, Sweden, Denmark, and most of Eastern Europe, and that remains the case even today.

Germany was of course the key player in this process. The euro was to be a hard Teutonic currency which mirrored Germany’s powerful position as a globally competitive manufacturing base. It was envisioned that the euro currency would be extended to other parts of the eurozone. (3) However, the euro was unwisely broadened to include peripheral countries which were far from the levels of productivity – and thus of international competitiveness – needed to contribute to making the euro a strong currency. This was particularly the case in Europe’s southern periphery. These nations simply could not compete with Germany since their unit costs were too high and productivity levels were lower than Germany’s (and for the rest of the northern European bloc). Moreover, the get-out-of-jail ‘solution’ by Greece, Spain, Ireland, Portugal, and the Baltics, of a currency devaluation was closed since these states were all members of the Eurozone who had abandoned their old currencies and now used the euro.

In passing it could be argued that devaluation is not necessarily an optimal economic policy. Certainly, devaluation makes exports cheaper, and provides a breathing space for indebted states; but the obverse side of this practise is that it also makes imports more expensive. Imports which include strategic commodities such as oil, foodstuffs, drinks and tobacco, motor vehicles, chemicals, machinery and transport equipment, mineral fuels, and lubricants. The rise in prices in these imported goods and services may well lead to imported cost-push inflation.

Thus Europe’s southern periphery attempted to skirt around the devaluation problem with what became known as a policy of internal devaluation. This involved engineered austerity, whereby a country seeks to regain competitiveness through lowering wage costs and increasing productivity and not reducing the external value of the exchange rate. This enforced policy has resulted in what can only be described as a disaster as country after country in the southern bloc clocked up larger and larger trade deficits whilst the North European bloc including both members and non-members of the euro, e.g., Sweden and Denmark, clocked up big trade surpluses with the Eurozone in the southern periphery. In any case Germany had pre-empted this internal depreciation by its own earlier competitive devaluation as contained in the Hartz reforms.(4)

TRANSITION STATES

Things were not much better on the Eastern periphery. Present current growth figures for Czech Republic 0% Poland -0.1% Croatia N/A Hungary 0-1% Bulgaria -1.6% and Romania -4.4% all struggle with trade deficits.

At some stage during the 1990s, it became common to refer to these Eastern European countries as “transition states” or the ‘New Europe’ an interesting description by Donald Rumsfeld (See below).This implied an optimistic future, a linear progression, a transformation from a failed communist past to a stable western European future. Surely one of the most obvious lessons from the financial crisis and recession of recent years, however, is that the idea of such a transition is misplaced. If the societies of central-eastern Europe are indeed in transition, the mode of transit is that of the covered trailer, haphazardly attached to a juggernaut, driven by remote political and economic forces. And it is very unclear what the destination will be, given the continued economic upheavals and displacement across the whole of Europe.

The result of the transition so far seems to have been the creation of a low-wage hinterland, a border economy on the fringes of the highly developed European core, and this has had wider political and social ramifications for the entire European project – in effect shifting the goalposts of what it means to be European.

It is worth pointing out that, as is always the case, not everyone lost out. Shock therapy had its domestic supporters, people entranced by the ideas of neoclassical and Hayekian economics. Sometimes this was based on genuine intellectual engagement, as neoliberal western economists gained fervent followers in the universities and colleges of Warsaw, Prague, Bucharest, and Budapest. More often, however, the new disciples of neoliberalism were cynical converts from communism, the prospectors of a new capitalist order. Through incorporation into western institutions, such as NATO/EU, some of the new capitalists hoped to entrench their situations as the primary political arbitrators, a new elite of western-influenced reformers. All very reminiscent of the Yeltsin years. (5)

THE US INTERVENTION

US Defence Secretary Donald Rumsfeld’s ‘New Europe’ involved a geopolitical incorporation whereby the ex-soviet republics, and Warsaw Bloc allies were enrolled into the EU and more importantly were brought into NATO. Membership of the NATO was mandatory for all new EU entrants. Rumsfeld opined that “You’re thinking of Europe as Germany and France. I don’t. I think that’s ‘old Europe … If you look at the entire NATO Europe today, the centre of gravity is shifting to the East. And there are a lot of new members. And if you just take the list of all the members of NATO and all of those who have been invited in recently — what is it, 26, something like that? [But] you’re right. Germany has been a problem, and France has been a problem.”

If this was not a blatant intrusion into European affairs I stand to be corrected. This was the creation of a geopolitical beach-head militarily primed and ready to go; its purpose was to prevent any modus vivendi crystallising between Europe as a whole, and, in particular Russia. Central to this strategy …

‘’There was an overarching strategic concept of sorts in the double enlargement – strategic and economic – it was a strategy for Americanising the social structures of Europe within the NATO security perimeter whilst Americanising the hinterland beyond the perimeter. Firstly the Central European and Eastern Countries (CEECs) have become and will continue to be a significant middle-class market for western multinationals grabbing market share there at will, using the Single Market Rules embodied in the European Agreements to legitimise their market domination. Secondly, the CEECs will offer a limitless supply of cheap labour for western multinationals to use for the labour-intensive parts of the production circuits. Thirdly these attractions will be used by big capital in Western Europe to threaten to exit eastwards unless Western Europe Americanises its labour markets and turns the welfare state into minimal safety nets and allows British and American levels of social inequality, poverty, urban decay, and prison populations. Western Europe will then be distinguishable from the USA only by the virulence of its internal racist, neo-fascist, and xenophobic movements. (6)

WITHER GERMANY?

At the present time and at the beginning of a new and even bigger crisis in the global economy the future of the EU depends on the interests of the different factions of the German ruling elite. This is nowhere better instanced than in the Nordstream-2 episode. One faction, German big business, which has extensive investment in Russia together with other financially strong countries wants to reorientate its long-term strategies seeking an expansion of Germany toward China and Russia. There are several reasons for this;

‘’Firstly Both Russia and China have immense resources and reserves of raw materials. Secondly, the level of China’s economic growth and the size of its market are way above those of the EU. Thirdly, Germany’s technological superiority is the ideal condition for intra-trade appropriation of Chinese surplus value. Fourthly, if bi-lateral trade relations were to continue at the current pace Beijing will become Germany’s main trading partner by 2021. Fifthly, for China, Germany is the European state with the most optimal investment opportunities; China is the second largest non-European investor in Germany after the United States. Finally, China’s ultimately likely goal is to lessen US influence in Europe by forging its own close ties to the EU – and Germany is China’s strategic foothold in Europe. These are ideal conditions for German expansionism to scale down its interests in Europe and redirecting its attention to the East.’’(7)

The other faction in Germany are the geriatric Atlanticists, political, security (BND) and military elites, with the Greens in tow of course, who are apparently still fixedly stuck in an Americo-centric NATO bloc not knowing which way the wind is blowing and on which side their bread is buttered. The Nordstream-2 issue is crystallising these fault-lines among the German ruling elites with Frau Merkel being pulled hither and yon between Germany’s reactionaries and its more forward-looking business class which is enamoured of the pro-China-Russia siren songs. Moreover, given the centrifugal drift within the Eurozone there seems sufficient reason to believe that a new bloc of northern European states, grouped around Germany, Holland, Scandinavia, and possibly including the Tax Havens of Switzerland, Luxembourg, and Liechtenstein, could coalesce around the establishment of a new Northern Euro. This delinking from the ‘weak’ euro by the Northern bloc could well be the strategy that Germany, that is to say, its business elite, pushes – or at least does not oppose – the default of the weaker countries in the south and the east so that they leave the Eurozone.

At the present time this is conjecture, but the slow but inexorable economic and geopolitical underground shifts make change inevitable.

NOTES

(1) It should be noted in passing that this was never intended to take on the contours of a European geopolitical alternative to the American continental hegemon. That came later. At the time there was a school of thought that held the creation of a European alliance to act as a third force based upon social-democratic and unaligned neutrality which would act as a buffer between US imperialism and Russian communism, and as an alternative to the two heavily armed super-states. Alas that was not to be. The collapse of the Soviet Union was regarded in Anglo-American right-wing circles and their euro proxies – the UK, Poland, and the Baltics – as a wonderful opportunity to punish and over-run the prostrate and weakened Russian state. It almost succeeded as an enlarged NATO gobbled up ex-soviet republics pushing right up to Russia’s western borders.

(2) Barry Eichengreen – Exorbitant Privilege 2018 – pps3/4

(3) The Eurozone is composed of 19 out of 27 European States. The following use the euro as their currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia, Spain

(4) The Hartz Reforms. These reforms involved the restructuring of Germany’s internal labour markets involving a lowering of labour costs and introducing ‘mini’ jobs wage and welfare cuts. So the reduced share of unemployed in the German work-force was achieved at the expense of the real incomes as those in work. Fear of low benefits if you became unemployed, along with the threat of moving businesses abroad into the rest of the Eurozone or Eastern Europe, combined to force German workers to accept exceptionally low wage increases whilst capitalists reaped an excessively big profit expansion. Real wages in Germany have fallen during the Eurozone era and are now below the level of 1999. This whilst real GDP per capita has risen nearly 30%.

(5) The accession states of Eastern Europe are simply an entrenched euro version of a US/Mexico periphery grouping on the border of the US southern states. These maquiladoras have certain tax advantages which make them attractive to US businesses. These US businesses can capitalize on a cheaper labor force in Mexico and also receive the benefits of doing business in the U.S. The presence of maquiladoras contributed significantly to the industrialization of the Mexican-American border.

(6) Peter Gowan – The Global Gamble – p.317.

(7) Guglielmo Carchadi – From Crisis of Surplus Value to Crisis of the Euro – A Global Analysis of Marx’s Law of Profitability. – p.419

US economic decline and global instability

US economic decline and global instability

January 19, 2021

by Phillyguy for The Saker Blog

Summary

The US emerged from WWII as the world’s preeminent economic and military power. Seven decades later, American power is in decline, a direct consequence of decades of neoliberal economic policies, spending large amounts of public money on the military and attainment of economic/military parity by Russia and China. These policies have eroded US economic strength and are undermining the role of the dollar as the world’s reserve currency, key pillars of US global power. In this essay, we highlight how this situation evolved and its implications for US foreign policy and international relations.

Foundations of American Global Hegemony

The US emerged from WWII as the world’s leading military and economic power. This power was further solidified at the United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire in 1944, which came to be known as the ‘Bretton Woods Agreement’. This agreement: 1) pegged the value of member country’s currencies to the US dollar, which was pegged to the price of gold, and 2) created the International Monetary Fund (IMF) and International Bank for Reconstruction and Development, later known as the World Bank. The purported goals of the Bretton Woods system were to ‘stabilize currencies and promote international economic growth’. This conference also recognized the US dollar as the world’s reserve currency. 12

International economic relations started to change in the mid-1970s as US corporate profits began to stagnate/decline, a direct consequence of spending lots of taxpayer money on wars in Korea and Vietnam and increased competition from rebuilt economies in Europe, primarily Germany (Marshall Plan) and Asia- Japan, South Korea (Korean and Vietnam wars) and more recently China. US policy makers responded to these economic challenges in several ways. 1) Recognizing that the government had insufficient gold reserves to cover all of the dollars in circulation, in 1971 President Richard Nixon was forced to suspend convertibility of the dollar into gold, effectively devaluing the US dollar and making it a fiat currency. 3 2) In the early 1980s, US policy makers began instituting neoliberal economic policies. Neoliberalism can be broadly defined as policies promoting free-market capitalism, deregulation, and a reduction in government spending and was widely promoted in the US by President Ronald Reagan (1981-1989) and in the UK by Prime Minister Margaret Thatcher (1975-1990). 4 These policies included multiple tax cuts for the wealthy, financial deregulation, attacks on labor and poor, job outsourcing and spending $ trillions of taxpayer money on the military. 5 A short description of these policies and their impact on US society follows.

Tax Cuts

Beginning with the Reagan Administration, a number of tax cuts were enacted which reduced and/or eliminated top tax rates, corporate taxes and inheritance taxes (aka ‘death tax’; see Table 1). It should be noted that to market this legislation and ‘sell’ it to a generally uninformed American public, these bills frequently contain words or phrases in their titles which convey a positive and progressive message, such as ‘Economic Recovery’, ‘Tax Reform’, ‘Economic Growth and Tax Relief’, ‘Jobs and Growth’ and ‘Jobs Act’. After all, who is against ‘Economic Recovery’ and ‘Growth’ or a ‘Jobs Act’? However, to quote Phaedrus (Greek; circa 444 – 393 BC) ‘things are not always what they seem’. Each of these pieces of legislation was the result of massive lobbying campaigns by large financial interests- banks and corporations, with the goal of rolling back ‘New Deal’ tax and economic legislation enacted by President Franklin D. Roosevelt during the depths of the Great Depression (1933-1939) 67 and ‘open up’ the economy to unregulated and risky financial schemes, which under the right circumstances can yield substantial profits, but when things do not proceed as planned, can lead to large losses, as observed during the 2008 financial collapse. An analysis by the Institute on Taxation and Economic Policy (ITEP) concluded that between 2001-2018, 65% of the benefit from these tax cuts went to the wealthiest (top 20%) households, while federal tax revenues declined $5.1 Trillion and federal deficits grew $5.9 Trillion. 8 As a result of the COVID19 pandemic, federal deficits are now hemorrhaging.

Attacks on Labor and Poor

In 1981, members of the Professional Air Traffic Controllers Organization (PATCO) went on strike. President Reagan declared the strike a threat to ‘national safety’ and ordered all workers back to work, under the Taft-Hartley Act (1947). Of the circa 13,000 striking air traffic controllers, only 1,300 returned to work; Reagan fired the remaining 11,345 air traffic controllers who were still out. 9 The decline in labor solidarity was readily apparent as there was little support for striking PATCO workers from other unions. As a result, this began a frontal assault on union workers and labor.

During the 1992 presidential campaign, Bill Clinton vowed to ‘end welfare as we have come to know it’ 10 and in 1996, signed the Personal Responsibility and Work Opportunity Reconciliation Act, creating the Temporary Assistance for Needy Families (aka TANF) program 11, which changed the financing and benefit structure of cash assistance to poor people, Predictably, these changes did not ‘end welfare’ but increased poverty. Not surprisingly, Conservatives in Congress want to use the TANF model to ‘reform’ other federal programs such as Medicaid.

Job Outsourcing

The North American Free Trade Agreement (NAFTA), enacted Jan, 1994, created a ‘free trade’ agreement between Canada, Mexico, and US. While not fully appreciated at the time, this trade agreement would have a major impact on US industrial policy and jobs. NAFTA enabled large American corporations such as auto makers- Ford, General Motors, etc., to build manufacturing plants in Mexico taking advantage of lower wage rates and import the finished products back into the country duty free. The savings in labor costs is significant- the 2020 manufacturing wage in the US- $23/hr 12 vs $2.50/hr in Mexico 13 (90% lower) and not surprisingly, decreased labor costs boost corporate profits. On the negative side, NAFTA has: 1) led to the loss 4.5 million manufacturing jobs, with many of these displaced workers were forced to take lower paying jobs, 2) reduced growth in the export of manufactured products and services, 3) increased trade deficits with Canada and Mexico 14.

Job outsourcing has acquired the acronym ‘Globalization’ implying that it is a natural form of economic evolution, enabling large corporations to make their operations more cost-effective and efficient. Not surprisingly, the reality is somewhat different. Since passage of NAFTA, large corporations from the US and other countries have moved their manufacturing to Mexico, China, India, and other low-wage platforms to reduce labor costs, take advantage of lax environmental regulation and more favorable tax policies which increase corporate profits. It should be stressed that these polices have been voluntarily enacted by large financial interests in the US and other countries based on economic decisions and the relentless drive of capitalism to maximize corporate profits. During his 2016 ‘Make America Great Again’ campaign, presidential candidate Donald Trump repeatedly stated that China has ‘stolen’ American jobs and been involved in massive ‘theft’ of intellectual property 15 . Indeed, China has aggressively pursued economic development and has clearly taken advantage of technology transfer by multinational corporations 16. However, China is certainly not unique as these practices are frequently used by other developing countries. For example, during the Industrial Revolution (circa 1760-1840), the developing US manufacturing base relied largely on knowledge and technologies that had been developed in Europe, primarily the UK. No doubt, some of this technology was acquired by unscrupulous methods. Thus, while Trump was correct in pointing out that many American jobs had indeed moved to China, he has repeatedly failed to acknowledge that these jobs were deliberately moved by American corporations because it is more profitable. Trump’s allegations also beg the obvious question, if large US corporations and their functionaries in government were concerned about technology transfer to China, they should not have moved their production and associated ‘sensitive’ technology out of the US in the first place. Following his electoral victory in 2016, Trump attempted to force corporations to repatriate outsourced jobs. While some US-based firms left China, little of this production was moved back to the US; the vast majority were relocated to Vietnam, Thailand, India, Mexico and other low-wage platforms 17. A fundamental axiom of Capitalism is that business enterprises always seek the highest rate of return on their capital investments. Further, US CEO compensation is typically tied to stock price. Given this reality, large US corporations have curtailed domestic business spending (i.e., investing in new plants and equipment) and instead have allocated large amounts of money for stock buybacks. The reason for this behavior is clear- investments in new plants and equipment have payback periods ranging from years-decades, while spending money on share buybacks and stock futures results in near instantaneous increase of equity prices and higher financial compensation for corporate management. No one forced the CEOs of Apple, Nike, Levis, GM, etc. to move their RD/production facilities to China or other countries. Rather, this was done deliberately to maximize corporate profits. Unfortunately, the proverbial ‘chickens are coming home to roost’. The US is lagging behind China in 5G technology because corporate CEOs have been more interested in boosting stock price and their financial compensation, rather than investing in new plants and equipment to compete with China in this technology.

Financial Deregulation

The Glass-Steagall Act was part of the Banking Act of 1933, and established a barrier or ‘firewall’ between commercial banks, which accept deposits from working people and issue loans and investment banks that sell investment products, such as stocks and bonds. 7 Not surprisingly the financial industry lobbied heavily to repeal the Glass-Steagall Act; in 1999, this lobbying paid off as Bill Clinton enacted the Gramm–Leach–Bliley Act (GLBA; aka the Financial Services Modernization Act), which repealed the depression era Glass-Steagall Act thus loosening regulations on banking. Prior to leaving office, Clinton also signed The Commodity Futures Modernization Act of 2000 (CFMA) into law, which exempted over-the-counter (OTC) derivatives from regulation.

A derivative is defined as a financial security whose value is based or ‘derived’ from an underlying asset- bonds, commodities, currencies, interest rates, stocks and market indexes. 18 Not surprisingly, derivatives can potentially yield a large financial reward to savvy investors. On the down side, derivatives carry significant ‘market risk’ and lead to financial losses, which can rapidly accelerate during periods of collapsing equity prices. Warren Buffett has described the $ multi-quadrillion derivatives market as “financial weapons of mass destruction. 19 As Pepe Escobar has pointed out, ‘If Tehran were totally cornered by Washington, with no way out, the de facto nuclear option of shutting down the Strait of Hormuz would instantly cut off 25 percent of the global oil supply. Oil prices could rise to over $500 a barrel or more even $1000 a barrel. The 2.5 quadrillion of derivatives would start a chain reaction of destruction.’ 20

Financial deregulation enacted during the Clinton Administration (see Table 1) have been considered a major cause of the 2007-2008 GFC. 21 As pointed out by Pam Martins-

‘The Glass-Steagall Act had kept the U.S. financial system safe for 66 years. It took just nine years after its repeal by Clinton for Wall Street to enrich its own pockets to the tune of billions of dollars, blow up the U.S. economy, and then collect an astounding and secret $29 trillion in below-market-rate loans from the Federal Reserve to bail itself out.’ 22

Unfortunately, none of the structural economic problems giving rise to the 2008 crisis were resolved and as we are now seeing, have returned with a vengeance from the COVID19 pandemic. As a result, American Capitalism confronts the deepest crisis since the Great Depression, plagued by excess capacity and slack demand, high unemployment, with millions of families facing eviction from their homes, food insecurity, loss of medical insurance and financial ruin. Debt levels have exploded- projected US government debt for 2020- $3.1 Trillion (CBO estimate), while total debt levels are projected to reach $80 trillion, up from $71 trillion at the end of last year. 23 A further indication of the severe structural economic problems confronting American capitalism is that the financial industry has been unable to recover from the Global Financial crisis of 2008 and is still dependent on taxpayer support to function. Indeed, since April, the FED has pumped circa $ 7 Trillion of taxpayer-backed funds to Wall St for share buybacks and to purchase toxic corporate debt and mortgage-backed securities. 24 Without this support, many corporations and banks will collapse. 25

Enduring Economic Power

Despite continuing economic decline, the US still wields considerable global economic power, which stems from several factors.

1) Dollar- The US dollar is the world’s reserve currency, and as of 2019, comprises 60% of central bank foreign exchange reserves; circa 90% of forex trading involves the U.S. dollar. 2627 The dollar (i.e., ‘Petrodollar’) is used for purchase of crude oil. 28

2) FED– The US Federal Reserve System was set up following the 1910 secret meeting of executives from large banks- J.P. Morgan, Rockefeller, and Kuhn, Loeb & Co. for ten days on Jekyll Island, Georgia, which was followed by Congress passing the Federal Reserve Act (Dec, 1913), which established the Federal Reserve System as the central bank of the United States. The Chairman, currently Jerome Powell, and FED Governors are appointed by the US President. Thus, the ‘FED’ was set up by private bankers to support the interests of large banks and has effectively no public control over its actions. 29 Of the 12 Reserve banks in the Federal Reserve System, the New York FED (NY FED) wields the most power. 30 The NY FED directs monetary policy through open market operations, emergency lending facilities, quantitative easing, and foreign exchange transactions. It also stores gold on behalf of the U.S. and foreign governments, other nation’s central banks, and international organizations. FED policies, such as setting interest rates and money supply are closely followed by the European Central Bank (ECB), Bank of England, Bank of Japan (BOJ) and other central banks.

3) SWIFT– The Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is used to conduct financial transactions between 11,000 SWIFT member institutions and is the largest financial network in the world. 31 SWIFT is described as a ‘cooperative society’ under Belgian law, owned by its member financial institutions and headquartered in La Hulpe, Belgium. Due to its dominant global economic position, the US has been able to exert a strong influence on SWIFT policies, such as enforcing unilateral US economic sanctions (effectively a form of financial warfare) on the Islamic Republic of Iran, Russia, Venezuela, Cuba, North Korea and other countries deemed an obstacle to US global hegemony. 32

WWII and subsequent events shaping US foreign policy

Nuclear Attacks on Japan

The twentieth century was marked by turbulence, economic depression, war and economic prosperity. Eclipsing all prior conflicts, WWII was the deadliest conflict in human history, resulting in circa 75 million fatalities, with approximately twice as many civilian vs military casualties. During the war, the Soviet Union, much of Europe and Japan experienced high casualties and physical destruction. At the end of the war, the US dropped ‘Little Boy’ an enriched uranium gun-type fission device on Hiroshima, Japan on Aug 6, 1945, followed 3 days later, with ‘Fat Man’, a plutonium implosion-type nuclear weapon dropped on Nagasaki, resulting in circa 250,000 casualties. 33

While much has been written about the decision by the US to attack Japan, when the outcome of the war was all but certain, several things stand out.

1) The Soviet Union suffered the most physical destruction and casualties in WWII, a minimum of 25 million. In comparison, the US experienced circa 400,000 casualties.

2) During the war, the Soviet Union was an ally of the US/allied forces. As the war began winding down, this relationship rapidly changed, as the ruling elite, led by President Harry Truman were positioning the US as the world’s leading military power and viewed the USSR as a threat to American global hegemony. Thus, by dropping atomic bombs on Japan, the US was: i) sending an unmistakable message to the global community of US military might, and ii) also sending a warning to Stalin and the Soviet Union to not interfere with US global policies.

3) As pointed out by Prof Michel Chossudovsky, Center for Research on Globalization, as early as 1945 “the Pentagon had envisaged blowing up the Soviet Union with a coordinated nuclear attack directed against major urban areas. The Pentagon estimated that a total of 204 atomic bombs would be required to Wipe the Soviet Union off the Map”. 34

Iron Curtain & Truman Doctrine

On March 5, 1946 former British PM Winston Churchill delivered a speech at Westminster College, Fulton, MO, dubbed the ‘Iron Curtain speech’, stating

‘From Stettin in the Baltic to Trieste in the Adriatic an ‘iron curtain’ has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in some cases, increasing measure of control from Moscow.’ 35 In his speech, Churchill stressed the need for the US and UK to work together, acting as ‘guardians of peace and stability’ against the menace of Soviet communism. As a representative of the [former] British Empire, Churchill was signaling that the UK would willingly serve as a junior partner to American imperialism.

In a speech to Congress March 12, 1947, President Harry Truman laid out the ‘Truman Doctrine’, whose primary goal was to ‘contain Soviet geopolitical expansion’ and more broadly, implied American support for other countries ‘threatened’ by Soviet communism. The Truman Doctrine became the bedrock of post-WWII US foreign policy and in 1949, led to establishment of North Atlantic Treaty Organization (NATO). Truman’s speech is considered by many to be the start of the ‘Cold War’.

Demise of Soviet Union

Between 1988–1991 the Soviet Union experienced a process of internal disintegration which began with growing unrest in its various constituent republics are subsequent political and legislative conflicts between the republics and the central government. This is not surprising considering that the country was the largest country in the world, covering a vast land mass of 22,400,000 square km2 with a diverse population of circa 290 million consisting of 100 distinct nationalities. In addition, the USSR faced near continuous hostility from the US, UK and other imperialist powers since its very inception. The collapse of the Soviet Union and ‘end’ of the Cold War was interpreted by some in the US, notably Charles Krauthammer as the beginning of a US-directed ‘unipolar’ movement and a ‘new world order’ by President GW Bush. As is usually the case in global affairs, things did not go exactly as planned- the cold war never ‘ended’ and a ‘multipolar’ world emerged.

Project for the New American Century (PNAC)

The PNAC was founded by William Kristol and Robert Kagan in the Spring of 1997 as ‘a non-profit, educational organization’ that had a neo-conservative philosophy with close ties to the American Enterprise Institute (AEI) and endorsed strong American global leadership. 36 The PNAC had a particular focus on Iraq, predating the Bush Presidency and in Jan, 1998, sent a letter to then President Bill Clinton stating:

‘We are writing you because we are convinced that current American policy toward Iraq is not succeeding……We urge you to seize that opportunity, and to enunciate a new strategy that would secure the interests of the U.S……That strategy should aim, above all, at the removal of Saddam Hussein’s regime from power’. 37

In Sept 2000, ironically a year prior to 911, the PNAC would publish an influential policy document “Rebuilding America’s Defenses” that would serve as a blueprint for US foreign policy in the 21st century. Summarized in its Statement of Principles:

‘As the 20th century draws to a close, the United States stands as the world’s most preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievement of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?’

‘[What we require is] a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States’ global responsibilities.’

‘Of course, the United States must be prudent in how it exercises its power. But we cannot safely avoid the responsibilities of global leadership of the costs that are associated with its exercise. America has a vital role in maintaining peace and security in Europe, Asia, and the Middle East. If we shirk our responsibilities, we invite challenges to our fundamental interests. The history of the 20th century should have taught us that it is important to shape circumstances before crises emerge, and to meet threats before they become dire. The history of the past century should have taught us to embrace the cause of American leadership.” 38

The PNAC advocated: 1) increased ‘defense’ spending to ‘carry out our global responsibilities today and modernize our armed forces for the future’, 2) ‘strengthen our ties to democratic allies and to challenge regimes hostile to our interests and values’, 3) ‘promote the cause of political and economic freedom abroad’, and 4) ‘accept responsibility for America’s unique role in preserving and extending an international order friendly to our security, our prosperity, and our principles’.

Many PNAC members would go on to hold high level positions in the GW Bush administration, including: Elliott Abrams, Richard Armitage, John Bolton, Dick Cheney (Vice President), Eliot Cohen, Paula Dobriansky, Aaron Friedberg, Francis Fukuyama, Zalmay Khalilzad, Lewis “Scooter” Libby, Richard Perle, Peter Rodman, Donald Rumsfeld, Paul Wolfowitz, Robert Zoellick, William Schneider and James Woolsey. 39 Not surprisingly, these individuals would play a major role in shaping post-911 US foreign policy.

911 and Eruption of US Military Activity

On the morning of Tuesday, Sept 11, 2001 the US experienced the deadliest attack in its history. According to the ‘official’ narrative, nineteen people affiliated with al-Qaeda, a radical Islamic group, hijacked 4 jet aircraft- 2 from Boson, 1 from Newark and 1 from Washington Dulles. Two of these aircraft subsequently crashed into the World Trade Center (WTC) in NYC resulting in the collapse of building 1 (WTC1) and building 2 (WTC2), one hit the Pentagon and the fourth crashed into an empty field in Shanksville, PA. 40 Two decades later, there are still multiple outstanding questions about 911, including what did the intelligence community- FBI, CIA know about the hijackers prior to 911, why didn’t the Pentagon immediately scramble fighter jets to intercept the hijacked aircraft, and why did steel framed buildings that had been ostensibly engineered to survive an impact from an airplane, rapidly collapse? 41

As it turned out, 911 would be a ‘watershed’ event, showcased in President George W. Bush’s 2002 State of the Union address where he delivered his [in]famous ‘axis of evil’ speech, designating three countries- North Korea, Iran and Iraq- as rogue states that he claimed ‘harbored, financed and aided terrorists’. 42 Indeed, 911 would set the stage for US military engagements, currently stretching from the Levant, to Caspian Basin, Persian Gulf, South-Central Asia, China Sea, Indian Ocean, Horn of Africa, the Maghreb, to Eastern Europe and Russian border (Figure 1). 4344. These conflicts and conflict zones are summarized in Table 2.

Invasion of Afghanistan

The Pentagon has had a longstanding interest in Afghanistan, due to its strategic location in southern Asia- sharing borders with Tajikistan, Uzbekistan, and Turkmenistan to the north, Iran to the west, and Pakistan to the south and east. During the Soviet–Afghan War (1979-1989), the Mujahideen, headed by Osama Bin Laden fought a nine-year guerrilla war against the Soviet Army and Afghanistan government, receiving material and financial support from the US, Pakistan, Iran, Saudi Arabia, and other countries and has been described as a ‘Cold War-era proxy war’, pitting the US against the USSR. In October 2001, immediately following 911, the U.S. launched its invasion of Afghanistan, rapidly ‘defeating’ the Taliban, and soon thereafter, installing a new government headed by Hamid Karzai in Kabul, and declaring the country ‘liberated’. 45. It soon became obvious that this rapid ‘success’ would be short lived. Despite spending over $1 trillion of US taxpayer money and deploying more than 100K troops, the conflict in Afghanistan continues and is the longest war in US history. The Taliban currently control >50% of Afghan territory and Afghanistan has the dubious distinction of supplying >90% of the world’s heroin 46

War on Iraq

Following defeat of the Central Powers in WWI, the Paris Peace Conference (1919-1920) assembled diplomats from 32 countries, resulting in the creation of the League of Nations, denounced by Lenin as a “thieves’ kitchen” and the ‘awarding’ of German and Ottoman overseas possessions as “mandates,” primarily to Britain and France. 47 Well aware of Iraq’s large energy reserves and strategic importance, Winston Churchill managed to cobble together Basra, Bagdad and Mosul into the ‘state’ of Iraq, while at the same time, carve out the state of Kuwait, which has 499 km of Coastline on the Persian Gulf, compared with Iraq, which has 58 km. 4849 This was likely done to limit Iraqi coast line and access to the Gulf.

The collapse of the Soviet Union and 911 attacks provided the directors of US foreign policy considerable latitude to pursue a more aggressive foreign policy. As described above, the PNAC laid out their perspective in their 2000 policy manifesto ‘Rebuilding America’s Defenses’. The Bush Administration was literally infiltrated with PNAC members, led by Vice President Dick Chaney and Defense Secretary Don Rumsfeld who were well aware of Iraq’s large energy reserves and was ‘ripe’ for the picking. All that was missing was a ‘marketing’ strategy, using 911 as a rationale for initially invading Iraq and then attempting to widen US control of other countries in the Middle East, with the goal of governing the regions vast energy reserves and selling this to a skeptical American public. This was accomplished using corporate media and testimony by Colin Powell, a respected former four-star Army General and 12th Chairman of the Joint Chiefs of Staff. The stage would be set by a 2002 piece by Michael Gordon and Judith Miller in the paper of record (NYT), alleging that Iraqi leader Saddam Hussein was secretly building ‘weapons of mass destruction’ (WMD). 50 This piece would form the basis of Collin Powell’s Feb 5, 2003 Speech before the UN, setting up a casus belli (Latin, ‘occasion for war’) for the 2003 invasion and occupation of Iraq. 51 As is now well known, the piece by Gordon and Miller was essentially fabricated as was much of Powell’s UN speech. 52 As preparations for Invading Iraq were being formulated, President Bush, Vice President Dick Cheney, Defense Secretary Donald Rumsfeld and others estimated the costs of the conflict to be below $100 billion and ‘reassuring’ nervous Americans that Iraq’s oil ‘would cover’ the cost of the war. 53 As is now readily apparent, the Iraq war which is still ongoing, has been a strategic disaster, resulting in thousands of American casualties, killing or displacing circa 25% of the Iraq population, led to the creation of ISIS and has cost US taxpayers circa $ 5 Trillion. The extent of this disaster was pointed out in vivid detail by Thomas Ricks, former US military reporter for the Washington Post, in his 2006 book- ‘Fiasco: The American Military Adventure in Iraq, 2003 to 2005. As pointed out by General Wesley Clark in his 2007 interview with Amy Goodman, US plans to invade Iraq were formulated within days after 911. In addition, these plans also included strategies for ‘taking out’ six other countries in 5 years, including Syria, Lebanon, Libya, Somalia, Sudan and Iran.” 43

Libya, Syria and Yemen

On Mar 19, 2011 a multi-state NATO-led coalition began a military intervention in Libya, to implement UNSC Resolution 1973, which ‘demanded’ an immediate ceasefire in Libya, including an end to the current attacks against civilians and imposed a no-fly zone and new sanctions on the Qadhafi regime and its supporters. This resolution would be used by US/NATO to overthrow the Libyan government and kill Libyan leader Muammar Gaddafi. Secretary of State Hillary Clinton would later ‘joke’ about Qaddafi’s death, commenting ‘We came, we saw, he died’. 54 In a 2016 interview with the BBC, President Barack Obama stated- failing to prepare for the aftermath of the ousting of Libyan leader Col Muammar Gaddafi was the ‘worst mistake’ of his presidency’. 55 Gaddafi’s removal plunged the country into chaos and became an international arms bazaar for radical Islamic groups, as he predicted. 56 Since 2014, the country has fractured- split between forces loyal to the Tripoli-based Government of National Accord (GNA), supported by Turkey and Qatar and the Libyan National Army (LNA) led by Benghazi-based Field Marshal Khalifa Haftar and supported by Egypt, United Arab Emirates (UAE) and Russia.

The US has been intent on ‘regime change’ in Syria since at least 2007. 43 Syria occupies a strategic position in Western Asia, sharing borders with Israel, Lebanon, Turkey, Iraq and Jordan (see Figure 1). Direct US involvement in the war on Syria began in 2014, with the support of US vassals- Bahrain, Jordan, Qatar, Saudi Arabia, UAE and Israel, with the goal of removing President Bashar al-Assad from power, a policy which remains in effect today. Due to the loyalty of the Syrian Arab Army (SAA) along with support from Hezbollah, the Islamic Republic or Iran and Russian Air Force and advisors, Syrian forces have fortified control over much of the country and Bashar al-Assad remains in power.

Yemen occupies a strategic position on the Arabian Peninsula, abutting the Bab-el-Mandeb strait, which connects the Arabian Sea to the Red Sea and the Mediterranean. Thus, the Bab-el-Mandeb Strait is considered a strategic ‘chokepoint’ that can be closed during a military crisis and thus, of interest to major global powers. 57 In 2015, the Houthi Ansarullah movement overthrew the Yemeni government, led by Abdrabbuh Mansur Hadi, forcing him to flee to neighboring KSA. In response, Mohammed bin Salman (aka MBS), Crown Prince of Saudi Arabia, formed a ‘coalition’ consisting of circa 10 countries, including Gulf Cooperation Council (GCC)- the United Arab Emirates (UAE), Bahrain, Kuwait, Qatar, along with Egypt, Jordan, Sudan and Morocco. While not directly involved in the Yemen conflict, the US, UK and other imperialist countries have provided the Saudi coalition with intelligence, logistical and material support. 58 As pointed out by HRW and others, the war on Yemen has been a humanitarian disaster, leading to massive cholera epidemics, poverty, starvation and physical destruction of the country’s infrastructure. 5759

2021 and Beyond

The US emerged from WWII as the world’s dominant economic and military power. This power has been facilitated by the dollar’s privileged status as the world’s reserve currency, giving Washington the ability to print money and effectively ‘weaponize’ the dollar. Since the mid-1970s, US global power has been systematically undermined from decades of neoliberal economic policies and costly wars. Since 2001, the US has been involved in conflicts in Afghanistan (longest war in US history), Iraq, Libya, Syria and Yemen. These conflicts have been humanitarian disasters, resulting in the injury or death of thousands of American soldiers, while displacing/killing an estimated 37 million people in the affected countries. The ongoing refugee ‘crisis’ in Europe is a direct consequence of these wars, with millions of people escaping the chaos, violence and poverty that US/NATO wars have created. 60

The costs of these wars to American taxpayers have been staggering. In addition to spending circa $14 trillion on the Pentagon (2001-2020) 61, post-911 conflicts have cost taxpayers circa $6.4 trillion. 60 Despite expending astronomical amounts of financial and human capital on these wars, the American empire has been unable to extract significant imperial rent from these countries. Unfortunately, the Pentagon is incapable of extricating itself from these conflicts as doing so is an admission of failure and by extension military/geopolitical weakness. No amount of jingoistic and bellicose rhetoric from politicians in Washington or talking heads on corporate media changes this reality.

The Trump administration has accelerated US global isolation by exiting or contemplating leaving: Paris Climate Accord, Trans-Pacific Partnership (TTP), Joint Comprehensive Plan of Action (JCPOA; Iran Nuclear deal), Intermediate-Range Nuclear Forces (INF) Treaty, Open Skies Treaty, UN Human Rights council, World Trade Organization (WTO) and several other agreements. 62 At the same time, China has been actively negotiating multiple trade agreements, including: $400 billion comprehensive energy and security agreement with Iran 63; Regional Comprehensive Economic Partnership (RCEP) with 15 Asian countries including Japan, South Korea, New Zealand and Australia and is the largest trade deal in history 64; EU-China Comprehensive Agreement on Investment 65. Significantly, the US is not a party to any of these agreements and trade will be conducted using regional currencies, excluding the dollar. Not surprisingly, these trade deals are exacerbating tensions between the US, China and other countries. 66 US economic decline has now progressed to the point where the very survival of the American Empire depends on continued money printing to prop up Wall St and large banks, subsidize the military and war. This was recently summarized by economist Richard Wolff- “The Federal Reserve is sustaining US capitalism — directly by loaning to corporations and indirectly by loaning to the federal government — to run a huge deficit, excess of trillion dollars… The federal government is not an intrusion; the federal government is the only thing that keeps private capitalism from a complete bust… And what do we know about this way that the Federal Reserve is keeping capitalism going? It’s funding the most extreme inequality in a century of American history.” 25

Thus, the US is stuck between the proverbial ‘rock and a hard place’. The very functioning of the American state- keeping Wall St. and large banks solvent and funding the Pentagon and ongoing wars, requires continued public support- i.e., providing unlimited amounts of ultra-cheap money from the Treasury, as laid out in a recent presentation by FED chair Jerome Powell. 67 Indeed, anytime there is so much as a hint that interest rates are going up, equity markets fall. These policies have become so ingrained and accepted as the ‘normal’ functioning of the state, that they were not addressed by Donald Trump or Joe Biden, during the 2020 campaign. The problem is that this is further undermining the strength of the dollar and jeopardizing its role as the world’s reserve currency 68, readily seen from the rising price of gold, which increased 25% last year. History tells us that over the last 700 years, world reserve currencies maintain their position on average 100 years. 69 At this point, the dollar has been the reserve currency for 77 years. 70 As the global economic vise continues to tighten, American foreign policy is becoming increasingly reckless and bellicose, while debt levels continue rising, putting increasing downward pressure on the dollar. When the dollar crashes the American Empire will crash with it. The American ruling elite are courting a rendezvous with disaster.

Notes

1. Bretton Woods Agreement and System by James Chen Apr 30, 2020; Link:

https://www.investopedia.com/terms/b/brettonwoodsagreement.asp

2. Launch of the Bretton Woods System- The international currency system became operational in 1958 with the elimination of exchange controls for current-account transactions By Robert L. Hetzel Federal Reserve History; Link: https://www.federalreservehistory.org/essays/bretton_woods_launched

3. Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls- With inflation on the rise and a gold run looming, President Richard Nixon’s team enacted a plan that ended dollar convertibility to gold and implemented wage and price controls, which soon brought an end to the Bretton Woods System. By Sandra Kollen Ghizoni, Federal Reserve Bank of Atlanta Aug 1971; Link: https://www.federalreservehistory.org/essays/gold-convertibility-ends

4. The Politics of Privatization: How Neoliberalism Took Over US Politics By Brett Heinz; Sept 8, 2017; Link: http://www.faireconomy.org/the_politics_of_privatization

5. Neoliberalism – the ideology at the root of all our problems- Financial meltdown, environmental disaster and even the rise of Donald Trump – neoliberalism has played its part in them all. Why has the left failed to come up with an alternative? By George Monbiot Apr 15, 2016; Link: https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot

6. New Deal by History.com Editors Nov 27, 2019; Link: https://www.history.com/topics/great-depression/new-deal

7. Glass-Steagall Act by History.com Editors Aug 21, 2018; Link: https://www.history.com/topics/great-depression/glass-steagall-act

8. Federal Tax Cuts in the Bush, Obama, and Trump Years Report July 11, 2018 Institute on Taxation and Economic Policy; Link: https://itep.org/federal-tax-cuts-in-the-bush-obama-and-trump-years/

9. Labor Day: Ronald Reagan and the PATCO Strike by David Macaray HuffPost Aug 20, 2017; Link: https://www.huffpost.com/entry/labor-day-ronald-reagan-and-the-patco-strike_b_59a6d604e4b05fa16286beb1

10. How Bill Clinton’s Welfare Reform Changed America- Bill Clinton’s 1992 presidential campaign placed welfare reform at its center, claiming that his proposal would “end welfare as we have come to know it.” By Mary Pilon Aug 29, 2018; Link: https://www.history.com/news/clinton-1990s-welfare-reform-facts

11. The Real Lessons from Bill Clinton’s Welfare Reform- The 1996 creation of the Temporary Assistance for Needy Families program effectively killed cash assistance. Now, Republicans want to use it as a model for the rest of the social safety net. By Vann R. Newkirk II Feb 5, 2018; Link:

https://www.theatlantic.com/politics/archive/2018/02/welfare-reform-tanf-medicaid-food-stamps/552299/

12. United States Average Hourly Wages in Manufacturing-1950-2020 Data; Link: https://tradingeconomics.com/united-states/wages-in-manufacturing

13. Mexico Nominal Hourly Wages in Manufacturing- 2007-2020 Data; Link: https://tradingeconomics.com/mexico/wages-in-manufacturing

14. NAFTA’s Legacy: Lost Jobs, Lower Wages, Increased Inequality; Link: https://www.citizen.org/wp-content/uploads/nafta_factsheet_deficit_jobs_wages_feb_2018_final.pdf

15. The White House is only telling you half of the sad story of what happened to American jobs by Linette Lopez Jul 25, 2017; Link: https://www.businessinsider.com/what-happened-to-american-jobs-in-the-80s-2017-7

16. China, Saudi Arabia and the US: Shake Up and Shake Down. By Prof. James Petras Global Research, Dec 04, 2017; Link: http://www.globalresearch.ca/china-saudi-arabia-and-the-us-shake-up-and-shake-down/5621487

17. Why bringing manufacturing jobs to the U.S. from China is “highly unlikely” by Victoria Craig Marketplace Morning Report Aug 27, 2020; Link: https://www.marketplace.org/2020/08/27/trump-manufacturing-jobs-china-trade-war-deal/

18. Derivative By Jason Fernando Dec 5, 2020; Link: https://www.investopedia.com/terms/d/derivative.asp

19. What are the Main Risks Associated with Trading Derivatives? By J.B. Maverick Apr 3, 2020; Link: https://www.investopedia.com/ask/answers/070815/what-are-main-risks-associated-trading-derivatives.asp

20. War on Iran & Calling America’s Bluff by Pepe Escobar April 24, 2019; Link: https://consortiumnews.com/2019/04/24/pepe-escobar-war-on-iran-calling-americas-bluff/

21. Bill Clinton – 25 People to Blame for the Financial Crisis – TIME; Link:

http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877322,00.html

22. The Bizarre Action in U.S. Treasuries Is Linked to the U.S. National Debt and the Repeal of the Glass-Steagall Act By Pam Martens and Russ Martens: Aug 29, 2019; Link: https://wallstreetonparade.com/2019/08/the-bizarre-action-in-u-s-treasuries-is-linked-to-the-u-s-national-debt-and-the-repeal-of-the-glass-steagall-act/

23. World economy engulfed by “debt tsunami” by Nick Beams Nov 20, 2020; Link: https://www.wsws.org/en/articles/2020/11/21/debt-n21.html

24. The Fed Man Song (to the music of Beatles ‘The Taxman’) by Jack Rrasmus Nov 16, 2020; Link:

The Fed Man Song (to the music of Beatles ‘The Taxman’)

25. Capitalism is on life support by Richard Wolff Democracy at Work Jan 4, 2021; Link: https://www.youtube.com/watch?v=jYrgFU-P63g

26. IMF Currency Composition of Official Foreign Exchange Reserves (COFER); Link:

https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4

27. Why the US Dollar Is the Global Currency By Kimberly Amadeo July 23, 2020; Link: https://www.thebalance.com/world-currency-3305931

28. The Rise of the Petrodollar System: “Dollars for Oil” By Jerry Robins Thu, Feb 23, 2012; Link: https://www.financialsense.com/contributors/jerry-robinson/the-rise-of-the-petrodollar-system-dollars-for-oil

29. Federal Reserve Act; Link: https://www.federalreserve.gov/aboutthefed/fract.htm

30. Federal Reserve Bank of New York By Investopedia Staff Dec 18, 2020; Link: https://www.investopedia.com/terms/f/federal-reserve-bank-of-new-york.asp

31. SWIFT; Link: https://www.swift.com

32. SWIFT and the Weaponization of the U.S. Dollar- The U.S. has used the system as a stick before. Continuing down this path could trigger de-dollarization and an ensuing currency crisis. Saturday, Oct 6, 2018; Link: https://fee.org/articles/swift-and-the-weaponization-of-the-us-dollar/

33. The Atomic Bombings of Hiroshima and Nagasaki; Link:

https://www.atomicarchive.com/resources/documents/med/med_chp10.html

34. “Wipe the Soviet Union Off the Map”, 204 Atomic Bombs against 66 Major Cities, US Nuclear Attack against USSR Planned During World War II When America and the Soviet Union Were Allies. By Prof Michel Chossudovsky Global Research, Oct 27, 2018; Link: http://www.globalresearch.ca/wipe-the-ussr-off-the-map-204-atomic-bombs-against-major-cities-us-nuclear-attack-against-soviet-union-planned-prior-to-end-of-world-war-ii/5616601

35. The Sinews of Peace (‘Iron Curtain Speech’) Mar 5, 1946; Link: https://winstonchurchill.org/resources/speeches/1946-1963-elder-statesman/the-sinews-of-peace/

36. Project for the New American Century Oct 16, 2019; Link: https://militarist-monitor.org/profile/project_for_the_new_american_century/

37. 1998 PNAC Letter to President Clinton on Iraq Jan 26, 1998; Link: https://zfacts.com/zfacts.com/metaPage/lib/98-Rumsfeld-Iraq.pdf

38. Rebuilding America’s Defenses- Strategy, Forces and Resources for a New Century. A Report of The Project for the New American Century By Donald Kagan, and Thomas Donnelly Sept, 2000; Link: https://cryptome.org/rad.htm; https://archive.org/details/RebuildingAmericasDefenses

39. List of PNAC Members associated with the Administration of George W. Bush; Link: https://gyaanipedia.fandom.com/wiki/List_of_PNAC_Members_associated_with_the_Administration_of_George_W._Bush

40. The 9/11 Commission Report- Final Report of the National Commission on Terrorist Attacks Upon the United States; Link: https://govinfo.library.unt.edu/911/report/911Report_Exec.pdf

41. Architects & Engineers for 9/11 Truth; Link: www.ae911truth.org

42. President Bush cites ‘axis of evil,’ Jan. 29, 2002 By Andrew Glass Politico Jan 29, 2019; Link: https://www.politico.com/story/2019/01/29/bush-axis-of-evil-2002-1127725

43. “We’re going to take out 7 countries in 5 years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan & Iran.” Interview with General Wesley Clark Global Research, Feb 06, 2018; Link: https://www.globalresearch.ca/we-re-going-to-take-out-7-countries-in-5-years-iraq-syria-lebanon-libya-somalia-sudan-iran/5166

44. A Timeline of the U.S.-Led War on Terror- In the wake of the attacks of 9/11, President George W. Bush called for a global “War on Terror,” launching an ongoing effort to thwart terrorists before they act. By History.com Editors May 5, 2020; Link: https://www.history.com/topics/21st-century/war-on-terror-timeline

45. A timeline of U.S. troop levels in Afghanistan since 2001 AP July 6, 2016; Link:

https://www.militarytimes.com/news/your-military/2016/07/06/a-timeline-of-u-s-troop-levels-in-afghanistan-since-2001/

46. Washington’s Twenty-First-Century Opium Wars: How a Pink Flower Defeated the World’s Sole Superpower- America’s Opium War in Afghanistan by Alfred McCoy Tom Dispatch Feb 21, 2016; Link: https://tomdispatch.com/alfred-mccoy-washington-s-twenty-first-century-opium-wars

47. The First World War – A Marxist Analysis of the Great Slaughter by Alan Woods June 2, 2019; Link: https://www.marxist.com/first-world-war-a-marxist-analysis-of-the-great-slaughter/16.-the-treaty-of-versailles-the-peace-to-end-all-peace.htm

48. Paris 1919: How the Peace Conference Shaped the Middle East; Link:

https://www.arcgis.com/apps/MapJournal/index.html?appid=afb36eefd9184d99afb1d654dc987767

49. The Impact of Western Imperialism in Iraq, 1798-1963 By Geoff Simons Dec, 2002; Link: https://www.globalpolicy.org/component/content/article/169-history/36399.html

50. Threats and Responses: The Iraqis; U.S. Says Hussein Intensifies Quest for A-Bomb Parts By Michael R. Gordon and Judith Miller NYT Sept. 8, 2002; Link:

https://www.nytimes.com/svc/oembed/html/?url=https%3A%2F%2Fwww.nytimes.com%2F2002%2F09%2F08%2Fworld%2Fthreats-responses-iraqis-us-says-hussein-intensifies-quest-for-bomb-parts.html#?secret=uidQmCNcdY

51. Colin Powell Still Wants Answers- In 2003, he made the case for invading Iraq to halt its weapons programs. The analysts who provided the intelligence now say it was doubted inside the C.I.A. at the time. By Robert Draper NYT Jan. 11, 2021; Link: https://www.nytimes.com/2020/07/16/magazine/colin-powell-iraq-war.html

52. Lie After Lie: What Colin Powell Knew About Iraq 15 Years Ago and What He Told the U.N.- The evidence is irrefutable: Powell consciously deceived the world in his 2003 presentation making the case for war with Saddam Hussein. By Jon Schwarz

Jon Schwarz The Intercept Feb 6, 2018; Link:

https://theintercept.com/2018/02/06/lie-after-lie-what-colin-powell-knew-about-iraq-fifteen-years-ago-and-what-he-told-the-un/

53. The cost of the Iraq war Mar 19, 2013; Link: https://www.registerguard.com/article/20130319/OPINION/303199842

54. The Libya Gamble- A New Libya, with ‘Very Little Time Left’. The fall of Col. Muammar el-Qaddafi seemed to vindicate Hillary Clinton. Then militias refused to disarm, neighbors fanned a civil war, and the Islamic State found refuge. By Scott Shane and Jo Becker NYT Feb. 27, 2016; Link: https://www.nytimes.com/2016/02/28/us/politics/libya-isis-hillary-clinton.html

55. President Obama: Libya aftermath ‘worst mistake’ of presidency BBC April 11, 2016; Link: https://www.bbc.com/news/world-us-canada-36013703

56. Coups and terror are the fruit of Nato’s war in Libya- The dire consequences of the west’s intervention are being felt today in Tripoli and across Africa, from Mali to Nigeria by Seumas Milne The Guardian May 22, 2014; Link: https://www.theguardian.com/commentisfree/2014/may/22/coups-terror-nato-war-in-libya-west-intervention-boko-haram-nigeria

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

58. Ending the Yemen war is both a strategic and humanitarian imperative by John R. Allen and Bruce Riedel Brookings Monday, Nov 16, 2020;

https://www.brookings.edu/blog/order-from-chaos/2020/11/16/ending-the-yemen-war-is-both-a-strategic-and-humanitarian-imperative/embed/#?secret=48yOxEXf85

59. U.S. War Crimes in Yemen: Stop Looking the Other Way- The State Department warned for years that the U.S. was complicit in war crimes in Yemen. No one put a stop to it. Foreign Policy in Focus by Andrea Prasow Sept 21, 2020; Link:

https://www.hrw.org/news/2020/09/21/us-war-crimes-yemen-stop-looking-other-way

60. Costs of War Brown University; Link: https://watson.brown.edu/costsofwar

61. U.S. military spending from 2000 to 2019; Link: https://www.statista.com/statistics/272473/us-military-spending-from-2000-to-2012/

62. Here are all the treaties and agreements Trump has abandoned By Zachary B. Wolf and JoElla Carman, CNN Fri, Feb 1, 2019; Link: https://www.cnn.com/2019/02/01/politics/nuclear-treaty-trump/index.html

63. A China-Iran bilateral deal: Costs all around- Beijing sees an opportunity in Tehran’s international isolation – but may not realise the tangle it is entering. By Jeffrey Payne Sept 2, 2020; Link: https://www.lowyinstitute.org/the-interpreter/china-iran-bilateral-deal-costs-all-around

64. China signs huge Asia Pacific trade deal with 14 countries By Jill Disis and Laura He, CNN Business Tue Nov 17, 2020; https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html

65. The Strategic Implications of the China-EU Investment Deal- The EU-China Comprehensive Agreement on Investment is a win for China, and a blow to transatlantic relations. By Theresa Fallon Jan 4, 2021; Link: https://thediplomat.com/2021/01/the-strategic-implications-of-the-china-eu-investment-deal/

66. EU–US tensions mount after EU signs trade deal with China by Alex Lantier Jan 4, 2021; Link: https://www.wsws.org/en/articles/2021/01/05/euch-j05.html

67. Fed chief pledges massive support for Wall Street will not cease by Nick Beams Jan 16, 2021; Link: https://www.wsws.org/en/articles/2021/01/16/powl-j16.html

68. Is the US Dollar’s Role as the World’s Reserve Currency Under Threat? International Banker. Sept 30, 2020; Link: https://internationalbanker.com/finance/is-the-us-dollars-role-as-the-worlds-reserve-currency-under-threat/

69. 3 Major Signs That Precede the Fall of World Reserve Currencies- Economics by Graham Smith Oct 24, 2019; Link: https://news.bitcoin.com/3-major-signs-that-precede-the-fall-of-world-reserve-currencies/

70. 75 Years ago the U.S. Dollar Became the World’s Currency. Will that last? By Greg Rosalsky Jul 30, 2019; Link:

https://knpr.org/npr/2019-07/75-years-ago-us-dollar-became-worlds-currency-will-last

Figure 1 and Tables 1, 2

Figure 1. Map of Western Asia and Middle East. Source: https://ian.macky.net/pat/map/easa/easa.html

Table 1. Major economic legislation since the election of Ronald Reagan in 1980.

DateTitleAdministration
1981Economic Recovery Tax ActReagan
1986Tax Reform Act of 1986Reagan
2001Economic Growth and Tax Relief Reconciliation Act (EGTRRA)GW Bush
2003Jobs and Growth Tax Relief Reconciliation Act (JGTRRA)GW Bush
2010Tax Relief, Unemployment Insurance Reauthorization, and Job Creation ActBush/Obama
2012American Taxpayer Relief ActBush/Obama
2017Tax Cuts and Jobs Act (TCJA)Trump
1993North American Free Trade Agreement (NAFTA)Clinton
1996Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA)Clinton
1999Gramm–Leach–Bliley Act (GLBA; Financial Services Modernization Act)Clinton
2000Commodity Futures Modernization Act (CFMA)Clinton

Table 2. US involvement in conflicts and conflict zones since 911.

ConflictAdministrationDate
AfghanistanGW Bush2001-present
IraqGW Bush2003-present
LibyaObama2011- present
UkraineObama2014-present
SyriaObama2014-present
YemenObama2014-present
Eastern Europe/Russian BorderClinton- Trump1997-Present
China Sea/Western PacificObama/Trump2011-present
Persian GulfBush/Obama/Trump2003-present

Economic war on Lebanon, into 2021: Dr Marwa Osman

Dr Marwa Osman’s Press TV program, 13 January 2021

عام التحوّل العظيم…

باريس – نضال حمادة

يواجه الغرب عاصفة كاملة. لقد فشل في مواجهة الوباء وفشل نظاميّ للديمقراطية الليبرالية. وأيضاً فشل اقتصاداتها الغارقة في ركود عميق، بينما تتقدّم الصين في السباق. والآن، كما نرى، تواجه الولايات المتحدة أسوأ أزمة سياسية لها منذ الحرب الأهلية.

لقد جادلت بأنّ عام 2020 سيُنظر إليه على أنه عام التحوّل العظيم، عندما ترى غالبية سكان العالم الصين كقائد عالمي جديد. سيؤدّي انهيار النظام السياسي الأميركي إلى تسريع تكريس هذه الزعامة بشكل كبير.

لقد تمّ التقليل من شأن طبيعة الأزمة السياسية الأميركية إلى حدّ كبير، وأسبابها عميقة للغاية. فالبلاد منقسمة إلى نصفين، مستقطبة بشكل ميؤوس منه ونظام حكومتها مشلول. السؤال الأساسي هو: ما هي الأسباب الكامنة وراء هذا الوضع؟

تشهد أميركا حالة من التدهور منذ الثمانينيات، وبشكل كبير منذ عام 2008. على مدى أربعة عقود، عانى نصف السكان من هبوط أو ركود في مستويات المعيشة. لقد وصل عدم المساواة إلى مستويات الثلاثينيات من القرن الماضي إنْ لم يكن قبل ذلك. انتهى الحلم الأميركي.

طوال تاريخها تقريباً، كانت أميركا في صعود. لم يعرف عنها أيّ شيء مختلف. لقد انتهى هذا العصر. من المتوقع أن تصبح أميركا أقلّ أهمية بكثير. يتمّ استبدالها بسرعة باعتبارها القوة الأولى في العالم من قبل الصين.

المؤسّسة الغربية غير قادرة على قبول ما لا يمكن وصفه إلا بنهاية الغرب كما عرفناه. إنّهم يتشبّثون بالماضي وينكرون الحاضر ويعيشون في خوف من مستقبل مختلف تمامًا. نحن نشهد نقلة نوعية عميقة.

كان من الممكن أن يكون التراجع أسرع لو لم تلجأ أميركا إلى تحويل الدولار إلى دولار بترودولار، والذي بدوره أبقى المطابع مستمرة وتمويل النزعة العسكرية وكلّ شيء بينهما من دون هذا النوع من التضخم الذي من شأنه أن يشلّ أيّ بلد آخر.

China’s Economy of Peace

China’s Economy of Peace

December 14, 2020

by Peter Koenig for the Saker Blog

In the context of China’s webinar on 14 December 2020, on the topic of “China’s New Development Paradigm and High-Quality Belt and Road Cooperation”, organized by the China Center for Contemporary World Studies, International Department of CPC Central Committee and the Chongyang Institute for Financial Studies, Renmin University of China, my presentation was on China’s Economy of Peace.
—–
China, about a decade ago, has deliberately embarked on an Economy of Peace. A strategy that China pursues, unimpressed by constant aggression from the west, which are mostly led by the United States. Is it perhaps this Chinese steadfast, non-aggressive way of constant forward-creation and embracing more and more allies on her way – that has made China such a success story? Overcoming violence by non-violence is engrained in 5000 years of Chinese history.

Despite relentlessly repeated assertions by the west, China’s objective is not to conquer the world or to “replace” the United States as the new empire. Quite to the contrary. The alliance China-Russia and the Shanghai Cooperation Organization (SCO) is seeking a multipolar world, with more justice for all – i. e. fairer trade in the sense of “win-win”, where all parties are benefitting equally. This is also a policy pursued by the recently signed Regional Comprehensive Economic Partnership, or RCEP, the 15-country trade agreement signed at the 37th ASEAN Summit – 11 November 2020, in Vietnam, as well as by President Xi’s Belt and Road Initiative (BRI), launched in 2013 by the President himself.

China does not coerce cooperation – but offers peaceful cooperation. In 2014, Mr. Xi traveled to Germany to offer Madame Merkel for Germany to become – at that time – the western most link to the BRI, or the New Silk Road. This would have been an opening for all of Europe. However, Madame Merkel, having to follow Washington’s mandates – did not respond positively. President Jinping returned to Beijing, no hard feelings. And China continued her persistent course of connecting the countries of our Mother Earth with transport infrastructure, inter-country industrial ventures, education and research projects, as well as cultural exchanges to enrich the world – all the while respecting individual countries’ monetary and political sovereignty.

Many country leaders from Africa and the Global South in general express openly their contentment and satisfaction to have China as a partner and for dealing with China on the basis of equals. With the west, especially the US, there is bullying and coercion, unequal contracts, and often total disrespect for legally signed contracts.
——

Meanwhile, the west lives in a permanent state of hypocrisy. It bashes China – actually without any reason, other than that the dying Anglo-Saxon-American empire mandates it to its partners, especially the European NATO allies – under threats of sanctions. Unfortunately, spineless Europe mostly complies.

Yet, having outsourced – for economic and profit reasons – most production processes to reliable, efficient and cheaper-labor China, the west depends very much on China for its supply chains. The covid-crisis, first wave, has clearly shown how dependent the west is on goods produced in China from sophisticated electronic equipment to pharmaceuticals.

As an example: About 90% or more of antibiotics or ingredients for antibiotics are Made in China. Similar percentages apply to other vital western imports. – But China does not “punish” or sanction. China creates and moves forward offering her alliance to the rest of the world.

China has also developed a new digital international Renminbi (RMB) or Yuan that may soon be rolled out for use of monetary transactions – of all kinds, including transfers, trade and even as a reserve currency. The yuan is already an ever-stronger reserve currency. This trend will be further enhanced through the RCEP and BRI.

Of course, the US is afraid that their dollar-hegemony they have built up since WWII with Fiat money backed by nothing, may suffer as international trading currency which the Anglo-American banking cartel practically imposed on the world, will come to an end; and the US-dollar’s standing as a reserve currency may rapidly decline.

And yes, the yuan will gradually replace the US dollar as reserve currency – and this – because countries’ treasurers realize that the yuan is a stable, gold-backed currency, also supported by a solid economy – the only economy of any importance in the world that will grow in the covid-year 2020, by perhaps as much as 3.5%, while western economies will falter badly. Predictions are dire for the US and Europe, between 12% (EU predictions) and up to 30% / 35% (US FED prediction).

The US dollar and its dominion over the international transfer system through SWIFT – has been used massively for sanctioning non-compliant countries, including totally illegal confiscation of assets – even countries reserve assets – case in point is Venezuela.

Escaping this coercive dollar dominion is the dream of many countries. Therefore, trading, investing and dealing with the Chinese currency, will be a welcome opportunity for many sovereign nations.
—-
China’s economic achievements and forward-looking perspectives may be summarized in two major events or global programs, the just signed free trade agreement with 14 countries – the 10 ASEAN countries, plus Japan, South Korea, Australia and New Zealand, altogether, including China 15 countries. The so-called Regional Comprehensive Economic Partnership, or RCEP, was in negotiations during eight years – and achieved to pull together a group of countries for free trade, of some 2.2 billion people, commanding about 30% of the world’s GDP. This is a never before reached agreement in size, value and tenor.

In addition to the largest such trade agreement in human history, it also links to the Belt and Road Initiative (BRI), or One Belt, One Road (OBOR), which in itself comprises already more than 130 countries and more than 30 international organizations. Also, China and Russia have a longstanding strategic partnership, containing bilateral agreements that too enter into this new trade fold – plus the countries of the Central Asia Economic Union (CAEU), consisting mostly of former Soviet Republics, are also integrated into this eastern trade block.

The myriad of agreements and sub-agreements between Asian-Pacific countries that will cooperate with RCEP, is bound together by the Shanghai Cooperation Organization (SCO), founded on 15 June 2001 in Shanghai as an intergovernmental organization, composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The SCO is little known and little talked-about in the west.

The purpose of the SCO is to ensure security and maintain stability across the vast Eurasian region, join forces to counteract emerging challenges and threats, and enhance trade, as well as cultural and humanitarian cooperation.

Much of the funding for RCEP and BRI projects may come in the form of low-interest loans from China’s Asian Infrastructure and Investment Bank (AIIB) and other Chinese and participating countries’ national funding sources. In the hard times emerging from the covid crisis, many countries may need grant assistance to be able to recover as quickly as possible from their huge socioeconomic losses, created by the pandemic. In this sense, it is likely that the new Silk Road may support a special “Health Road” across the Asian Continent.

The RCEP may, as “byproduct”, integrate the huge Continent of Eurasia that spans all the way from western Europe to what is called Asia and covering the Middle East as well as North Africa, of some 55 million square kilometers (km2), and a population of about 5.4 billion people, close to 70% of the world population – See map (Wikipedia).

The crux of the RCEP agreement’s trade deals is that they will be carried out in local currencies and in yuan – no US-dollars. The RCEP is a massive instrument for dedollarizing, primarily the Asia-Pacific Region, and gradually the rest of the world.

Much of the BRI infrastructure investments, or New Silk Road, may be funded by other currencies than the US-dollar. China’s new digital Renminbi (RMB) or yuan may soon become legal tender for international payments and transfers, and will drastically reduce the use of the US-dollar.

The US-dollar is already in massive decline. When some 20-25 years ago about 90% of all worldwide held reserve-assets were denominated in US-dollars, this proportion has shrunk by today to below 60% – and keeps declining. The emerging international RMB / yuan, together with a RCEP- and BRI-strengthened Chinese economy, may further contribute to a dedollarization, as well as dehegemonization of the United States in the world. And as said before, the international digital RMB / yuan may progressively also be replacing the US-dollar, as well as euro reserves in countries’ coffers around the globe. The US-dollar may eventually return to be just a local US-currency, as it should be.

Under China’s philosophy, the unilateral world may transform into a multi-polar world. The RCEP and New Silk Road combination are rapidly pursuing this noble objective, a goal that will bring much more equilibrium into the world.

Maybe for a few years more to come, the west, led by the US – and always backed by the Pentagon and NATO, may not shy away from threatening countries participating in China’s projects, but to no avail. Under Tao philosophy, China will move forward with her partners, like steadily flowing water, constantly creating, avoiding obstacles, in pursuit of her honorable goal – a world in Peace with a bright common future.

*****
Peter Koenig is a geopolitical analyst and a former Senior Economist at the World Bank and the World Health Organization (WHO), where he has worked for over 30 years on water and environment around the world. He lectures at universities in the US, Europe and South America. He writes regularly for online journals such as Global Research; New Eastern Outlook (NEO), Information Clearing House (ICH) and more. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed; and  co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020)

The Twilight of Neo-liberalism?

The Twilight of Neo-liberalism?

by Francis Lee for the Saker Blog

It speaks volumes about the gravity of the current political and economic situation that the leading US investment bank Goldman-Sachs has seen fit to issue a sombre warning.

‘’Goldman Sachs Group Inc. put a spotlight on the suddenly growing concern over inflation in the U.S. by issuing a bold warning on Tuesday that the dollar is in danger of losing its status as the world’s reserve currency. With Congress closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy, and the Federal Reserve having already swelled its balance sheet by about $2.8 trillion this year, Goldman strategists cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign-exchange markets …

There are many factors pushing the gold price higher, including fear of increasing political uncertainty, rising concerns involving another spike in COVID-19 infections in the country, increasing government debt, rising inflation, and concerns that the US dollar is seeing a new downtrend to the Chinese Yuan.’’ (1)

The fact that gold is being spoken about by the financial cognoscenti is in itself significant. Gold bugs (like me!) have long been regarded by orthodox academic economists and business financiers as being beyond the pale in terms of their relevance to current economic and financial issues. But, as with everything, times change, fashion changes, paradigm shifts take place – such is the way of the world.

At the time of writing gold has, after the 2012 engineered smackdown, been ascending remorselessly toward its present gold price of $1972,00.00 a whisker away from $2000.00 per oz. This latter price has an important psychological significance – a tipping point for both investors and owners of this particular asset. The new economic order established paper assets – representations of wealth, which replaced real wealth – i.e., gold. This was the beginning of the new epoch, a turbulent period now reaching what appears to be a climax. The increasing economic disorder has become chaotic since that date as fundamental and seemingly intractable problems began to manifest themselves.

The Nonage

In order to maintain a semblance of vitality, western capitalism entered into a period of steroid-enforced growth based upon increasingly unorthodox methods. This inflexion point took place in 1971 when in a televised broadcast Richard Nixon took the US off the gold standard and introduced a fiat standard based purely upon the US dollar. This was a little later supplemented by the US-Saudi agreement whereby oil would be fixed to a dollar price. At a stroke, these two events destroyed the Bretton Woods system of a dollar-gold standard with the $ convertible with gold at $35 per oz. The old order was finished; a new ideological economic regimen was rolled out. When and how long it might last is a matter of speculation.

In this Brave New World and following the lead of the US most of the rest of the world economies followed suit. This was a pivotal moment in economic history. But, whisper it softly, there were deep-going structural weaknesses initially hidden from view in the new economy which would eventually become increasingly problematic. The global economy had become increasingly dependent on expanding debt levels and on the expansion of fictitious capital. This was all part of what was to become known as neoliberalism, globalization or increasing financialization, call it what you will, it amounts to the same thing. [2]

Fictitious capital, consists of layers of financial paper assets – but it should be understood that these ‘assets’ are only symbols of value, not real values. For example, company shares which are traded like goods and services do not, in the same way, embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value it is only a claim on value. Real value is the production of goods and services such as cars, haircuts, IPhones, hotels and eating out, aroma therapy, shoes, books … and so forth, in a productive economy. This as opposed to rising share/stock prices which are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity.

John Stuart Mill once commented in this respect.

‘’The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies’’ (3)

Capital movements into and out of existing assets was not necessarily productive investment but mainly pure speculation. And speculation itself was driven by increasing levels of cheap debt, both sovereign and private. This process may be observed in the Fed’s force-feeding new monies into the economy at which corporations use this largesse to buy-back their own stock thus enhancing their market price. Insofar as it might be produced it becomes clear that finance led growth is based upon trickle-up economics in which the gains of the wealthy come directly at the expense of ordinary people. Financialization involves the extraction of economic rent from the circulation (of capital) process, as well as patents, copyrights and land/property.

The United States demonstrates these tendencies very clearly and its interest rates remain the dominant influence across the mature economies. This is due to the dollar’s role as a reserve status, i.e., the world money. But there has been a long trajectory of decline in real commercial bank interest rates which averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% and even lower ever since. They are now being held down to zero or even minus interest levels and functioning as free monies for the speculating community or corporations who wish to avail themselves to this monetary largesse to increase their market capitalisation. Demonstrably the US and the rest of the mature economies have been undergoing a secular decline since the 1970s which has eventuated in what seems to be a policy of demented money printing.

Moreover, financialisation has not to any extent been adept at creating more wealth for all, but instead has channelled this wealth to particular favoured groups. This is evidenced with the GDP metric which is only measured in terms of output and not the distribution of and ownership of wealth produced. The result is, in short, that the rich have got considerably richer and the rest have either stagnated or declined. And this has not been an accident.

Maturity and Decline

The present crisis in the global economy has been brought about by the culmination of a number of variables which taken as a whole have been responsible for the present impasse. All the early promises of a new world order of stability, prosperity and peace which were touted in the 80s 90s and 00s never lived up to their billing. The then UK Prime Minister, Gordon Brown, boasted that under ‘New Labour’s’ stewardship the boom-bust cycles of both the domestic and world economies had been banished. University of Chicago’s Professor Robert Lucas claimed that macro-economics had ‘’solved for all practical purposes’’ the problem of economic depressions. In the real world, however, the entire period from 1971 and well into the 21st century was punctuated by a series of rolling bubbles and crises: the 1987 stock market crash, 1990, the collapse of the junk bond market, the 1994 great bond market massacre together with the Tequila crisis in Mexico, the 1997 Asian financial crisis, the 1998 collapse of Long Term Capital Management, the 1998 default in Russia, and the 2000-02 dot-com bubble crash and finally the 2008 blowout. These once in a lifetime events seem to occur every year or so.

But the economic/financial powers that be (PTB) ensconced in the ivory towers of University Economics departments and Editorials in the Washington Post, Financial Times, The Wall Street Journal and Economist were having none of it. As these esteemed ladies and gentlemen saw it the new paradigm was going through a ’tricky’ teething stage and all would be well in the fullness of time, or so we were persuaded. It is difficult to know whether or not these people actually believed what they were articulating or were just plain stupid. But their theories at times actually verged upon a timeless circulation of axioms which are true by definition. It has been noted that,

‘’Academic economics has become a disaster and disgrace … Not only did the academic economists fail to see the great 2008 implosion coming, they weren’t even looking in the right direction. And having been surprised by its arrival, they had little to say about its implications – the greatest event to have befallen the capitalist system since WW2 … although there are shining exceptions, most academic economists, whilst clinging to the idea that their subject is relevant and of interest to the wider world, in fact practice a modern form of medieval scholasticism – of no use to man or beast. The output of this activity consists of articles entombed in ‘scholarly’ journals usually about questions of startling irrelevance, badly thought out and appallingly badly written, littered with jargon and liberally dosed with mathematics, destined to be read by no-one outside of a narrow coterie, and increasingly, not even by them.’’ (5) Agreed!

The Interregnum 2008-2020

The Great Financial Crisis (GFC) of 2008 has shown that perpetual growth and progress is an illusion. Moreover this was the first leg of the mega-crisis of which the second leg is now looming. Recent indicators include structural unemployment which is around 15% in the US – but this figure is almost always understated: See John Williams’ excellent repudiations in Shadow Government Statistics. Additionally there has been the growth of semi-employment in the ‘gig’ economy, short-term contracts, non-unionized labour, and illegal (often foreign) presence in itinerant employment and workers from the EU’s southern and eastern peripheries who are temporarily employed on farms during the summer for lack of UK workers. Many of these workers have no insurance or medical cover and live hand-to-mouth on a daily basis.

Unprecedented debt levels, chronic levels of debt-driven consumption are now common-place and the modern workforce is increasingly stratified. There are well-paid jobs for a small portion of those with requisite skills, but the vast majority of new employment is in the low paid service sector, such as retail, leisure, hospitality, security, aged care, and health care … youth unemployment remains high, even where work can be found starting incomes are around 10 to 12 percent lower than they were in 2007.

This situation was not only present in the UK but on the European continent also.

Millions of Europeans in temporary, part-time or bogus self-employed contracts can only find insecure and badly paid jobs, despite the healthy economic climate. That is the price of deregulating labour markets, Investigate Europe reports. This precarious set of labour conditions was created intentionally.

‘’The misery of bad jobs has many faces. It can take the form of work contracts without health or social insurance; it can be part-time jobs, which don’t pay enough to live on. Or those affected are kept dangling from one temporary contract to the next, or they have to eke out a living as bogus self-employed and contract workers. The methods vary from one country’s national legislation to that of another, but the outcome is always the same: millions of EU citizens have to get by with insecure and badly paid jobs, offering them no prospects.’’ (6)

2020 – the Debacle

Thus the world enters the second decade of the 21st century totally unprepared for what’s coming and with a leadership bereft of any plans or ideas of how to handle the situation. GDP growth is in unprecedented negative territory pretty much everywhere. In the United States, the birthplace of the Washington Consensus, GDP growth rate fell by no less than -32.9% and GDP annual growth rate by -9.5%. In Germany GDP growth rate fell by -10.1% and annual GDP growth rate by -11.7%. In China GDP growth rate was positive 11.5% and annual GDP growth rate was 3.2%. In the euro area GDP growth rate was -12.1% and annual growth rate was -15%. These are quite extraordinary figures which will need to sink in before any reasoned judgements are made. One look at the US situation is hardly comforting however.

‘’On Thursday, the Labor Department reported that 1.43 million new claims for unemployment benefits were filed last week, the 19th straight week that new claims have exceeded one million. After declining for months, new claims have risen over the last two weeks.

The number of workers claiming continuing unemployment benefits also rose from 16.1 million to 17 million for the week ending July 18. In addition, 830,000 new claims were filed for federal Pandemic Unemployment Assistance, which covers self-employed, gig workers and others who do not qualify for traditional jobless benefits.

Under these conditions, the $600-a-week federal supplement to state unemployment benefits is running out today for an estimated 20 million workers. Overnight, millions will see their incomes cut by two-thirds, from an average of $921 a week in May to about $321 a week. In some states, the theft of this lifeline will be even worse. In Oklahoma, jobless aid will be cut by 93 percent to $44 a week.

It is a measure of the precarious situation American workers faced even before the pandemic that the weekly supplemental assistance and the paying out of a one-time $1,200-per-person “stimulus” check led to a 45 percent increase in US personal income in the second quarter. Seventy percent of those who returned to work in June suffered an income loss by doing so.

Last week, the moratorium on evictions expired for about 18 million renters—more than a third of the 44 million total US renter households—who live in buildings with mortgages backed by the federal government. With rent bills accumulated over the last four months now due, housing advocates predict a “tsunami” of evictions, with half a million households in Los Angeles alone threatened.

Millions in the US are also going hungry. According to a US Census Bureau survey, food insecurity last week reached its highest reported level since May, with almost 30 million Americans reporting they had not had enough to eat at some point in the seven days through July 21.’’ (7)

Mindful of the impact of the Corona Virus and not wishing to rush to any rash judgement, the fact still remains that the world economy was already in a parlous and brittle condition, long over-due for a big correction which was going to happen with or without the complication of the Corona Virus. All the sugar-coated promises made at the turn of the century by various politicians, journalists, and world leaders regarding the new economy, a world-wide system of prosperity peace, harmony and growth turned out to be fairy-tales best suited to infants – and infants are precisely what our leaders seem to think we are.

Speculating about future developments is difficult since we are in the early phases of the downturn. What we do know is that it is like most previous downturns but beyond bad and seemingly unprecedented. Events can only be assessed retrospectively. It is now also clear that hegemonic turbo-capitalism and its tendency toward imperialism and war is not congruent for further human development and even perhaps life on this planet. This seems patently obvious to anyone who actually thinks about these issues. We (humanity) is now at a critical juncture in history. But the world has postponed, indefinitely, dealing decisively with the challenges. Anyone who questions the present course is held up to ridicule as a professional permanent pessimist, or worse. Nothing is done, and we ignore reality. Unfortunately as the Russian/American writer Ayn Rand – who is not one of my favourite writers – declared. “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

Enough said. Francis Lee

NOTES

(1)Bloomburg – 27-July-2020

(2) Phillip Mullan – Creative Destruction – pp57/5 – ’In addition to the direct contribution of the fire sector to raising GDP artificially, the explosive growth in debt and other features of financialization a major, probably a bigger role.

(3) The notion of economic rent – made famous by David Ricardo and his theory of ground-rent – is based upon the extraction of rent from particular income streams or other assets, including land. Monopolistic rents are those which contain price levels which are over and above the costs of production.

(4) J.S.Mill – The Principles of Political Economy – 1848

(5) Roger Bootle – The Trouble with Markets – pp.232-233

(6) Tagesspiegel – Berlin – 25-10-2017

(7) World-Wide Socialist Website – 31-July-2020

The problem with the various ‘Fiat is all the problem!’ (FIATP) crowds

June 09, 2020

The problem with the various ‘Fiat is all the problem!’ (FIATP) crowds

By Ramin Mazaheri for the Saker Blog

“‘(The German economist Kestner wrote:) The greatest success no longer goes to the merchant whose technical and commercial experience enables him best of all to understand the needs of the buyer, and who is able to discover and effectively awake a latent demand; it goes to the speculative genius [?!] who knows how to estimate, or even only to sense in advance the organisational development and the possibilities of connections between individual enterprises and the banks.’

Translated into ordinary human language this means the development of capitalism has arrived at a stage when, although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the big profits go to the ‘geniuses’ of financial manipulation. At the basis of these swindles and manipulations lies socialised production; but the immense progress of humanity, which achieved this socialisation, goes to benefit the speculators. We shall see later how ‘on these grounds’ reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to ‘free’, ‘peaceful’ and ‘honest’ competition.” (emphasis his)

  • V.I. Lenin

The rather ideology-defining question of connecting banks and businesses; socialising the production and creating massive human progress, but then privatising the gains; (Corona proving the loser of the Cold War was both the USSR & the USA because corona exposed how in order to beat the USSR the US turned to) the constant swindles and manipulations of hyperfinancialisation, like Quantitative Easing… Lenin could have easily also unmasked the “Fiat is all the problem” critics of neoliberal capitalism in 2020 – like this article will – but Lenin lays in Red Square (because he is still so important today).

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During the corona overreaction into Great Lockdown into US rebellions era many of the most dynamic commentators are those who feel dominated, insulted, financially cheated and unfairly bested by the almighty US greenback, which they insist is about to become less valuable than used toilet paper (as the value of unused toilet paper has infamously skyrocketed during the Great Lockdown).

A whole range of political, economic and moral ideas are represented by these who insist that the primary problem in non-socialist-inspired nations is paper (fiat) money and its alleged overprinting:

Goldbugs, bitcoin evangelists, and silver miners; crooked Austrian economic policemen and their sons and daughters who follow “the (University of) Chicago Way: Get them before they get you”; Trotskyists who kind of understand economics but interpret every stock market dip as a sign that capitalism is finally collapsing under the weight of its own contradictions; anti-imperialists who are getting ready all the yuan they have been hoarding under their mattress – all these groups have insisted since the start of QE5 (i.e., QE 2.1) that the very next sheet of printed dollars will be the one which breaks the greenback’s back.

I accurately related what happens to the US dollar in times of economic crisis in No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all, but this article seeks to correct another incorrect view related to and often shared by these ardent “dollar demisers”:

The problem is not the dollar, nor the fact that it is issued on paper, nor the fact that QE issues money via a keyboard tap – the problem is not even the nature of money itself but the capitalist-imperialist culture which surrounds that money. Thus, the problem with the “Fiat is all the problem” (FIATP) crowds is that they obsessively see only a financial system instead of a moral-political system.

Translated into ordinary human language: The “dollar demisers” have no conception that the problem is not paper money, nor is it all money – it is the capitalist ideals regarding money.

Goldbugs: Old Testament fire and brimstone in monetary policy

Of the FIATPs the most resistant to modern political ideas – and the ones who are the most vocal and the most certain about the immediate collapse of the dollar – are the proponents of gold, but also many bitcoiners.

I understand their frustration: I, too, would be upset if I believed that overprinting should lead to a drop in the greenback… but then if I believed that it would mean that I foolishly believed that economics followed mathematical laws, and it would also indicate that I had little understanding about the political-social-moral role money plays in the absolute non-science of economics.

This group, which believes that the physical asset they have invested in should be worth more than it currently is, has two major flaws: 1) They view economics as investors, not as real people/workers. The former are competing at least partially as carnival barker salesmen: they want THEIR product to win so they can profit. 2) Unlike normal people/workers, they do not realise that it doesn’t matter at all if nothing is “backing” fiat in the 21st century – the real-world necessity of needing to get something in return for your labor makes paper as good as gold, or as good as cowrie shells, or as good as increasingly scarce toilet paper, or as good as whatever a government-backed-by-guns says that it is. If the government says we go back to cowrie shells then we all go back to cowrie shells, and this could absolutely be a positive thing because money is merely a tool, duh!

The gold proponents sound the most Old Testament – they act as if it is a God-given law that gold and only gold or gold-backed tools must be used as a medium of exchange and that it is just a matter of time before God’s wrath smites us for going fiat. I am unaware of this verse in Scripture.

Goldbuggers especially feel entitled to some sort of moral supremacy over the “early adopters” of digital fiat money (i.e. QE) when the average person knows they deserve nothing of the sort.

Gold and silver, after all, only became poplar because monarchs and aristocrats thought that wearing shiny stuff would give them an air of divinity to us plebes. That Lenin quote doesn’t apply to this crowd, for whom there is no “development of capitalism” – no changes or progress – merely the eternal value of gold (their God), which always was and always will be.

Austrians/Chicagoans/Bitcoiners – ‘moral hazard is when I don’t profit’

Bitcoiners can be placed along with the goldbugs because they both share an intense moral rage. However, libertarian/radical-individualist bitcoiners don’t have an old-fashioned sense of collective morality, thus their critiques of 21st century Western capitalism lack Biblical depth. This is why many of them really belong with the Chicago/Austrian crowd, which is ruled by competition, cruelty and greed-is-good.

(However, I am an open supporter of bitcoin, and we’ll see that those who would use bitcoin for personal and not social gain actually fall into all three camps.)

The Austrian/Chicagoan crowd… wow. It’s not really sure what they want – other than that they want money for themselves, and for the exciting law of the jungle to rule unchecked.

This group is defined by one primary characteristic: anti-socialism. The proof of their opposition to the ideology of political modernity is their Salafistic, fundamentalist insistence that all would be well if we could only just return to the roots of classic English liberalism. Oho! How they pine for the sweet days of Adam Smith & David Ricardo up until the Third World holocausts of the late Victorian era – what sweet days unmarred by problems they were!

These sentimental and thus ultimately right-wing critics of QE merely “dream of going back to ‘free’, peaceful’ and ‘honest competition” – Lenin had to deal with these types in his day as well.

We can certainly include many MMT-ers (Modern Monetary Theory) here, as they believe that capitalism is a way to control rentier exploitation, not expand it.

This entire group truly acts as if capitalism only started with the invention of the cotton gin or steam engine, and their primary fear mongering reflects that limited historical view: a warning that we are headed towards to “neo-feudalism”. But feudalism was certainly capitalist – there is ultimately no significant difference between the two in either their means nor their ends (simply change “king” for “banker” and “church” for “corporation”; certainly, nobody has ever confused feudalism with socialism.

This group insists that QE is a perverted degradation of sweet, sweet capitalism from the Salafist era of Smith and Ricardo. Oho! If only we could return to that angelic era unmarred by economic inequality when those mild and holy saints of competition spread the ideals – the TRUE ideals, not the false ones of this QE-corrupted era! – of the true capitalist gospel!

People like the MMT-ers because they are capitalists but at least they are not heartless hypocrites bent on ruining their country in order to show their personal greatness. However, they essentially claim to have found the elusive “Third Way” – I just don’t understand why they don’t openly push socialism, because after over a century of trying humans have found that there is no Third Way.

However, absolutely nobody likes Austrians/Chicagoans, and Austrians/Chicagoans are made quite content by that: they view it as proof that they are winning the competition over losers who are just jealous of their success.

The ‘QE feeds imperialism’ crowd – but then why did imperialism exist before digital fiat?

Bitcoin evangelists can often declare how fiat money feeds American imperialism. Surely, if everyone would buy some of their bitcoin and use it in everyday purchases, then Western militarism would collapse.

The obvious problem here is that these laudable anti-imperialists correctly perceive how imperialism is wrong and predatory as an economic system, but they fail to see how neo-imperialism is equally undergirded by a political-cultural-moral system. The Pentagon’s “war on ____” is not solely about the greenback – that is an outdated nation-state analysis and not a class-based view.

Their inevitable solution of isolationism (towards non-bitcoining nations) is the same flaw of the libertarians: as long as the extent of my individual rights/society are not curtailed, then I am content to not become involved in the problems of others. This “just wait for fiat to implode” leads to the same flaw as the Trotskyists “just wait for the capitalist system to implode” – what does Palestine, for example, do in the meantime? The moral aspect of this question should be obvious, but have you ever heard a bitcoiner discussing Palestine?

They discuss Palestine about as often as they discuss bitcoin’s moral Achilles heel: the fact that 40 percent of bitcoin is held by perhaps 1,000 owners (known as “whales”). If the moral philosophy of that tiny vanguard party is libertarianism, radical individualism and Anglo-American liberal Salafism (which it sadly is), then I for one say that we should confiscate their bitcoin immediately because how is their political-cultural-moral system they any different than American banksters? Aspiring to be an all-controlling bankster but with bitcoins is still banksterism.

Inevitability has laziness inherently inscribed in it, as well as selfish individualism, because YOU do not need to do anything, take a moral stand, resist, sacrifice, etc., only wait. Thus, of course comfortable bitcoin investors do nothing but play defense around their own little yard and digital wallets, waiting for the fiat-based economy to implode and then the price of bitcoin to explode: They feel they are all set – Palestinians deserve what they get because they haven’t gone fully bitcoin quickly enough.

Even Kestner had to write “[?!]” at these “speculative genius(es) who are indeed at the crest of the wave: Lenin, however, would surely say that many of them are actually just “reactionary, petty-bourgeois critics of capitalist imperialism”.

Conclusion: The world actually had major problems before QE-fiat

These groups lack coherence, modernity and popular appeal because when they look at the QE economy they see a financial system and not its concomitant political system.

When they do perceive a moral system they look with the isolated eyes of a Western individualist instead of with the united, consensus-respecting socialist outlook provided by billions of pairs of eyes. Therefore, FIATPs answer comes down to the same old Western answer post 1989: technology and technocratism. The FIATPs could have become epidemiologists, had they been biologically and not monetarily inclined.

FIATPs often deserve credit for seeing the internationalist aspects of Western war, but their lack of modern political ideology causes them to fail to see the domestic & historical aspects such as the Yellow Vests, Black Power Movement, the jailing of Eugene V. Debs, etc. They seem to think that because they have invented a new tool they have discovered a new morality – they have not, and this is another example of their often blatant arrogance and overweening pride.

The FIATPs hostility to socialism is based entirely on the outdated and always-inaccurate Western capitalist-imperialist propaganda that socialism is totalitarian (when it is instead all about the empowerment of the individual in order to reach his or her full potential), of course, but it is especially unfortunate with many of the bitcoiners because the social morality they are demanding in public policy is fundamentally socialist democratic, not liberal democratic – 99.9% of bitcoin holders are not whales, after all.

Money in any form – fiat, bitcoin, gold, beads, whatever – is not the key to happiness for anyone with a compass whose pointer extends to heaven even only occasionally. Money is the root of all evil – its pointer only drops towards earth, thus it will always carry the potential of carrying disastrous imbalances.

Goldbugs, bitcoin whales and Austrian/Chicagoan gangsters may be speculative geniuses and merchants talented at finding profits, but they are not a vanguard political party which can lead society to a healthy balance of broad prosperity and stability – they aren’t even right about money.

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Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis.

Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020

Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020

A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020

MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020

Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020

If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020

Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020

Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020

(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020

Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020

Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020

‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020

Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020

No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020

Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020

No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all – April 16, 2020

Same 2008 QE playbook, but the Eurozone will kick off Western chaos not the US – April 18, 2020

We’re giving up our civil liberties. Fine, but to which type of state? – April 20,

2020

Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020

Iran’s ‘resistance economy’: the post-corona wish of the West’s silent majority (1/2) – April 23, 2020

The same 12-year itch: Will banks loan down QE money this time? – April 26,

2020

The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020

What would it take for proponents to say: ‘The Great Lockdown was wrong’? – April 28, 2020

ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance – April 30, 2020

Given Western history, is it the ‘Great Segregation’ and not the ‘Great Lockdown’? – May 2, 2020

The Western 1% colluded to start WWI – is the Great Lockdown also a conspiracy? – May 4, 2020

May 17: The date the Great Lockdown must end or Everything Bubble 2 pops – May 6, 2020

Reading Piketty: Does corona delay the Greens’ fake-leftist, sure-to-fail victory? – May 8, 2020

Picturing the media campaign needed to get the US back to work – May 11, 2020

Scarce jobs + revenue desperation = sure Western stagflation post-corona – May 13, 2020

France’s nurses march – are they now deplorable Michiganders to fake-leftists? – May 15, 2020

Why haven’t we called it ‘QE 5’ yet? And why we must call it ‘QE 2.1’ instead – May 16, 2020

‘Take your stinking paws off me, you damned, dirty public servant!’ That’s Orwell? – May 17, 2021

The Great Lockdown: The political apex of US single Moms & Western matriarchy? May 21, 2021

I was wrong on corona – by not pushing for a US Cultural Revolution immediately – May 25, 2021

August 1: when the unemployment runs out and a new era of US labor battles begin – May 28, 2021

Corona proving the loser of the Cold War was both the USSR & the USA – May 30, 2021

Rebellions across the US: Why worry? Just ask Dr. Fauci to tell us what to do – June 2, 2021

Protesting, corona-conscience, a good dole: the US is doing things it can’t & it’s chaos – June 3, 2021

Why do Westerners assume all African-Americans are leftists? – June 5, 2020

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books Ill Ruin Everything You Are: Ending Western Propaganda on Red China’ and the NEW Socialisms Ignored Success: Iranian Islamic Socialism.

The Rise and Fall of Empires

Francis Lee for the Saker Blog

June 08, 2020

The Rise and Fall of Empires

I think that it would be true to say that sudden spurts of economic growth are often caused by preparation for war, war itself, and post-war reconstruction. This process in particular was occasioned by the end of WW1 which was succeeded by a restless and runaway period of economic growth based on the US Stock Market boom in 1929. Given the laws of capitalism and its immanent rhythm of boom-bust this break-down was entirely predictable.

The ensuing downturn migrated over the pond to a still weak Europe which had not really recovered from the carnage of 1914-18. The resulting depression in Europe was particularly acute in Germany since it was still attempting to pay its wartime reparations to the allies which had been foisted upon it as a result of the Versailles Treaty. This resulted in the great German inflation during the early to late 1920s.

As if this wasn’t enough, another blow to global economic and financial stability was to be delivered: this in the form of the Anstalt-Credit Bank failure of 1931. Credit-Anstalt was an exceptionally large bank based in Vienna. Given the interconnectedness of banking and finance, and the fragility of the European banking system at the time, one bank failure can give rise to multiple failures. In October 1929, the Austrian  Schober government compelled the allegedly well-financed Credit-Anstalt to assume liabilities, which together with the simultaneous Wall Street Crash led to the financial imbalance of the then-largest Austrian credit provider. Credit-Anstalt had to declare bankruptcy on 11 May 1931.

The collapse of the Credit-Anstalt in Vienna started the spread of the crisis in Europe and forced most countries off the Gold Standard within a few months. A feeling of financial distrust and insecurity spread from Vienna and led to runs on other banks in Hungary, Czechoslovakia, Romania, Poland, and Germany. The collapse set off a chain reaction that led from the run on German banks to withdrawals in London and the devaluation of the pound to large-scale withdrawals from New York and another series of bank failures in the United States. So in brief the news of the crisis of the Credit-Anstalt, the most important bank in Central Europe, shook the whole economic structure of Europe and sent shock waves through the rest of the world.

POLITICAL AND STRATEGIC IMPLICATIONS

All of which added even greater political and economic instability in both Europe and North America during the Interregnum. Crises of this type unsurprisingly gave rise to bitter class struggles between capital and labour, and various other social and political disequilibria. Revolution in Russia, the rise of the Nazis in Germany and earlier in Italy the new political movement of the black-shirted Fascisti led by one Benito Mussolini – this new political template being the counter-revolution from below. Coincidental with this there was, moreover, the fall of no less than four royal dynasties, the Habsburgs, Hohenzollerns, Romanovs, and Ottomans. The old order had gone, in Europe at least, but their empires still remained: Britain, France, and new kid to the imperialist club – the United States since it had got into the imperialist game in the late 19th century, and there it still remains.

The resulting collisions of interest between the rival nations and blocs with unfinished geopolitical business left over from WW1 seemed to take on an inexorable process – a process headed toward open military conflict between the Great Powers. And so it turned out. Germany was a powerful well-armed state with imperial ambitions but eventually was to be confronted by the combination of the USA, the USSR, and the British Empire, which meant it was bound to lose.

World War 2 was, with the exception of Latin America, a global war and had global ramifications. The major reconstruction of physical, economic, political, and geopolitical organizations and institutions had a number of distinct phases in both war-ravaged Europe and the Far East. The US was fortunate in this regard since apart from Pearl Harbour no major damage occurred on its own territory with the exception of Hawaii.

BRETTON WOODS 1944

The year 1942 was the turning point when the allied victory was more or less guaranteed. It was decided therefore to convene a meeting of the allied powers – excluding the USSR for geopolitical reasons – which was in the main conducted and overseen by the US and UK, with the US being the senior partner, of course. In 1944 the conference was to be held at the Washington Hotel in the small town of Bretton Woods in New Hampshire, USA; grandiosely titled, the United Nations Monetary and Financial Conference. At the time Hitler would last another 10 months, and war continued to rage in the Far East and Japan would not surrender for another 13 months. The UN Charter was still a year away. The specific goals of the attendees was to create institutions that would promote a vision beyond the end of the war united in hopes for a world united through prosperity.

US FOREIGN POLICY & TWILIGHT OF THE BRITISH EMPIRE

All very noble and idealistic. However also in play were the usual motivations of nation states and their internal interest groups – groups who harboured their own concerns which were somewhat less idealistic. It was argued by some realist foreign relations theorists that the plan for these Bretton Woods institutions go back further to the 1930s and to the US Council of Foreign Relations. (1)

‘’Members of this group assessed early on that, at a minimum, the US national interest required free access to the raw materials of the Western hemisphere, the Far East, and the British Empire. On July 24, 1941, a council memorandum outlined the concept of a grand area: that part of the world which the United States dominated economically and militarily to ensure materials to its industries.’’ (2)

Of course it was tacitly understood by the Americans that the British Empire stood in the way of US imperial aggrandisement and ultimately it had to go. The British delegation were in fact being played by the Americans throughout these tortuous negotiations. But the British were semi-aware of what the Americans were up to. According to the principal British negotiator J.M.Keynes who wrote in a private letter to a colleague:

‘’The greatest cause of friction between the US and Great Britain over a very long period was the problem of what we used to call the old commitments, arising out of the fact that lend-lease* did not come into anything like full operation for some nine months after it had legally come into force … You do not emphasise the point that the US Administration was very careful not to take every precaution to see that the British were as near as possible bankrupt before any assistance was given … or appropriately abated whenever there seems the slightest prospect that leaving things as they are might possibly lead to a result in leaving the British at the end of the war otherwise than hopelessly insolvent.’’(3)

Thus the whole issue of lend-lease boiled down to this: The UK was broke, a supplicant, and did not have the wherewithal to pay back the loans made to the US. On the other hand the hard-nosed US ruling circles were not a registered charity and insisted on business reciprocity involving loan repayment. Moreover, the fact that this meant the virtual winding up of the British empire and the Sterling Area was judged in certain American quarters as being a good deal for the US. It should be noted that the parsimony of the US vis-à-vis the British loan contrasted sharply with the extension of Marshall Aid and the wiping out of post-war German debts.

‘’The first loan on the post-war agenda was the British Loan which, as President Truman announced in forwarding it to Congress, would set the course of American and British economic relations for many years to come. He was right, for the Anglo-American Loan Agreement spelled the end of Britain as a Great Power.’’ (4)

POST-WAR AUSTERITY – POLITICS IN EUROPE

The post-war period was one of bitter austerity from the late 40s with rationing and austerity taking place among the ruins of war, and this continued until the early 1950s, to be exact 1954 in the UK, 1950 in Germany.

In the UK The Labour party was elected to power in 1945, which it is said, won the 1945 election by servicemen returning from the war and voting Labour in droves. The new government was given a political mandate to nationalise the core industries: Rail, Public Utilities (gas, electricity, water), Transport, Coal, Iron and Steel, and, most importantly, the setting up of the National Health Service, the jewel in the crown of a new social and political order as overseen by a determined social-democratic party

Over in Europe change was also on the agenda. There were open mass communist parties, the PCF in France, and PCI in Italy often supplemented with armed partisans in France, Italy, Yugoslavia, and the Balkans including Greece. Tito’s partisans gained power in 1946. But the civil war in Greece 1944-49 had a different outcome.(5) Also coming to power in the Balkans at this time were Albanian partisans led by the charismatic albeit demented figure of Enver Hoxha.

Things got better in the next phase of post-war recovery during the 1950s which marked the continuation of post-war reconstruction policies. This involved an end of rationing and a spurt of growth which had been pretty much flat for centuries until WW1 when the epoch of industrialisation of society evolved pari passu with mechanized industrial production; this was a feature of both civilian and military research which often involved a cross-fertilisation of both. Growth took off almost vertically in the 1950s and 60s. This was certainly true in the mid-20th century. But this was a political as well as a strategic/economic phenomenon. This was a period of acute internal political conflict and struggle.

POST-WAR BOOM AND COLD WAR

However from the middle 1950s the momentum of social and political developments moved to a more sustained and semi-tranquil path. The Trente Glorieuses as the French called it – a golden age of social and political peace: there were high levels of growth, low levels of unemployment, high wage levels, high levels of investment, not quite a social-democratic utopia, but at least the years of poverty, war and austerity had been left behind, it seemed for good. I think this unparalleled post-war economic boom had a great deal to do with post-war reconstruction. A point I made in the opening paragraph.

However, it should also be borne in mind that in international and strategic terms this was the Cold War era. A period of nuclear standoff, NATO, the Warsaw Pact, and the unstable division of Europe and colonial wars in Korea (UN under US control) Indo-China (French and American) Malaya, Kenya, Palestine (British). A situation which is still ongoing with the U.S. attempting (unsuccessfully) to carve out an empire.

BRETTON WOODS 2

These tendencies were highly visible and generally in the public realm. But perhaps the less contentious issues and decisions had been and were taking place in more recondite settings. Back in 1944, at the opening session of Bretton Woods, Henry Morgenthau, then Secretary of the US Treasury was to set forth one of the underlying assumptions that guided the work of the architects of the Bretton Woods system. Some were valid others less so. In particular the assumption that 1. Everyone would be the beneficiary of increased world trade, and 2. That economic growth would not be constrained by the limits of the planet.

The trouble with this mode of thinking is that the policy consensus and values among the powers that be (PTB) are also shared by everyone else. This is a very obvious and common shortcoming ‘groupthink’ among the ‘power elite’ of policy makers, and opinion formers, as was pointed out by the astute American intellectual, C Wright Mills way back in the 1950s.

All of this notwithstanding, by the end of the historic meeting, the World Bank (International Bank for Reconstruction and Development) and IMF (International Monetary Fund) and GATT (the General Agreement on Tariffs and Trade) which was superseded by the WTO (World Trade Organization). If I may paraphrase the poet Robert Browning: Roosevelt was in the White House, God was in his Heaven and all was right with the world!

CONSOLIDATION AND NEW WORLD ORDER

Since that time these global organizations have been dutifully occupied over the years adhering faithfully to their mandate to promote economic growth through globalization – globalization being a catch-all term involving market liberalisation, deregulation and privatisation. Through Structural Adjustment Programmes/Policies (SAPs) the World Bank and the IMF have pressured countries of the Global South to open their borders and convert their economies from self-sufficiency to export production. Trade agreements negotiated through GATT/WTO have reinforced these policies and prized open economies in both the Global South and North opening the path to the increasingly free importation of goods and capital flows (usually ‘hot money’). These archaic trade theories are justified by reference to David Ricardo and his archaic concept of ‘comparative advantage’ which is still taught in economics departments of universities.

The American New World Order established in 1945 had a strategic-military component as well as an economic one. US occupation in 1945 became permanent through the imposition of NATO which has expanded incrementally all the way to the Russian border. This occupation has lasted for 7 decades and is barely noticed as such. Europe has essentially become a collection of vassal states unthinkingly loyal to its American masters. The situation has become so entrenched that – apart from a brief Gaullist opposition – Europeans are completely unaware of this silent annexation. An annexation which in large part was carried out by the CIA and its euro Quislings. These included Operations, Gladio, Mockingbird and Paperclip.

This Atlantic Military-Strategic bloc – NATO – is an aggressive intercontinental vehicle serving as the instrument for US strategy for global dominance. Hard power.

‘’The occupied and colonized can come to accept and adopt the system and ways of their occupiers and colonizers … In Western (and now a fortiori Eastern) Europe many have come to accept without challenge the primary role of the US over the affairs of their states and give little thought to NATO except as a foundation of their security architecture. They have been raised and socialised, with this as part of their world. In many instances it is not only a normal part of the status-quo for them, it is also invisible to them. This is why the post-Cold-War continuation of the Atlantic Alliance went mostly unchallenged at the societal level in NATO member states, leaving the US to slowly consolidate its influence in each and every state.’’(6)

Financial dominance has also been another weapon operationalised and used by the US in their quest for global hegemony. This is particularly relevant with the role of the US$. As the global reserve currency the dollar gives a number of trade advantages over its trade ‘partners’. These are easy enough to enumerate but taking one example:

‘’It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries have to pony up $100 of goods and services in order to obtain one. (The difference between what it costs the government to print a note and a foreigner to procure it is known as seignorage after the right of the medieval Lord or seigneur to coin money and keep for himself some of the precious metal from which it was made.) About $500 billion of US currency circulates outside of the United States for which foreigners have had to provide the United States with $500 billion goods and services.’’(7)

But it is not a privilege which should be abused. Human Nature being what it is, however, it was abused. When the US left the Gold Standard in 1971 it could print dollars with abandon to pay its import bills. This meant it could accrue many advantages including the one mentioned by Eichengreen above. However, all was not as clear-cut as it seemed.

THE TRIFFIN DILEMMA AND THE DOLLAR RACKET

There was always a fundamental incompatibility between the attainment of global economic stability and possession of a single national currency to perform the role of the world’s reserve currency. As a global reserve currency the dollar has to be the anchor of the world’s trading system. However, as a domestic currency the dollar needs to have sufficient flexibility for internal policy. Thus at the heart of the dollar’s value and use there is this contradiction for the dual roles of this currency.

During the Bretton Woods ‘golden age’ which lasted from 1944 until 1971, the US$ was fixed against gold at $35 per oz. However the cost of US wars of choice in Korea and Indo-China, as well as ambitious social programmes like LBJ’s ‘Great Society’, saw a global build-up of surplus dollars accumulating in central banks around the world. These surplus dollar countries then began trading in their surplus dollars at the gold window at the Fed. This was a situation which the US could not tolerate as gold was flying out of the US to various overseas central bank venues.

Thus it was that on August 15, 1971, President Nixon suspended dollar/gold convertibility for a temporary period, which in fact morphed into a permanent arrangement – an arrangement which persists to this day. The gold standard was replaced with the US$ fiat standard. The dollar was to be regarded as being as good as gold, which was rather more like an act of faith than rational economic policy.

The maverick Belgian economist Robert Triffin first drew attention to this anomaly during the 1960s in his seminal work Gold and the Dollar Crisis: The Future of Convertibility. He observed that having the US dollar perform the role of the world’s reserve currency created fundamental conflicts of interest between domestic and international economic objectives.

On the one hand, the international economy needed dollars for liquidity purposes and to satisfy demand for reserve assets. But this forced, or at least made it easy, for the US to run consistently large current account deficits.

He argued that such a policy of running persistent deficits would eventually put pressure on the dollars convertibility and ultimately lead to the demise of the Bretton Woods system of international exchange which is exactly what happened in 1971.

This arrangement led to what in effect were tangible advantages for the US, at least to the current situation.

Nice work if you can get it. International trade as denominated in US$’s meant that the US$ qua world reserve currency could use its dollars to buy foreign assets and pay for them in dollars. These dollars were then held by foreigners who could no longer convert surplus dollars into gold but could only purchase US Treasuries and other US dollar-denominated assets which were never going to be repaid. Surplus dollar countries would sell their hard-earned dollars to purchase US Treasuries which pushed up the value of the dollar and kept US interest rates low; and the US in turn would buy goods and services from these same surplus countries. It worked rather like this: a foreign computer company – say ‘Japcom’ – sells you a computer by lending you the money to buy it! The ultimate free lunch.

But of course there’s always a catch! The effect of a strong dollar which raised domestic US industries costs, led to the hollowing out of the US domestic economy which ultimately could not compete with more efficient overseas competition. The last thing that the US rust belt needed was/is a strong dollar which had the effect of making its export industries less competitive. This left the US in an economic quandary. Namely, that the United States must on the one hand simultaneously run a strong/dollar, policy and on the other a weak/dollar policy, or put another way must allow for an outflow of dollars to satisfy the global demand for the currency, but must also engineer an inflow of dollars to make its domestic industries more competitive. As explained thus: when the Fed cuts interest rates, investors sell dollar-denominated assets and buy foreign assets, which tends to weaken the dollar’s exchange rate.

Having it both ways! Which of course is hardly possible.

Moreover, it is a moot point as to whether the rest of the world will continue to support this ‘exorbitant privilege’ in perpetuity. So far, the Vichy-Quisling-Petainst regimes in Europe and East Asia have to touch their forelocks and prostrate themselves before their Lord and Masters, but it would be wrong to imagine that this can continue as a permanent arrangement. Ironically, however, the US hegemon treats its friends and allies considerably worse than its putative enemies. Such is the nature of geopolitics.

WHAT NEXT?

The rise and fall of empires has always been a leitmotif for historians from Thucydidies and Herodotus, to Gibbon, Glubb and Hobsbawm in the modern period. It seems fairly obvious that the United States is in irreversible decline, and I think that the same is probably true of Europe given that Europe has been effectively Americanised. The American intellectual Morris Berman has perceptively got his finger on the pulse of the decay of modern-day America.

‘’As the 21st century dawns, American culture is, quite simply, in a mess … The dissolution of American corporate hegemony, when it does occur – and our own ‘Soviet Watershed’ is at least 40 or 50 years down the road as of this writing – will happen because of the ultimate inability of the system to maintain itself indefinitely. This type of breakdown which is a recurrent historical phenomenon is a long-range one and internal to the system.’’ (8)

The long decline as described by Berman is in general a cultural critique. A dumbing down so massive, relentless and comprehensive that is seems irresistible and sadly unstoppable. As Berman further writes:

‘’For a zoned-out, stupefied populace, ‘democracy’ will be nothing more than the right to shop, or to choose between Wendy’s or Burger King, or to stare at CNN and think that this managed infotainment is actually the news. As I have said, corporate hegemony, the triumph of global democracy/consumerism based upon the American model is the collapse of American civilization. So a large-scale transformation is going on, but it is one that makes triumph indistinguishable from disintegration.’’(9)

Add to this the hollowing out of the US productive economy (10) and the rise of a bloated financial sector which is kept going by infusions of money freshly printed by the Fed and which is more and more taking on the visage of an gigantic Ponzi scheme where existing debt levels are serviced by more debt, apparently without end. This is not going to be easy to reverse. The ongoing deindustrialisation of the US and its satellites seems to be irreversible.

The US political elites and the MSM seem little more than a monkey house of corrupt buffoons with not a political idea in their heads or what they are about and where they are going: but everything is fine as long as they get paid-off. It seems all very reminiscent of the last days of the French monarchy with America’s own Marie Antoinette, the air-head Nancy Pelosi, passing the time on TV by recommending the variety of ice-cream she keeps in her fridge during the current shut-down. The people have got no bread Nancy! Well let them eat ice-cream! Brilliant PR from Nancy Antionette.

Then of course there are the complete and certifiable lunatics (the neo-cons) who, along with Israel and its 5th column within the US, are intent on dragging the US into unwinnable wars which are slowly degrading the morale the civilian population and fighting capacity of the ‘invincible’ US military machine.

An historical analogy from history seems germane at this point.

It has been recorded that the most important battle that the Roman Army fought was The Battle of the Teutoburg Forest. Three crack Roman legions crossed the Rhine to engage the Germanic tribes; a cake walk, or so they thought. Unfortunately, they were overconfident and badly led. Strung out on the march and unable to get into their customary Roman battle formations – the dreaded testudo (tortoise) – and were attacked on all sides by hordes of Germanic tribesmen and unceremoniously put to the sword: three crack legions, 20,000 men, one tenth of the Roman Army. This was in 9 CE. The Roman Empire lasted approx. another 400 years, but its reputation had suffered a blow from which it never recovered. The beginning of the end came when the Visigoths crossed the Danube 376 AD into the Roman Empire properly. When Rome was sacked it was the definitive end of empire. The US seems set on the same course, or one similar perhaps, although it is difficult if not impossible to put a date on its final demise.

Who can tell the future? We shall wait and we shall see.

NOTES

(1) The Council of Foreign Relations founded in 1921, is a United States non-profit think tank specializing in U.S. foreign policy and international affairs. It is headquartered in New York City, with an additional office in Washington, D.C. This somewhat bland description does not explain the reality. In fact the CFR is made up of a number of notables drawn from the American political and financial nomenklatura, an incubator of leaders and ideas unified in their vision of a global economy dominated by US corporate interests.

(2) The Failures of Bretton Woods – David C Korten – The Case Against the Global Economy – 1996 – p.21

* Under the Lend-Lease program, from 1941 to 1945 the United States provided approximately $50 billion in military equipment, raw materials, and other goods to thirty-eight countries. About $30 billion of the total went to Britain, with most of the remainder delivered to the Soviet Union, China, and France

(3) Robert Skidelsky – John Maynard Keynes – Fighting for Britain – 1937-46- collected works and letters – xxiv 28/29 letter to E.R.Stettinuis, 18 April 1944

(4) Michael Hudson – Super Imperialism – pp.268/269

(5) The British Labour government of 1945-40 actually took sides in the Greek Civil War fought between the Greek government army (supported by the United Kingdom and the United States)and the Democratic Army of Greece (DSE) — the military branch of the Communist Party of Greece (KKE) supported by YugoslaviaAlbania and Bulgaria. This lasted from 1946 to 1949. The Soviet Union avoided sending aid. The fighting resulted in the defeat of the DSE by the Hellenic Army. The Labour party, social-democratic as it may have portrayed itself, was nonetheless pro-imperialist to the core and a founder member of 1940.

(6) Mahdi Darius Nazemroaya – The Globalization of NATO p.334.

(7) Barry Eichengreen – Exorbitant Privilege – pp.3/4

(8) Morris Berman – The Twilight of American Culture – p.21. Published in 2000.

(9) Berman – ibid. – p.132

(10) The Auto-vehicle industry which was pioneered by Henry Ford was dominant up until recently when it produced 50% of motor vehicles. But this is no longer the case. Currently global auto-vehicle producers can be ranked as follows:

1. Toyota (Japan) Annual Output: 10,455,051 2. Volkswagen (Germany) Annual Output: 10,382,384 3. Hyundai/Kia (South Korea) Annual Output: 7,218,391. 4. General Motors (United States) Annual Output: 6,856,880. 5. Ford (United States) Annual Output: 6,386,818. 6. Nissan (Japan) Annual Output: 5,769,277. 7. Honda (Japan) Annual Output: 5,235,842. 8. FCA (Italy, USA) Annual Output: 4,681,457. 9. Renault (France) Annual Output: 3,373,278. Group PSA (France) Annual Output: 3,152,787

What Have the US and Protesters in Lebanon Achieved over Iran and Its Allies?

Global Research, December 09, 2019
Elijah J. Magnier 8 December 2019

For several weeks now, much of the Lebanese population has turned on the country’s traditional political leaders and wrought havoc on the corrupt domestic political system. Those who have ruled the country for decades have offered little in the way of reforms, have paid little attention to the infrastructure, and done little or nothing to provide job opportunities outside the circle of their clients. The protestors were also driven into the street by the US measures strangling the Lebanese economy and preventing most of the 7-8 million expatriates from transferring financial support (around $8 billion per year) to their relatives back home. This is how the US administration has conducted its policy in the Middle East in its failed attempt to bring Iran and its allies to their knees. The US seems to believe that a state of chaos in the countries where the “Axis of the Resistance” operates may help curb Iran and push it into the US administration’s arms. The US seeks to break Iran’s back and that of its allies and impose its own conditions and hegemony on the Middle East. What has the US achieved so far?

In Lebanon, since the beginning of protests, the price of merchandise has gone sky-high. Medicines and goods are lacking from the market and the Lebanese Lira has lost more than 40% of its value to the US dollar. Many Lebanese have either lost their jobs or found themselves with a salary reduced to half. Lebanon came close to civil war when pro-US political parties closed the main roads and tried mainly to block the Shia link from the south of Lebanon to the capital, around the suburb of Beirut and from Beirut to the Bekaa Valley.

War was avoided when Hezbollah issued a directive instructing all its members and supporters to leave the streets, asking its members to stop and persuade any ally members to come off the streets and to avoid using motorcycles to harass protestors. The instructions were clear: “If anyone slaps you on the right cheekturn to him the other also.”

Hezbollah understood what the corners of Beirut are hiding: an invitation to start a war, particularly when for over a month the Lebanese army refused to open the main roads, allowing not only legitimate protestors but also thugs to rule.

The situation today has changed: the Lebanese President is using the constitution to his advantage, equally to the practice of the Prime Minister who has no deadline in forming a government. President Michel Aoun gave the Christians what they have lost after the Taif Agreement: he refused to ask a Prime Minister candidate to form a new government unless he offers a successful and harmonious cabinet membership that pleases all political parties and has strong chances of success.

Aoun was about to offer the mandate to a new candidate, Samir al-Khatib, had the caretaker the Sunni Saad Hariri – who nominated al-Khatib initially – avoided to boycott him at the last moment or did not ask the ex-prime Ministers, the religious Sunni authority and political parties who support him to nominate Hariri in person. The nomination of the Prime Minister is most likely postponed to an unknown date.

However, the protestors have not achieved much because the traditional political parties will hold onto their influence. The new government, once and if formed, will not be able to lift US sanctions to relieve the domestic economy. On the contrary, the US administration is willing to resume its sanctions on Lebanon and impose further sanctions on other personalities, as Secretary Mike Pompeo sated a couple of months ago.

Today, no Lebanese citizen is able to dispose of his own saving or company assets in banks due to restrictions on withdrawals, effective “capital controls”. Only small amounts are allowed to be delivered to account holders–around $150-300 per week in a country where cash payments prevail. No one is allowed to transfer any amount abroad unless for university fees or special demands of goods import of first necessities.

However, Hezbollah, the US-Israel main target, was not affected directly by the US sanctions and by the new financial restrictions. Militants were paid, as is the case monthly, in US dollars with an increase of 40% (due to the local currency devaluation) with the compliments of “Uncle Sam”.

Hezbollah not only has avoided civil war but also has managed to boost the position of its allies. President Aoun and the leader of the “Free Patriotic Movement” (FPM) the foreign Minister Gebran Bassil were in a confused state in the first weeks of the protests. Hezbollah leadership played a role in holding on to his allies and supporting them. Today, the situation is back under control and the President and the FPM leader are holding the initiative over their political opponents.

Hezbollah will be part of the new government with new personalities and perhaps one traditional minister. The “Axis of the Resistance” believes if “Hezbollah’s presence in the new government disturbs the US administration, then why it should comply and leave? Quite the opposite. It should stay or appoint Ministers on its behalf”.

The “Axis of the Resistance” is convinced that the exit of Hezbollah from the cabinet would trigger further US demands. It is Hezbollah’s legitimate right to be represented in the government since it holds a large coalition in the Parliament. Besides, who will stop any attempt by the US to allow Israel to annex the disputed Lebanese water borders? Who will campaign for the return of Syrian refugees back home? What about the US request to deploy UN forces on the borders with Syria?

Hezbollah enjoys large amount of popular support and this from a society that is behind it and that suffers as much as everybody else from the country of the corrupted Lebanese system. Notwithstanding its poverty, the society of Hezbollah stands with the “Axis of the Resistance” against the US sanctions and attempts to corner it.

The US administration failed to achieve its objectives, even when riding the wave of protestors’ legitimate demands. It has also failed to drag Hezbollah to street fighting. It is about to fail to exclude Hezbollah and its allies, determine to be part of the new government regardless of the names of individual ministers. The US failed to corner Hezbollah – as was possible with Hamas – because Lebanon is open to Syria and from it to Iraq and Iran. Lebanon has also the seafront on the Mediterranean open to the outside world to import much needed goods. However, the “Axis of the Resistance” has asked its friends and supporters to cultivate the land in order to soften the increase of prices of food.

The “Axis of the Resistance’ also has lines open to Russia and China. Hezbollah continues trying to convince political parties to diversify the resources and cease depending on the US and Europe only. Russia is proving itself on the political international arena – even if still not enjoying influence in Lebanon – and is able to stand firm against US hegemony. Europe is also happy to see Hezbollah and its allies in power, afraid of seeing millions of Syrian and Lebanese refugees flocking to the old continent. China is willing to open a bank in Lebanon, collect and recycle the bins, offer drinkable water and construct electricity generators. The total of what China is ready to invest in Lebanon is close to $12.5 billion, much more than the $11 billion offered by CEDRE that is linked to the privatisation of Lebanese infrastructure.

Doors in Lebanon are open for an alternative to the US. Therefore, the more Washington is willing to corner the Lebanese government and its inhabitants, the more certainly they move towards Russia and China.

The Lebanese have lost much since the protests began. The US has gained a society ready to keep at a distance whihc is further from its hegemony and its allies have failed to trap Hezbollah. However, protestors did manage to sound an alarm and warn politicians that their corruption can’t continue forever and that they may someday be brought to justice. Once again, the agents of chaos have failed and the “Axis of the Resistance” has the upper hand in Lebanon.

*

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Putin announces the death of the dollar, and soon…

Source

November 18, 2019

IMF who? Lagarde shows ECB is the top dollar job in QE age

July 17, 2019

by Ramin Mazaheri for the Saker blog (cross-posted with PressTV by permission)

IMF who? Lagarde shows ECB is the top dollar job in QE age

(Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea, and elsewhere. He is the author of “I’ll Ruin Everything You Are: Ending Western Propaganda on Red China.”)

Christine Lagarde just quit her top post at the International Monetary Fund in order to run the European Central Bank. This shows just far the euro has come (and central bankers), and represents either a historic step backwards or a leap of faith forward in the fight against the global domination of the US dollar.

The dollar’s dominance is what allows Washington to impose murderous, illegal sanctions on countries like Iran, Cuba, Korea and elsewhere, which is why many are so keen to end it.

The dollar’s imposition began after World War II, when the war-ravaged powers were forced to accept equating US paper with (but actually above) gold, a move which Charles de Gaulle bitterly referred to as the “exorbitant privilege” of the United States. The logic is simple: a $100 dollar bill cost Washington only the price of a piece of paper, whereas everyone else still had to mine, barter, earn or steal $100 worth of gold (or its equivalent in goods) to acquire that banknote.

The expensive US failure in Vietnam caused Richard Nixon to end this policy in 1971, but QE – printing money out of thin air – was opposed back then, so a replacement tool had to be quickly found in order to maintain US empire. The solution to effectively maintain the Bretton Woods system was found with the petrodollar” agreement of 1973: every barrel of Saudi oil sold to anyone had to be purchased in dollars, and surplus Saudi profit would be invested in US banks and in US debt securities (“petrodollar recycling”, per Henry Kissinger).

Washington had no qualms about propping up the ruthless, reactionary House of Saud to maintain US economic hegemony. The system expanded to other oil producers to the point where: no dollars? No oil.

The petrodollar keeps money flowing into the US and allows the US to “print gold” – it finances their huge budget deficits, high demand for the dollar fights off their inflation, it gives their banks a source of income for which they do zero genuine work, and the US themselves can buy “as much oil as they can print” from the Saudis. This is obviously a tremendous bargain for the US – the only reason the Saudis accept it is because they know they have absolutely zero legitimacy and would be deposed instantly without US arms and military support.

But the great deal is only for some in the US, as they are rabid neoliberal capitalists: from 1980 onwards the US elite funnelled these huge monies into Wall Street and other asset classes which only their fellow elite can touch, as opposed to intelligently and patriotically using the income to improve the overall conditions of their own nation, or even just raising wages (neoliberals call these concepts “socialism”).

Pick your poison: the US or the IMF?

The IMF, which is always led by a European, has long-pushed something to end this scam that weakens everyone for the US’ benefit, via the concept of the SDR (special drawing rights): a basket of international currencies which could replace the dollar as the world’s backing currency. Who needs the Fed when the SDR can provide international liquidity and financial stability? It wasn’t a great system, but it was closer to the IMF’s original aim of having an international monetary system, instead of the current US empire system of (petrodollar) tribute, which is no different from the Roman era.

The Great Recession pushed the superiority of the SDR to the fore – in 2009 China publicly supported, for the first time, that an international reserve currency be based on the SDR and be run by the IMF. The immorality and business failures of US bankers caused the Great Recession – it was only logical that the Americans lose their banking primacy.

The IMF was thus poised to become top banker, and one of their own was even about to be democratically elected.

In 2011 then-current IMF chief Dominique Strauss-Kahn, a major backer of the SDR basket, was outpolling Nicolas Sarkozy 2 to 1 to head the world’s 5th-largest economy and the neo-imperialist master of North and West Africa. He was certain to win, but on American soil he was accused of attempted rape of a hotel maid, dooming his presidency. The charges were dropped, but Strauss-Kahn admitted the liaison. People screamed “conspiracy” – I always found it highly coincidental that Strauss-Kahn found a maid whose native language was French in a country where seemingly all the cleaning women are Latinas? Conspiracy theorists assumed Sarkozy was behind it, with few noting how the IMF, the SDR and Strauss-Kahn threatened US economic hegemony.

QE means the US’ 1% never have to pay for their crimes

The US pushed back the IMF with one arm while the other arranged the current global financial regime – Quantitative Easing.

QE has been a total failure for the average person worldwide, but nowhere more so than in Europe. Incredibly, 1.5 years after it became official, PressTV and I remain one of the very few people to write about the statistical reality of Europe’s “Lost Decade”. I saw it happening in painful slow-motion, being PressTV’s chief correspondent in Paris.

The reason the Mainstream Media doesn’t want to talk about the failure of QE to provide broad economic growth is because their pro-capitalist media are owned by the same billionaires who get all the profit from QE.

The printing of trillions of paper money (which are certainly not backed by trillions in newly-mined gold) has, just like the oil-produced fruits of the petrodollar, gone to remake the same asset bubbles which sparked the Great Recession.

Once again, only the wealthy are profiting from shady capitalist practices: Housing Bubble II, new stock market records despite the endemic failure of the “real-economy” (evidenced by the Lost Decade), and absurd records in the prices of absurd luxury goods like MBS’ purchase of a da Vinci painting – this has all been paid for by the neoliberal-neoimperialist policy of QE which has failed the average Western citizen and continued the economic misery of the developing world.

But QE has proven one thing: governments are the most powerful forces in society, not bankers. This is something which socialist-inspired democracies are based on, but which only the 1% appear to take advantage of in Western liberal democracies.

Lagarde moving from the IMF to ECB would have been thought of as a step down pre-QE, mainly because nobody imagined that the head of the ECB could create several trillions of dollars simply by tapping a keyboard, as her predecessor Mario Draghi did. The IMF has a lot of money, but they do not have the power to create money.

Lagarde: More bad news for Europe’s 99%

When Lagarde was announced as the new head of the ECB the Western mainstream media provided – of course – none of this background, nor any perspective which fairly criticises the record of neoliberal thought and practice. Instead, their leading media justified Lagarde on one criterion – gender. The New York Times’ article was, “In Tense Times, ‘Call in the Woman’: Lagarde Will Lead the E.C.B”.

The Times championed Lagarde’s own claim that she deserved the job because she was not a male: “As I have said many times, if it had been Lehman Sisters rather than Lehman Brothers, the world might well look a lot different today.”

Such a claim is preposterous and shows how little Lagarde understands the principles and practices of neoliberal economics. However, everyone can quickly see that it also denies the existence of empresses, queens, Thatchers and Clintons; it also denies that women have played any role in shaping the positive and negative aspects of our modern world; it is a justification entirely based on divisive, distracting “identity politics” instead of a class-based true feminism.

Certainly, nobody would claim that simply being a male would be all that is necessary to head the ECB. And yet, such nonsense is all it takes in 2019 – we must all cheer simply because the new boss is female. This is what works with the average American today.

But the ECB is not American – why Lagarde?

The Times repeated the same misleading claim – that Lagarde is an “antitrust lawyer by training” : she worked for the world’s biggest law firm, based in Chicago (the Qom of neoliberal capitalist thought), meaning that she likely worked to manipulate the law in order to maintain trusts, not to dismantle trusts. The Times was forced to acknowledge that she has no experience as a central banker and will thus have a “steep learning curve”.

The West continues to put people in power based on the most absurd pretences of qualification for public service, even when such posts are unelected.

Investopedia had the same assessment as The Times: “However, the absence of an economics background or a discernible opinion on monetary policy means she would have to rely on financial technocrats a fair amount. Lagarde, who says she faced sexism and discrimination in her professional life….”

Lagarde clearly does not have the background required – just like The Times, Investopedia ignores this to assert her “gender qualifications”.

Pity the poor European Mainstream Media reader: Largarde is only a shiny tool whose ascension will do nothing but put an unqualified person in charge of the QE money-printing scheme. She will obviously kowtow to “technocrats” who insist that QE will eventually, one day stop creating Lost Decades.

Lagarde thus got the job not her qualifications but her ideology: it is not Islamic, nor socialist, nor moral – she believes in phony technocratism, because for Lagarde and her ilk “technocrats” are synonymous with “the 1%”. I know Lagarde well from covering the Tapie Affair in France: she was found guilty of negligence and misuse of public funds in a case where she got Sarkozy’s friend Bernard Tapie a hugely controversial 400-million euro payout from the French public coffers.

She only doesn’t have a criminal record and didn’t go to jail, which would seemingly have disqualified her for the ECB Post because…because Frances judicial system is not independent but totally corrupted by 1% influence – the judge simply decided to let her go scot-free, despite her guilt.

Negligence, misuse of public funds, payouts for millionaires – now we understand why Lagarde is considered to be “qualified” to run the ECB, and their QE scam, and to continue the phony “the 99% must work their nation out of debt” justification for austerity policies. More “Western-style leadership”…..

The leap of faith forward I mentioned at the start is this: the ECB runs the world’s largest macro-economy – it is possible they could decouple themselves from the dollar’s decades of exorbitant privilege, and the Chicago school of (neoliberal) capitalism, and start pursuing policies which do not flood the 1% with cheap credit to buy cheaply the lives of people across Europe.

However, the legal structures of the EU and the Eurozone are written in post-1989 language which is even more typically American than what underpins the system of the US itself. Therefore we can have little basis for faith that the cabal of bankers and public-into-private national finance minsters which is the Eurogroup, which runs the Eurozone with zero democratic accountability or even transparency, is going to start caring about the 99% in any of their respective nations.

The selection of the French Lagarde illustrate that Europe is no longer sovereign, but content to be a tool of US economic hegemony.

The BRICS countries hold out hopes for ending the petrodollar-fuelled US global finance domination, but they have effectively lost Brazil via the US-orchestrated coup against Dilma Roussef, and they have foolishly not offered to make it BRIICS, with the second ‘I’ standing for Iran. No need, really: China, Russia and Iran continue to make the most headway against the dollar, via the Belt and Road Initiative but especially the unstoppable petroyuan.

Cryptocurrency is another unstoppable way for countries to oppose US control over the global financial system, which is why The New York Times and the US treasury secretary just screamed, “Cryptocurrencies Pose National Security Threat, Mnuchin Says”. Cryptocurrency was indeed created in order to end the US petrodollar and QE schemes, which is why they are so wonderful and why they must be supported.

Lagarde leaving the IMF for the ECB is definitely a historic shift in the (Western) priority rankings. It is simply tragic for the West’s billion of innocents that unaccountable, unelected central bankers and their ineffective, corrupt cronies have become their political elite. This, of course, has equally lamentable consequences for those nations suffering under neoimperialism, illegal sanctions and other Washington-based policies.

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