If America fails, who will the World turn to next? Can the Chinese carry that weight? Do they Trust the Russians at all, let alone enough to give them the absolute power over both World Economics and War?
By Daniel at 24 August, 2008, 8:34 pm
It will be a coalition of nations with no super power. However, if there is a “leader” it might be a “city” more than a nation. Dubai or Hong Kong or Singapore? Some financial center that money flows through and instead of a government being the “superpower,” it may be a “financial market” comprised of powerful people who control the “money supply.”
The reason the U.S. became a super power was the “money supply” was allowing the U.S. to do things other nations couldn’t do. It allowed the growth a super power needs. While the underlying work ethic, resources, and infrastructure had to be there to have those who control the money supply to want to supply that money to it, the growth required a financial system that fostered growth.
The U.S. is becoming insignificant because the “money supply” is moving and it is not moving to one nation but to a group of cities that deal with all other nations including the nation they reside in. The whole financial system of the world is changing. Some for the worse, as in our financial crisis and the global damage it is causing and some for the betterment of the world in that growth now in 3rd world nations is not as dependent on the dollar and IMF loans but on these financial centers and the spending also, of nations like China that will buy the raw materials needed for manufacturing.
Our biggest problem is that we are tied to the dollar which is the world’s reserve currency and the world wants to move to a basket of currencies or a “global currency” that is sound and that nations are willing to let their currencies float to. Remember that nations are leaving the dollar already for a basket of currencies and I believe that trend will continue.
The more that happens, the more we risk the collapse of the dollar. Our solution so far, has been to create even larger reserve holdings in nations like Russia, China, and OPEC to make “dumping” the dollar even more painful than it already is. The problem with this “solution” is that it is causing imbalances as the extra money is not seeking our debt but our assets or global raw materials or gold or some other way of spending the dollars without adding too much more in our debt instruments.
A war with Iran would drop demand for the euro and raise demand for the dollar because it would take Iranian oil sold in euros off the market will increasing demand for the dollar in oil sales by nations using the dollar. It would also increase demand for the dollar because taking Iran’s oil off the market would cause supply shortages, driving the price of oil much higher.
The risk of that to “save” the dollar is that Russia may take over where Iran left off and move out of the dollar with its sales. It is already under pressure to do that and has said “a strike against Iran is a strike against Russia.” The loss of value for their “dollars” they hold would be replaced with the over 400 tons of gold they have been accumulating, going up in price and their own currency, should they choose to sell in Rubles going up in value, as well. Even if they choose a basket of currencies, the dollar would probably collapse or at least fall great enough to cause other oil nations to have to abandon the dollar due to inflation the dollar caused.
Everything is tied to propping up the dollar. Bailouts, wars, oil production here, trade policies, offshoring, lending policies, Central Bank interventions, etc.
The further we go into debt the more difficult the balancing act is and the more we need to borrow to cover the problems debt creates. It is to the point where debt is “feeding” on itself and that “feeding” is growing. Remember there are different kinds of cancer. Some are very slow growing and some are very rapid. We are moving from slow growth debt cancer but, don’t know to what speed, yet, we are moving to.
The thing is that the developing nations are starting to trade more and more and more with each other and less with us. Europe is more a trade partner now with the developing nation than we are but, that is deceptive too. Much of that growth is due to “emerging markets” in Europe that have been reforming and changing tax and business policies. They are evolving even in Germany and France, older developed nations that are lowering corporate tax rates, changing some other tax and business policy and learning how to compete in this new world.
What we have to realize is that the world may not be better off by moving away from the U.S. as the economic leader but, it will still do it even though they don’t have somebody better to turn to. It is like the old child’s game of “king on the mountain.” You don’t know who the next king will be but, you join together in pulling down the one that is there. You may even replace him with a kid that can’t last as long, but you don’t care. The goal is “change.” Nations have personalities. They get angry, greedy, abuse power, whine, grovel, fight, plead, and do things that are often not good for them in either the short or long run but, they still do it. They act out of “emotion” and without a good plan for what they will do when “change” comes.
Don’t think the U.S. is safe because it “makes sense.” The world doesn’t act sensible at times. If it did, half the wars we have had would have never happened.
Chazz
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