El siempre
recomendable sitio web Strategic Culture Foundation (http://www.strategic-culture.org),
de origen ruso, publicó el año pasado un artículo de Daniel Saarinen titulado “Geopolitical
Implications of the World Economic Crisis”. Nada nuevo, pero conciso y bien
escrito. Vale la pena reproducirlo aquí, a propósito de los tiempos que corren.
The world economic depression is a dire threat to the
national security of the United States. To date, little or nothing has been
done to address the causes of the depression and rebuild the economy. With the
lack of leadership and vision in the western world, the depression will
continue until the Anglo-American economic system known as the Washington
Consensus self-destructs. This is occurring rapidly, and the Beijing Consensus
is being asserted to replace it. At some point during this process the center
of world politics, economics and military power will shift to North East Asia.
This shift will not happen peacefully, and system wide warfare is the likely
outcome if this breakdown crisis is allowed to run its course.
Let us be clear that we are in a depression on par
with the Great Depression, not a downturn, a slowdown, a rough patch or a
recession. Housing values have already fallen on average 26%, and during the
Great Depression they fell 25.9% (1). We are not at the bottom for real estate
by any means either. Unemployment the way it was measured back then was at
least 24.9% (2). Today by those measures it stands at about 23% (3). Let there
be no mistake, we are in an extreme crisis. The purpose of this passage is to
emphasize the magnitude of the crisis. Calling it by other names and creating a
false propaganda reality will only delay the actions needed to combat the
depression. The longer our leaders delude themselves, the more severe the
crisis will become.
Derivatives are the Cause of the Depression
The origin of the crisis lies in deregulated credit
derivatives of various types. The proper way to understand derivatives is that
they are some form of paper based on paper. Anytime we are more than one step
removed from an underlying asset we are dealing with derivatives. The Bank of
International Settlements admits that there are around ~$600 trillion in
derivatives out there (4). This is more than ten times the entire GDP of the
Earth, which is about ~$58 trillion. Other sources indicate that the
outstanding amount of derivatives of all types approached ~$1.5 quadrillion,
and has now fallen to a mere ~$1 quadrillion (5). A dangerous feature of derivatives
is that they are zero sum instruments, in that there is always a winner and a
loser. This means that every derivative represents some amount of debt that
someone will have to pay at some point in the future, with the notional
fulfillment value much higher than the market value of the instrument.
These derivatives are controlled by globalized finance
oligarchs based primarily in New York and London. These oligarchs dominate the
governments of most western countries, and they have abused their power by
making the sole mission of the state that of propping them up. All of the other
concerns of the nation states of the world are regarded as secondary to the
effort to rehabilitate the cancerous mass of $600 trillion-$1.5 quadrillion of
derivatives. The United States cannot recover until Wall Street is stopped and
put into receivership by the federal government, and the derivatives are
liquidated in bankruptcy proceedings. The Special Inspector General of the
Troubled Asset Relief Program (SIGTARP) Neil Barofsky reported to Congress that
as of 2009 the potential public liabilities from the banking bailouts of
various types were already at $23.7 trillion just for the United States (6).
The Wall Street banking cartel, and the London oriented Inter-Alpha Group of
Banks are already bankrupt. They exist as economic wards of the state, and
survive only because of vast amounts of public money. The deregulated markets
that they need in order to operate are also responsible for tremendous
instability around the world. Here is the example of Federal Reserve (The Fed)
Chairman Bernanke’s Quantitative Easing II (QE2) bailout program, and how it is
contributing to the destabilization of the world.
Banker Bailouts Destabilize the World
QE2 is by no means the only liquidity vehicle being
used to recapitalize the banks, but it is a discrete example that can be used
in the space available here. All of the money coming from the other unmentioned
credit facilities is subject to the same logic presented here on QE2. QE2 involves
the Federal Reserve engaging in open market operations to monetize ~$110
billion per month of treasury securities in the 7-10 year range, and this is
ongoing. This means they print the money and give it to the banks, and the
treasury securities go onto the Fed balance sheet.
The money that the banks get is not regulated, and
they can use it anyway that they want to. Since the Fed maintains its interest
rate at .25%, the banks have a hard time making any money in the United States.
This money becomes flight capital because of this. The banks send it to
speculate in emerging markets, commodities exchanges, foreign exchange markets
and derivatives. Emerging markets are experiencing speculative booms and busts
because of this hot money, and this is destroying jobs and social order across
the third world. This constant huge influx of flight capital is driving up the
currencies of exporting nations like Brazil and Japan, and stoking high
inflation in China because of the Renminbi peg to the dollar. The Finance
Minister of Brazil has stated that currency war has already broken out around
the world (7). This analysis of QE2 is supported by Joseph Stiglitz in an
interview with the London Telegraph (8).
When this money hits deregulated commodities markets
we see speculative booms in prices to unprecedented levels, and this includes
food stuffs. Food prices are at all time highs, and have risen dramatically in
the last year (9). Much of the unrest across North Africa and in the Middle
East is the result of massive increases in food prices. In areas where large
sections of the population survive on $2 per day or even less, this is a matter
of life and death. Chairman Bernanke’s banking bailout activity is destroying
the geostrategic position of the United States around the world as friendly
regimes fall, or are destabilized and weakened. America’s influence throughout
the entire third world is now seen to be in decline because of the depression.
The growing un-governability in the United States may drastically accelerate
the crisis as well.
The approaching danger here lies in the
destabilization of the US Treasury market. Brief explanation is required. The
only source of US dollars in the world is here in the US, not in China, or
anywhere else. Congress first appropriates money into existence to do various
things, and second authorizes bonds to be issued by the treasury. The media
deceives people into believing that it is the other way around, and this leads
to confusion. Part of the money appropriated into existence goes to fund the
trade deficit with China. The bonds that are issued from the treasury allow
China a place to invest those dollars without driving up prices in other
markets. Limiting the availability of bonds to soak up these dollars is
dangerous to the international currency system, and the mass of derivatives
associated with it.
The House Republicans are playing a game of
brinksmanship with President Obama and the Democrats over the US debt ceiling
this spring. This is an ideological and demagogic exercise. If the ceiling is
not raised, no new bonds can be issued. This does not stop congress from
spending money, because the government is the sole source of new dollars in the
world. It also does not stop the trade deficit from continuing either. It just
means that as the deficit continues, and treasury bonds are naturally redeemed
over time, there will not be enough new bond issues to roll over into. In order
to have economic stability in a situation like this the federal deficit would
have to quickly fall to an amount equal to interest payments on the debt plus
bond redemptions, and there would have to be no trade deficit. This would allow
enough month to month roll over room to keep the current dollar supply locked
up in bonds.
Since that level of cutting cannot and should not
happen, it means that hundreds of billions of dollars that are currently locked
up in the secondary treasury market will suddenly be forced to start competing
for scarce goods and services around the world. This could cause a dramatic
currency crisis, and bring a new wave of mass panic to nations around the
world. With the world economic system already battered from the depression,
there is no telling how the system would react to this potentially huge shock.
Our leaders would be wise to back away from the abyss, and not test the theory.
Anglo-American Institutions in Crisis
The post-WWII international financial institutions
dominated by the Anglo-Americans are also collapsing. The World Bank, dominated
by the Washington Consensus, has fallen behind the Chinese in lending to
developing countries. The World Bank loaned out ~$100 billion from mid-2008 to
mid-2010. The Chinese Development Bank and Export Import Bank lent ~$110
billion during a comparable period of time (10). This means that western
influence is waning all across the third world. Africa, Latin America and South
Asia are turning increasingly to Beijing and not Washington for economic
development. This translates directly to loss of strategic position and
influence around the world.
China is overtaking the United States economically at
an alarming rate. Chinese financial institutions have overtaken the World Bank
in lending to developing countries. In 2010 China surpassed America in total
energy consumption (11). China is projected to pass America in manufacturing
either this year or in the next few (12). America has been the greatest
manufacturing nation in the world for 110 years, and when we took the crown
from Britain we became the greatest nation in the world. America will cease to
be the greatest nation in the world when it is surpassed in industrial
capability by China.
The GDP measurement appears to give America some
breathing room with the US at $14.6 trillion and China at $5.7 trillion. GDP
measurement should not fool anyone though, because it is a fraudulent measure
of economic strength. This is because GDP counts everything that goes on in an
economy. In the world of physical economy and national greatness many things do
not count: narcotics trafficking, money laundering, gambling, pimping and
prostitution, lawsuits, and generally all forms of Wall Street related
speculative activity. In real physical terms the Washington Consensus is being
defeated by the Beijing Consensus, and the change over in domination of the
world system is not likely to be peaceful.
John Mearsheimer argues convincingly that potential
military power derives from economic power, and potential economic power
derives from population size. The unproductive activities listed above
contribute to GDP, but not to potential military power and therefore should not
be counted economically from the point of view of strategy. If American leaders
make the mistake of believing the GDP measure, they will believe that the
nation possesses more potential military power than it actually does. When
leaders believe that they have significantly more power than they actually do,
it is easy for otherwise rational actors to commit huge blunders.
China, Russia, and the many nations looking to them
for help and protection will assert their national interests more and more
against the United States over the coming years. As the crisis deepens in these
countries, problems will have to be blamed on someone. Some of the problems
will really be their own fault, some really will be America’s fault and it will
not matter which is which. In America similar demagogic things are happening
already. The obsessive, compulsive focus on the Chinese Renminbi exchange rate
is a prime example. This is a mask for the larger problems of free trade,
globalism and deregulation that lie at the heart of the system here. These
problems will not be addressed, so there must be a suitable stand in to be
blamed for all of our ills. Years of this type of propaganda on both sides sets
the stage for escalating levels of confrontation. The danger of system wide
warfare is real.
There is no certainty in how this conflict will play
out. Of course, the apocalyptic scenarios are possible, featuring direct
confrontation between great powers. The more likely scenario is already in
play, and involves decades of low level guerilla war and regional scale war.
The first decade of this is already completed, and in the books. These wars
will prohibit industrialization and economic development across the third world,
and allow the real culprits behind the crisis to fade into the background
unpunished. China and Russia will begin to intervene by proxy in these
brushfire wars and coups across the third world. As time goes on, the reasons
for the collapse of world civilization will become less and less clear as the
wars take on lives of their own. An entire generation doomed to falling
standards of living, and even immiseration, will fight a thousand small endless
wars as fascist corporatism dominates the formerly free nations of the West.
The only way for the United States to avoid this fate
is to return to its economic traditions. End globalization, the free trade
mania and bring back the protective tariff. Break up finance capital with a new
Glass-Steagall Act. Bringing industrial development back to this country will
automatically put tremendous internal pressures on rival nations when they are
no longer able to rob America blind for free. This will preserve the reserve
currency status of the dollar, and stabilize markets around the world. Force
the Chinese economic engine to fuel itself, and the Chinese Miracle will be
shown to be an empty illusion.
__________________________________________
Notas:
(1) Curnutte, Katie. “Home Value Declines Surpass
Those of Great Depression”, 1/11/2011. Zillow.com. Accessed at
http://www.zillow.com/blog/home-value-declines-surpass-those-of-great-depression/2011/01/11/
on 2/11/2011.
(2) Vangiezen, Robert and Schwenk, Albert.
“Compensation from before World War I through the Great Depression”. Bureau of
Labor Statistics, 1/30/2003. Accessed at
http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm on 2/11/2011.
(3) Williams, John. “Unemployment (U3 & U6) vs SGS
Alternate”, 1/2011 data. Shadow Government Statistics. Accessed at
http://www.shadowstats.com/alternate_data/unemployment-charts on 2/11/2011.
(4) Bank of International Settlements. “Table 19:
Amounts Outstanding of over-the-counter (OTC) derivatives”. Accessed at
http://www.bis.org/statistics/otcder/dt1920a.pdf on 2/11/2011.
(5) Matai, D.K. “Derivatives Quadrillion Play: How Far
Away Are We From A Second Financial Crisis?” SeekingAlpha.com, 3/23/2010.
Accessed at
http://seekingalpha.com/instablog/585690-dk-matai/60082-derivatives-quadrillion-play-how-far-away-are-we-from-a-second-financial-crisis
on 2/11/2011.
(6) Office of SIGTARP. “Quarterly Report to Congress,
July 21st 2009”, Page 4. Accessed at
http://www.sigtarp.gov/reports/congress/2009/July2009_Quarterly_Report_to_Congress.pdf
on 2/11/2011.
(7) Wheatley, Jonathan. “Brazil in ‘Currency War’
Alert”. Financial Times, 9/27/2010. Accessed at
http://cachef.ft.com/cms/s/0/33ff9624-ca48-11df-a860-00144feab49a.html#axzz1DA6iTjfh
on 2/11/2011.
(8) Trotman, Andrew. “Joseph Stiglitz: America’s QE2
‘poses considerable risks’”. The Telegraph, 12/10/2010. Accessed at
http://www.telegraph.co.uk/finance/economics/8195572/Joseph-Stiglitz-Americas-QE2-poses-considerable-risks.html
on 2/11/2011.
(9) Lubin, Gus. “Global Food Prices Just Hit Their
Highest Level Ever”. Businessinsider.com, 2/3/2011. Accessed at
http://www.businessinsider.com/un-food-price-record-2011-2 on 2/11/2011.
(10) Dyer, Geoff and Anderlini, Jamil. “China’s
Lending Hits New Heights”. Financial Times, 1/17/2011. Accessed at
http://www.ft.com/cms/s/0/488c60f4-2281-11e0-b6a2-00144feab49a.html#axzz1DgohDwtA
on 2/11/2011.
(11) Smith, Grant and Schmollinger, Christian. “China
Passes U.S. as World’s Biggest Energy Consumer, IEA Says”. Bloomberg,
7/20/2011. Accessed at
http://www.bloomberg.com/news/2010-07-19/china-passes-u-s-as-biggest-energy-consumer-as-oil-imports-jump-iea-says.html
on 2/11/2011.
(12) Isidore, Chris.
“China Close to Chatching U.S. in Manufacturing”. CNN Money, 6/21/2011.
Accessed at
http://money.cnn.com/2010/06/21/news/economy/china_us_manufacturing/index.htm
on 2/11/2011.
