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Another Idiotic Plan to Hurt Russia

2015/04/22 4 comments

America’s Start is Setting

by Mike Whitney

CounterPunch (April 20 2015)

The US must show the leadership necessary to establish and protect a new order that holds the promise of convincing potential competitors that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests … We must, however, be mindful that … Russia will remain the strongest military power in Eurasia and the only power in the world with the capability of destroying the United States. {1}

For America, the chief geopolitical prize is Eurasia … and America’s global primacy is directly dependent on how long and how effectively its preponderance on the Eurasian continent is sustained. {2}

The Laussanne negotiations between Iran and the so called P5+1 group (the United States, Russia, China, France, Britain, and Germany) have nothing to do with nuclear proliferation. They are, in fact, another attempt to weaken and isolate Russia by easing sanctions, thus allowing Iranian gas to replace Russian gas in Europe. Laussanne shows that Washington still thinks that the greatest threat to its dominance is the further economic integration of Russia and Europe, a massive two-continent free trade zone from Lisbon to Vladivostok that would eventually dwarf dwindling US GDP while decisively shifting the balance of global power to Asia. To counter that threat, the Obama administration toppled the elected government of Ukraine in a violent coup, launched a speculative attack on the ruble, forced down global oil prices, and is presently arming and training neo-Nazi extremists in the Ukrainian army. Washington has done everything in its power to undermine relations between the EU and Russia risking even nuclear war in its effort to separate the natural trading partners and to strategically situate itself in a location where it can control the flow of vital resources from East to West.

Laussanne was about strategic priorities not nukes. The Obama administration realizes that if it can’t find an alternate source of gas for Europe, then its blockade of Russia will fail and the EU-Russia alliance will grow stronger. And if the EU-Russia alliance grows stronger, then US attempts to extend its tentacles into Asia and become a major player in the world’s most prosperous region will also fail leaving Washington to face a dismal future in which the steady erosion of its power and prestige is a near certainty. This is from an article titled “Removing sanctions against Iran to have unfavorable influence on Turkey and Azerbaijan”:

If Washington removes energy sanctions on Iran … then a new geopolitical configuration will emerge in the region. Connecting with Nabucco will be enough for Iran to fully supply Europe with gas …

Iran takes the floor with inexhaustible oil and gas reserves and as a key transit country. Iran disposes of ten percent of the reported global oil reserves and is the second country in the world after Russia with its natural gas reserves (fifteen percent). The official representatives of Iran do not hide that they strive to enter the European market of oil and gas, as in the olden days. Let’s remember that the deputy Minister of Oil in Iran, Ali Majedi, offered to revive project of Nabucco pipeline during his European tour and said that his country is ready to supply gas to Europe through it …

Some months earlier the same Ali Majedi reported sensational news: “two invited European delegations” discussed the potential routes of Iranian gas supply to Europe … It is also noted that the West quite materially reacted to the possibility of the Iranian gas to join Nabucco. {3}

So, is this the plan, to provide “energy security” to Europe by replacing Russian gas with Iranian gas?

It sure looks like it. But that suggests that the sanctions really had nothing to do with Iran’s fictitious nuclear weapons program but were merely used to humiliate Iran while keeping as much of its oil and gas offline until western-backed multinationals could get their greasy mitts on it.

Indeed, that’s exactly how the sanctions were used even though the nuclear issue was a transparent fake from the get go. Get a load of this from the New York Times:

Recent assessments by American spy agencies are broadly consistent with a 2007 intelligence finding that concluded that Iran had abandoned its nuclear weapons program years earlier, according to current and former American officials. The officials said that assessment was largely reaffirmed in a 2010 National Intelligence Estimate, and that it remains the consensus view of America’s sixteen intelligence agencies. {4}

See? The entire US intelligence establishment has been saying the same thing from the onset: No Iranian nukes. Nor has Iran ever been caught diverting nuclear fuel to other purposes. Never. Also, as nuclear weapons physicist, Gordon Prather stated many times before his death,

After almost three years of go-anywhere see-anything interview-anyone inspections, IAEA inspectors have yet to find any indication that Iran has – or ever had – a nuclear weapons program.

The inspectors were on the ground for three freaking years. They interviewed everyone and went wherever they wanted. They searched every cave and hideaway, every nook and cranny, and they found nothing.

Get it? No nukes, not now, not ever. Period.

The case against Iran is built on propaganda, brainwashing and bullshit, in that order. But, still, that doesn’t tell us why the US is suddenly changing course. For that, we turn to an article from The Brookings Institute titled “Why the details of the Iran deal don’t matter” which sums it up quite well. Here’s a clip:

At heart, this is a fight over what to do about Iran’s challenge to US leadership in the Middle East and the threat that Iranian geopolitical ambitions pose to US allies, particularly Israel and Saudi Arabia. Proponents of the deal believe that the best way for the United States to deal with the Iranian regional challenge is to seek to integrate Iran into the regional order, even while remaining wary of its ambitions. A nuclear deal is an important first step in that regard, but its details matter little because the ultimate goal is to change Iranian intentions rather destroy Iranian capability. {5}

Notice how carefully the author avoids mentioning Israel by name although he alludes to “the threat that Iranian geopolitical ambitions pose to US allies”. Does he think he’s talking to idiots?

But his point is well taken; the real issue is not “Iranian capability”, but “Iran’s challenge to US leadership in the Middle East”. In other words, the nuclear issue is baloney. What Washington doesn’t like is that Iran has an independent foreign policy that conflicts with the US goal of controlling the Middle East. That’s what’s really going on. Washington wants a compliant Iran that clicks its heals and does what its told.

The problem is, the strategy hasn’t worked and now the US is embroiled in a confrontation with Moscow that is a higher priority than the Middle East project. (The split between US elites on this matter has been interesting to watch, with the Obama-Brzezinski crowd on one side and the McCain-neocon crowd on the other.) This is why the author thinks that easing sanctions and integrating Iran into the predominantly US system would be the preferable remedy for at least the short term.

Repeat: “The best way for the United States to deal with the Iranian regional challenge is to integrate Iran into the regional order.. In other words, if you can’t beat ’em, then join ’em. Iran is going to be given enough freedom to fulfill its role within the imperial order, that is, to provide gas to Europe in order to inflict more economic pain on Russia. Isn’t that what’s going on?

But what effect will that have on Iran-Russia relations? Will it poison the well and turn one ally against the other?

Probably not, mainly because the ties between Iran and Russia are growing stronger by the day. Check this out from the Unz Review by Philip Giraldi:

Moscow and Tehran are moving towards a de-facto strategic partnership, which can be easily seen by the two groundbreaking announcements from earlier this week. It’s now been confirmed by the Russian government that the rumored oil-for-goods program between Russia and Iran is actually a real policy that’s already been implemented, showing that Moscow has wasted no time in trying to court the Iranian market after the proto-deal was agreed to a week earlier. Providing goods in exchange for resources is a strategic decision that creates valuable return customers in Iran, who will then be in need of maintenance and spare parts for their products. It’s also a sign of deep friendship between the two Caspian neighbors and sets the groundwork for the tentative North-South economic corridor between Russia and India via Iran. {7}

But here’s the glitch: Iran can’t just turn on the spigot and start pumping gas to Europe. It doesn’t work that way. It’s going to take massive pipeline and infrastructure upgrades that could take years to develop. That means there will be plenty of hefty contracts awarded to friends of Tehran –mostly Russian and Chinese–who will perform their tasks without interfering in domestic politics. Check this out from Pepe Escobar:

Russia and China are deeply committed to integrating Iran into their Eurasian vision. Iran may finally be admitted as a full member of the Shanghai Cooperation Organization (SCO) at the upcoming summer summit in Russia. That implies a full-fledged security/commercial/political partnership involving Russia, China, Iran and most Central Asian ‘stans’.

Iran is already a founding member of the Chinese-led Asian Infrastructure Investment Bank (AIIB); that means financing for an array of New Silk Road-related projects bound to benefit the Iranian economy. AIIB funding will certainly merge with loans and other assistance for infrastructure development related to the Chinese-established Silk Road Fund … {8}

Get the picture? Eurasian integration is already done-deal and there’s nothing the US can do to stop it.

Washington needs to rethink its approach. Stop the meddling and antagonism, rebuild relations through trade and mutual trust, and accept the inevitability of imperial decline.

Asia’s star is rising just as America’s is setting. Deal with it.











Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press, 2012). Hopeless is also available in a Kindle edition. He can be reached at

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Is Western Policy on Ukraine Putin’ World at Risk?

The West’s support of the Ukraine revolution could have been a tipping point in bad relations with Russia.

by Victor Kotsev

WhoWhatWhy (April 20 2015)

You know you have a problem when Henry Kissinger and Noam Chomsky agree on something. But then, the Ukraine crisis can create strange bedfellows. Kissinger and Chomsky agree that the Obama’s administration and its EU allies helped stir a tragedy in Ukraine by misjujdging Ukraine’s critical significance to the Kremlin.

The fault-finding with the West’s clumsy affronts to Putin’s Russia may, in fact, have only just begun: A recent British Parliament report described Western strategy in Ukraine as “sleepwalking”. At times, the critical analysis borders on the absurd. The British are “explaining” their role in the mess by claiming they didn’t have enough diplomats with Russian skills to follow the situation properly.

But there’s nothing funny about the mess itself. The West’s failure to understand Putin’s strategic interest in  Ukraine helped spawn a civil war with thousands of casualties, hundreds of thousands displaced, and a country torn apart in such a way that it would take a miracle to put it back together. Even in the West, there is a vibrant community of foreign-policy pundits who acknowledge this debacle. Among them are the declining stars of the old Cold War, who are charging their successors with recklessly helping to start a new one by insisting that Ukraine join Nato.

Improbable Bedfellows Intercede for Russia

Of course, a loud chorus of opportunistic politicians as well as predictable voices in the press continue to paint Vladimir Putin as the sole villain in this tragedy. Now, to be sure, there is plenty to criticize in Russia these days – from political murders of dissidents to covert military support for the Ukrainian rebels to high-pitched sabre-rattling at home, complete with national TV showing footage of nuclear-tipped missiles rolling out of silos. But it’s one thing to criticize where criticism is due. It’s quite another to declare, as German Chancellor Angela Merkel reportedly did last year, that Putin may be out of touch of reality and is living “in a different world”.

A more nuanced view of what’s happened in the Ukraine begins with the West’s determination to expand Nato to Russia’s very borders. In 1998, after Nato extended membership in the military alliance to Poland, Hungary and the Czech Republic, George Kennan, the man who devised the original Western doctrine of deterrence against the Soviet Union half a century earlier, warned:

I think it is the beginning of a new Cold War. I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves.

Kennan’s words are echoed by the aging Mikhail Gorbachev, the Soviet leader credited with bringing down the Iron Curtain. Gorbachev insists that the West went back on a promise made to him not to enlarge Nato east of Germany. And he warned earlier this year that the West is “dragging” Russia into what could become a “hot war”.

As for Putin’s mental state? Stephen Walt, the star realist at Harvard’s Kennedy School of Government, argues that the wrong application of Kennan’s original doctrine of deterrence has led to the explosion of violence in Ukraine. In a January Foreign Policy article, Walt contended that Putin is “motivated primarily by fear or insecurity” – rather than over-vaulting ambition – and that “applying the deterrence model [issuing warnings and credible threats] to an insecure adversary will heighten its paranoia and fuel its defensive reactions”.

Putin himself projects a rather different image. Russia’s elites perceive him as a triumphant meritocrat, a strategist whose equal the West doesn’t have and hasn’t had since Churchill or Reagan. This is the view of  Victor Mizin, vice president of the Center for Strategic Assessments in Moscow. Mizin adds that Russian insiders are highly skeptical of President Barack Obama’s foreign policy skills and see him at this point as merely a “lame duck”.

Mizin and and many of his counterparts among Western analysts dismiss the occasionally grotesque propaganda circulated by the Russian government in Moscow as strictly for homefront consumption. They believe that Putin is rational in his foreign policy and that the West should reach out and make a serious offer to him, taking in mind Russia’s strategic interests.

Putin may be no Churchill, but for all his authoritarian leanings, neither is he the dictator that Western observers often make him out to be. With his eighty-plus percent domestic popularity ratings and his considerable reach throughout Eastern Europe – even across the continent – he has demonstrated that if, anything, he is more in touch with certain local realities than are his opponents.

Ukrainian Instability

Meanwhile the post-revolutionary Ukrainian government, to whose aid the US is sending military advisers over Russia’s objections, is hardly any more democratic or reliable as a partner than Russia is. Ukraine has, for example, clearly surpassed Russia in politically motivated murders over the past few months. The Ukrainian economy is nearing a total collapse.

The most enthusiastic fighting units in the Ukrainian forces appear to be made up of former criminals and neo-Nazis; the low morale of the regular army was on full display two months ago as the beaten soldiers pulling out of the Debaltseve battle gave in to several days of massive looting and drinking on their own territory.

Ukraine is not only divided between East and West, Russian-speaking and Ukrainian-speaking regions; it is also an uneasy mosaic of different ethnicities and religions, often concentrated in certain geographical enclaves. If law and order continue to unravel in the country, it’s hard to predict where the next trouble spots will be. What seems most likely is that Russia will play an important role in this process – either as a peacemaker, in the event a more comprehensive deal can be reached that protects its interests, or as a spoiler.

There is a long history of US and European leaders slighting Russia on various policy issues, from going around the UN to attack several countries to refusing to expand Nato. Ukraine is just the latest and most serious example to date. In any case, it’s time to take Putin seriously. The alternative would be the “Bosnia-ization” of Ukraine, as Mizin put it, or the chaotic fragmentation of the country into several warring statelets. And that kind of “trouble” might be difficult to keep from spreading beyond Ukraine’s borders.

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Dollar Hegemony and the Iran Nuclear Issue

The Story Behind the Story

by Peter Koenig

Global Research (April 09 2015)

International treaties are being held hostage by the west. There has been a lot of interference inside Iran by Washington.  The nuclear issue is just an excuse to undermine the Islamic Republic and has very little to do with anything else.

— Interview with RT by Soraya Sepahpour-Ulrich (April 06 2015)

This statement is right on the dot. The artificially created nuclear issue’ is just an excuse for regime change … perhaps yes. But there is more to it. While the expressed views on what the recent “Lausanne deal” really brought for Iran and the 5+1 participants may differ widely, one must sense that there is another story behind the story.

A little detail, nobody talks about, and maybe most pundits – even honest ones – are not aware of. In 2007 Iran was about to launch the Iranian Oil Bourse – an international hydrocarbon exchange, akin to a stock exchange, where all countries, hydrocarbon producers or not, could trade this (still) chief energy source in euros, as an alternative to the US dollar.

This, of course would have meant the demise of dollar hegemony – the liberation of the world from the dollar stranglehold. This was inadmissible for Washington. It would have meant the end of the dollar as the world’s chief reserve currency, and giving up the instrument of coercing the world into accepting Washington’s dictate, the tool that serves to dish out sanctions left and right – no way!

Hundreds of billions of dollars’ worth of hydrocarbons are traded on a daily basis; huge amounts of dollars that find no justification in the US economy, but – they allow the Federal Reserve to print money at will – and every new dollar is a dollar of international debt, filling the reserve coffers of nations around the world, thereby also gradually devaluing the US currency, but barely affecting the US economy.

As long as petrol and gas are traded in dollars – a ‘negotiated’ imposition on Saudi Arabia by Father Bush, friend of the House of Saud, in the early 1970s under the Carter Administration, in return for military protection – and as long as the world needs hydrocarbons to fuel its industries, so long the world will need dollars, insane amounts of dollars. The so-called Quantitative Easing (QE) allowed the US to print hundreds of billions, if not trillions of dollars to finance wars and conflicts around the globe, and to fund the relentless Zionist-Anglo-Saxon lie and propaganda machine. No problem. It’s just debt. Debt – paradoxically carried by the very countries that the empire eventually fights and lies to; countries which hold dollars in their reserves.

Hardly anybody knows that the real US debt, consisting of ‘unmet obligations’ has risen in the last seven years from about 48 trillion to close to 130 trillion dollars in 2014 (General Accounting Office), about seven and a half times the US GDP. Comparatively speaking, a debt by a multiple higher than that of ‘troika’ (EU-IMF-ECB) badgered and shattered Greece.

Allowing a country like Iran destroying the US hegemon’s power base by taking a sovereign decision to abandon the dollar for oil and gas trading – no way. A pretext had to be invented to surmise the country which according to George W Bush became a link of the axis of evil. What better than the nuclear threat – with the full support of Israel, of course. Bolstered by worldwide media manipulation, Iran became a nuclear menace not only for Israel and the entire region, but also for the US of A. A threat for the empire, some 15,000 kilometers away, when at that time the most powerful Iranian long-range missile had a range capacity of about 2,000 kilometers.

This sounds almost like the latest (bad) Obama joke, accusing Venezuela to be an imminent threat to the United States. It would be laughable, if it wouldn’t be so sad, so criminal actually. Because this lie is followed by economic warfare, akin to the one led against Russia – which – eventually backfired punishing the ‘sanctioneers’ themselves, especially the Europeans. When the real impact of the ‘sanctions’ became evident, the mainstream media were simply silent. People easily forget. Without opening their eyes, they remain gullible for the next lie.

The dollar is the ultimate pillar of the empire’s world hegemony. Without it, it is doomed. Washington knows it. You don’t have to look far to find similar examples to that of Iran. When Saddam Hussein announced in the late 1990s that he would sell Iraq’s petrol in euros, as soon as the embargo would end in 2000, a reason had to be found to invade his country. The WMD menace that never existed was sold around the world, including at the UN Security Council, and – bingo – the western media killing machine had created a motive for invading Iraq and to murder Saddam. As if this wasn’t enough, he was suddenly linked to 9/11 – and big miracle, Americans bought even this lie.

Muammar Gadhafi was another victim for asserting his country’s sovereignty. He announced a new hard currency for Africa, the Gold Dinar, backed by Libyan gold. Libyan and African hydrocarbons could henceforth be traded in an alternative currency to the dollar, the Gold Dinar. Gadhafi also intended to free Africans from the western predatory telephone giants, by introducing a Libya sponsored low-price mobile network throughout Africa. Gadhafi was atrociously murdered by CIA handlers on 20 October 2011. Libya today is a hotbed of civil unrest and murder.

Iran’s case is a bit more complicated. Iran has Russia and China backing. Nevertheless, with the propaganda machine painting a nuclear danger to the world, Iran could be brought to her knees, no problem. No matter what logic said and still says, no matter that the fifteen US key intelligence agencies assured the then Bush Administration that Iran has no plans of manufacturing a nuclear bomb, that Iran was genuine in using its enriched uranium for power generation and for medical purposes.

No matter that Iran’s enrichment process reached a mere twenty percent purity, enough for medical purposes, but far from the 97% required for a nuclear bomb, Iran had to be oppressed and under a web of lies made a pariah state, a risk for the world. That’s what the average American and European today believes. It’s a shame. Nobody openly dares talking about the only nuclear threat in the Middle East, Israel. That is another shame.

No matter what the Lausanne deal is today, or next June, after three more months of intense, but useless negotiations, no matter what a UN resolution would say about the deal, about the lifting of sanctions – Washington will always find a pretext to keep the stranglehold on Iran. As Soraya Sepahpour-Ulrich said, “International treaties are being held hostage by the west” – there is no international compact or law that prevents the only rogue state in the world, the atrociously criminal US empire from crushing its way to satisfy its abject greed.

Always – that is, as long as empire survives. And yes, the economic survival is only a question of time. Fifteen years ago some ninety percent of worldwide reserve holdings were kept in US dollars, or dollar denominated securities. In 2010 the ratio shrunk to about sixty percent; today it is approaching fifty percent. When it sinks below fifty percent, governments around the globe may gradually lose confidence in the greenback, seeing it as what it is and has been for the last 100 years, nothing else but a fraudulent Mickey-Mouse currency at the service of a Zionist dominated western financial system, not worth the paper it’s printed on; a currency that has been abusing and impoverishing the ‘non-aligned’ world at will.

Iran knows it, Russia knows it – without direct confrontation, the empire’s grip may not hold as long as the Iran deal is planned to last, some twenty to thirty years. Therefore, the large concessions that Iran had to make for ‘peace’ – to reduce its enrichment process to 3.37% just enough to fuel power plants, and to sell or transfer its stock of twenty percent enriched medical-grade uranium abroad – these concessions to reach this ‘glorious’ interim agreement, are unimportant. It is a winner for Iran, as announced by Iran’s Foreign Minister, Mohammad Javad Zarif, as well as Russia’s Sergei Lavrov. Even if Washington derails the agreement within the next three months, or at any time at will, as is likely, Iran has won a battle of credibility worldwide, as she is ready to adhere to a signed agreement, no matter how far its sets her back.

In fact, the rotten palaces of empire are crumbling as these lines are going to print. Two new international Asian based development and investment banks have been created within the last two years. The BRICS Development Bank was signed into existence in Brazil in July 2014 by the leaders of the five BRICS countries – Brazil, Russia, India, China and South Africa. Earlier this year sponsored by China and twenty other countries, the Asian Investment and Infrastructure Bank – AIIB, located in Shanghai, was created. Iran is a founding member of the AIIB.

Ecuador’s Foreign Minister has also just announced that the Venezuela sponsored Banco del Sur – development bank for the Latin American hemisphere – will become operational in the course of 2015. These three banks are direct challenges to the Washington dominated IMF, World Bank and IDB (Inter-American Development Bank). Guess which ones are the most notorious ‘allies’ of Washington and which against the will of the White House, are joining AIIB’s forty-some membership?’ They include the epitome of neoliberal Europeans – UK, France, Germany, Italy and Switzerland.

Washington’s seemingly blind and preposterous arrogance drives the closest allies into the ‘adversary’s camp. The Federal Reserve Bank announced on 2 April 2015 that it fined the German Commerzbank with 1.7 billion US dollars for dealing with Cuba, Sudan and Iran – Washington sanctioned countries.

This can only happen as long as all international banking transactions have to be channeled through US banks and controlled by the Rothschild dominated Bank for International Settlement. Russia, China and other Shanghai Cooperation Organization-aligned countries have already broken away from the dollar system for international contracts and money transfers, including hydrocarbon trading. They are about to launch an alternative to the western ruled privately owned SWIFT transfer systems. The new system could be joined by any country wanting to break loose from the predatory dollar claws.

When even the staunchest stooges of empire seek alliances in the East, the writing is on the wall, that the economic winds are shifting, that a tectonic sea-change is in the offing and that the Iran nuclear deal, one way or another, doesn’t really matter in the foreseeable future.


Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He writes regularly for Global Research, ICH, RT, Sputnik News, the Voice of Russia / Ria Novosti, TeleSur, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed (2008), fiction based on facts and on thirty years of World Bank experience around the globe.

Copyright (c) 2015 Global Research

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Our Current Illusion of Prosperity

by Frank Hollenbeck

Mises Daily (April 01 2015)

President Obama and Federal Reserve Chair Janet Yellen have been crowing about improving economic conditions in the US. Unemployment is down to 5.5 percent and growth in 2014 hit 2.2 percent.

Journalists and economists point to this improvement as proof that quantitative easing was effective.

Pile on More Debt

Unfortunately, this latest boom is artificial and has been built by adding debt on top of debt. Total household debt increased 2.5 percent in 2014 –  the highest level since 2010. Mortgage loans increased 1.5 percent, student loans 6.6 percent while auto loans increased a hefty 9.6 percent. The improving auto sales are built mostly on a bubble of sub-prime borrowers. Auto sales have been brisk because of a surge in loans to individuals with credit scores below 620. Since 2010, such loans have increased over 100 percent and have gone from twenty percent of originations in 2009 to 27 percent in 2013. Yet, auto loans to individuals with strong credit scores, above 760, have barely budged over the last year.

Subprime consumer borrowing climbed $189 billion in the first eleven months of 2014. Excluding home mortgages, this accounted for 41 percent of total consumer lending. This is exactly the kind of lending that got us into trouble less than a decade ago, and for many consumers, this will only end in tears.

But we need to ask ourselves: is the current boom built on sound foundations? In other words, do we have sharp increases in productivity or real wage growth?

Productivity increased less than one percent on average in the last three years and real wages have flat lined or declined for decades. From mid-2007 to mid-2014, real wages declined 4.9 percent for workers with a high school degree, dropped 2.5 percent for workers with a college degree and rose just 0.2 percent for workers with an advanced degree.

Is the boom being built on broad base investment in plant and equipment? The current average age of working plants and equipment in the US is one of the oldest on record.

Meanwhile, it is now clear that the shale boom was an illusion of prosperity. Oil prices have dipped below $50 (per barrel) with some analysts calling for $20 oil by the end of the year. This is a drop from over $100 from last year. Many shale outfits need oil above $65 just to break even. Massive layoffs in the energy sector are now a certainty. Few realize that most of the gains in employment in the US since 2008 have been in shale states. Yet the carnage is not over. Induced by low interest, investment banks loaned over one trillion dollars to the energy industry. The impact on the financial sector is still to be felt.

There Has Not Been a True Home Price Correction

The same is true about current increases in housing prices and construction costs. Following the financial crisis of 2008, real estate prices should have dropped much more than they did relative to other prices. The new reality between supply and demand would have led to a price correction similar to the ones we see in oil prices today or to high-flying internet stocks after the dot-com bubble burst. Housing should then have remained in a slump possibly for a decade or more, until the overhang of empty residential and commercial real estate had been cleared off.

Today, housing is back, with price increases at bubble-era levels and construction activity is picking up. The improvement is being driven by professional investors stretching for yield in the buy-to-rent market and by historically low long-term mortgage rates of below four percent. Yet, the overhang of empty commercial properties from the previous boom has not disappeared. It has just been left in limbo, because of the “extend and pretend” strategy of banks made possible by the central bank’s massive printing over the last six years. The number of vacant units (Table 7 at in the US still stands at over eighteen million units –  a level reached back in 2008 and 2009. As of 2014, the number of units held off the market was still at a record level of over seven million units.

Will Easy Money Fix Everything?

Current policy coming from the Federal Reserve seems to be geared to create a never-ending series of booms and busts, with the hope that the busts can be shortened with more debt and easy money.

Yet one major driver behind the financial crisis in 2008 was too much debt –  much of which led to taxpayer-funded bailouts. In spite of this, the best the Fed can come up with now is to lower interest rates to boost demand to induce households and governments to borrow even more.

Interfering with interest rates, however, is by far the most damaging policy. The economy is not a car, and interest rates are not the gas petal. Interest rates play a critical role in aligning output with society’s demand across time. Fiddling with them only creates an ever-growing misalignment between demand and supply across time requiring an ever larger and more painful adjustment.

Links: The original version of this article, at the URL below, contains many links to further information not included here.

Note: The views expressed on are not necessarily those of the Mises Institute.

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China Targets Dollar

Washington Has Conniptions

by Wolf Richter

Wolf Street (April 02 2015)

Now even Israel – joined at the hip to the US though the relationship has run into rough waters – has applied to become a founding member of the China-led Asian Infrastructure Investment Bank. Despite US gyrations to keep them from it, over forty countries, including bosom buddies Australia, Britain, and Germany, have signed up to join. Japan is still wavering politely.

The US government sees the China-dominated AIIB as competition to the US-dominated World Bank and Asian Development Bank. But now that it is clear even to the White House that the US can’t stop the tide, Treasury Secretary Jack Lew backpedaled vigorously on Tuesday. The government would welcome the AIIB, he suddenly said, as long as certain conditions are met, such as adequate transparency.

So after this bruising setback, the US now has another opportunity to oppose China’s financial and monetary ambitions.

China is trying to get the IMF to bestow reserve currency status on the yuan, which would add the yuan to a glorious basket that includes the dollar and the euro – currently the dominant reserve currencies with a 63% and 22% share respectively. So it has been lobbying core members of the IMF behind the scenes for support, and they’re coming around despite US conniptions, the Wall Street Journal reported {1}.

China also wants the yuan to become part of the IMF’s Special Drawing Rights “in the foreseeable future”, Yi Gang, Director of the State Administration of Foreign Exchange and Deputy Governor of the People’s Bank of China, pointed out a couple of weeks ago {2}. With the yuan, SDRs – which currently include only the dollar, the euro, the yen, and the British pound – would “undoubtedly” be more “representative” of the global economic landscape, Yi said.

Numerous countries are already publicly supporting the yuan as a payment currency. Excluding transactions between China and Hong Kong, the yuan’s use as payment currency is still tiny and edged down last year, handicapped also by China’s restrictions on capital flows. But hey, those are minor details. By now, there are fifteen yuan clearing centers around the world, including in London, Frankfurt, Paris, and Luxembourg.

And oops, the rebellious city of Los Angeles, in the rebellious state of California, has signed such a deal with the Industrial and Commercial Bank of China late last year, without apparently asking distant Washington for permission. So this is happening, whether the US government wants it or not.

And twenty central banks, once again including US allies Australia and the UK, have inked $430 billion in currency-swap agreements with China.

Baby steps, all of them, but part of a slow, methodical, relentless process of elevating the yuan and whittling away at the power of the dollar – and by extension, the power of the long arm of the US government.

More immediately, all these efforts contribute to making the yuan “freely useable”, which is what a currency must be in the eyes of the IMF in order to qualify as a reserve currency. And the IMF’s executive board will rule later this year on the yuan’s reserve currency status. Hence China’s intense lobbying.

The governments of Germany and Australia have already indicated that they would support the yuan as a reserve currency; other countries that support the yuan as a trading currency are expected to do the same.

It would be a huge win for China. Central banks around the globe would start buying the yuan, necessarily at the expense of other currencies, including the dollar. It would create demand for the yuan. It would raise China’s profile on the global stage. It would, in fact, bring China one step closer to being a full-fledged economic, financial, and political challenger to the US in a US-dominated system.

The US government has been, let’s say, lukewarm in its support for the idea. And it’s fighting back. To truly internationalize the yuan, China would need to first implement “a more market-determined exchange rate, interest-rate liberalization as well as strengthening of financial regulation and supervision”, Lew said.

These three items are where the Fed excels: It has manipulated the exchange rate of the dollar for decades; it has repressed interest rates to near zero for over six years; and it has abysmally failed “financial regulations and supervision”, as the Financial Crisis has amply demonstrated. So Lew’s concerns are baffling. Unless they’re a pretext, in which case they’re not baffling.

But US opposition at the IMF could still be difficult to overcome: the US has nearly eighteen percent of the vote, as opposed to China, the second largest economy, which has a puny 3.8% of the vote. With the odds stacked against it, China would have to get the support of a lot of other countries.

The US is trying to leverage its power at the IMF to get China to reform its financial sector and liberalize its financial markets, though it remains unclear if the US’s manipulated financial markets and a financial sector gone haywire under the direct supervision and encouragement of the Fed make such a great model for China to follow.

Despite these US conniptions, the writing is on the wall, at least for the long term. IMF Managing Director Christine Lagarde summarized it last week while in China: The yuan as a reserve currency, she said, is more a matter of when, not if.

For China, it’s part of a long-term strategy, and not dependent on the next election cycle: reign in the power of the dollar – and the benefits it conveys to the US – by elevating the yuan and transferring some of those benefits to China. It won’t happen on a straight line. A “hard landing” or the outright implosion of the China bubble would be one of the zigzags along the way. But it will happen, and the US government is only able to slow down the process.

After six years of reckless monetary policies around the globe, asset bubbles have been inflated nearly everywhere, though no top banker is allowed to admit it in public. But this bank CEO must have accidently veered off script during the press conference. Read {3}.





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Russia, China, Iran: In Sync

by Pepe Escobar (April 16 2015)

Over past decades, the pre-fabricated myth of an elusive “Iranian bomb” was never the real issue between the US and Iran; the issue was how to subdue – or “isolate” -a powerful, independent nation that refused to toe the exceptionalist line.

Now that the “rehabilitation” of Iran – at least for some exceptionalists and their minions – may be imminent, pending a nuclear deal to be clinched in June, various Washington factions still can’t get their act together.

The Pentagon has all but admitted the perennial wet dream of neocons and corporate media remains on the table; the military option.

The US Congress will go no holds barred in trying to scotch the deal. The US Senate Foreign Relations Committee unanimously passed a bill that would give Congress the right to interfere with anything related to the removal of sanctions.

Iranian Foreign Minister Mohammad Javad Zarif faces an even more uphill battle as the “fact sheet” the Obama administration insisted it needed to release to make the case in Washington complicates how the nuclear deal may be received in Iran. To top it off, “fact sheet” or not, the case was not made in Washington after all.

And now the usual suspects – from the State Department to Congress and the Israel lobby – are predictably going bonkers on a demented “Putin selling missiles to the ayatollahs” narrative.

Got “S”, Will Sell

What Russian President Vladimir Putin has just done is to get back to business as usual; even before sanctions are lifted, he signed a decree lifting Moscow’s own ban on the delivery of the S-300 surface-to-air anti-missile system to Tehran, following an $800 million 2010 contract that was not fulfilled due to relentless US pressure. Tehran expects to receive the S-300 by the end of the year.

Moscow’s official line has always been that the arms embargo on Iran must be lifted as soon as a final nuclear deal is clinched. The Obama administration insists that sanctions must be removed gradually. Tehran, from Supreme Leader Ayatollah Khamenei on down, is adamant that sanctions must be lifted “on the day of the deal”, in Khamenei’s words.

The Supreme Leader had added a conciliatory note though, remarking that, “if the other side avoids its ambiguity in the [nuclear] talks, it’ll be an experience showing it’s possible to negotiate with them on other issues”. That remains a galaxy-sized “if”.

Meanwhile, and in sync, the director-general of Russia’s top weapons exporting company Rosoborobexport, Anatoly Isaykin, confirmed China has just bought S-400 missile defense systems from Russia. Beijing is the first in a long list of foreign buyers – as the Russian defense industry is obliged to give priority on the S-400s to the Russian Defense Ministry

Each S-400 is capable of launching up to 72 missiles, engaging up to 36 targets simultaneously, and shield territory from air strikes, strategic, cruise, tactical and operating tactical ballistic missiles, and medium-range ballistic missiles. It’s been operational since 2007, replacing the S-300 systems now sold to Iran.

The crucial issue is that the S-300s will render Iran’s air defenses virtually secure against anything the Pentagon may throw at them, except fifth-generation stealth fighters. And these – the S-300 and S-400 – are not even Russian state-of-art; that would be the S-500 system, which I’ve referred to here, capable of definitely sealing Russian – and any other – territory from anything the Pentagon may come up with.

Strategically in Sync

The simultaneous rolling out of the S-300s and S-400s to Iran and China are yet one more graphic example of the strategic partnership involving the three Eurasian nations that actively contest the hyperpower’s hegemony. They are certainly in sync.

In parallel, discreetly, Moscow has already started, in practice, a $20 billion oil-for-goods swap with Tehran – exchanging grain, equipment and construction materials for up to 500,000 barrels of Iranian crude a day. According to Deputy Foreign Minister Sergei Ryabkov, “this is not banned or limited under the current sanctions regime”.

Ryabkov only stated the obvious; “It takes two to tango. We are ready to provide our services and I am sure they will be pretty advantageous compared to other countries … We never gave up on Iran in a difficult situation …”

Tehran responded in sync, via the Chairman for the Committee for Foreign Policy and National Security of the Islamic Consultative Assembly of Iran, Alaeddin Boroujerdi; Iran is ready to expand cooperation with Russia in all spheres at the highest level. Crucially, “this is also the opinion of our supreme religious leader Ayatollah Ali Khamenei about development of relations with Russia”.

The usual suspects, as usual, are clinging to any argument that “proves” Russia-Iran cooperation is doomed. For instance, “rehabilitated” Iran will doom Russia’s energy industry because of the “serious impact” on the oil market from Iran’s increased supply and competition with gas exporter Gazprom.

Ryabkov dismissed it by going straight to the point; “I am not confident as yet that the Iranian side would be ready to carry out supplies of natural gas from its fields quickly and in large quantities to Europe. This requires infrastructure that is difficult to build.”

This infrastructure upgrade is costly and will take years; it may happen, but with help from – once again’the Russians and the Chinese. Russia will be back in play in full force in Iran’s energy sector, as Gazprom, its oil arm, Gazprom Neft, and Lukoil had to put on hold many projects because of sanctions. Rosatom, for its part, will be able to clinch further contracts at the Bushehr nuclear power plant.

The EU – and especially the US – are betting on Iran’s “rehabilitation” as an economic/political bonanza; the first real benefit would be Tehran becoming a supplier to yet another troublesome ‘Pipelineistan’ gambit, the Trans-Anatolian (TAP) gas pipeline, which may – or may not – be finished by 2018. TAP will supply gas to the EU via Turkey, but it’s still unclear how much gas potential suppliers – Azerbaijan or Iran – are able to commit.

TAP coming online does not mean Gazprom’s exports to the EU must be cut down. In fact, what Russian and Iranian officials have been discussing for a while now is how profitable exporting to the EU may be for both nations. Besides, Russia has still another key ‘Pipelineistan’ card to play – Turkish Stream, which will channel Russian gas to Turkey and Greece.

And yes, Gazprom is getting ready to be a key provider to two essential markets at the same time. Here’s what Gazprom’s CEO Alexei Miller told Rossiya-24:

The resource base of Western Siberia is a resource that is used for delivering gas for exports to Europe. In other words, at this point we are on the cutting edge when actual competitiveness will begin for our energy resources between two mega-markets: Asian and European.

SWIFT Business

Beijing, meanwhile, has also been on the offensive. As a top energy supplier – of both oil and gas – Iran is a matter of Chinese national security. So even with sanctions after sanctions, the US government was always forced to renew waivers for China, as Beijing kept importing energy from Iran at will.

Iran is an absolutely key node of the Chinese-led New Silk Road(s) – be it as part of the land route or as part of the Maritime Silk Road, which will touch the port of Chabahar. And the China-Iran partnership does not span only close ties on energy and trade/commerce; it also includes advanced Chinese defense technology, and Chinese input in Iran’s ballistic missile program.

China created a parallel SWIFT system to pay Iran for energy; Tehran, after the nuclear deal, will be free to access these funds in yuan. Iranian energy executives have already been to Beijing to discuss Chinese investment in the Iranian energy industry. Sinopec and CNPC will be instrumental in developing projects in the South Pars gas fields – the largest in the world – and in the monster Yadavaran and North Azadegan oil fields.

For Iran, all this will happen in parallel with European energy giants investing in liquefied natural gas (LNG) development and technology.

Investing in multiple fronts, China will also be instrumental in its push to finally help complete the much-troubled Iran-Pakistan (IP) pipeline, which in the future may even include an extension to Xinjiang.

Xi Does Tehran

The icing in this vast energy cake is how both Russia and China are deeply committed to integrating Iran into their Eurasian vision. Iran may finally be admitted as a full member of the Shanghai Cooperation Organization (SCO) at the upcoming summer summit in Russia. That implies a full-fledged security/commercial/political partnership involving Russia, China, Iran and most Central Asian ‘stans’.

Iran is already a founding member of the Chinese-led Asian Infrastructure Investment Bank (AIIB); that means financing for an array of New Silk Road-related projects bound to benefit the Iranian economy. AIIB funding will certainly merge with loans and other assistance for infrastructure development related to the Chinese-established Silk Road Fund.

And last but not least, the China-Iran strategic partnership will be discussed in detail as Chinese President Xi Jinping visits Tehran next month.

It’s easy to remember how Iran was relentlessly derided as “isolated” by the exceptionalist crowd only a few months ago. Yet the fact is it was never isolated – but painstakingly building blocks towards Eurasian integration.

European firms are of course itching to unleash an avalanche of investment in the Iranian market post-sanctions, and most of all the energy giants badly yearn to lessen EU’s dependency on Gazprom. But they’ll be facing formidable competition, as it was up to Moscow and Beijing to identify, a long time ago, which way the wind was blowing; the inevitable (re)emergence of Iran as a key Eurasian power.


Pepe Escobar is the roving correspondent for Asia Times/Hong Kong, an analyst for RT and TomDispatch, and a frequent contributor to websites and radio shows ranging from the US to East Asia.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Categories: Uncategorized

China’s Bank & Waning USA Hegemony

by Jack Rasmus (March 29 2015)

Two events occurred last week that mark a further phase in the waning of US global economic hegemony: China introduced its own Economic Development Bank, the ‘Asian Infrastructure Investment Bank’ (AIIB); the IMF simultaneously announced it will decide in May to include the Chinese currency as a global reserve-trading currency alongside the dollar, pound, and euro – an almost certainly ‘done deal’ as well.

The dual moves caught the US off guard, especially as the USA’s erstwhile main economic ally, Britain, was the first to announce it would join China’s AIIB as a founding member. That announcement set off a quick succession of further announcements by major western economies that they too were now joining the AIIB – by Germany, France, Italy, Luxembourg, and Switzerland – as major European capitalist economies scurried to ensure a piece of the Asian economic action and to tap China’s huge foreign currency reserves for investment in their own economies. Singapore and Australia followed within days. South Korea and Canada are now reconsidering joining, as are other once solid USA economic allies.

The initial USA response to Britain was to accuse it of “constant accommodation” of China. US Treasury Secretary, Jack Lew, even made telephone calls to British finance minister, George Osborne, requesting that he ‘hold off’ after Britain’s initial announcement, according to reports in the international business press. That effort was apparently to no avail, however, as British politicians, including prime minister, David Cameron, facing re-election within weeks, chose to leverage the decision for political purposes as well as economic. Reportedly the US also attempted to strong-arm Singapore into not joining, but failed there as well.

The entire affair caught USA political bureaucrats by surprise. The matter of joining the AIIB was thought to have been raised in European centers at low levels, but not at senior financial minister or ambassador levels. No decisions appeared imminent. Events in recent weeks show the Europeans successfully kept USA out of the loop concerning their real intentions, as Britain last week ‘jumped the gun’, as they say, with British government officials giving the reason for their decision to join the AIIB as “We want to be a Chinese partner of choice in international finance” (read: we want a slice of the economic pie before someone else gets to eat it).

The China-UK Connection

In making their announcement, British officials vowed that they want the UK to become the main destination for Chinese investments. In 2013 and 2014, when the British and Euro economies were in particularly bad shape, major trade delegations from China repeatedly visited both Britain and Germany on numerous occasions. Much of Britain’s recent tentative economic recovery the past two years has been driven by infrastructure and property deals that have been heavily financed by massive China private capital inflows into London real estate, infrastructure projects, and south England investments. Deals to revitalize investment in Britain’s nuclear power sector are also being financed by China investment. Without China investments in the UK in recent years, and other capital inflows from emerging markets, British economic ‘recovery’ would have remained British ‘stagnation’ at best.

USA vs China policies toward British banks offer another example of a growing divergence of interests between the USA and Britain with regard to China.

USA bank regulators have been targeting and fining London banks for their repeated scandals, money laundering, global interest rate (Libor) manipulations, and speculative excesses. London in recent years has become a veritable ‘wild west’ of international banking. The US levying of fines on UK banks has been justified. But banking is one of the few industries that keep Britain from becoming a ‘third tier’ economy. British Prime Minister Cameron therefore has done – and will do – whatever it takes to protect and advance the economic interests of his so-called ‘City of London’ (UK banking sector). He is even prepared to leave the European Union, if necessary, to prevent re-regulation of the British banking sector. So it should not have been a surprise to the USA when Cameron and other conservative British politicians turned to China and quickly joined China’s AIIB. All the signals were there already. British finance capital had already last year, in 2014, announced an agreement with China that London would become the global trading center for China’s currency, the Yuan. And Britain has become increasingly dependent on China money capital inflows in recent years, as noted. So the recent AIIB decision is just a logical consequence of deepening British-China economic relations that have been already underway now for some time, even though the USA didn’t totally ‘see it coming’.

Deepening China-Europe economic relations extend to the Eurozone and eastern Europe economies as well, not just to Britain. Trade integration between China and Germany has been growing sharply. China is Germany’s fourth largest trading partner. China has been setting up investment funds in eastern European economies from the Baltics to the Balkans; China has an offer on the table to buy Greece’s main port at Pireaus; and in recent years has been repeatedly purchasing Italian and other southern European countries sovereign bonds to help those economies weather their recent debt crisis.

Origins of the AIIB

The origins of the AIIB announcement trace back at least to 2010, when the USA quietly agreed to allow China to increase its influence in the USA-dominated international economic institution, the International Monetary Fund (IMF). Since then, however, the USA has reneged on that agreement, in order to ensure that China’s influence in the IMF would remain minimal. So China went off last October 2014 and formed its own AIIB, in what amounts in effect to a fundamental challenge to the IMF’s parallel USA-dominated institution, the World Bank.

With 27 nations having already signed on, including Britain and other Europeans, Australia, Singapore, and others, the AIIB represents a major challenge to the USA-dominated development banks, the World Bank, as well as to the Asian Development Bank (USA and Japan dominated ADB) located in Manila, Philippines. Initially the AIIB is to be funded with $50 billion to invest in Asian infrastructure. That compares with $160 billion in the Asian Development Bank (ADB). However, the near term AIIB target is to provide $100 billion in funding. And by 2020, potentially up to $730 billion. That’s a lot of projects and potential profits for European and British businesses.

Britain and the other European economies were quick to join China’s AIIB because it allows their own companies almost guaranteed participation in the AIIB’s lending projects – thus giving them a ‘leg up’, as they say, in their competition with USA and Japanese companies involving development and infrastructure investment projects in the EMEs. It also gives them, the British and the Europeans, the opportunity to redirect some of that investment capital to companies inside their own economies, where their own companies get to provide semi-finished goods and services to the infrastructure projects in Asia that the AIIB will approve with its initial (and no doubt soon to expand) $50 billion fund.

Indeed, Europeans have become increasingly frustrated with USA dominated World Bank and IMF, in which the USA typically vetoes decisions of those institutions that it dislikes with as little as twenty percent of the ‘voting rights’ in those bodies. At the same time, conservatives in the US Congress continue to refuse to provide the US’s share of the operating funds for those institutions. China’s AIIB enters the global infrastructure investment field with a promise by China not to veto and to hold no more than 49% of voting rights in the AIIB. It is an attractive alternative to the USA’s World Bank and IMF dominated bodies. Not surprising, Europe and other major economies are therefore seriously interested in participating in the AIIB. However, to the extent they do, it represents a waning of USA economic influence over its once, almost completely economically subservient allies.

The ‘Old Order’ of US Economic Hegemony

The USA’s dominance of the IMF and World Bank since 1945 has provided Washington with great leverage in influencing both political events and economic directions in emerging market economies (EMEs). Often multi-billion dollar lending projects are dangled before an EME, or threatened with suspension, if the EME in question fails to do the bidding of Washington involving a political decision Washington wants, or an investment concession Washington wants from the EME for a US bank or company.

A good example of the kind of ‘economic arm-twisting’ by the USA still going on today is the pressure exerted by USA government and courts to force Argentina to agree to terms demanded by USA shadow banksters with regard to the repayment of loans; or the moves underway by USA government and banksters to drain Venezuela’s currency reserves to effect a collapse of its currency, the Bolivar, to set off import inflation to set the stage for another coup and political intervention. Those are extreme, but not untypical, examples; countless ‘lesser’ forms of pressure on EMEs occur frequently by the USA through its control of decisions by the IMF and World Bank. Ukraine is another, perhaps more traditional example, where the USA has influenced the IMF to install US citizen, shadow bankers, like private equity CEO, Natalia Jaresko, to run the Ukraine’s economy as finance minister as a condition for the Ukraine receiving IMF loans.

But by providing an alternative source of infrastructure project funding, the China AIIB reduces potential USA economic and political influence over EMEs.

From 1944 to 1973 the US maintained more or less total economic hegemony in the global economy. The US dollar was the prime currency for trading and reserve purposes. This dominance was challenged in the post-1973 period briefly, however, as the US economy experienced an economic crisis at that time. The institutional arrangements by which the US retained dominance from 1944 to 1973 were restructured and rearranged. The US economy and its world dominance was restored in a new set of arrangements and relationships with other states and economies starting in the 1980s, which is sometimes referred to as ‘Neoliberalism’. The symbol of that economic dominance, the US dollar, after having seriously weakened in the 1970s was restored again to unchallenged status as the global currency in the 1980s and after.

But the restructuring of the global economy in the 1980s, led by the United States (and a junior partner the UK) has now run its course for a second time.

Once the unchallenged global currency, the US dollar is once again facing challenge as the dominant global currency. US dominated global institutions like the World Bank and IMF are being challenged by alternative institutions, like the AIIB. The focal point of that challenge, today and in the years ahead, is China. The Yuan will not overturn or replace the US dollar tomorrow, or even in the near term. The World Bank and Asian Development Bank won’t be displaced by the AIIB. But in the longer term it is inevitable, should China continue to grow at its recent rates and the USA continue to lag with its recent below historic average growth rates.

Recent events surrounding the AIIB, and the IMF adding the Yuan to its currency mix, are just a subset of the broader and even more strategically significant rise of the Yuan as a global trading and reserve currency and of alternative institutions developed that break the hegemonic control of global economic institutions by the USA.

A Global Economic ‘Grand Game’?

As China continues to successfully target Europe for economic integration, the USA has been clumsily targeting Russia for European de-integration.

What’s ironic is that the USA today is directing its most aggressive efforts against Russia, in an attempt to prevent Europe from deepening its economic relationships with that country and to roll back those relationships by means of economic sanctions. Since at least 2010, Europe’s growing resource and trade integration with Russia since has made the USA increasingly nervous. Much of the USA’s policies toward Ukraine (especially the USA initiated coup there in 2014), and subsequent efforts to get Europe to impose severe sanctions on Russia, should be viewed in this light. The USA wants to sever the growing Europe (especially German)-Russian trade connections and, in particular, Europe’s recent growing dependence on Russian energy. It is at least arguable that the USA initiated and supported the coup in the Ukraine with that in mind: that is, to provoke a Russian military response, in order to force Europe to impose severe sanctions leading to a roll back of economic relations with Russia. The USA sees its economic influence in Europe as strategic. Severing Russia economically from Europe ensures that. It would ensure Europe’s continuing dependence on the USA, economically, and therefore politically and militarily. The Ukraine-Russia conflict should thus be viewed in the context of a much bigger ‘competition’ between Russia and the USA over economic influence in Europe.

But while the USA focuses on undermining economic relations between Europe and Russia, China continues to ‘slip in the back door’ and deepen its economic relationships with Europe. Today it’s the AIIB. Tomorrow the Yuan as an officially accepted trading currency. Thereafter the Yuan as the dominant trading and reserve currency, and an even deeper European dependence on China money capital flows.

China thus represents by far a much greater challenge to US economic hegemony in Europe, and indeed globally as well. But the USA blindly continues to engage in economic adventurism in Europe to contain a Russian threat there that doesn’t exist.


Jack Rasmus is author of the forthcoming book, Systemic Fragility in the Global Economy (Clarity Press, 2015); and the previous works, Epic Recession: Prelude to Global Depression (Pluto Press, 2010), and Obama’s Economy: Recovery for the Few (Pluto Press, 2012). He has been a local union president, negotiator and representative for several American unions. He blogs at

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