The Dollar and Delusional Assumptions about Sanctions

 Sanctions are a form of warfare, and few would deny that we have moved into a new era of economic warfare with sanctions, led by the US, have become the norm, rather than the exception. This was the conclusion recently of the pro-Western World Economic Forum. If there is general agreement that sanctions are a form of warfare, and not selectively, but regardless of who imposes them and for whatever reason, the next question is the cost-benefit ratio on the country or countries imposing them.

Clearly, the desired goal is to use economic sanction as leverage, although there is an appreciation of their impact on the general population, rather the elite of the targeted nation. From the Cuban Revolution, to the Iranian Revolution, and to Russia’s invasion of Ukraine, history has shown that sanction do not yield the desired goal. When imposed on countries like China, economic sanctions have shown to cause far greater damage to those imposing them than on the targeted country. Assuming that heads of state are well aware of this reality, why go the route of economic sanctions, only to suffer the detrimental consequences?  

The combination of ideology, power status, the mythology/pathology of “greatness”, even when time has diluted such “greatness”, revenge at any cost, desperation owing to lack of alternative paths, and, of course, delusional thinking of which it is always in abundance on the part of the political and business elite, merely because they embrace the fallacy of the eternal sameness against the harsh reality of constant change combined with the other reality of the unpredictability on the part of the sanctioned party. Just as Russian is not what it was in 1949 when it successfully tested the first atomic bomb, and simultaneously Mao’s revolution succeeded in China, neither is the US the same as the world’s hegemonic superpower with the dollar as the world’s preeminent currency.

When Biden announced the massive US-led sanctions against Russia, US and European officials as well as Western analysts were predicting the complete collapse of the Russian currency now linked to gold; the quick bankruptcy of the Russian state agencies owing to defaults, followed by an economic depression and presumably the Kremlin’s decision to leave Ukraine in humiliation. At the same time, US-Western analysts expected an international rush to buy dollars, thereby strengthening the US reserve currency.

The above scenario was around the end of February when the euro-dollar exchange rate just $1.13-1.14 to one euro. On 28 April the dollar-euro rate stands at $1.05, representing a significant drop against a currency itself in trouble because of the Russian sanctions. More significant, a number of private financial institutions as well as the IMF which monitors currencies globally, have concluded that the dollar is headed for continued decline. Saudi Arabia among other countries have already announced that they are transitioning out of the dollar as the most reliable reserve currency. The US-NATO sanctions regime which is in essence a reaffirmation of economic bloc trading in the absence of their ability to compete with China, regardless of what has taken place with Russia, demonstrates that the West is undermining the Western neoliberal model from within, using the Russian war as a pretext in a desperate attempt to retain core status in the world economy.  

The US-NATO plan to weaken Russia militarily, thereby sending a message to China about Taiwan, rather than to pursue a diplomatic solution will hasten and deepen global economic recession, and by default strengthen China despite its own supply chain problems because of an austere COVID-19 lock down policy. Rhetoric aside, the Russian currency has stabilized. GAZPROM has already compelled a number of European countries and companies to pay in rubles for natural gas. And the idea that a war of attrition will only hurt Russia has proved delusional so far, and we are still early in a conflict that the US wants to be drawn out.

The idea that a military solution will favor the US-NATO bloc and result in the demise of Russia is another leap into the murky realm of delusional thinking, considering that autocratic Putin is more determined and far more capable of doing damage to Europe than NATO can inflict on Russia, unless the West has resolve to put an end to the continent. This is not to suggest that the Kremlin's delusions are less imperialistic, less militaristic and more ethical than those of the US-NATO coalition. If China never existed, and if more than two dozen countries of the 195 in the world were taking part in US-led sanctions, US-NATO sanctions would not be as delusional, though they would still not be nearly as effective as policy makers assume.

BIDEN, RUSSIAN WAR, AND STAGFLATION ECONOMICS

When Trump left office, he had a personal low public opinion poll of 34% amid the January 6th quasi-coup attempt, whereas Biden in a middle of an enemy that most Americans love to hate, and have done for more than century, has approval rating 1% lower than Trump when the latter left office in January 2020. The question is why do only one-third of the voters polled approve of a president trying to blame Russia and/or China for all calamities befalling the US?

1.      Stagflation – A recession cycle was as inevitable as the Federal Reserve was due to raise interest rates to slow down speculative financialization on Wall Street. Biden exacerbated the problem by arrogantly assuming that "punishing" Russia with sanctions that would have minimal impact on the world economy with which the US is intertwined. Trump tried tariff wars with China and the net economic loser was the US; a lesson one would assume that Biden's advisors would have learned and provided a bit of realistic analysis to the White House dreaming of a return to the Cold War of the 1950s.

Instead, they have been willing to sacrifice the US and world economy to "punish" Russia, as though it were ever a possibility that Putin would actually change his mind and abandon his war aims in Ukraine. Calling the high cost of living the "Putin inflation" is about as "cute" as Trump calling COVID-19 "the China virus" and indicative of why Beijing criticizes the US leadership for conducting policy from a realistic perspective.

2. Another reason for Biden’s low polling numbers is that the Progressive wing of the Democratic Party and rank and file feel betrayed. Biden had promised a pro-labor agenda. Instead, he has continued some of the Trump economic policies both in fiscal measures as well as corporate subsidies, favoring Wall Street and the richest 1%. Despite the Progressive Caucus’ urging to push the Build Back Better program, to do something about college student debt, and support labor unions and higher federal minimum wage, he and the mainstream Democrats engage in patronizing rhetoric, but have done nothing to deliver on policy.    

3. Biden has placed militarism above environmentalism and the environmentalists have taken notice that he has abandon the promise of a green economy. Nationalism works up to a certain point when people’s material needs are satisfied. Biden has used nationalism to justify not seeking a diplomatic solution, while benefiting the defense sector industries, but above all, the fossil fuel which he had promised that he would not be supporting. On the contrary, he has given the industry the green light and provided corporate subsidies, all in a desperate effort to create an Atlantic bloc economy that would minimize the role of Russia and China. This has meant tossing out all campaign promises about green energy.

4. While remaining true to symbolic gestures like choosing the first black woman for the Supreme Court, he has done absolutely nothing to lift living standards among minorities, as he promised when he insisted that a massive infrastructure program would create high paying jobs. The cost of living was climbing higher before Russia’s invasion of Ukraine, and reached new heights thereafter. People are judging Biden based on their living standards, not his policy intended to replace Russian natural gas and oil market in Europe with US exports.

5. Focusing on a war in a distant land where Americans feel a general sense of empathy does work for a brief period, very brief when the realities of paying bills are confronting working families. Biden has failed to deliver for working families, as he had promised in 2020 and this is the main reason only one-third of those polled support him. Every few days, people find out that there are hundreds of millions of their tax dollars going to military aid in Ukraine whose chances of winning the conflict were always ZERO and are unlikely to improve. They also discover that Biden has proposed the highest defense budget in US history. Meanwhile, the country’s debt is reaching new highs, as a percent of GDP, while the IMF is warning that US GDP growth will be in the low 1% in 2022 and the dollar’s future is looking very grim.

In March 2022, the IMF issued a warning about the global demise of the dollar owing to US-NATO-led global sanctions on Russia’s the world's largest producer of commodities. A few days later Goldman-Sachs followed the IMF with a more dire warning about the dollar's future as a reserve currency, arguing that it will be somewhat analogous to the British pound, given that the US has chosen to place military-based geopolitics above economic considerations, or rather risk using military means as economic leverage.

 This week, CREDIT SUISSE issued an even more pessimistic scenario than either the IMF or Goldman-Sachs, arguing that bloc-trading geopolitics in essence disengages a segment of the world economy, forcing countries at odds with US policy to go their own way and drop the dollar as a reserve currency. Right now, there is really no problem, other than inflation and stagnation, cyclical in nature with a good possibility for a recession exacerbated by the Russian invasion of Ukraine and US-NATO sanctions regime, and combined with the adamant US refusal for a diplomatic solution based on accommodating Russia's security concerns.

 After the Russian war, the recession will remain and after the recession, the dollar will continue the long slide to oblivion, exactly as the IMF, Goldman-Sachs and CREDIT-SUISSE have warned. This was not inevitable, but rather a decision by Washington to rely on "military Keynesian" policy, as it has since the Truman presidency, to the detriment of the civilian economy under the neoliberal model that has already debilitated the middle class and working class.

 China has been watching NATO and the US weakened economically by their own sanctions, while they are and taking down the world economy. Prolonging the conflict provides nothing but destruction for Ukraine, a weaker global economy, which inadvertently benefits China, and nuclear-powered Russia becomes more distant from the West. Following a path contrary of the US, on 14 April, China asked banks to keep less cash on reserve and make more credit available. This was in anticipation of a global economic contraction and a means of stimulating internal demand to substitute for the anticipated drop in exports. Undermining that policy, US Treasury Janet Yellen called on China to stop undermining US-led sanctions against Russia, while hinting that the US wants to avoid a split with China. In reality, the US and EU have been pursuing bloc trading and the so-called split that Yellen mentioned is manifested in the East-West approach to the war in Ukraine.

África en el siglo XXI; El legado del imperialismo y perspectivas de desarrollo

 

Algunos de los argumentos que hoy se esgrimen acerca de por qué África no se puede poner a nivel de Occidente también se esgrimieron hace cien años cuando África estaba bajo la colonización europea y los colonizadores culpaban a todo excepto al imperialismo de ser la causa fundamental del subdesarrollo. La estructura económica mundial no ha cambiado, independientemente de la retórica de la globalización. África sigue siendo semicolonial: cada vez más dependiente de los países desarrollados por sus sobrevalorados artículos manufacturados mientras exporta materias primas a unos precios determinados por los mercados de materias primas de Occidente.

RESUMEN

Este trabajo argumenta que en el siglo XXI África está experimentando cambios en sus economías, no sólo por el papel que desempeña China, sino también por la fuerte competencia de otros países occidentales y de Oriente Medio. El papel de China forma parte de la economía capitalista mundial y del modelo de integración patrón-cliente que los europeos siguieron después de que los países africanos lograran su independencia formal de la colonización. Durante la segunda mitad del siglo XX la Europa del noroeste siguió siendo el conducto para la integración africana en la economía global centrada en Estados Unidos, a pesar del papel de las corporaciones multinacionales con base en Estados Unidos. Según las encuestas sobre las naciones africanas del Pew Research Centre, el problema que afecta a la vasta mayoría de las personas sigue siendo el abismo entre ricos y pobres, lo cual está directamente relacionado tanto con la rivalidad internacional por la cuota de mercado en África como con la cuestión de la seguridad relacionada con los grupos rebeldes y con lo que Estados Unidos califica de «terrorismo» de inspiración islámica u otras formas de guerra de guerrilla. Este artículo examina muchas de estas cuestiones para poder entender en profundidad el África actual y sus perspectivas de futuro.

Traducido del inglés para Rebelión por Beatriz Morales Bastos

 Jon V. Kofas – Rebelion

https//rebelion.org/ autor/jon-v-kofas/ 

El legado del imperialismo y perspectivas de desarrollo – Rebelion