The Chinese, Russians and other so-called "leaders" in Eurasia have FINALLY decided to stop financing their own US-led politico-economic enslavement & military encirclement by the US banksters and their political puppets.
The American Empire Is Bankrupt
By Chris Hedges
http://www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/
14 June 2009
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.”
It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe.
Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak (as he is (emphasise is mine)). And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.
I called Hudson, who has an article in Monday’s Financial Times called “The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony.” “Yekaterinburg,” Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.” His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,” which appeared in the May 28 issue of the London Review of Books.
“This means the end of the dollar,” Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.”
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.”
The architects of this new global exchange realize that if they break the dollar they also break America’s military domination. Our military spending cannot be sustained without this cycle of heavy borrowing. The official U.S. defense budget for fiscal year 2008 is $623 billion, before we add on things like nuclear research. The next closest national military budget is China’s, at $65 billion, according to the Central Intelligence Agency.
There are three categories of the balance-of-payment deficits. America imports more than it exports. This is trade. Wall Street and American corporations buy up foreign companies. This is capital movement. The third and most important balance-of-payment deficit for the past 50 years has been Pentagon spending abroad. It is primarily military spending that has been responsible for the balance-of-payments deficit for the last five decades. Look at table five in the Balance of Payments Report, published in the Survey of Current Business quarterly, and check under military spending. There you can see the deficit.
To fund our permanent war economy, we have been flooding the world with dollars. The foreign recipients turn the dollars over to their central banks for local currency. The central banks then have a problem. If a central bank does not spend the money in the United States then the exchange rate against the dollar will go up. This will penalize exporters. This has allowed America to print money without restraint to buy imports and foreign companies, fund our military expansion and ensure that foreign nations like China continue to buy our treasury bonds. This cycle appears now to be over. Once the dollar cannot flood central banks and no one buys our treasury bonds, our empire collapses. The profligate spending on the military, some $1 trillion when everything is counted, will be unsustainable.
“We will have to finance our own military spending,” Hudson warned, “and the only way to do this will be to sharply cut back wage rates. The class war is back in business. Wall Street understands that. This is why it had Bush and Obama give it $10 trillion in a huge rip-off so it can have enough money to survive.”
The desperate effort to borrow our way out of financial collapse has promoted a level of state intervention unseen since World War II. It has also led us into uncharted territory.
“We have in effect had to declare war to get us out of the hole created by our economic system,” Lanchester wrote in the London Review of Books. “There is no model or precedent for this, and no way to argue that it’s all right really, because under such-and-such a model of capitalism ... there is no such model. It isn’t supposed to work like this, and there is no road-map for what’s happened.”
The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite.
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Note regarding prof. Michael Hudson's article - De-Dollarization: Dismantling America’s Financial-Military Empire: The Yekaterinburg Turning Point:
In the above article, prof. Michael Hudson bases his argument on the following contradictory premise. He writes that foreign Central Banks “ 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. …this buildup is not really voluntary…, but simply a lack of alternatives.”
However, in Chris Hedges' article, he is quoted by Chris Hedges as saying that China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency.
Hedges writes: “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.”
I wrote to prof. Michael Hudson to point out these contradictory claims and to ask him to clarify his claims into this important issue.
Sadly, however, instead of responding to my inquiry with a coherent argument and an intelligent response, Prof Michael Hudson chose to respond to my inquiry with sarcasm...
Please find below a copy of my inquiry and his "response".
From: arya@yajnacentre.com
Subject: email of inquiry to professor Michael Hudson
To: crg.online@yahoo.com
Received: Monday, June 15, 2009, 10:37 AM
TO: Global ResearchHello,Could you please forward the following email of inquiry to professor Michael Hudson. Thank you!Dear Professor Michael Hudson
I have just read your very informative article - De-Dollarization: Dismantling America’s Financial-Military Empire: The Yekaterinburg Turning Point - published in globalisation.ca.I am writing to you to ask you to shed some light into the following issue related to the subject of your article:
You write:
Central banks “ 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.”
Questions:
1) Why do Central Banks not use their $US reserves to buy other foreign currencies (i.e. Euro, Yen, etc.) as reserves, or gold, stocks, real estate, etc- both at home and abroad - or invest their $US reserves into their own economies to build up public infrastructures to create employment, revenue and thus economic growth?
2) Why do countries such as US-creditor nations such as China, Japan, etc. not sell their goods/services in other currencies such as the Euro, Yen, etc.?
I thank you for shedding some light into these interrogations and I look forward to your response.
Please note that I have posted a copy of your article on my blog at the following link:
http://yajnacentre.blogspot.com/2009/06/beginning-of-end-of-us-dollar-hegemony.html
Best regards,
Arya Tajdin
Prof. Hudson's 1st response to my email
My book Super imperialism deals with these questions in detail. I have many articles on line explaining this too.
Rushing out now...
MH
My follow-up email
prof MH,
I have just read two very informative articles on the same subject which seem to contradict what you are writing, namely that central banks “ 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. …this buildup is not really voluntary…, but simply a lack of alternatives.”
The first article I refer to - The American Empire Is Bankrupt - has been written by Chris Hedges on 14 june 2009. The full article can be viewed at:
www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/?lnIn his article Hedges quotes you as saying:
“The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt.”
But then you add that China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency.
Hedges writes: “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.”
So on the one hand you write “they don’t have any choice but to recycle the money to buy U.S. government debt.” while also stating that “China is trying to get rid of all the dollars they can in a trash-for-resource deal…” ?
These claims seem to be contradicting each other and only serve to further reinforce the confusion raised by your contradictory claims around this important issue as you have chosen not to respond to my inquiry…
Furthermore, another article THE NAKED HEGEMON - Why the emperor has no clothes by Andre Gunder Frank – written on the same subject also seems to contradict your claim.
Please find below a relevant excerpt from the article on this issue:
The greatest real-world threat to Uncle Sam is that the inflow of dollars dries up. For instance, foreign central banks and private investors could any day decide to place more of their money elsewhere than in the declining dollar and abandon poor ol' Uncle Sam to his destiny. China could double its per capita income very quickly if it made real investments at home instead of financial ones with Uncle Sam. Central banks, European and others, can now put their reserves in (rising!) euros or even soon-to-be-revalued Chinese yuan.
Or what if, long before that comes to pass, exporters of oil simply cease to price it in ever-devaluing dollars, and instead make a mint by switching to the rising euro and/or a basket of East Asian currencies? That would at one stroke vastly diminish the world demand for and price of dollars by obliging anyone who wants to buy oil to purchase and increase the demand price of the euro or yen/yuan instead of the dollar. That would crash the dollar and tumble Uncle Sam in one fell swoop, as foreign - and even domestic - owners of dollars would sell off as many of them as fast as they could, and other countries' central banks would switch their reserves out of dollars and away from Uncle Sam's no-longer-safe haven. That would drive the dollar down even more, and of course halt any more dollar inflow to Uncle Sam from the foreigners who have been financing his consumption spree. Since selling oil for falling dollars instead of rising euros is evidently bad business, the world's largest oil exporters in Russia and OPEC have been considering doing just that. In the meantime, they have only raised the dollar price of oil, so that in euro terms it has remained approximately stable since 2000. So far, many oil exporters and others still place their increased amount of dollars with Uncle Sam, even though he now offers an ever less attractive and less safe haven, but Russia is now buying more euros with some of its dollars. ( see also the following recent news article Russia Dumps US Dollar as basic reserve currency source: http://www.globalresearch.ca/index.php?context=va&aid=13691)
So also many countries' central banks have begun to put ever more of their reserves into the euro and currencies other than Uncle Sam's dollar. Now even the Central Bank of China, the greatest friend of Uncle Sam in need, has begun to buy some euros. China itself has also begun to use some of its dollars - as long as they are still accepted by them - to buy real goods from other Asians and thousands of tons of iron ore and steel from Brazil, etc. (Brazil's president recently took a huge business delegation to China, and a Chinese one just went to Argentina. They are going after South African minerals too.)
Full article available at the following link:
http://www.atimes.com/atimes/Global_Economy/GA06Dj01.html
I would very much appreciate it if you would take the time to clarify your claims on this important issue.Arya Tajdin.
http://yajnacentre.blogspot.com/2009/06/beginning-of-end-of-us-dollar-hegemony.html
Prof. Hudson's "response" to my email
From: Michael Hudson
Subject: Re: email of inquiry to professor Michael Hudson
To: arya@yajnacentre.com
Date: Wednesday, June 17, 2009, 1:46 PM
The world is contradictory.
MH
My response to prof. Hudson:
From:
"arya@yajnacentre.com"
Add sender to Contacts
To:
"Michael Hudson"
MH,
Is that the best response you can provide...? From a logical and intellectual point of view, it is truly mind-boggling to comprehend how - from a contradictory premise - you can deduct and conclude that "the world is contradictory"!
I, however, can deduct my own logical conclusions about your writings from both your contradictory claims, incoherent articles and your "response" to my inquiry.
Needless to say, I will not waste any more precious time reading your books & articles (as you suggested) since you evidently cannot write coherently (and politely)!
Please note that I shall publish the emails exchanged between us on my blog.
Sincerely,
Arya Tajdin.
I also wrote to Global Research to express my disappointment. Below is a copy of my email sent to Global Research.
TO: Global Research
ATT: Prof. Michel Chossudovsky,
Director
Dear Prof. Chossudovsky,
I am writing to you to express my utter disappointment at prof. Michael Hudson. In fact, I wrote to him to inquire about a (contradictory) claim he made in his recently published article in Global Research. ( pls see copy below)
Sadly, he chose to respond with sarcasm instead of responding to my inquiry with a coherent argument and an intelligent response. Of course, his "response" says a lot about himself...
I have been a regualr reader of Global Research for many years, and needless to say I find such experiences very disappointing and I hereby wished to express my disappointment to you.
Please find below a copy of the emails exchanged between us.
Sincerely,
Arya Tajdin
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