05/04/2020 - The End of Cost
A Failure of Leadership, Part II:
21st Century Geopolitical Options
Return to Geopolitics
Prelude: Follow the Dollar
G. Friedman P. Zeihan K. Rudd Y. Smith S. Wilkin J. Mearsheimer H. Brands
The Gold Standard ruled geopolitics until the mid 20th century. The steam ship had dramatically increase globalization. Gold backing put a limit on printing money. Open capital and current trade accounts were the RULE. Goods and paper currency flowed between countries. Wages were the adjustment mechanism of economic activity with the resulting inflation/deflation determined by a countries gold supply.
Two Country example:
Slow adjustment accepted, but fast and often means employment/political dissatisfaction.
Think Karl Marx
Brittan had all the gold and ruled capitalism. The US grew economically, took control of gold, and after WW 2, ruled capitalism. Economic growth created pressure on US gold reserves so, in 1970, Nixon gave up partially gold backing of the dollar. This US devaluation ended the Brenton Woods monitory order.
A Dollar Standard evolved as the US had enough foreign financed consumer/ business demand to supply the dollars needed to finance world trade. Open current accounts allowed dollars to piled up around the world. But lessons from the 1930's kept capital markets closed. This kept investment home and allow for high wages. Making a profit would require increase margins.
The goal of the Bretton Woods System Brenton Woods was creating jobs, economic prosperity and political security for the noncommunist world. world. US would spend and the dollars would come back to the US as foreigners bought US assets, products, and debt. This led to wage/demand led growth rather than the earlier profit led growth.
Many currencies were pegged to the dollar and in doing so, the new dollar standard had a gold standard affect. Under both systems, a country could lose monetary/fiscal control of their domestic economy. Earlier, the Great Depression caused countries to try and increase trade by devaluing their currencies. In doing so, they reneged on their monetary commandments.
Pegged countries learned from the Asian crisis that protection from dollar value fluctuations required holding high excess dollar reserves. From the late 1990's to 2014, dollar reserves piled up in developing countries.
As world trade grew, the need for dollar reserves grew. The US bought much with borrowed dollars increasing their trade deficit. Dollars flowed back from around the world as everyone made loans to US consumers, business and governmnets-especial when geopolitical trouble increased. The biggest traders was the US and China. China, like Japan before her, worked hard, built good stuff, sold it cheap to the world, and lent their receipts back into the system. Now, a trade wars might end the Dollar Standard with no replacement in sight.
Meanwhile, an 11 nation currency Euro controlled by Germany was created in 1999. Germany kept a tight reign on inflation. Her banks lent to much, especially to the PIGS of Southern Europe. Members who did not manage budgets well soon got into trouble. This coincided with a few European bank controlling worldwide dollar trade flows using Euro's, not dollars, as collateral. But contracts required payment in dollars and the banks, wanting to maximize profit, had borrowed dollars very short term. They were in trouble when the Great Recession created a need for dollars and rolling over dollar loans became impossible. The FED, as lender of last resort, created irregular dollar obligations, first used in the in relation to the Great Depression, to supply liquidity to the world's financial community.
The problem: Unlike the US, Germany believing in austerity plus forced debt repayment of failing countries and their banks. Cyprus, a very small economy was used as an example. It was immediately devastated.
Germany was also slow to help. Illegal immigrants began arriving throughout Europe, and Populism resulted. Interestingly, Populism had developed in the US where, ironically, illegal immigration had been falling.
FED owes the dollar obligations to the
Treasury and may or may not repay them. Since 1776, a strong
US economy has allowed her to refinance debt. Cost, Interest
Payments have been low.
Born in 1944, a
child of WW 2 debt, I have never repaid it. No one has. See
20th Century War Geopolitics
Born in 1944, a child of WW 2 debt, I have never repaid it. No one has. See 20th Century War Geopolitics
Beginning of a New Post War
1648 Peace of Westphalia
Sovereignty of participants over their lands, people, and agents abroad was established. It was Broken by European Colonialism.
First problem came immediately as Soviets did whatever it took to keep Communists in charge of the buffer state Poland.
The US responded with the Truman Doctrine. Eventually US/Britain sponsored covert activities would try to slow Communist advancement. One such activity was the September of 1953 when GB/US sponsored then Iranian Coup to keep control Iranian oil/profit. Unintended consequences followed. First came the seizure in 1979 of the Tehran U.S. embassy by Militant Iranian students. Then, 20 years later, the 9/11 Trade Center attacks which made many American feel insecure. "Have a good day' was replaced by stay safe."
The US would try to maintain its sphere of influence
America and stop Russia and China from creating there own spheres
of influence. Similar geopolitical situations often
A 1973 U.S. orchestrated Chilean Coup had set up a new government to follow neoliberal Chicago Boys privation with government disinvestment and except for copper, resource ownership would not change.
Unites States controlled IMF development programs followed similar guidelines in support of a US International Trade Hegemony. But more was involved as independent leaders like 1970's Margaret Thatcher and Deng_Xiaoping embraced neoliberal economics. In response to Great Recession budget and banking problems Germany required similar neoliberal economic austerity requirement. Unlike the US, they austerity, not economic growth was required to end the recession.
Iraq's Economic Restructuring Agenda was issued in September of 2003 by Paul Bremmer of the Coalition Provisional Authority. Many felt these dictums were illegal under the Hague and Geneva conventions so an interim sovereign government was created. It had many neoliberal economic requirements. Key among them were 1) Private Property for everything but oil 2) Free Markets with unlimited Foreign Direct Investment/Ownership 3) Unregulated International Trade 4) Unlimited Profit Repatriation. Entrepreneurship was fostered by guaranteed Intellectual Property Rights and a conservative Flat Tax.
US Hegemony 3?
Liberals did not support labor and union buyback enhanced US ability to compete at the expense of wage growth. To protect profit, conservatives expanded neoliberal political activities.
was controlling the Supreme Court by
financing conservative law
Hegemony 2 made Wall Street more important than Main Street as conservative presidents Reagan, Bush I and Bush II combined with business friendly Clinton to provide government business/financial industry support. Obama was also Wall Street friendly. Neoliberal economic dominance was complete.
The stage was set for the public to pay for
inevitable market failures caused by
Less Financial Regulation. A Great Recession,
US Financial Crisis was
followed by a European Financial Collapse.
1. Post WW 2 American Hegemony
Led to Prosparity, Stability,
1-1 Great Wars Led to a U.S. Managed International Order
1-2 Six Weeks that Changed the World
1-3 Nationalism Was Back
1-4 Why Populism Develops
1-5 Future of Geopolitics
1-6 Germany wanted high employment, low inflation, high saving
1-1 Wars Led to a U.S. Managed International Order
A. New Boarders especial in the Middle East
B. Europeans Faced a Moral Abyss caused by believing she was the world's most civilized people and then killed 100 million people.
C. Nations must be controlled before they destroy each other.
D. Multiple International Organizations were needed to create a unity not coming from the League of Nations. Munich based Political Organizations—NATO, European Union ...and Financial Organization —IMF, World Bank...were to do just that.
Success resulted as there were no major world military conflicts for 70 Years. Moral Justification was provided by this success, organizations represented no one.
Weeks that Changed the World
A. Russia invaded Georgia
B. Financial Organizations failed
to stop Lehman Brothers
C. Self-Ruling Technocrats failed
A. Greece Unemployment of 20%
was not German pain and
B. Polarization was dramatic
within countries as
European Union was usurping the future
D. Technocrats fail to see the problems and they
E. Hatred, anger and outrange would have to be dealt with.
C. Leader to Protect People from Failed Elites Were
D. Elites try to impeach leader rather than fix
1-4 Why Populism Develops
History Repeating: Why Populists Rise and Fall video
A. Mainstream Elite Establishment Failed and Must be
B. New Communication Creates New Power Source
1-5 Future of Geopolitics
Dr. George Friedman, Geopolitical Forecaster
A. The 21st century will be politically volatile,
more like the 19th century than the second half of the 20th century.
A. Multilateral Organizations Solve All of Problems.
B. Harvard Graduate Managed Organizations Solves Problems.
Source The Creation of a New International Order 20 min video 1-6 Germany wanted high employment, low inflation and high saving from the editor
To increase employment German
using employee givebacks to help companies compete.
Unemployment was lowered with job sharing.
Low inflation was maintained
by Germany controlling the European Central Bank.
German savings increased because of her balanced budget.
was a choice
between loan forgiveness
Brussels is dead or the European is dead; choose one.
West Did Not Managing Post WW 1
Europe had enjoyed nearly 100 years of peace.
One reason was that after Napoleon's march through Europe, the 1815 Treaty of Vienna gave top priority to how various territories were to be ruled.
Second, the new liberal order, powered by the Industrial Revolution, was producing improved and apparent domestic prosperity which reduced the attractiveness of war.
Third, British and European states territorial ambitions and colonial land grabs offered more upside with less risk to manpower and treasure.
By Anatol Lieven. a professor in the War Studies Department of King’s College London and a senior fellow of the New America Foundation in Washington DC. See Anatomy of American Nationalism republished in September 2012. Originally published in The National Interest on December 22, 2018; cross posted from open Democracy
World War 1 caused some 16 million dead Europeans, two great European countries were destroyed, and others crippled. It engendered Communism and Nazismscourges. It led to a Second World War and the near destruction of European civilizations. Political and cultural elite were swept away for leading their countries into war which were never worth the potential loss.
Western alliesportrayed the war as civilizations against German barbarism. Today one can certainly say the British and French Colonial Systems were better than that of Germany; but one must admit that Algerian subjects of the French Empire or African subjects of the British Empire, might have a different perspective. Also, the Russian Empire made for an pretty odd member of the supposed alliance for democracy.
The real 1914 barbaric threat to European civilization was the ruling establishments. It came from decades of social and economic changes which generated hatreds with tensions building within European societies.
Before 1914, the European conservative elites encouraged aggressive nationalism to divert mass support away from socialism. To preserve the old European order, they moved in a most disastrous direction.
Today, the new cold war against China and Russia represent grave threats toward the conservative western establishment. A new geopolitical direction is developing. It is comparable to one taken in during the early 20th century.
This new cold war is serving as a distraction from a vastly graver threats. Western political elites are unwilling to address threats which would involve radical changes to their ideological positions. Their obsession with their own righteousness and civilizational superiority is leading to moral civilizational fantasies similar to those that helped bring on the 1914-18 disaster. This is liable to engender distortion of judgment which, in the blindness of crusading frenzy, destroys nations and civilizations.
Ironies abound: The US is leading a new “league of democracies” against an “authoritarian alliance.” It includes the anti-Chinese participation of Vietnamese communists, the murderous Filipino authoritarian populists, and above all, the Indian Hindu neo-fascists. Authoritarian and cultural nationalistic member Poland is bitterly anti-Russian. Add France in 2022 if she elects a president from the National Front.
Diverting domestic discontent into external hostility rarely works because the factors that created the discontent remain unchanged. Does anyone who has interviewed the “Yellow Vests” in France seriously think that they are acting as they do because of manipulation from Moscow? Does anyone who has seriously studied the crisis of the white working classes in the USA believe they have voted for Trump because they have been swayed by Russian propaganda?
A More important link between Russia and America is the rise of Putin and Trump. Another is the rising death rate among working class males since the 1990’s in Russia and recently in America. An additional cause is the diseases and the addictions fueled by economic, social and cultural insecurity and despair. In Central America, a far more terrible version of these pathologies is driving millions of people to seek US asylum. This is driving U.S. radicalization. Yet total US aid to Mexico in 2017 was less than that to Ukraine or Egypt, and a fraction of that to Afghanistan. Does any truly responsible national establishment neglect its own neighborhood in this way?
Climate change threatens damage greater than anything the Chinese or Russian governments could or would wish to inflict. Yet media-politically generated hysteria over a minor Russia/Ukrainian clashes in the Sea of Azov could overshadowed close US-Russian co-operation to block the latest UN report on climate change.
There are real threats from Russia and China (notably trade) where the USA needs to push back. But these are limited issues which are negotiable or containable. They do not justifies restructuring western national geopolitical strategies and institutions around a new cold war.
If a 1956 Khrushchev had not transferred Crimea from the Russian Soviet Republic to the Ukrainian of the Soviet Republic, everyone would recognize the Sea of Azov as Russian. This issue would not even exist. In the South China Sea, the USA is pushing back against China in the name of an international Law of the Sea which the USA itself does not recognize. If the Chinese were ever so mad as to use their position in the South China Sea against US trade, the US Navy could block Chinese trade to the whole of the rest of the world.
Serbian nationalist triggered WW 1. Most British soldiers who died in the First World War had never heard of Serbia or of Sarajevo. In the name of God, let us not make this mistake again.
The Creation of a New
1. The 21st century will
be politically volatile,
2. World is no longer
"hard wired" to a liberal
4. World will revolve around
who faces an equal Turkey,
hopes for coexistence, and
hopes not to react.
1. Multilateral Organizations Solve All of Problems.
2. Harvard Graduate Manage Organizations Solves Problems.
2. Saving Liberal Democracy from Extremes, M. Wolf
Dr. Hal Brands on American Grand Strategy in an Age of Upheaval
Post 1989 Changes
Trump wants to win the economic competition but
has no Ideological or Geopolitical preferences.
Steps to Determine What We Want
1) Fixing the Political Party Systemat a time when political parties are
in a reinvention process last happened in the 1930's. It took 12 years.
2) Need a Conversationon replacing the Breton Woods trading system
1. It was designed by the U.S. to win the Cold War by fostering world trades.
a. U.S. would open her markets providing friends with export revenue from the U.S.
b. Resulting U.S. trade deficit would provide the world with dollars, a de factor world currency.
c. U.S. Navy would protect trade routes for all her friends.
d. U.S. would have complete freedom when fighting the cold war.
3. Replacing Brenton Woods began after the Cold War by Bush 1 but
it stopped when the American voters elected domestic President Clinton.
Add Bush 2, who listened to the neocons and went after a few terrorists, and
Obama, who knew a lot, but really failed to coordinate anything.
4. Set a Foreign Policy Goals
Productive geographyprotected from outside forces.
U.S easily leads the world. Other major powers geopolitical factors are poor, if not terrible.
Economically Favorable Demographyfor high growth requires
many younger members spending, mature members earning/investing and few older members.
U.S. doing well relative to almost everyone as baby boomers had Millennials.
Financial burden of the U.S. relatively small because baby boomer social needs slowly erode.
China, Japan, Canada, United Kingdom, Germany, Italy,
Only Spain and GB are not
quite past the point of Demographic
Few countries, other than maybe the French and New Zeeland, have a favorable demographic
Most require imported energy and have reliance on export growth.
This analysis was reported in Accidental Superpower by Peter Zeihan
Strategy 1. Stability Ends, US Dominates
from works of P. Zeihan
agreement of countries that are cultural and
from a next group countries needing little
U.S. strong and
growing Hegemony allows a Take It or Leave It
U.S. Geopolitical Position is First
Korean nukes are a worry for South
3. China is Japans concern
5. Nukes will be used, but not against the U.S.
as no one is close
3. Eurasian Fringe War with Russia vs. Germans, Poles, Scandinavians and the Brits
4. Naval conflict between China, Japan, S. Korea and Taiwan
as they try to
See Are We Repeating Post WW 2 Mistakes video
But, Obama did not care enough to have related policies.
disengagement, which began before Trump,
has forced a
acceleration of world player adjustments.
2. Expansion would require taking on Japan's modern navy with almost no chance of success.
lockdown was to eliminate possible political opposition.
Strategy 2. U.S. Liberal Foreign Policy Failed
Liberalism: Focus on individualism and makes allowance for social contracts.
All have inalienable rights, it is universalism.
Nationalism: Focus on social groups, tribalism, and make allowances for individualism.
Realism: Focus on the top of the geopolitical food chain, the state. Balance of Power is
a realist's only concern, political systems are irrelevant, takes a black box approach.
Spreading liberal democracy using a liberal foreign policy has not been possible.
Defensive Realists seek geopolitical balance by limiting aggression and perpetuating the status quo.
They were against force in Vietnam because balance of power was not at stake.
Nationalism, "the" most powerful geopolitical doctrine, made US Vietnam success problematic.
Unipolar World after collapse of Soviet Union
U.S. Liberal Middle East Foreign Policy
Analysis of U.S. Liberal Foreign Policies
A Realist Grand Strategy
Isolationism to avoid foreign entanglements
Offshore Balancing uses regional powers to check potential hostile power.
Selective Engagement limits US engagement to events affecting security and Prosparity.