Are we losing control?

[kawilt]

We may be getting spread a little to thin. Interesting points:

Commentary No. 364, November 1, 2013
"Consequences of U.S. Decline"

I have long argued that U.S. decline as a hegemonic power began circa 1970 and that a slow decline became a precipitate one during the presidency of George W. Bush. I first started writing about this in 1980 or so. At that time the reaction to this argument, from all political camps, was to reject it as absurd. In the 1990s, quite to the contrary, it was widely believed, again on all sides of the political spectrum, that the United States had reached the height of unipolar dominance.
However, after the burst bubble of 2008, opinion of politicians, pundits, and the general public began to change. Today, a large percentage of people (albeit not everyone) accepts the reality of at least some relative decline of U.S. power, prestige, and influence. In the United States this is accepted quite reluctantly. Politicians and pundits rival each other in recommending how this decline can still be reversed. I believe it is irreversible.

The real question is what the consequences of this decline are. The first is the manifest reduction of U.S. ability to control the world situation, and in particular the loss of trust by the erstwhile closest allies of the United States in its behavior. In the last month, because of the evidence released by Edward Snowden, it has become public knowledge that the U.S. National Security Agency (NSA) has been directly spying on the top political leadership of Germany, France, Mexico, and Brazil among others (as well, of course, on countless citizens of these countries).

I am sure the United States engaged in similar activities in 1950. But in 1950, none of these countries would have dared to make a public scandal of their anger, and demand that the United States stop doing this. If they do it today, it is because today the United States needs them more than they need the United States. These present leaders know that the United States has no choice but to promise, as President Obama just did, to cease these practices (even if the United States doesn't mean it). And the leaders of these four countries all know that their internal position will be strengthened, not weakened, by publically tweaking the nose of the United States.

Insofar as the media discuss U.S. decline, most attention is placed on China as a potential successor hegemon. This too misses the point. China is undoubtedly a country growing in geopolitical strength. But accession to the role of the hegemonic power is a long, arduous process. It would normally take at least another half-century for any country to reach the position where it could exercise hegemonic power. And this is a long time, during which much may happen.

Initially, there is no immediate successor to the role. Rather, what happens when the much lessened power of the erstwhile hegemonic power seems clear to other countries is that relative order in the world-system is replaced by a chaotic struggle among multiple poles of power, none of which can control the situation. The United States does remain a giant, but a giant with clay feet. It continues for the moment to have the strongest military force, but it finds itself unable to make much good use of it. The United States has tried to minimize its risks by concentrating on drone warfare. Former Secretary of Defense Robert Gates has just denounced this view as totally unrealistic militarily. He reminds us that one wins wars only by ground warfare, and the U.S. president is presently under enormous pressure by both politicians and popular sentiment not to use ground forces.

The problem for everyone in a situation of geopolitical chaos is the high level of anxiety it breeds and the opportunities it offers for destructive folly to prevail. The United States, for example, may no longer be able to win wars, but it can unleash enormous damage to itself and others by imprudent actions. Whatever the United States tries to do in the Middle East today, it loses. At present none of the strong actors in the Middle East (and I do mean none) take their cues from the United States any longer. This includes Egypt, Israel, Turkey, Syria, Saudi Arabia, Iraq, Iran, and Pakistan (not to mention Russia and China). The policy dilemmas this poses for the United States has been recorded in great detail in The New York Times. The conclusion of the internal debate in the Osama administration has been a super-ambiguous compromise, in which President Obama seems vacillating rather than forceful.

Finally, there are two real consequences of which we can be fairly sure in the decade to come. The first is the end of the U.S. dollar as the currency of last resort. When this happens, the United States will have lost a major protection for its national budget and for the cost of its economic operations. The second is the decline, probably a serious decline, in the relative standard of living of U.S. citizens and residents. The political consequences of this latter development are hard to predict in detail but will not be insubstantial.

by Immanuel Wallerstein




--
Becky Dunlop
Secretary, Fernand Braudel Center
Binghamton University
PO Box 6000
Binghamton NY 13902
Binghamton University - Fernand Braudel Center

 

[CensoredBoardsSuck]

Comment:

Interesting article and I agree with many of Wallerstein's points but I believe he, like many others, is missing the real problem. Decline is not exclusively an American phenomenon, but rather one of Western civilization itself. History has shown that when the great civilizations reached the height of their power and wealth, their survival is no longer a concern - it's assumed. It gets taken for granted and they become soft. And we've become soft. It's a sad commentary on a society that is facing the very real existential threats the West is facing that the greatest concern its population has isn't survival at all, but superficial issues like gay marriage.

The post-Christian West is in rapid decline. It has turned its back on the culture that allowed it to flourish. Its population is aging and it's not reproducing fast enough to keep up. The social programs and generous government pensions that so many have come to depend on (and demand) are being paid for by an ever shrinking workforce. The once wealthy West is broke.

So yeah, the writing is on the wall for the West. But there is one irony I find quite amusing in all this. American Marxists got the shaft - the US missed the socialist boat when it spent its wealth providing security to Europe during the cold war, freeing Europe to spend its wealth embracing socialism. Now it's too late - they'll never see their dream of a socialist utopia in America. Ain't that a kick in the head?

 

[zkt]

Comment:

Interesting article and I agree with many of Wallerstein's points but I believe he, like many others, is missing the real problem. Decline is not exclusively an American phenomenon, but rather one of Western civilization itself. History has shown that when the great civilizations reached the height of their power and wealth, their survival is no longer a concern - it's assumed. It gets taken for granted and they become soft. And we've become soft. It's a sad commentary on a society that is facing the very real existential threats the West is facing that the greatest concern its population has isn't survival at all, but superficial issues like gay marriage.

The post-Christian West is in rapid decline. It has turned its back on the culture that allowed it to flourish. Its population is aging and it's not reproducing fast enough to keep up. The social programs and generous government pensions that so many have come to depend on (and demand) are being paid for by an ever shrinking workforce. The once wealthy West is broke.

So yeah, the writing is on the wall for the West. But there is one irony I find quite amusing in all this. American Marxists got the shaft - the US missed the socialist boat when it spent its wealth providing security to Europe during the cold war, freeing Europe to spend its wealth embracing socialism. Now it's too late - they'll never see their dream of a socialist utopia in America. Ain't that a kick in the head?

While I am in agreement with virtually every point you make, I must take exception with the point that the west is broke. The middle class is broke and gettng broker all the time.
The upper crust has never had it better. Its is about time that they start paying their fair share of the cost of maintaining the country.

 

[kawilt]

I hate to keep posting articles and not giving my own thoughts on all this mess we are in, but this is a pretty good look at the financial quagmire we have been in for some time and should make you ponder just what and who we are we paying our "fair share" to and want to share with the "upper crust".

The Entire Fiat Money System is Bankrupt: Demise of the Global US Fiat Dollar Reserve Currency
By Matthias Chang
Global Research, November 01, 2013
Url of this article:
The Entire Fiat Money System is Bankrupt: Demise of the Global US Fiat Dollar Reserve Currency | Global Research


It’s been a while since I last wrote an article on the on-going financial crisis. I don’t write for the sake of writing, as others do because they have to do so, on account of their subscribers who pay hefty subscription fees and demand their money’s worth.
Major issues or trends do not change on a daily or even monthly basis. A trend may take a few years to run its course and unless there is a major factor that may affect the trend, there is hardly any need to comment any further on the trend or outcomes.
The events unraveling post Bernanke’s decision not to taper QE is most significant because it confirms our analysis that the banking crisis has not been resolved in any significant way after five years of money printing and massive asset inflation. The fiat money system has but one outcome – total collapse. It will also mean the demise of the global US dollar reserve currency.
There are no solutions at hand.
Bernanke is totally discredited and his continued tenure as Chair of the FED would only accelerate the realisation that the FED and all central banks have failed. Hence, the need to change the “leadership” at the FED, but the same policies would be followed with some cosmetic changes to hoodwink the ignorant masses. It is analogous to the transition from the second Bush presidency to that of Obama and all the theatrics of “change” propaganda. In fact, Obama is Bush 2 on steroids! Yellen will be Bernanke on steroids. Why are we so certain of this outcome at Future Fast-Forward?
Our reasons are as follows:
Prior to the Global Financial Tsunami of 2008, I had written several articles exposing the global Too Big To Fail (TBTF) banks as financial rapists and predators and they would cause untold havoc to the financial system.
Post the crisis, I had also warned that these global TBTF banks are all insolvent and the toxic assets on their balance sheets would exceed US$20 trillion at the minimum. The entire fiat money system is bankrupt. Printing toilet paper money by the trillions does not make the system solvent. It is a clear admission that the system is totally broken.
The banking Humpty-Dumpty has fallen from the wall and shattered into a thousand pieces! The confirmation for this is the fact that all central banks led by the FED have only one aim – to create massive asset inflation. How can a stock market of a bankrupt nation be at an all-time high? The FED and central banks the world over are not interested in resolving the unemployment problem because record unemployment would not collapse the fiat money system. It may trigger massive social unrest but that can be put down by a militarised police force, supported by a battle-hardened military as is happening in the US.
In the circumstances, we need to ask the US$ Trillion question – Why are all the central banks focusing on asset inflation via creation of money out of thin air?
The answer: THE FIAT MONEY SYSTEM IS THE ECONOMY, STUPID!
It used to be that the Petro-dollar was the linchpin of the global economy. However, when the derivatives market took off and became a US$800 Trillion global casino, the US$ toilet paper became the currency in global financial trading and speculation.
All the TBTF banks were leveraged to their eyeballs and the collaterals were hypothecated and re-hypothecated so many times over, it became an inverted pyramid joke.
The collaterals were bundled up into CDOs etc. rated AAA by corrupt rating agencies and traded. We need not repeat this old story. The point we are making here is that not only are the collaterals junks but they are supporting a mountain of debts in the trillions. Therefore, when collaterals are impaired the TBTF banks are in a shit-hole from which they cannot get out. The FED and other central banks have no choice but to bail out the TBTF banks if a systemic failure is to be avoided. If all the junk collaterals were to be off-loaded at once in the full glare of public scrutiny, there would be a run on all the banks. So, what was required was a stealth rescue effort. The TBTF banks were allowed to unload the junk collaterals bit by bit by the various schemes of the FED culminating in the US$85 billion a month purchases of treasury bonds and mortgages by the FED.
Additionally, newly “minted” collaterals were used to replace the junks so as to clean up the balance sheets of the TBTF banks. I have stated earlier that the minimum amount of toxic assets needed to be mopped up is US$20 trillion. After five years, the FED has just scratched the surface. It is debatable how many US$ Trillions the FED has actually pumped into the system directly and indirectly. How much and how long more can the FED continue to pump US$ toilet paper into the system without creating a massive loss of confidence in the dollar? When the balance sheet of the FED reaches US$7 Trillion or maybe US$10 Trillion? It is anybody’s guess.
For sure, there will be a point when another US$100 Billion is created on top of the stash of US$ toilet papers which will tip the scale and collapse the entire system. It is a catch-22 for the FED. If it stops creating fiat money out of thin air, the fiat money system would collapse immediately. If it continues with more money creation, it merely postpones the inevitable and more devastating end-game. This is the price we all have to pay for allowing the fiat money system to hold sway for so long.
The world was conned into accepting the biggest Ponzi scheme in the history of banking and finance – the US$ Global Reserve Currency Ponzi Scheme.
This scheme was created on a sand castle of debt, specifically US Treasury Bonds. The world does not need a Global Reserve Currency. Global trade can be conducted in any currency in accordance to the needs and resources of a country.
Why should there be a special privilege given to only one country to have its currency as the sole reserve currency for purposes of trade? It makes no sense as it is the result of US imperialist policies under the pretext of the Cold War. The con was based on the propaganda that the US$ should be the preferred currency and the US Treasury Bond is the “safest asset” to have in the event of an outbreak of war between the Western Imperialist camp and the Soviet bloc. We were told this arrangement was necessary if we are to enjoy the protection of the mighty US superpower!
Yet, when the Soviet bloc collapsed no one questioned the need to perpetuate the system.
Another spin was propagated. The US was the linchpin in the new era of globalisation as the US market was the biggest consumer / export market. Everyone was caught in this web of deceit. The US market was a market built on a mountain of debt. Adding insult to injury, the US consumers paid for the goods produced by millions breaking their backs with US$ toilet paper money!
Some so-called currency experts have asserted that no other currency can replace the US$ toilet paper as the global reserve currency because no other country has a bond market like the US bond market, dominated by the US treasury bonds. What an idiotic statement!
If a country is not in debt, there is no need for any bonds to be issued. A bond is an I.O.U. A bond is a mere paper pledge to repay a debt.
And anyone who says and continues to perpetuate the myth that a US debt is a better debt and is more secure is an A@#hole!
Why would anyone want to work and produce goods which are sold and paid in US$ toilet paper and then use the surplus US$ toilet paper to lend to the US government who repays the debt by merely printing more US$ toilet paper?
So, do you still think the world needs a US$ toilet paper money as a reserve currency?