Crippled Economy & US Strategic Decline

Smoke and Storm Signals 

"Starting next month, we will be able to remove 10,000 of our troops from Afghanistan by the end of this year, and we will bring home a total of 33,000 troops by next summer, fully recovering the surge I announced at West Point (in December 2009) - by 2014, this process of transition will be complete, and the Afghan people will be responsible for their own security," said President Barack Obama in a speech from the White House on 22 June, 2011. US was starting the drawdown from a position of strength and that al-Qaeda was under "more pressure" than at any time since 9/11, asserted Obama. 

"The Americans have the watches, but we have the time."  An Afghan Tribesman 

"Recent events surrounding Afghanistan shouldn't confuse anyone, - The US-NATO coalition has lost a war its political leaders never meant, or knew how, to win." Michael Scheuer, former head of the CIA's bin Laden unit. 

“The war in Iraq is a historic strategic and moral calamity undertaken under false assumptions – undermining America's global legitimacy – collateral civilian casualties, – abuses, – tarnishing America's moral credentials. Driven by Manichean impulses and imperial hubris, it is intensifying regional instability." Zbigniew Brzezinski, National Security Adviser to US President Jimmy Carter. 

“United States air superiority is now so total that "war" no longer accurately describes its one-sided battles. With the risk to US fighter pilots almost as slight as for those flying unmanned drones from Nevada, the days of noble dogfights are over, as Afghans, Pakistanis and now Libyans face attack from a foe sophisticated and distant enough to be feared as a predatory, malign god.-- No knights of the air. No dogfights and sky-jousts. No valor. Just one-sided slaughter and targeted assassinations. That is where air power has ended up. ”- Tom Engelhardt                                

(But it misleads political leaders who are seduced by power point projections of how air power can win as happened in Iraq war and even the Israeli-Hezbollah war of 2006 - the author)  

"I think there is a risk that the U.S. debt default may happen," said Li Daokui of the People's Bank of China in Beijing in early June. "The result will be very serious and I really hope that they would stop playing with fire," he added. 

(The idea of a technical debt default i.e. delaying interest payments for a few days, gained backing from a growing number of mainstream Republicans to force the White House to slash spending. Any form of default could destabilize the global economy and sour relations with big U.S. creditors such as China, government officials and investors warn. China is holding more than $1 trillion in Treasury debt as of March, so its concerns carry considerable weight in Washington).

“Congressional Republicans, who played a major role in piling up the government’s unsustainable debt in the first place, have thrown a tantrum and walked out of the debt limit talks. This bit of grand standing has brought the nation closer to the financial crisis that Republicans have been threatening for weeks.” New York Times Oped on 23 June, 2011. 

Asked about Peter Schiff’s comments earlier on about the US defaulting, John Embry, Chief Investment Strategist of the now $9 billion strong Sprott Asset Management, said:
“When you look at the financial condition of the United States at the federal level, at the state level and at the municipal level, to me I don’t see any way out of this.  There’s too much debt, interest rates are far too low.  If interest rates really reflected what’s going on, this risk in the debt and the risk of inflation, they would be hundreds of basis points higher and under that event the debt couldn’t be serviced.  So there will be some form of default.” 

According to Financial Times (London) of 27 June, 2011,the US dollar will lose its status as the reserve currency in 25 years and would be replaced by a portfolio of currencies according to a survey of central bank reserve managers who collectively control more than $8,000 billion, unlike in the past when they said the dollar would retain its status as the sole reserve currency.  The dollar would be replaced by a portfolio of currencies within the next 25 years. Central banks have bought about 151 tonnes of gold so far this year, led by Russia and Mexico, according to the World Gold Council, and are on track to make their largest annual purchases of bullion since the collapse in 1971 of the Bretton Woods system, which pegged the value of the dollar to gold. The Yellow metal would be the best performing asset class over the next year, citing sovereign defaults as the chief risk to the global economy. 

US debt now amounts to around $ 14 trillion, almost equal to its GDP. Even in this GDP, the financial industry contributes 40%.The economy is now 20-25 % of world GDP unlike 50% after WWII and is being artificially sustained by a stimulus of $2.8 trillion. There are no green shoots of revival, unemployment continues to rise. US economy is in recession. The 1930s recession was overcome by WWII which allowed its protected (from war) industry to run full steam and indebt European and other countries. With many industries disappearing or in decline, even the automobile one, the economic downhill can only worsen. 

“First-quarter GDP growth clocked a meager 1.8 per cent, the unemployment rate is over 9 percent and the housing market remains moribund. The Fed, for one, acknowledges that growth for the year would be softer than expected earlier (it revised its forecasts for 2011 from 3.1-3.3 per cent range down to 2.7-2.9 per cent), but it expects “the pace of recovery to pick up over coming quarters. Besides, Fed Chairman Ben Bernanke and his cohorts at the central bank have been emphatic that QE2 was specifically designed to fend off deflation risks that had emerged last year. With a steady rise in both headline and core (shorn of energy and food prices) inflation figures, these risks have dissipated”, Business Standard 28 June, 2011. 

“One could take this a step further and argue that were the Fed to continue with quantitative easing, it would end up doing more harm than good. Easy dollar liquidity created by the Fed has helped push global commodity prices, setting off a global inflationary spiral and rising inflation expectations in the US. The latter has fed through to US interest rates, and bond yields are at the same level as they were at the start of QE2. More cash in the economy could, ironically, push up inflation expectations and interest rates further and defeat the very objective of an expansionary monetary policy — that of stimulating the economy through lower interest rates,” added Business Standard 

Europe's Lehman moment: “As with Lehman Brothers in 2008, the size of Greek debt will not be the root cause of the next financial crisis, but merely the catalyst in an over-leveraged system based on trust that it is backstopped by government policymakers; Archimedes would understand,” Doug Noland. (The much heralded "bailout" bond for Greece, issued in January 2011, on the opening day plummeted to two-thirds of its value and since then has only traded down to a now-derisory price of 50%,implying that over a five-year period investors would be expected to lose half their original principal)  

“As European economies wilt under unchecked fiscal imprudence and fears of contagious sovereign defaults, it seems absurd that Britain and France are leading a depleted North Atlantic Treaty Organization (NATO) coalition to militarily attack Libya. Financially imperiled states facing mass protests from irate citizens are puzzlingly prosecuting war in North Africa” Sreeram Chaulia in Asia Times

“Imperialism has been the most powerful force in world history over the last four or five centuries, carving up whole continents while oppressing indigenous peoples and obliterating entire civilizations, ”Michael Parenti--” the subject of imperialism has been sanitized, so that empires become “commonwealths,” and colonies become “territories” or “dominions”. Imperialist military interventions become matters of “national defense,” “national security,” and maintaining “stability” (Or civilizing missions, saving the souls and more recently ,” Operation enduring freedom” in Afghanistan, ‘Operation Iraqi Freedom’ and ‘Humanitarian intervention’ in Libya)   

"So I think for all our three countries, China, India and Pakistan we should have new perspective concerning international situation and we should shake our cold war mentality," MaZhengang, head of the Ambassador's group of Chinese State Institute of International Studies, on China's policy perspectives in next 5 years. “If the bilateral (ties) between India and Pakistan can make breakthroughs it is a great pleasure for Chinese people too," he added "So I think for all our three countries, China, India and Pakistan we should have new perspective concerning international situation and we should shake our cold war mentality," continued Zhengang. 

In end 1993, along with six ambassadors resident in Ankara I flew to Baku, capital of Azerbaijan, to present our first letters of credence to president Haidar Aliev , a former senior member of the Soviet Politburo, from Azerbaijan ,who had recently captured power after the last head of state Elcibey , had left the capital. After the letters ceremony and calls on ministers, I called on resident ambassadors in Baku. The new US embassy was quite large and imposing, the British, smaller undergoing renovation; the Israeli, extensive extensions and renovation. 

But I was in for a shock when I called on the Russian ambassador, whose residence consisted of a couple of rooms in an Intourist hotel. Russians were the masters of Azerbaijan till it broke away a few years earlier, because of policies of glasnost and perestroikaby a somewhat naïve Mikhail Gorbachev. (He  recently moaned that Washington could have saved the Russian economy after the break-up. Can there be a more unrealistic thought.) 

The point I want to make is that the Russians who lorded over Azerbaijan till recently were reduced to such straits that its Ambassador Extraordinary and Minister Plenipotentiary was confined to a suite in a two star hotel you find near old Delhi Railway station. But this kind of thing is not new in history. After all USSR had lost the Cold War, which was a tabletop nuclear war exercise between the two mighty adversaries. Moscow just could not match huge sums Washington poured into military expenditure. 

Further, President Ronald Reagan hoodwinked Gorbachev by threatening Moscow with StarWars (on which hundreds of billions of dollars have been sunk without a proved destruction of an incoming missile yet). Obedient US corporate media flattered Gorbachev daily as a great democrat (The Russians rebuffed him when he got 0.50% of votes against his successor Boris Yeltsin, mostly drugged or drunk , in the 1996 presidential elections for the Russian Federation) 

Since the break-up of USSR it is believed that under the charade of globalization, between $400 billion to $ one trillion wealth was transferred from Russia to the West on advice by throngs of Harvard trained and other business experts in league with complicit Russians, mostly former Communists. The Soviet Union's collapse was ruthlessly exploited by US led West. Its capitalist controlled media sang praises of economic reforms and democratization which brought economic disintegration and ruination to Russia and the worst kind of depression in modern history with economic losses more than twice those suffered by USSR in World War II. Russian GDP was trimmed to half and capital investment fell by 80 percent. People were reduced to penury and misery, death rates soared and the population shrank. According to an estimate an extra million Russians died. And in August 1998, the Russian financial system collapsed. 

In what has been described as the Piratization of Russia, the plunder of its natural resources is a story of intrigue, adventure, and of the incestuous relationship between government leaders, corporate directors, and bankers. It is about insider deals, golden parachutes, corporate jets, villas in the south of France and Spain, and instant millionaire status for those who shrewdly played the game. It created seven (six Jews) Oligarchs , half of whom have escaped or do not live in Russia and one remains jailed in Siberia for trying to take over the country on behalf of Western bankers and financiers. 

The cold war ended in Moscow, but not in Washington. 

Vladimir Putin finally let go, at the 43rdannual International Security Conference held in Munich on 10 February, 2007,accusing Washington of provoking a new nuclear arms race by developing ballistic missile defenses, undermining international institutions, trying to divide modern Europe and making the Middle East more unstable through its clumsy handling of the Iraq war. 

Stephen F. Cohen in an article "The New American Cold War" wrote in 10 July 2006 issue of US magazine, 'The Nation" that since 1990s , Washington has followed hypocritical policy of "strategic partnership and friendship," with presidents being on first name basis but underneath, all US administrations have followed a ruthless policy of undermining Russia "accompanied by broken American promises, condescending lectures and demands for unilateral concessions. USA has been even more aggressive and uncompromising than was Washington's approach to the Soviet Communist Russia." 

With growing military encirclement of Russia, on and near its borders, by US and NATO bases, which are already ensconced or being planned in at least half the fourteen other former Soviet republics, from the Baltics and Ukraine to Georgia, Azerbaijan and the new states of Central Asia. US has built reverse iron curtain and there militarization of American-Russian relations. 

"A tacit (and closely related) US denial that Russia has any legitimate national interests outside its own territory, even in ethnically akin or contiguous former republics such as Ukraine, Belarus and Georgia." Late Richard Holbrooke, former US point man for Af-Pak had condemned Russia for promoting a pro-Moscow government in neighboring Ukraine, where Russia has centuries of shared linguistic, marital, religious, economic and security ties and declared ' that far-away Slav nation part of "our core zone of security."

"Even more, a presumption that Russia does not have full sovereignty within its own borders, as expressed by constant US interventions in Moscow's internal affairs since 1992 -- included an on-site crusade by swarms of American "advisers," to direct Russia's "transition" from Communism; endless missionary sermons from afar, often couched in threats, on how that nation should and should not organize its political and economic systems; and active support for Russian anti-Kremlin groups, some associated with hated Yeltsin-era oligarchs.” 

It was even suggested that Putin be overthrown by the kind of US-backed "color revolutions" carried out since 2003 in Georgia, Ukraine and Kyrgyzstan, and attempted this year in Belarus. (Do proponents of "democratic regime change" in Russia care what it might mean destabilizing a nuclear state?) -- Underpinning these components of the real US policy are familiar cold war double standards, condemning Moscow for doing what Washington does - such as seeking allies and military bases in former Soviet republics, using its assets (oil and gas in Russia's case) as aid to friendly governments and regulating foreign money in its political life. 

"More broadly, when NATO expands to Russia's front and back doorsteps, gobbling up former Soviet-bloc members and republics, it is "fighting terrorism" and "protecting new states"; when Moscow protests, it is engaging in "cold war thinking." When Washington meddles in the politics of Georgia and Ukraine, it is "promoting democracy"; when the Kremlin does so, it is "neo-imperialism." 

"When in the 1990s the US-supported Yeltsin overthrew Russia's elected Parliament and Constitutional Court by force, gave its national wealth and television networks to Kremlin insiders, imposed a constitution without real constraints on executive power and rigged elections, it was "democratic reform"; when Putin continues that process, it is "authoritarianism." 

So history never ended. After the fall of the Berlin Wall, U.S. led West along with its military arm NATO, moved first stealthily, then rampantly to roll back Russia from the strategic space it occupied as WWII victor in central and eastern Europe, beginning with the removal of Milosevic of Serbia, an Orthodox Slav people, traditional friends of Orthodox Slav Russians, after having encouraged divisions in the Yugoslav republics and then bombings ,with help from West European countries like Germany with old imperial memories.   

Democracy and Washington’s Hypocrisy

Washington then brought about regime changes in Georgia and Ukraine and installed its puppets. The Guardian, Global search, New Statesman and other websites have documented covert and overt supporters of regime change. Some of these are the National Endowment for Democracy (NED), the Carnegie Endowment for International Peace, Freedom House and George Soros' Open Society Institute. The NED has four affiliate institutes: The International Republican Institute (IRI), the National Democratic Institute for International Affairs (NDI), the Center for International Private Enterprise(CIPE), and the American Center for International Labor Solidarity (ACILS).They” provide technical assistance to aspiring democrats worldwide."  

Oil Prices – A Rigged Game 

F. William Engdahl an eminent expert on politics of oil says that the oil price is by and large driven by massive speculation? For example in October last year the daily volume of crude traded on New York MEX was over 1 billion barrels per day while the total daily global demand was only 83 million barrels per day. Thus the amount traded on one single exchange is more than 10 times total daily consumption. It is a giant casino with prices being driven up by speculators (with stimulus funds and derivatives at hand) and consumers having to pay through their nose. In 2008 when price per barrel was spiked-up to $ 147 per barrel and Goldman Sachs was issuing client-advisories that it was going quickly to $ 200, and JP Morgan was advising the Chinese government that China ‘buy all the physical crude it could since it was going to be $ 200, Engdahl wrote that roughly 60-70% of the price of oil then was pure speculation, manipulated by the GSCI, the Goldman Sachs Commodity Index. Thus Wall Street controls the oil price irrespective of supply and demand. The crucial ingredient these days is not the NYMEX for the global oil price benchmark, but the ICE Futures in London, a daughter company of the International Commodity Exchange of Atlanta in Georgia, owned by Goldman Sachs, Morgan Stanley, JP Morgan Chase etc. – the big oil banks that benefit enormously from the inside. There is absolutely no serious regulation of the ICE. 

Speculation puts massive political pressure on Germany, EU, China and others. The emerging giant, Beijing, many in Washington feel is acting too independently. Engdahl also explains lucidly the myth behind ‘Peak Oil’ theory , stating that there is enough oil and also the Western scare about climate change to curtail economic progress in the East and also to benefit from it. 

For a fascinating analyses of oil politics read an interview of FWEngdahl

In the Caspian energy region, Washington allowed Ilham Aliev to succeed his father Haidar Aliev, an ally, in a disputed 2003 election. In this 21st century struggle for the control of strategic space, energy sources and raw materials, US built up a million barrel a day Baku-Tibilsi-Ceyhan pipeline, an energy corridor to squeeze Russia and Iran out from energy transportation to Europe. Stationing of troops in Georgia and Azerbaijan to guard it is a strategic menace in the region, especially for Azerbaijan‘s southern neighbor Iran, part of the US Axis of Evil and on its hit list off and on. But West is coming out second best in the control over energy resources in the Caspian and central Asia and its transfer to Europe. Germany is going ahead with energy cooperation with Russia .In any case where else Europe can buy oil or gas. (India is succumbing to US pressure on its oil purchases from Iran. India lies supine before Washington when asked to bend, whatever the color of the coalition government in New Delhi) Control of energy resources and manipulation of its price is a potent weapon in Wall Street’s hands to browbeat opponents and even allies.  

Continued to Shanghai Cooperation Organisation (SCO)


More by :  K. Gajendra Singh

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