De-Dollarization: Dismantling America’s Financial-Military Empire
The city of Yakaterinburg, Russia’s largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.
Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO).
The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).
The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim.
They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all.
For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.
Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system.
A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire.
But George W. Bush (“I’m a uniter, not a divider”) built on the Clinton administration’s legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.
What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.”
What this means in plain English is: We have reached our
limit in subsidizing the United States’ military encirclement of
Eurasia while also allowing the US to appropriate our exports,
companies, stocks and real estate in exchange for paper money of
questionable worth.
"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much.
Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.
The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks.
These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.
When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary.
It does not reflect faith in the U.S. economy enriching foreign central banks for their savings,
or any calculated investment preference, but simply a lack of
alternatives. “Free markets” US-style hook countries into a system that
forces them to accept dollars without limit. Now they want out.
This
means creating a new alternative. Rather than making merely “cosmetic
changes as some countries and perhaps the international financial
organisations themselves might want,” Mr. Medvedev ended his St.
Petersburg speech, “what we need are financial institutions of a
completely new type, where particular political issues and motives, and
particular countries will not dominate.”
When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances.
The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – land these loans have financed most of the US Government’s domestic budget deficits for over three decades now!
Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.
The main political issue confronting the world’s central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?
For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself.
Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4]
Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine.
The nation has too many dollar assets
as it is, his colleagues explained. Central
bank governor Zhou Xiaochuan of the People's Bank of China wrote an
official statement on its website that the goal is now to create a
reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.
In
addition to avoiding financing the US buyout of their own industry and
the US military encirclement of the globe, China, Russia and other
countries no doubt would like to get the same kind of free ride that
America has been getting.
As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself?
The United States is now the world’s largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.
The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors.
And at home, Congress blocked China’s CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.
In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups.
To date, China’s attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations.
They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout.
Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.
Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve’s credit bubble drove interest rates down China’s sovereign wealth funds sought to diversify in late 2007.
China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa’s Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis.
But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.
Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe.
But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.
On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means.
The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’”6
At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings.
It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America’s balance-of-payments deficit.
Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.
Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China’s currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan.
This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don’t mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring.
When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China’s US investments therefore were safe and sound, he was greeted with derisive laughter.7
Anticipation of a rise in China’s exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency.
So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?
To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner’s visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country’s central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8
An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.
Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars.
Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order.
If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.
US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.
Notes
1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,
Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”
2 Kremlin.ru, June 5, 2009, in Johnson’s Russia List, June 8, 2009, #8.
3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int’l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. That means using the Chinese currency to settle international trade payments …”
4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.
5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.
6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009. http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia
7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.
8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.
USA elites and political strategists, take my advice.
End your global military empire and give up your position and ambitions of being the sole superpower hegemon.
There is no other way.
You cannot keep on attacking, invading, bombing, killing and torturing.
How can there be peace under heaven by using your methods, USA?
How?
Since the Brenton Wood Agreement, the Dollar has been accepted as the currency of choice for valuation of commodities and trade exchanges - as well as a Reserve Currency.
Can an organisation formed largely by ex-Soviet bloc countries and a Communist China succeed in a venture like this ?
Without the co-operation and willing support from the other national or economic bodies - such as the OIC, OPEC, APEC, OAU, SAARC, ASEAN, EU, and also international bodies such as IMF, WB and ADB - can such an idea take root ?
What will be the alternative instrument of international trade and valuation ?
Can the currencies of the Communist and/or ex-Communist Bloc form a basket of currencies to replace the US Dollar ?
Will these currencies or a single currency from this Bloc - be acceptable by all other nations on this globe, when there are as little checks and balance in the various countries in the Communist or ex-Communist Bloc ?
Since the Brenton Wood Agreement, the Dollar has been accepted as the currency of choice for valuation of commodities and trade exchanges - as well as a Reserve Currency.
Can an organisation formed largely by ex-Soviet bloc countries and a Communist China succeed in a venture like this ?
Without the co-operation and willing support from the other national or economic bodies - such as the OIC, OPEC, APEC, OAU, SAARC, ASEAN, EU, and also international bodies such as IMF, WB and ADB - can such an idea take root ?
What will be the alternative instrument of international trade and valuation ?
Can the currencies of the Communist and/or ex-Communist Bloc form a basket of currencies to replace the US Dollar ?
Will these currencies or a single currency from this Bloc - be acceptable by all other nations on this globe, when there are as little checks and balance in the various countries in the Communist or ex-Communist Bloc ?
Without the co-operation and willing support from the other national or economic bodies - such as the OIC, OPEC, APEC, OAU, SAARC, ASEAN, EU, and also international bodies such as IMF, WB and ADB - can such an idea take root ?
That is a project in the future, not now.
Will these currencies or a single currency from this Bloc - be acceptable by all other nations on this globe, when there are as little checks and balance in the various countries in the Communist or ex-Communist Bloc ?
USA financial sector also no better.
They were the ones who caused the current financial crisis.
These despots run countries can dream on..... they cannot achieve their aims like this. Without freedoms for their people, their people will never achieve their full potential. Only a country that can successfully realise the potential of most of their citizens can the country be strong.
China is a country of coolies. Russia is dependant of oil.
Right now only the USA and Western Europe are giving their citizens the freedoms to do what they want. This in turns maximises the potential of their people and in turn ensures that their countries (businesses, currencies, military) are strong and remain strong.
About time, ironically this move will serve to help America and hence the world in the long run. The more other countries lend America money for it to fund its reckless spending the more likely the chance of the destruction of its currency. No one wins if that happens. Time for it to stop
Originally posted by AndrewPKYap:
These despots run countries can dream on..... they cannot achieve their aims like this. Without freedoms for their people, their people will never achieve their full potential. Only a country that can successfully realise the potential of most of their citizens can the country be strong.
China is a country of coolies. Russia is dependant of oil.
Right now only the USA and Western Europe are giving their citizens the freedoms to do what they want. This in turns maximises the potential of their people and in turn ensures that their countries (businesses, currencies, military) are strong and remain strong.
Or screw their country when some people decided the welfare of the country to be not their first piority *cough* the recent Financial Crisis *cough*
WWIII is coming....
Andrew says it all and well. China and Russia can dream on all they want.
When americans buy their products, they sure were happy enough to use such earnings to build and invest in armaments instead of building up their only true valuable and renewable resource - its people.
I once believed foolishly in de-coupling ability of the world from US economic domination, but the financial crisis showed me it is impossible. It is the human potential of the free American people that made all other great despotic nations go down on their knees.
Thus the only way to decouple from US is to build the human potential of individual nations. A simple example is the domination of Microsoft's Windows software worldwide. Till today, had anyone in the world built any other software capable of being internationally used? None.
And the only way to build the human potential of the world is not just education alone. It is the freedom to use and maximise what had been learnt, freely and experimentally, without causing hurt and harm to others. But i doubt if anyone can do so in China or Russia, even India. They have the habit of cutting poppies that grew too tall or using whatever that had been invented and turning it into secret military applications.
Dream on. US domination will continue till leaders of the world start to wake up on human potential instead of military and authoritarian might.
US domination will continue till leaders of the world start to wake up on human potential instead of military and authoritarian might.
Why?
Originally posted by Ah Chia:De-Dollarization: Dismantling America’s Financial-Military Empire
The Yekaterinburg Turning Pointby Prof. Michael HudsonJune 13, 2009The city of Yakaterinburg, Russia’s largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.
Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO).
The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).
The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim.
They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all.
For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.
Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system.
A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire.
But George W. Bush (“I’m a uniter, not a divider”) built on the Clinton administration’s legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.
What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.”
What this means in plain English is: We have reached our limit in subsidizing the United States’ military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.
"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much.
Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.
The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks.
These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.
When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary.
It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.
This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances.
The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – land these loans have financed most of the US Government’s domestic budget deficits for over three decades now!
Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.
The main political issue confronting the world’s central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?
For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself.
Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4]
Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine.
The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.
In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting.As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself?
The United States is now the world’s largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.
The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors.
And at home, Congress blocked China’s CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.
In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups.
To date, China’s attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations.
They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout.
Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.
Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve’s credit bubble drove interest rates down China’s sovereign wealth funds sought to diversify in late 2007.
China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa’s Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis.
But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.
Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe.
But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.
On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means.
The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’”6
At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings.
It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America’s balance-of-payments deficit.
Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.
Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China’s currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan.
This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don’t mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring.
When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China’s US investments therefore were safe and sound, he was greeted with derisive laughter.7
Anticipation of a rise in China’s exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency.
So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?
To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner’s visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country’s central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8
An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.
Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars.
Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order.
If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.
US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.
Notes
1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,
Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”
2 Kremlin.ru, June 5, 2009, in Johnson’s Russia List, June 8, 2009, #8.
3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int’l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. That means using the Chinese currency to settle international trade payments …”
4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.
5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.
6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009. http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia
7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.
8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.
Regardless good or bad, between Russian and the USA... I still prefer the USA...
Originally posted by sgN00b:Regardless good or bad, between Russian and the USA... I still prefer the USA...
I think the problem lies in thinking we only get to chose between these 2.
Originally posted by Stevenson101:
I think the problem lies in thinking we only get to chose between these 2.
There is one more, although it's not as strong as those 2, it's the Euro...
The American Empire Is Bankrupt
By Chris Hedges
June 15, 2009 "Truthdig" --- This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.
Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.
There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.” ...
...China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China’s yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China’s central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund’s Special Drawing Rights.
What the new system will be remains unclear, but the flight from the dollar has clearly begun.
The goal, in the words of the Russian president, is to build a “multipolar world order” which will break the economic and, by extension, military domination by the United States.
China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia.
It desperately needs to shed its dollars...
...“China is trying to get rid of all the dollars they can in a trash-for-resource deal,” Hudson said. “They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly.”...
http://informationclearinghouse.info/article22836.htm
Originally posted by Ah Chia:The American Empire Is Bankrupt
By Chris Hedges
June 15, 2009 "Truthdig" --- This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.
Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.
There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.” ......China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China’s yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China’s central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund’s Special Drawing Rights.
What the new system will be remains unclear, but the flight from the dollar has clearly begun.
The goal, in the words of the Russian president, is to build a “multipolar world order” which will break the economic and, by extension, military domination by the United States.
China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia.
It desperately needs to shed its dollars...
...“China is trying to get rid of all the dollars they can in a trash-for-resource deal,” Hudson said. “They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly.”...
http://informationclearinghouse.info/article22836.htm
Can the USA ever go bankrupt ?
Do you not realise that you are stepping on the answers at the same time you are trying to trample USA in with such enthusiasm ?
They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril.
The fact that the USA will not sell any of its high-tech industries means that these will remain the key for the recovery of the USA.
The US industrial strength combined with the creativity and energy of the migrant population is the foundation from which the USA will recover from the trillions dollars in the debt that they got stuck with.
At the end of Ronald Reagan's two term presidency, he left behind some trillion dollar debts, which were all cleared at the end of Bill Clinton's two term in the White House.
The sum total value of the industrial and creative strength of the USA is worth much more then the trillion dollar debts that was incurred by George W Bush and Dick Cheney during their 8 years in the White House.
The net worth of all the wealthy US citizens is equal to - if not larger then - the size of the entire China's US Dollar holdings.
History has yet to be made, why are you in hurry to see a crisis unfold ?
Originally posted by Atobe:
Can the USA ever go bankrupt ?
Do you not realise that you are stepping on the answers at the same time you are trying to trample USA in with such enthusiasm ?
The fact that the USA will not sell any of its high-tech industries means that these will remain the key for the recovery of the USA.
The US industrial strength combined with the creativity and energy of the migrant population is the foundation from which the USA will recover from the trillions dollars in the debt that they got stuck with.
At the end of Ronald Reagan's two term presidency, he left behind some trillion dollar debts, which were all cleared at the end of Bill Clinton's two term in the White House.
The sum total value of the industrial and creative strength of the USA is worth much more then the trillion dollar debts that was incurred by George W Bush and Dick Cheney during their 8 years in the White House.
The net worth of all the wealthy US citizens is equal to - if not larger then - the size of the entire China's US Dollar holdings.
History has yet to be made, why are you in hurry to see a crisis unfold ?
....You realised there is a difference between deficit and the national debt?
Bill Clinton did NOT paid off the national debt, he only balanced the yearly budget. He did NOT cleared the national debt, he had a yearly surplus. There is a major difference there.
And you're looking only at the numbers. The networth of the wealthy US citizens are increasing but the middle class and lower classes are not. It's now more difficult to find families that have only 1 single working parent.
I thought you hated that the PAP was doing that. Somehow it's more acceptable that the rich is getting richer in America and unacceptable that it's happening here?
minimum 3 more share market plunging down period, buy in at your own risk
with gov not mid year bonus, what good market we are talking.
so many TOP delay payment, still so many new housing unit for sale,
eye really must open very big or else has to work minimum 30 years for bank loan
Originally posted by Stevenson101:....You realised there is a difference between deficit and the national debt?
Bill Clinton did NOT paid off the national debt, he only balanced the yearly budget. He did NOT cleared the national debt, he had a yearly surplus. There is a major difference there.
And you're looking only at the numbers. The networth of the wealthy US citizens are increasing but the middle class and lower classes are not. It's now more difficult to find families that have only 1 single working parent.
I thought you hated that the PAP was doing that. Somehow it's more acceptable that the rich is getting richer in America and unacceptable that it's happening here?
Other then the spelling and meanings in the words - is there a marked difference between "deficit" and the "national debt" ?
What do you think contribute to "deficit" - and what "becomes National Debt" ?
No, Bill Clinton did not clear the National Debt which was caused by Ronald Reagan.
However, if Ronald Reagan did not appear at the moment in US History, the US economy would have continued to flounder - all of which began with Jack Kennedy commiting the US to the Vietnam War, to Lyndon Johnsons attempt to shorten the war by accelerating US commitments, to the crisis of Nixon's Watergate, and the inability of Gerald Ford and Jimmy Carter to ignite and reinvent USA after the Vietnam War and the US Embassy crisis in Iran.
The slide was more the 30 years in the making from Jack Kennedy to Ronald Reagan, and after Reagan it was George H Bush Sr that could not get his act together to fix the US economy - when he had to settle the Kuwaiti Crisis caused by Saddam Hussein's invasion..
Had Bill Clinton not appeared, the USA would have spiralled downwards.
Am I looking at numbers alone, or are the numbers given to placate the speculative statements made ?
Was it admiration on my part for the growth in the number of wealthy US citizens, or was the "net worth of the US private wealth" quoted as a response to a statement made in pure speculation ?
You can be quite comical in your enthusiastic effort to find fault in my post.
Originally posted by Atobe:
Other then the spelling and meanings in the words - is there a marked difference between "deficit" and the "national debt" ?
What do you think contribute to "deficit" - and what "becomes National Debt" ?
Am I looking at numbers alone, or are the numbers given to placate the speculative statements made ?
Was it admiration on my part for the growth in the number of wealthy US citizens, or was the "net worth of the US private wealth" quoted as a response to a statement made in pure speculation ?
You can be quite comical in your enthusiastic effort to find fault in my post.
.............Resorting to sarcasm and personal attacks when you make a mistake Atobe? I'm starting to see the trend.
National debt is what is owed to the world, while deficit means you're spending more than what you're getting within the fiscal year. Bill Clinton policies resolved the latter, not the former.
Bill Clinton did not even came close to clearing the trillon dollar debts left behind by Reagan, he only balanced the budget and paid back some of it.
I have better things to do than to do fault finding in your anti PAP posts. But it's a problem when you distort facts.
Originally posted by Atobe:
Other then the spelling and meanings in the words - is there a marked difference between "deficit" and the "national debt" ?
What do you think contribute to "deficit" - and what "becomes National Debt" ?
No, Bill Clinton did not clear the National Debt which was caused by Ronald Reagan.
However, if Ronald Reagan did not appear at the moment in US History, the US economy would have continued to flounder - all of which began with Jack Kennedy commiting the US to the Vietnam War, to Lyndon Johnsons attempt to shorten the war by accelerating US commitments, to the crisis of Nixon's Watergate, and the inability of Gerald Ford and Jimmy Carter to ignite and reinvent USA after the Vietnam War and the US Embassy crisis in Iran.
The slide was more the 30 years in the making from Jack Kennedy to Ronald Reagan, and after Reagan it was George H Bush Sr that could not get his act together to fix the US economy - when he had to settle the Kuwaiti Crisis caused by Saddam Hussein's invasion..
Had Bill Clinton not appeared, the USA would have spiralled downwards.
Am I looking at numbers alone, or are the numbers given to placate the speculative statements made ?
Was it admiration on my part for the growth in the number of wealthy US citizens, or was the "net worth of the US private wealth" quoted as a response to a statement made in pure speculation ?
You can be quite comical in your enthusiastic effort to find fault in my post.
I just quote this post since you have changed the content after my previous post. Adding in the part that you realised Bill Clinton did not cleared Ronald Reagan's Debt as you believed in your debate with Ah Chia.
The rest of it had nothing to do with my post so i would not comment on it.
I merely corrected your facts. If you wish to look at it as deliberate fault finding that's your choice to believe.
Originally posted by Stevenson101:
.............Resorting to sarcasm and personal attacks when you make a mistake Atobe? I'm starting to see the trend.National debt is what is owed to the world, while deficit means you're spending more than what you're getting within the fiscal year.
Bill Clinton did not even came close to clearing the trillon dollar debts left behind by Reagan, he only balanced the budget and paid back some of it.
I have better things to do than to do fault finding in your anti PAP posts. But it's a problem when you distort facts to justify your utopian ideals of democracy.
Have I begun to be sarcastic and resort to personal attacks, or are you simply oversensitive and unable to take the heat - when your attempt to apply the heat on others had also encountered the same efforts to deflect the heat back on you ?
In your hurry to score points, have you missed the tree from the forest ?
If you spend more than what you're getting within the fiscal year - what do you think will become of it ?
Will that not add into the "National Debt" ?
Is it necessary for "National Debt" to be owing to the World ?
You did say that - "Bill Clinton did not even came close to clearing the trillon dollar debts left behind by Reagan, he only balanced the budget and paid back some of it. " - to a point, you are correct but perhaps way out in terms of the quantum reduced.
Try digesting the following abstract from an assessment of the achievement about the Clinton-Gore Administration:
Perhaps you could notice the drifts and the flows in the relationship between the "debt and the deficits" ?
Originally posted by Stevenson101:I just quote this post since you have changed the content after my previous post.
I merely corrected your facts. If you wish to look at it as deliberate fault finding that's your choice to believe.
I try my best to target only the content of the post, not the person.
No, you are not attacking the person, but in your anxiety to find fault in the contents of the post, have you not given yourself and the post some space - before hurriedly making a point without taking some effort to be more circumspect with your reply ?
I am not sure if other participants in this SgForum is facing the same problem that I have in that some paragraphs do not appear when first posted, and had to be re-edited for it to appear again.
It's time for a multi-polar world to be born and U.S unipolar hegemony to end.
I support that.
BRIC should create conditions for fairer world order
http://www.hindu.com/2009/06/17/stories/
http://www.russiatoday.com/Politics/2009-06-16
Age of empires has ended: Ahmadinejad
http://www.dailytimes.com.pk/default.asp
China for diversified monetary system
http://english.people.com.cn/90001/90776/
SCO summit shows there is no alternative to international cooperation
http://en.rian.ru/analysis/20090616/155269503.html
CSTO leaders agree on rapid reaction forces
http://news.xinhuanet.com/english/2009-06
So we can see that Bush's eight years in power and his aggressive pursuit to secure U.S hegemony and encirclement of Russia, China in eurasia has caused a reaction and forced the other powers to combine against the common threat.
It is sad that these things are not covered in our state media as Lee Kuan Yew is pro west and an anglo dog, so most Singaporeans don't know what is going on in international affairs. He doesn't want to offend the USA.
This is to be expected from Lee Kuan Yew.
He is regarded as a british colonial stooge after all by other countries.