Uncle Volodya says, "If you're riding at the head of the herd, take a look back every now and then to make sure it's still there."
From time to time over the last half-century, we’ve heard that the U.S. dollar’s perch on the pedestal of the world’s reserve currency was threatened. Every time, it turned out to be premature, and the greenback sneered at would-be contenders as its fingers jealously caressed the championship belt around its waist. Being as finance holds about the same excitement level for most people as tofu recipes – most of our interest in money being in spending it rather than understanding its complex structure – most people probably do not grasp just how important it is to the USA that the American dollar remain the world’s reserve currency and that any challenges to it be met and crushed. Those people probably do not realize that the dollar is entering a desperate battle in which its allies may no longer be able to come to its aid.
Let’s start off with a little history, for all those whose interest in money begins and ends with exchanging it for goods and services at something close to the rate at which we acquire it. As Forex Traders helpfully points out here, the United States was the only nation involved in the Second World War to come out of it without smashed cities and broad swathes of chaotic destruction. All other nations had serious rebuilding to their infrastructure and economies in the forefront of their plans, many urgently. The conquerors got together at Bretton Woods, New Hampshire just before the war ended, and hammered out an agreement that put the world’s most powerful nation in the driver’s seat for as far as the eye could see. The U.S. dollar became the world’s reserve currency, freely convertible – if you can stand a rush of nostalgia – for gold at $35.00 per ounce. This was known, for obvious reasons, as the “gold standard”, and it remained in force until the early 1970’s. All other major world currencies were pegged to the dollar. This remained until the USA dropped the gold standard, whereupon all currencies were permitted to float against each other.
Why does having the world’s reserve currency matter? Most of the world’s key exchanges of commodities such as gold and oil are purchased in U.S. dollars. The country that buys them must borrow in or convert to U.S. dollars, and if borrowed the country must pay back in U.S. dollars. This allows the Federal Reserve to print and circulate huge amounts of dollars, which helps to keep the currency stable and dominant, and countries often reinvest their dollar holdings in U.S. Treasury bonds. The country with the world’s reserve currency can borrow at preferential interest rates, and can run up significant debt without the alarm that other borrowers might inspire. Both the International Monetary Fund (IMF) and the World Bank also evolved out of the Bretton Woods agreement, and – thanks to the dollar being the world’s reserve currency – have largely become instruments of American foreign policy, as we will discuss.
First, though, hold on to your seat as we warp back for a minute, to 2006. Chris Cook, former Director of the International Petroleum Exchange, and his group – the Wimpole Consortium – are two years down the road from hatching the idea for a Middle Eastern oil bourse. “Bourse” is a French word meaning “stock exchange” or “stock market”, but what Cook envisioned is both more and less than that – nothing short of a bold plan to take volatility out of the energy market by removing intermediaries and putting the buyer and seller in direct contact. This marketplace would be based on ownership of the assets rather than futures-based contracts – heresy in the oil business, where middlemen amass fortunes hedging and manipulating the volatile futures market.
And it would be denominated in the Euro, not the dollar.
Although Cook did not think that likely or necessarily desirable, that was the direction things moved in. When Chris Cook was interviewed in the reference above, he had explored the initial idea with Iran’s Khatami. The incoming President was Ahmadinejad, and at the time he was struggling to get an oil minister confirmed by his fractious government. Some analysts speculated that Iraq’s Saddam Hussein had sealed his fate in September of 2000, when he announced that Iraq would no longer accept dollars for oil sales under the UN oil-for-food program, and that all further sales would be in Euros. A quick invasion later, and the exchange returned to the greenback – the world was made safe for democracy. The lesson was not lost on Ahmadinejad, but it did not teach him the expected caution; instead, he perceived that this was the United States’ soft underbelly – its reliance on the strategic strength implicit in the dollar as the world’s reserve currency. Accordingly, it was soon announced that the new bourse – to be underwritten and controlled by Iran – would be denominated in the Euro. According to The Prudent Investor, Iran’s initiative was “worse than a nuclear attack”, and had the potential to start an irreversible slide that would see a blurringly rapid erosion of American power.
Iran planned to start up the computers of the new exchange in 2008. Let’s jump to there, and see what happened. Hmmmm…a couple of days before the bourse was due to open, undersea internet cabling serving most of the Middle East was mysteriously severed, crashing service to most of the region, and the opening was delayed. The explanation was that the cables had probably been damaged by ships anchors. What ships were doing trying to anchor in water that deep was never explained, and any seaman knows that anyplace where fouling a seabed cable is actually a risk, signs are prominently displayed in multiple languages that read “Cable – Do Not Anchor”. Coincidence? Maybe.
The Iranian oil bourse opened in Kish, in 2011. And the Iran-is-pursuing-nuclear-weapons rhetoric in the western press, simmering for years, went into overdrive.
We’re not going to get too deeply into the nuclear issue here; suffice it to say that uranium weaponized for use in a nuclear bomb is enriched to better than 85%. Uranium destined for fuel in a nuclear reactor is enriched to a much lesser degree, usually less than 25%. Experts can easily measure the difference. No weaponized uranium has been discovered in Iran, although western sources try to introduce confusion by gabbling about centrifuges, which are simply used in the enrichment process. Iran voluntarily signed an additional protocol (something no other country did) which permitted even more frequent and stringent inspections by the IAEA, and abandoned enrichment altogether although it resumed this when it realized it cut no ice with the west. But the situation may be best summed up this way – as a signatory to the Nuclear Non-Proliferation Treaty (NPT), Iran is absolutely permitted the right to enrich uranium for peaceful development of power generation. There is, to date, no evidence at all that they are enriching uranium to weapons grade or for purposes other than those to which they are legally entitled. It is incumbent upon all nations who are signatories to the NPT to resist demonization of Iran on the nuclear weapons issue without evidence, as the same tactic might be used against them at any time. Just to be clear; Iran absolutely could be building a nuclear weapon – American demonstrations have shown it is far from difficult compared with, say, development of the MOSFET transistor or multilayering of silicon chips, both of which are long taken for granted, and Iran’s government has stated that it has everything it needs to build one although that is not the Islamic Republic’s policy. But why would Iran do that? Both the USA and Israel are going through its garbage like a pack of hounds – as Crosby, Stills, Nash and Young sang in, ironically enough, “American Dream” – every day looking for the slightest, slightest pretext that would justify an attack, and before Iran could get beyond building the fin stabilizers of an actual missile the whole country would be in ruins. The suggestion that Iran wants a nuclear deterrent to discourage attack might make sense if it already had a nuclear arsenal, but it has not and now there is no time to build one; the west is already like a mean dog on a weak leash in its eagerness to smash and rend and destroy.
Fast-forward one more time, to the present. After fits and starts, the Iranian bourse is due to open to full capability, next week. Since the 2008 opening it has traded mostly in products other than crude for energy consumption and kept its operations modest. What was the response? The west cut Iran out of SWIFT, the Society for Worldwide Interbank Telecommunications; an unprecedented step. Clearly, the west is not only desperate to prevent any competition with the dollar, it is prepared to stop at nothing to see it eliminated.
I imagine you were wondering where the Russian connection would come in. At the end of last month, soon-to-be-ex-president of the World Bank Robert Zoellick announced his endorsement of a new World Bank…a BRICS bank, to be created and supported by the top 5 emerging economies: Brazil, Russia, India, China and South Africa. This bank will differ sharply from the present world model in that it will not be tied to the dollar, but will promote trade in local currencies of the sponsor countries and avoid the world reserve currency. Central banks have been quietly buying up gold as a hedge, China possibly acquiring as much as 500 tons last year, while Russia added around 95 tons in a scramble that saw purchases of gold leap from 77 tons worldwide in 2010 to 440 tons in 2011 – the world’s biggest surge in gold acquisitions since 1964.
Monday-morning-quarterbacking is easy; that’s why so many indulge in it. But it seems to me the west – principally the USA – could have avoided things getting to this point – is it even desirable for the dollar to lose its status as the world’s reserve currency? It certainly would spell trouble for countries like the one in which I live, which sends about 80% of its exports to the USA. But once upon a time, the USA remained mostly unchallenged for world leadership. Why? Because it concentrated on being a partner rather than an overlord. Sometime toward the mid-to-late seventies, emphasis shifted to full-spectrum dominance right across the board as American policymakers came to believe they need not entertain a rival in anything. Walking softly was largely abandoned in favour of the big stick. Partnership was for sissies who did not have the world’s most powerful military and the will to use it. Gulf states such as Saudi Arabia, the UAE and Qatar grew fabulously wealthy by going with the trend rather than bucking it.
Which brings us to this moment. The dollar as reserve currency is challenged as never before, by a group that is increasingly dominant in the global economy; a group some say will lead the world by 2050, and which increased its GDP from $3 Trillion to $13.5 Trillion over the last 10 years.
Hillary Clinton warns that “time for diplomacy is running out“. If this was a street fight, those would be the last words out of her mouth before she swung for the chin. The USA doubled its Carrier presence in the region in January. Multinational partners arrived in Bahrain today for 10 days of war games, many of the countries involved enemies of Iran. Conditions are ripe for a “misunderstanding” that could flash into a larger conflict. All of these multi-axis pressures seem concentrated on making Iran back down. Is it too late? Have things gone too far?
High noon, folks; time to pull iron. The challenge has never been stronger, and the dollar has never been weaker. And it looks as if there are more targets than the greenback has bullets.
The Kremlin Stooge 
Dear Mark,
For someone who claims to struggle with economics you have written a very fine article on the subject. In fact it is an excellent article by any standard.
The ongoing currency wars are far and away the most important event underway at the moment. There is a vast amount that can be said about them and which the western media spectacularly is not saying. You are also absolutely right in identifying the conflict with Iran as the cutting edge of the currency wars.
As I said there is much to say, but I would at this point just make two points. The first is that I have little doubt that the reign of the dollar as the world’s currency is coming to an end as the US cedes economic dominance. The second is that on the only previous occasion since the onset of industrialisation when a currency lost its dominant hegemonic world position, in 1931 when sterling was devalued and taken off the gold standard, the collapse when it happened was sudden and chaotic and its effect on the world economy was tremendously disruptive. There is nothing to suggest that it will be any less sudden or chaotic this time.
The current economy in the west is a “dead man walking”. It was only thanks to internal demand in China and in other newly developing countries that we did not enter a full blown depression in 2008. China barely experienced a GDP growth drop and there was no hint of a contraction. This underlines that China is not some economic appendage to the west. If it was, then the downturn in the west would have pulled it down as well (much like Canada goes up and down together with the USA). The injection of several trillion dollars in 2008 and 2009 by the US and European central banks managed to actually do something because there was no 1930s style cascade of economic contraction around the globe.
One could say that US corporations are now dependent on their performance in China. This is not a trivial thing. The US has about 150 million active consumers (children and elderly are not in this category). I would say there are 300 million active, US-level, consumers in China today, So who cares if the US goes into a downturn when there are twice as many consumers in China who are following their own demand cycle. This is what US corporations that dumped their own workforce to move China as fast as they can wanted. Many more new consumers than the old base of consumers in the west.
But it is hard to see what would sustain the economies of the US and western Europe if offshoring is the systematic policy of their corporate elites. I think that cheap credit managed to hide some of the pain from this restructuring. But endless debt accumulation, even at low interest rates, is not sustainable. We had the mortgage meltdown in the USA which was prompted by giving mortgages to people who could not afford them (after the resests). There is a frenzy of migration being promoted to Canada and elsewhere. I see this as a hole filling exercise.
But why I really think the current economic order is on its way out is peak oil. When the IEA says that the depletion rate at existing fields is 6.7% per year and rising, and you consider that the average yearly discovery rate is down to under 20% of the consumption rate, then you know the jig is up. I don’t see any preparedness for gasoline and diesel shortages that will show up in the next 10 years (world oil production has been stagnating for over six years already). Europe is in much better off than North America due to the density of population centers and electrified public transport. Canada and the US are screwed, which will affect the EU badly.
The situation in China is more complex. They have a very high population density and can suffer loss of the private car. Since they are not saturated in development they may actually not collapse completely and find a new development path not starting from scratch.
Thank you very much, Alex; I value your opinion. As I have said elsewhere, it didn’t need to come to this. The United States misused its privileged position as guarantor of the world’s reserve currency to run up debt that other countries could not carry, and misused the organizations built to administer the world’s reserve currency for political advantage. I should say here that I rate Americans highly as individuals, and although they are slightly culturally different from Canadians in their unquestioning acceptance of religion (and again, that’s generalizing and many are not religious), they are fine, generous and kind people. America has done much in the past to make the world a better place, and deserves honest recognition for its altruistic acts. But most of those are in the past, and America began to become a less benevolent and a more self-interested giant under Ronald Reagan. Bill Clinton certainly did nothing to reverse the trend. I loathed the George W. Bush administration to the bottom of my soul, and am disappointed in Obama to an extent I’m unable to express. In the end, the voters determine the national attitude, and if they continue to vote in politicians who can’t wait to indulge their martial hobbies, it’s difficult to conclude otherwise than that the electorate approves of such behavior.
American values once were built around justice and fair play. Self-interest was pretty far down the list, especially if it meant kicking somebody when they were down or telling lies about them to achieve your own interests. Plenty of individual Americans still have a highly-developed sense of right and wrong, but the government has lost its way, and the potential leaders waiting in the wings inspire no hope in me that things will improve.
In the end, the voters determine the national attitude, and if they continue to vote in politicians who can’t wait to indulge their martial hobbies, it’s difficult to conclude otherwise than that the electorate approves of such behavior.
Mark, I understand the sentiment but I can’t help wondering if a lot it doesn’t have to do with the gradual change in the US (unofficial) electoral system since the 1960s/1970s with the increasing importance of primary elections and caucuses (as outlined on wikipedia (http://en.wikipedia.org/wiki/US_presidential_primary), note in particular the date of 1968 as the year when the primaries became nationally important) and the increasing restrictiveness of ballot access (as outlined in this column: http://english.pravda.ru/opinion/columnists/05-03-2012/120688-russian_elections-0/, also see this website for an excellent overview of this: http://www.ballot-access.org/winger/iba.html – note here it also mentions that it wasn’t until “the 1960s that compliance with ballot-access laws became extremely difficult” and that ” there was no such thing as public financing of the two major parties, which began for Presidential elections in 1974″).
Would these changes in the US electoral system not have essentially made the major parties into closed groups which could eventually become more radicalized from the mainstream? After all you now have groups which enjoy taxpayers’ money (and hence rely less on the contribution of their members meaning that moderates members would lose their voice) and which become the ONLY avenues available for persons seeking elected office as the ballot access laws mean that independents and third parties have almost no chance of competing. Thus potential candidates have to play to an increasingly radicalized choir and more and more we are likely to see candidates who not only recognize the need to preach to this radical choir, but who actually believe what they are preaching.
I would suggest that the US become less benevolent and more self interested under Kennedy (think about US policy in Vietnam) and that this became increasingly evident under Johnson (with Vietnam) and Nixon (again with Vietnam, but also with Laos and Cambodia and the end of the Bretton Woods system). Some amount of sanity returned under Ford and Carter (probably due in no small part to the deep soul searching America experienced after Vietnam and the general distaste for more foreign adventures). The self interested behaviour returned under Reagan and subsequent presidents, reinforced by an electoral system which forces candidates to pander to extremist views due to party politics. Whereas the US has always exhibited some amount of self interest (as all nations do), especially in its traditional stomping ground of the Americas, after the 1960s it become more global and more nakedly self interested. I don’t think it is a coincidence that this corresonds with changes in the electoral system that made it more difficult for a plethora of opinions to be expressed within parties.
It is said that Reagan wouldn’t stand a chance in a primary race today, but I sometimes wonder if someone like Dwight Eisenhower would have won a modern Republican primary race even with his highly decorated military background. Certainly his championing of the Interstate Highway system would be seen as nothing short of “socialism”.
This is as good an analysis of the current state of affairs, and the events and evolution which supported the changes, as I have seen. I certainly haven’t done any serious work on it myself – and I haven’t read anything better than this although I’m sure there is more to it – and I more or less defined it for myself that once the United States was a model for world leadership and self-realization (at least more so than any other and a refreshing change from the British Empire’s colonialism) whereas it underwent a change later which saw it aggressively pursue its own interests exactly as other countries it condemned had done. The perception seemed to be that exceptionalism accounted for the pursuit of power, like the cigarette-smoking teen who says, “I know it’s dangerous – but I won’t get addicted”.
What I was trying to get across is that once most of the world wanted to see America succeed, because even if it conquered other nations, it usually left them better and was largely satisfied with leaving their culture intact while only removing their leadership. I’m sure that’s an oversimplification, but Iraq stands as a good example. The original plan was to break it into fiefdoms, each of which would be ruled by an American or an American appointee. It devolved into the CPA, but even that was comprised of Americans, Arab expats from the USA or appointed local bootlickers. This kind of conquistadorial engineering brings resentment and such opposition as the world can bring to bear. The world no longer wants to see America succeed, and it’s not because they’re all narrow-minded non-visionaries or tyrants. It’s because the example of world domination has lost its power to inspire. And that can be laid directly at the feet of America’s leadership. While they were busy polarizing the electorate, they were losing the world.
I don’t think you can blame the American people for the leaders they pick, considering that the system is completely rigged. Also, most American children get a lousy education and are not taught to think logically, especially about politics and economics, thus they are not in any position to question what is told them by their leaders and media. Speaking of education, I read that American student debt now surpasses mortgage and credit card debt, to the tune of $1 trillion. Root cause: families desperate to send their kids to college, but not being able to afford the high prices. Hence, they borrow money from the bank. (In a civilized country, the government would either provide a free college education or at the very least offer interest-free loans to the students.) Most of this student debt can never be repaid, so another banking crisis just waiting to happen in USA:
http://news.consumerreports.org/money/2011/06/us-student-loan-debt-set-to-hit-1-trillion-already-outpaced-national-credit-card-debt.html
I hadn’t read that, but I know of someone who is saddled with a huge student loan, and from them I hear the government has become very militant about collecting on student loans where once it had a “just send me something from time to time to let me know you remember” kind of attitude. I wish someone would do an anaysis of how the Soviet Union was able to give everyone a college education, because I always felt that was a bright spot in the Soviet picture, and can personally vouch for how well-educated many Russians are today compared with their international counterparts. Because it’s perfectly true that a college education has gone out of the reach of all but the upper limits of the middle class and beyond. And a student loan is often a ball and chain that you will be the rest of your life shaking off. I’d be interested to hear the government’s explanation, too, though. I know that in Canada, there was at least an entire decade where students took loans to become doctors, for example, and would have a thriving practice and be driving around in a new BMW while their student loan remained unpaid, because the government was anxious to get them into the workforce. So there is often a serious inability to put debt in its proper place in priority of repayment as well, and a government that allows itself to be taken advantage of most certainly will be taken advantage of.
Yeah, I am not surprised your acquaintance is being hounded to repay their student loan. As I read that this is the one and only type of debt in the U.S. that CANNOT be squirmed out of via declaration of bankruptcy. Try as you might to weasel out of it, this truly is a ball and chain that follows you all your life, and these Shylocks will cut your heart out sooner than forgive your debt. I personally have this extreme fear and anxiety about getting into debt, so if this were my life, I guess I would rather remain poor and stupid than borrow so much $$$ to go to school. I say this as someone who was lucky enough in my own life to get a decent education, including post-graduate, without spending a kopeck. Not because I am a genius, or anything like that. Just pure blind luck. But I really feel for people who want to study, and I really believe everybody deserves a free education if they want it and are willing to study hard. How did the Soviet Union do it? Well, they had a rigorous examination system. If you studied your ass off and passed the exams, then you got to go to school. If you weren’t as smart, you still got to go to school, but maybe in the provinces, and maybe just a trade school.
When it came to prestigious institutions, like Moscow or Leningrad State University, there was a bit of corruption, it goes without saying — like, if your father was a General in the army or an important Party official, then you probably get in. But you still had to take the exams. So maybe they were oral exams, and the professor kind of helped you out by hinting at the answers. Like happens in any university. It’s all up to the professors: if they want you to succeed, then you will succeed.
I concur with @alexander: This is an excellent and important article, and you have explained the economics in a way that is clear to the layman while explaining the major cause of the current world crisis.
Thank you, Yalensis! If it’s clear to the layman, it’s because it was written by a layman. I have no education at all in financial matters and all my education in global affairs comes from reading the news. This is simply a matter of making connections, and doubtless there are holes in it. But having those pointed out is an education in itself.
Agreed! Excellent post & echoes a lot of my own thoughts on the subject, but much more entertainingly explained. Good luck on the move.
Nice article. I would repeat a point I made in a previous thread that the GDP of the USA is a fiction. Using the methodology to define the CPI pre-1990, the current and for most of the last 20 years CPI in the US is understated by a factor of two. This is a big deal since it means that the GDP growth in the range of 3% was more like zero and periods of no-growth were actual contractions. The CPI is only one component of the GDP deflator but there is indication that producer price increases have been quite high too.
The mass migration of US factory jobs to China and all the “right-sizing” and “down-sizing” was not for free and it looks like the US GDP has been stagnating for the last 20 years. I originally bought into the line that there were productivity gains, but there were also major wage reductions (all those lost manufacturing jobs were replaced with low pay service sector jobs.) All the talk about the new electronic economy was a crock too since those jobs went to China and India as well. The only source of growth that I can see is population increase in the US which is significant at around 2%.
So I would say the US GDP is closer to 10 trillion and not the 15 trillion that is being trumpeted in the media. China is a bigger economy now than the USA, except in per capita terms. The estimate of 2050 for the BRICS to overtake the west is based on overly rosy figures for the western GDP. There are too many inflation measurement shenanigans to take these figures at face value. So my thinking is that Uncle Sam and his minions will be able to do nothing to stop the US dollar from losing its world reserve status. The BRICS are not Iraq or Iran. Even Iran is an impossible nut for the west to crack since there is no way there is going to be an Iraq style invasion due to the much larger size and military capability of Iran compared to Iraq. Bunker busters will not do much either. Trying to bomb Iran back into the stone age will fail as well since Iran has surface to air missile systems that will actually bring down US jets and not some junk from the sixties.
There’s probably something to that, although it’s way over my head. But cracks are beginning to show already in global American domination, and countries that formerly would never dare talk back are frankly insubordinate. There is zero enthusiasm for an Iraq-style coalition assault, which may have determined the current makeup of the forces in Bahrain. Israel, too, has appeared in a couple of “hold me back” pieces in the western press, creating the impression that it is ready right now to give those uppity Persians a haircut like they haven’t had in a long time. But the shellacking they got the last time from Hezbollah, even with their biggest benefactor to hold their coat and cheer them on, makes them lick their lips and think twice. Maybe the west truly thinks it can achieve its goals with bluster and sabre-rattling, and does not actually intend to attack. But it’s hard to imagine, because that approach has had no success whatever up to this point. And the more the western press bellows that Iran is isolated and has no friends, the less credible that narrative looks. The west has kind of painted itself into a corner where it either must attack, or back down. All the other options have been systematically taken off the table. The World Bank/IMF/World reserve currency star has already passed its zenith, and competition now is likely to realize market share gains from all but the USA’s closest friends. China is the prime mover of the new order, and has no particular love for the west while it has plenty of money to spend. And if the greenback is likely to fall sharply in value, no time like the present for getting rid of it. But if it actually does come to pass, North America and Western Europe are going to have some adjusting to do.
Like I said, none of this needed to happen. Change is a part of life, but you can manage it so as to get the best deal as long as you don’t get too arrogant and full of yourself. The opportunity to manage changes was thrown away in favour of a couple of giddy years of social re-engineering, and it will not pass this way again.
Kirill made a good point about that “the GDP of the USA is a fiction”. But it is important to understand that GDP (via CPI) overstatement is only a part of what is called the USA “number racket”. Employment statistics is equally fake. Money supply is another good example of “number racket”. All the USA economics statistics now is manipulated by “power that be”. Not to the extent war casualties are manipulated but still…
As for the dollar let me play the devil’s advocate.
I saw this “dollar will be finished soon” predictions periodically for the last 15 years or so. What we need to understand is that reserve status of dollar to a certain extent presuppose huge debt for the USA. And country without such a capability can’t generally be the host of the world reserve currency.
Also while the USA has huge problem and first of all degradation of elite (just look at Repugs presidential debates), the country is far from finished and large US corporations still dominate world landscape.
So what is the real competition to the current hegemonic world power. BRICKs with their unsolved social-economic problems and fragile economies? No if we look at China or Russia without rose glasses. Yes they are still on the rise, but that does not mean that those societies are free from huge, potentially deadly socio-economic problems. Just two questions
1. What would happen with Russia if Putin is removed from power?
2. And what will happen with China when Communist Party of China self-destruct (it already betrayed its social doctrine, so now any economic trouble might be deadly for the one Party rule).
Those considerations undermine their pretence for the world currency. Please remember that the USA (like Canada) is really blessed (exceptional, althouth I hate the word) in a sense that it is devoid of nationalism, which is a curse for Europe, the xUSSR space and China. It remains attractive for immigrants from all over the world.
And it (with GB) remains unmatched in the ability to destabilize the countries it does not like. Syria and the latest troubles in Russia is apt demonstration of this power.
In other word while it is much less powerful then in 1990th, it is a force to be reckoned with.
Another key question is to what extent the current level of the USA debt is toxic (unbearable and unrepayable) is very complex. It might be not at all. First of all when we are talking about billions, a lender and the debtor (the USA) here are in the pact that is called “mutually assured destruction”: There is no safe way for, say, China or Russia to convert its US debt into gold or euro “in a short run”. Actually both countries still accumulate dollars.
Also euro is not without problems so its attractiveness was undermined by the European debt current crisis much more then dollar. From this point of view dollar is a real beneficiary of the most recent financial crisis.
Also despite setbacks for “Casino Capitalism” model the USA still dominate the world ideologically. Neo-classical economics, despite being bankrupt, is still taught in Russia and China. In a way its like Marxism, part good insight, part nonsense, part religion.
So IMHO its a way too early to write the USA off.
I would agree that the USA is not finished. Certainly the US dollar will be a major currency for years to come. Will it be THE reserve currency 50 years from now? I don’t know, but I wouldn’t necessarily bet on it. Looking very broadly at the trends in global currency reserves over the past decade (based on the chart here: http://en.wikipedia.org/wiki/Reserve_currency) one could estimate that the US dollar would fall below 50% of global reserves within 11-12 years, but that the euro would not go above 50% of global reserves until about 33 years from now. Looking at past global reserve currencies, we have the Pound Sterling which is STILL a major currency even today despite having lost reserve status decades ago. And even up to the 1800s Spanish coinage was in widespread use in parts of the world which were not Spanish colonies even though Spanish/Mexican dollars had long since lost reserve status (see the chart here: http://www.zerohedge.com/news/worlds-reserve-currency-whats-past-epilogue). Over 30 years from now in 2050 perhaps the euro will be the major reserve currency. But by then the Yuan might have become more accepted as a global currency. After all Hu Jintao said making the Yuan a global currency would take a long time. Maybe China would collapse before then, but given how the CCP has governed it would probably take some extraordinary financial catastrophe to turn the population against the CCP.
And if Putin were to be removed from power I rather doubt that Russia would descend into madness – that is the perception that the western media would give because it focuses incessantly on Putin as well as the liberal minority and the circus of old, familiar but non-liberal politicians (Zyuganov and Zhirinovsky). United Russia may be less popular than him personally, but there are other persons surely from within that party who could probably win an election and govern well enough. I certainly can’t think of any scenario in which Zyuganov, Zhirinovsky or Prokhorov could actually win an election even without Putin unless they were the only candidates. I strongly suspect that United Russia could put up a real bear (and probably even a stuffed, dead bear at that) as a candidate and the bear would at least come second to Zyuganov and definitely poll more than Zhirinovsky and Prokhorov. Combined. And Yavlinsky isn’t even in the frame. In fact I would think Oksana Dmitriyeva would be a possibility to win if AK is right. We must’n forget that despite Putin being well known now, back in 1999 he was literally an unknown to most of the world and I would imagine to quite a few Russians. When Yeltsin retired it wasn’t the old faces of Zyuganov, Zhirinovsky or Yavlinsky which benefited. It was an unknown man who just had the good sense to govern sensibly and soberly.
So overall what we may be seeing is not the end, but the beginning of the end of the US dollar’s status as a reserve currency and the process is by no means unavoidable or irreversible. But the world moving from one reserve currency to another is likely to go through a transition period in which multiple currencies are used as reserve currencies and compete to be the pre-eminent reserve currency until a new global one is established – if one is even established; there exists the remote possibility that there may be no single global reserve currency in the future. Certainly an overnight transition from the US dollar to another reserve currency is simply not going to happen.
Another very sharp analysis that is a pleasure to read, and with which I broadly agree. There are, in fact, already a number of reserve currencies of which the Euro is one. But the Euro has been severely damaged by the avalanche of national bankruptcies among its ranks, and the dollar remains the preferred reserve currency, followed by gold (which is of course not actually a currency).
Naturally the forecast is not irreversible, and if the dollar were knocked out of top spot it would not become instantly valueless. The biggest change would be that imperial overreach would immediately become unsustainable, because the cushion of being able to borrow fantastic sums and go far, far over the credit limit would be gone. The USA would have to pay as it went, and much of what it is doing right now would not meet that test.
The euro has not lost much of its value and it still occupies the same place it did years ago as a reserve currency. This is good for countries with a lot of savings, though I do not know how it turned out so badly for countries with few savers. Greeks can at least take solace in the fact that their euros have not lost their value.
I think I agree with those who are of the school of thought that governments should put protecting their currencies as a priority. Money is just a store of value, and it is deeply unfair when some in a country have access to forex, while others have only currency that is unstable. In the 1990s when the ruble destabilized, someone – like say Khodorkovsky – could be holding dollars outside the country and could exchange them for worthless rubles whenever there was a state firesale. I think the Liberasts were doing this on purpose. It should be noted that KGB chief Primakov was the first to implement a tax regime, which begat the stabilization of the ruble. Yeltsin reluctantly accepted his appointment, but got him fired as soon as he could.
btw, can you make the boxes stop snapping up when I am typing and reviewing?
The Euro may not have lost a great deal of its practical value, but it has lost a great deal of confidence as a stable currency with the landslide of bankruptcies and bad debts, all of which are seen as having to be bailed out in Euros and therefore threatening the currency’s stability. But you’re right that it is a reserve currency, and I believe the second-strongest after the dollar.
“btw, can you make the boxes stop snapping up when I am typing and reviewing?”
I’m not sure exactly what you mean, but it doesn’t sound like something I can control. When that happens to me, it usually means I have hit an unfortunate combination of keys while typing too fast (I am a two-finger typist), or rubbed the scroll bar section of the mouse accidentally.
“btw, can you make the boxes stop snapping up when I am typing and reviewing?” – it seems this is a minor (but annoying) bug in the WordPress input form’s javascript – this happens when the page with the open form with the text is refreshed. I usually simplty click anywhere inside the box, press CTRL+A then CTRL+X and then CTRL+V 🙂 – or similar on Macintosh.
Brilliant post, Mark (the previous one was – IMHO- too) – did not I tell you that you are much better at more intellectual topics than ridiculing Kim ? 🙂
Cheers
Thanks very much, Alex; I greatly appreciate it. I kind of grew away from Kimmie, but I still have a soft spot in my heart for her for giving me my start. If I had been allowed to have my say in her comments section(s) (plural because I have been banned on two blogs now) I would probably never have started a blog myself, and my original intent was to blog only about her posts. One thing led to another, and here we are. But I seem to have kept most of my old friends, and for that I am deeply grateful.
Thanks for the guidance on WordPress – I’m sure it will be helpful, and it’s way over my head. I’ll bet I use a computer for less than a hundredth what it could do, because that’s all I know.
@kievite made a lot of good points. I would expand on the point of the “Euro” not being all it is cracked up to be. In Saddam Hussein’s time, switching from Dollar to Euro seemed like a cool idea, but nowadays the Euro does not look so rosy. Allude to Greece going bankrupt. So why would BRIC’s want to trade in Euro? Did they cut a secret deal wtih Germany? Or am I just missing something?
I thought the Bric’s wanted to trade in their own currencies not the Euro?
As far as the empires ability to destabilize countries it doesn’t like, it didn’t really do much for them in Russia. I think that Americas ability to sew chaos in the major BRIC countries is pretty limited – As we’ve seen. I mean, what exactly did all of that money poured into the Russian “opposition” and NGO’s get them accept another round of boring repetitious Putin-bashing in the West? Putin still won the presidency and the protesters are now starting to look like fringe malcontents with rapidly declining numbers and support – and more importantly, the Russian electrorate is starting to view them more and more as stooges of the west as opposition leaders are filmed flocking out of US Ambassador McFaul’s office. I think this whole anti-Putin campaign in Russia was a misfire. The US has played its hand and lost royally. They can’t exactly go in and bomb Moscow, so the reality they now face is that they are going to have to deal with a Putin who’ll be far less willing to grant consessions to the west – especially after this pathetic attempt to derail his return to the Kremlin.
The big question we should ask: will the US allow a basket of currencies to supercede the dominance of the petrodollar? Sure, they bombed Libya and Iraq and now they’re going after Iran, but they most certainly can’t bomb Russia or China into submission. As much as I loathe Nuclear weapons, I’ve got a feeling that the 2000’s would’ve been a lot different for Russia if it had become a vassal state and destroyed all of their nuclear weapons and ICBM’s – as many western pundits hoped would’ve happen. The idea was never to allow Russia to become a world power again, so what can the US now do to stop a resurgent Russia since war is all but ruled out? What are they going to do about China?
I shudder to know the answer.
Yes, you’re right about the Euro, and as Yalensis has touched on, it has lost a lot of its shine in recent years owing to a series of bankruptcies in the Eurozone which resulted in exposure of its weakness and its tremendous reliance on Germany. You must remember, the Euro was an emerging currency when the plan for the Middle Eastern bourse was initially brought forward. And indeed the basket-of-currencies proposal is much more recent.
The remainder of your points are all accurate, but it should be remembered that all the opposition lacks is a charismatic populist leader to gel around. There was early hope that it would be Navalny, but he turned out to be a yob. Boris Nemtsov before him, but he was always tarnished by his status as Deputy Prime Minister when the economy imploded, and his twisting and turning and pretenses to have been completely in the dark at the time as to what was going on have fooled nobody. But the west will not stop combing the dissident ranks for that inspirational rebel leader who will unite the opposition against the government, and the law of averages says he or she is out there somewhere.
@mark: That inspirational rebel leader you are searching for — I think I found him, he’s the head of the BRMC (Black Rebels Motorcycle Club):
I think the problem for the west is that they are combing the wrong ranks. It seems as if they are combing the equivalents of the “National Democratic Party of Germany” or the “Front National” of France. Even a charismatic leader drawn from the ranks of those parties stands very little chance of actually winning an election (just look at the opinion polls of Marine Le-Pen versus just about anybody. Even Sarkozy would trounce her 63% to 37% and Hollande would annihilate her by easily getting over 70% of the vote.
The liberals (or “liberasts”) are too much of a fringe element now to really sweep into power without a major overhaul to their programme and parties; the LDPR…well..the chance of Zhirinovsky or anyone from that party winning an election is vanishingly small; the communists have wasted a lot of time and political capital on betting that the presidency would eventually be Zyuganov’s by default someday (as a result their high-water mark was between 1992 and 1999, and since then they seem to have stabilized/normalized around a support base of 14-20% and let A Just Russia/Fair Russia steal away the rest of their voter base). The only party left that stands a chance really would be Fair Russia. But since Fair Russia’s ideology seems to be basically a more leftist version of United Russia and cannot definitely be characterized as “liberal” in the Yabloko sense then even if the west were to rally around a Fair Russia candidate it might make little difference except that there would be a change in which party formed the government in Russia. I would hardly expect Russia’s domestic and foreign policy to change and the west would then be in for a rude awakening when it turns out that Fair Russia is not just a Yabloko clone with more support.
I think that’s as good a summary of the way things stand as you’re going to find. Russians seem to have chosen prosperity over the gratuitous freedom to have an individual voice in every aspect of government, and to have rejected the premise that only liberal democracy activists can bring about real freedom. This is well-worn ground for me now, I’ve said it over and over, but the average working stiff hasn’t a clue what is involved in running a medium-sized city, never mind a massive country. Bureaucracy might be artery-clogging – look at the U.S. tax code for an example – but everyone insists on their right to contribute their two cents. Not literally; actually, it’s a bit more than that – I meant in terms of telling the government how to run the country. Advocacy groups keep arguing for smaller and smaller government with less and less power, eventually what you’ll end up with is four or five scared-looking guys (or girls) in suits surrounded ten deep with angry citizens all bellowing their own self-interest. But any attempt to just go ahead and make things happen – even if doing so is plainly to the benefit of all – is portrayed as the mailed fist of authoritarianism. Everyone must be allowed to state their opinion and have it carefully considered. Sure sounds like a model for getting things done to me.
I’m not crazy about politicians myself; I find them a smarmy group who think everyone they deal with is an ignorant clod with straw in his hair, who must be pandered to for a few minutes to get his vote. But I’ll take them over a ragtag mob in flip-flops with AK-47’s.
But any attempt to just go ahead and make things happen – even if doing so is plainly to the benefit of all – is portrayed as the mailed fist of authoritarianism. Everyone must be allowed to state their opinion and have it carefully considered. Sure sounds like a model for getting things done to me
I think a major problem is that we tend to find situations where there is too little input (resulting in the government of a country missing out on key opportunities) or too much (resulting in gridlock).
For real progress there needs to be public input but there needs to be a way for it to be done quickly. The only way I can think of is for a government to hire an army of people to receive ideas and opinions from the populace and to summarize the ideas and opinions into various categories and then present them to the government. These “receivers” might need to have their work triple checked to ensure redundancy and to make sure that they aren’t being biased with the ideas and opinions they receive (nor that they are leaving out important bits). It would be expensive, but the pay-offs could be huge. Plus it could do a lot to reduce umeployment 😉
“The only way I can think of is for a government to hire an army of people to receive ideas and opinions from the populace and to summarize the ideas and opinions into various categories and then present them to the government.”
The government already has those. They are called bureaucrats and lobbyists, and that’s exactly what they do. And indeed their work does have to be triple-checked for self-interest, and often checking is not enough to filter it out altogether – especially in the case of lobbyists, who eat, sleep and breathe self-interest. And it is exactly that layer of fat the public keeps insisting be trimmed. But the payoffs are huge – for the government.
On another note, and entirely relevant to this post, have a look at this. I stumbled across it in related research. But it goes much, much farther: implying not only that the petro-dollar’s collapse is much closer than anyone thinks, that China’s lunge to wrestle the world currency from the USA is very much a reality, but – most startling of all – that the Middle East and the entirety of the Arab world may be about to dump its heretofore favourite dance partner in favour of security guarantees from Russia and China. If you think the plot needs an unresolved question, it asks (in the comments) – where did Libya’s 180 tons of gold go?
As the tagline for the 1974 horror flick “Black Christmas” went – if this doesn’t make your skin crawl, it’s on too tight.
And here’s a suggestion that Russia is “massing troops” on Iran’s northern border, although there is nothing in the story that supports any such conclusion; merely that Russia believes there will be a strike on Iran this summer, and that it has “made plans” for such an eventuality. The suggestion that Russia would roll up Georgia in order to get to its Armenian outpost has been made before, and it makes good sense logistically. But the story is suspicious for a couple of reasons – one, it relies heavily on serial tool Pavel Felgenhauer as an “expert source” (although it’s nice to see them actually acknowledge him as an employee of the Jamestown Foundation), and two, it mentions that Putin might “order another attack on Georgia like he did last time”. I love the tortured logic that makes a year or two of constant threats and sabre-rattling by Saakashvili, billions of dollars of aid and equipment poured into Georgia by the USA, troop training by American and Israeli instructors and a lot of bragging that they were “ready for anything” and a clumsy lunge for recapture of autonomous Republics that have declared their unilarteral independence just as Georgia itself did….into an attack ordered by Putin.
What this is, more likely, is another in the series of “hold me back” articles leaked to western and other sources in an attempt to convince Iran that a US/Israeli coalition is about to attack, and hopefully get Iran to capitulate – or offer to negotiate, which amounts to the same thing. The previous reference I cited suggests the cutting off of Iran from the SWIFT system has had a significant backlash, and has forced the hand of the anti-dollar cooperative. Interesting times are ahead.
There is not going to be an over-night transition to a brave new world ruled by the BRICS. But the current financial system of having to borrow dollars to buy oil is simply absurd. In fair trade you would use your local currency. The vendor countries could then buy things from you or others using your currency and so on. As long as your currency is not in some Weimar Republic free fall it is valid tender for goods and services. Designating a magic currency as the one and only is neo-imperialism and vastly inefficient since it forces you to borrow and pay an interest tax when you would not otherwise.
The BRICS have serious issues, but so does the west. The most important thing is that the uppity west which annointed itself the beacon of humanity while royally screwing it over is now in decline. This is a good thing. Call the new world emerging a multi-polar one or whatnot, but it is vastly fairer compared to the master and servant arrangement from before.
Who wants to take bets that the island of Kish in the Persian Gulf will be among the targeted areas of any Israeli and/or US airstrikes?
When looking at the international chessboard, one also needs to keep in mind that NATO now fully controls that whole stretch of the Mediterranean coastline that used to be called the “Libyan Jamahiriya”. People in West think NATO ditched Libya the moment that Gaddafi was killed, but that isn’t actually true. NATO and Qatari troops continue to occupy Libya, NATO planes control Libyan airspace and even continue to fly bombing missions over Libyan cities (most recently the southern city of Sabha – there are lots of videos on the web showing whole neighborhoods flattened). NATO soldies and contractors control the oil fields in Cyrenaica/Benghazi and are pumping oil like crazy without even paying for it. In summary, Libyan coastline could also serve as part of the staging ground against Iran, although I don’t think the water there is deep enough for submarines. However, Libya’s role would probably be to create a diversion by sending Al Qaeda brigades in to attack Syria. With Syria confused and diverted, they would be less able to help their ally, Iran.
This is part of the “post-BRIC Russia” discussion. Last year Brazil was the country that lagged, because its GDP for 2011 grew 2.7%.
http://www.bloomberg.com/news/2012-03-06/brazil-s-gdp-growth-of-2-7-last-year-underperformed-bric-peers-economy.html
hahaha, they didn’t write a f@cking world about Russia’s 4.3%, did they? It is simply forbidden. Joke.
Compared to China and India, it is not that much, but compared to the western countries… or even former communist countries…
When it is doing something for which no reasonable criticism can be found, Russia does not exist for the west – it is a great void that is not behaving obligingly by screwing something up. When something goes wrong, or when a liberal complains about something that he or she perceives to be wrong, Russia reappears on the radar.
Mark, I discovered when writing this post, that you were my third highest referrer when I was at S/O. You are the next best thing after Google and Facebook! Thanks. 🙂
It is my pleasure, Anatoly; your blog has been getting steadily less opinion-based and more research-based, and it is an excellent reference. That shouldn’t suggest it’s boring; there’s plenty of humour and it is very well-written, but there is much more methodology associated with it than with this one and I regularly cite your demographic and election-fraud research in disagreements. You are the highest referrer of any individual blog for mine, currently at 3,866 since I started.
This is an older piece, from a year ago, but highly relevant to the topic, it is about Gaddafi’s attempt to trade oil for Gold rather than dollars. According to this piece, Britain keeps her gold reserves in a bank in London. America, as we know, keeps hers at Fort Knox. It goes without saying these hoards would have dwindled rapidly if they had to use them to buy oil on a daily basis.
This allows the Federal Reserve to print and circulate huge amounts of dollars, which helps to keep the currency stable and dominant, and countries often reinvest their dollar holdings in U.S. Treasury bonds.
You’re right this allows the Fed to get away with creating more money than would otherwise be the case, but I wouldn’t say it is the money printing per se that keeps the Dollar stable. Really it has the opposite effect.
Bretton-Woods stipulated that every dollar was worth 1/35 ounce of gold, however, as many more Dollars had been printed up than there were actual gold reserves backing them, it had to be abandoned when France asked for its Dollars to be redemeed in gold at that rate as US had promised it always would be. So money printing is actually de-stabilizing, it is what fatally destabilized and killed Bretton-Woods.
US was the only major power after 1945 which still maintained its currency was not just paper (usable only in as much as you can find someone who will take it), but was redeemable and interchangeable with a commodity (as long as you happen to be a foreign central bank). Every other power had been forced to admit such promise of theirs were empty in their various wars and crises prior. This is what made the Dollar special in 1945, alone it still had at least a tenuous link to gold.
So it should be recognized going off Bretton-Woods was a form of default. All those Dollars lying in accounts of central foreign banks represented liabilities on the US Treasury’s gold. Every such Dollar represented an IOU for 1/35 ounce of gold, but when Nixon closed the gold window the US would no longer acknowledge it owed a foreign central bank that presented it with a Dollar the delivery of a corresponding amount of gold.
This is just for anyone who may doubt that a US default is possible – it has in fact already happened once before.
On the world currency front I would say the Dollar’s biggest boon is a lack of a credible competitor. Euro is riding on the reputation of the German Mark, but may be more akin to the Italian Lira. Its problem is the downsides of money creation are shared by all the participating countries whether they inflate themselves or not, but the benefits are concentrated among those which inflate the most. The Eurozone countries may not print Euros themselves – only the ECB may do that – but they may issue bonds redeemable in Euros which the ECB must accept as collateral and this ends up being almost the same thing. It makes for a tragedy of the commons situation that has everyone racing to run paid-for-by-all deficits, and the Euro a particularly flawed currency.
So it should be recognized going off Breton-Woods was a form of default.
Default is the event that happens between equals. This was not a default. It was more like extortion. Nixon’s Treasury secretary John Connally famously said to Europeans that dollar “is our currency, but your problem.” Hinting that a steep dollar depreciation would inflict more suffering on their economies then the USA economy. That might triggered the creation of euro.
The same thinking is applicable to the question “How long Chine will finance the US deficit”. I Think much longer that many expect. Like NYT noted ( http://www.nytimes.com/2005/03/13/magazine/13WWLN.html)
I think China’s days of being humiliated by the west are over. I could be wrong, but I believe the reason China continues to lend huge sums to the USA is so that it will overreach to the point where recovery would be impossible if China called in its markers. We’ve seen what I believe to have been probes before, testing for effect, in which China suggested it might dump its dollars for Euros. Both times the dollar took a shitkicking as people panicked. Then China would release a statement like, “Sadly, Comrade Wu in accounting made silly statements that were not actually true; please forgive him, he is a very funny person and he was only trying to be entertaining. No need to worry”. But I think market behavior taught them much.
However, as this layman’s summary helpfully explains, China (like Japan) is unlikely to dump its dollars, as it would hurt its own economy; not unless (a) it had a customer that would take its dollars at a decent price, (b) there was a viable currency to migrate to, and (c) there was a coordinated campaign against the dollar.
Unfortunately, as long as the U.S. perceives the dollar is under threat, it will take such measures as it thinks it must to protect its status.
I think the Euro was specifically and cleverly crafted in such a way that the strongest economies of the Eurozone would have to assume a degree of responsibility for the weaker ones. And they pretend to hate Communism!! It may have been that way through altruism – although I profoundly doubt it – but it has had the effect of some countries shirking their financial responsibility because they know someone else’s economy will have to stand good for it rather than let them go under, “for the good of the Eurozone”. Greece comes to mind, taking a big bailout and essentially going on summer holidays with the cash, then returning sheepishly for more.
I never thought of the over-proliferation of dollars as being a liability, but it makes sense based on your explanation. Still, there is nobody better at the currency-hedging game than the USA, and up until very recently the dollar had no serious challengers; any weakness inherent in overcirculation seems compensated for by being able to go far, far out on the credit limb. Mind you, only fools or those who inherited a soft economy would go so far out with such a weak dollar. It’s already basically at zero interest for borrowing, and can’t go any lower – but nobody dares raise the rate because it risks damaging the recovery.
I don’t mean one of the BRICS currencies might replace the dollar as the world’s reserve currency; I just think the challenge of another major world bank that avoids use of the dollar will render the notion of a world reserve currency irrelevant. The dollar will remain widely used, but will lose much of its advantageous power for the USA.
I really don’t think Greece did anything wrong or caused the crisis, they’re just the current whipping boys for a system that, in retrospect, never could succeed. You can’t have a unified currency without unified political institutions. German leadership was necessary for European Union to succeed, but Germany was compelled to lurk in the background, acting like a shrinking violet. (Because of all that unpleasantness 70 years ago.) Also, Germany is technically still under American military occupation and is not a fully sovereign nation, crazy as that sounds.
Kirill said:
But the current financial system of having to borrow dollars to buy oil is simply absurd. In fair trade you would use your local currency.
Far from that. It is a huge privilege. The size of it is reflected in the term “exorbitant privilege” coined by Valéry Giscard d’Estaing and usually attributed to Charles de Gaulle .
Just due to foreign holding of cash the USA gets a subsidy of approximately six billions a year. May be more. Another huge subsidy is the difference between interest rate of five years bond and the inflation rate. I wonder how many billions it is. And those two are just direct subsidies. Minimum net financial benefits per year according to http://www.mckinsey.com/Insights/MGI/Research/Financial_Markets/An_exorbitant_privilege
2007–2008 were around $40 billion to $70 billion.
Important indirect privilege is that the USA corporations pay relatively low interest on their foreign liabilities while receiving relatively high returns on their foreign assets. This is the engine of the US foreign expansion. Essentially reserve status of the dollar subsidizes the USA foreign expansion.
Designating a magic currency as the one and only is neo-imperialism”
Exactly. This is one of the key mechanism of the neo-imperialism. And it is instrumental in enslaving nations via convertible currency loans. No doubts this privilege will be protected by whatever means necessary including military. The recent conversion of NATO into a hit squad is a pretty telling development. “Might is right” principle in action so to speak.
In no way such a privilege will be abandoned voluntarily. The USA will fight tooth and nail for its preservation by whatever means possible.
”The recent conversion of NATO into a hit squad is a pretty telling development.”
And that’s only part of it. Even the once-honorable United Nations has been completely corrupted in recent years and now operates mainly as an arm of American foreign policy. Even a supposedly neutral organization such as Amnesty International has also signed onto this Faustian deal and serves as propaganda cheerleader for American military adventures. Seems like almost everybody in the world has been enslaved by the mysterious power of this malevolent Alberich, who renounced Love for Gold, and then Gold for Paper.
Dear Kievite and Yalensis,
Exactly right on both counts. NATO began supposedly as an alliance to defend western Europe from a perceived but probably fictitious threat of Soviet aggression. Its Charter specifically prohibits it from acting aggressively or “out of area” (ie Europe) and also specifically says that NATO is subordinate to the UN Security Council. When Clinton decided to break the promises that had been given to Gorbachev and to extend NATO into eastern Europe the Russians were assured that this could pose no possible threat to them because NATO could only function as a purely defensive alliance. Within a few months of the making of these assurances and after Yeltsin was bullied on the strength of these assurances into agreeing to NATO’s extension into eastern Europe, NATO attacked Yugoslavia without the authorisation of the Security Council. Within two years following the terrorist attacks on 9th September 2001 NATO forces were also operating in Afghanistan, which is far from Europe and at the other end of Eurasia. The USSR by contrast never asked its Warsaw Pact allies to send troops to support the forces it sent into Afghanistan in the 1980s.
NATO was of course also deeply involved in the attack on Libya last year even though Libya had not threatened or attacked any NATO state and is also located outside Europe.
As for the UN one of the most deplorable developments of the Bush era was the way in which following the retirement of Kofi Annan and with the election of Ban Ki Moon the US has been allowed to capture control of the US Secretariat, which has to all intents and purposes become an annex of the US State Department. Ban Ki Moon seems to see himself essentially as a cheerleader for US policies and the same can be said for the UN Human Rights agencies and of Nathi Pillay.
For this China and India are partly to blame. I heard rumours at the start of last year that Russia was looking for an alternative to Ban Ki Moon whose term in office was about to end but was unable to get the support of China and India who felt they had to support Ban Ki Moon as a fellow Asian. The BRICS states were similarly unable to agree a joint candidate for the posts of chief of the IMF and of the World Bank, both of which became vacant over the last year, with the result that they were again filled by a French woman and an American. Hopefully as the BRICS learn to work with each other better they will learn to take more coordinated positions on these questions as Russia and China already do on major foreign policy questions and in Security Council debates.
“The BRICS states were similarly unable to agree a joint candidate for the posts of chief of the IMF and of the World Bank, both of which became vacant over the last year, with the result that they were again filled by a French woman and an American.”
Ha, ha!! Actually, Zoellick at the World Bank is on his way out; he’ll be gone this summer. And if you think his replacement will be an improvement – think again.
No, come on, come out from under the bed; I was just messing with you. Actually the nominee is a Korean-American, Jim Yong Kim. Although it must have been a tough decision for Obama; I’d think he would leap at the chance to get Clinton out of the SecState slot, happily agreeing to make her the next American shotput entry in the Olympics if it meant getting rid of her.
“In no way such a privilege will be abandoned voluntarily. The USA will fight tooth and nail for its preservation by whatever means possible.”
And this is the part which frightens me. Does this include the possibility of plunging the world, or at least the Northern hemisphere, into a nuclear quagmire? We all thought humanity could breathe a sigh of relief when the cold war ended, but in many ways, things are more dangerous NOW than they’ve ever been at anytime during the cold war. This “”Missile shield” that the US wants to build (which they claim is to deter an imaginary threat from Iran, but it’s really to give them a first strike capability at Russia’s borders) will force Russia into a situation where they simply can’t back down – which is what happened to the US during the Cuban Missile crisis in 1962. American’s are simply going to have to wake up and reign in their leaders, because the course on which they’re being led is going to one day take them over a cliff and bring disaster to everyone.
Dear RC,
Notwithstanding the comment I have just made (see below) I think you have actually put your finger on what I think is a real danger. The US is totally unprepared to face psychologically or intellectually the possibility that history may be moving beyond it. How can it when its entire self image is that it is the future? How can the US bring itself to accept that its economic system and its system of government are not the future when at the end of the day it is difficult to see what the US is if not its economic system and its system of government? Bear in mind also that the US is a nation of immigrants. What happens to the US if the descendants of those immigrants one day wake up to the possibility that they might have been better off if their ancestors had stayed where they were?
Other countries that have had to cede leadership eg. Spain, France or Britain, have had reserves of history, tradition and identity that they were able to fall back on when their moment in the sun had passed. When the USSR ceased to exist the Russian people still retained their identity, culture and history as Russians, which distinguished them from people who live elsewhere. What beyond the US’s existing political and economic arrangements do the American people have when even their language is British?
What I am afraid this means is that there may be some people (perhaps many people) in the US who might see a sustained threat to the US’s international position not as a part of a process of inevitable transition to be accepted and managed gracefully but as an existential threat to the US’s very existence and identity. If so then the situation could become very dangerous indeed and some of the frightening scenarios you describe might suddenly become threatening. Alarming thoughts I know but then the US is a country like no other and I say this as someone who admires the US greatly and who considers New York City (the US city I know best) one of the most beautiful and exciting cities on earth.
This is brilliant, Alex. You are both a talented analyst and a superb writer.
I don’t share your concerns to the same degree.
The US spent the majority of its history – pre-1941, with a brief interlude in 1917-18 – as an isolationist continental power. Sooner or later, it will have to cede global leadership to China by dint of the latter’s sheer mass, but it will still retain a lot of influence over its traditional hinterlands (i.e. the Caribbean, C. America, etc). Merely getting out places never closely associated with the US, such as the Middle East or East Asia, I see as unlikely to have much effect on the “American psyche.”
The concept of empire to the US is fairly recent in historical terms, but at has been at the core of the Russian state since its inception. I daresay it will have little trouble returning to a more insular and still comfortably upper-middle class (by global standards) existence.
When empires fall, people learn to make psychological adjustments. Some acquire new hobbies (like going to Monster Truck Rallies). Others continue to live with fond memories of their former glory. In their future dystopic Idiocracy, the American people will still have memories of their glorious past when they saved the world. (Plus big Monster Truck Rallies.)
Dear Anatoly,
I hope you are right. Certainly there is no inherent reason why the US should not continue as a powerful and prosperous country. It certainly ought to remain the dominant economic and political power in the Americas for the foreseeable future.
The one important point I would make is that the US in its “pre empire” days was a rising, optimistic and self confident power that already believed it was riding the crest of the wave. Becoming a declining, secondary power will be a completely new experience. The majority of people will of course adjust to it as do people everywhere. My concern (which I accept may be alarmist) is that there are some people who might not.
There has been an American concept of “empire” since even before the United States came into existence, namely “The Empire of Liberty”:
“Jefferson used this phrase “Empire of Liberty” in 1780, while the American revolution was still being fought. His goal was an empire dedicated to liberty that could stop the growth of the British Empire, which he hated and feared:
‘We shall divert through our own Country a branch of commerce which the European States have thought worthy of the most important struggles and sacrifices, and in the event of peace [ending the American Revolution]…we shall form to the American union a barrier against the dangerous extension of the British Province of Canada and add to the Empire of liberty an extensive and fertile Country thereby converting dangerous Enemies into valuable friends.’ – Jefferson to George Rogers Clark, 25 December 1780″
(Source: WiKi)
This “Empire of Liberty” bullshit led to, amongst other things, the formulation of the Monroe Doctrine, which was implimented – in fact, could only be implimented – with the unacknowledged assistance of the British Royal Navy, and the annexation (liberation?) of Cuba, the Philipines, Puerto Rica etc.
In the early 19th century USA there was often talk of an American Empire “from shining sea to shining sea” and the secessionists of the mid-19th century made no secret of their intent to establish a southern empire based on slavery that would expand southwards into central America and even further. The Confederate States of America ceased to exist in 1865, but where they failed, the United States of America, largely by means of its agents the united Fruit Corporation and the United States marines, colonized in all but name much of central America.
Niall Ferguson has gone to great lengths to determine whether the present US “hegemony” is in reality an “empire” and compares the US present day world role with that of the 19th century British Empire. He came to the conclusion that the Americans do not like using “the ‘e’ word”, but that to all intents and purposes, US hegemony looks like and acts like an empire.
See: http://www.foreignaffairs.com/articles/59200/niall-ferguson/hegemony-or-empire
I’m sure everyone recalls that infamously overconfident slip of the tongue during the Bush administration – I don’t believe it was ever attributed to the individual, who sounded a lot like Richard Perle to me -“…we’re an Empire now, and when we act, we create our own reality…” There were significant differences, then and now, from the early concept of Empire, though – which once almost always meant colonization. You can’t trust the locals to learn western values on their own, after all. You need to offer a daily example of strength and fortitude, and leadership. Not any more. The west did not conquer Libya because Americans and Britons wanted to live there, or even because it was an important outpost and Americans and Britons could be persuaded to live there for the good of western foreign policy. Least of all was it in aid and assistance of a powerful democratic movement yearning for freedom: it was smashed as an example of force and willingness to use it in the maintenance of a world order dominated by the USA and – to a lesser extent – Britain. The forces involved did not even bother setting up a true proxy government, as they would have done were the sole intent gaining control of Libyan oil resources, which could probably support double or more pre-war production if it were modernized. More than anything else, it was simply to maintain momentum. That momentum was thrown off stride by the veto of intervention in Syria. Too late for Gadaffi and Libya, I’m afraid, but nobody cares about them now. Perhaps the “Greens” will take over again, who knows? The rabble that gained control is certainly not interested in representative government, but its enablers could care less.
Incidentally, Ding! Ding! Ding! this is the 10,000th comment, and Moscow Exile is the winner. Of what is yet to be determined. Congratulations!
I believe you mean Karl Rove and his sneer at the “reality based community”. They believe that their will and policies created reality. Smells like Triumph des Willens to me.
It certainly could have been; I only meant I had never seen it attributed to anyone by name, merely a “Bush insider” or something of that nature. Richard Perle was famous for fatuous stupidities praising the exercise in pure self-interest of naked power, such as his speculation that a year from now – I forget exactly when he said it, although it would be easy to find out, but suffice it to say it was quite a few years ago – there would be some grand square in Baghdad named for George Bush. The obvious implication was that the people of Iraq would recognize him as their liberator, acknowledge that the entire invasion was for their own good, and want to do him honour. Obviously, we’re still waiting for that to happen, and I for one am not as confident as Richard Perle that it ever will.
Yes, Perle was one of the key neocon “thinkers”. America has been going down hill for a while now. First the Republican Party was taken over by neocons, now it has been taken over by various species of evangelicals. What is frightening is that the Republicans have a chance at winning this year even though they did not have a single reasonable candidate. Romney is a bunker mentality flake.
If they named a square in Baghdad after Bush, they would have to call it “Nimble Dodger Square” :
A few comments on some of the things that have been said:
1. On the subject of US GDP I tend to side with Kirill. It is a big subject about which there is plenty of scope for argument but basically what has been happening since roughly the 1980s is that the US has been borrowing increasingly heavily on the strength of its assets whose value, in order the better to borrow, it has been busy inflating. That is what the infamous “Greenspan put” was all about. Like Kirill I strongly suspect that some (though surely not all) US GDP growth since the 1980s has been asset inflation. If one bears in mind that much of this asset inflation has been caused by debt then it is even possible to say that some (though obviously not all) US GDP growth since the 1980s is more properly understood as US debt growth. We are of course here talking about total debt, public, private and corporate, and not just the public debt that has been receiving so much attention recently.
2. A few months ago I had a discussion with an American on Anatoly’s blog about this in which his argument was that the US could afford to go on borrowing in this way because the US asset base is so valuable and so enormous that foreigners will “always want” to park their money in the US because they see it as a safe haven. I tried as gently as I could to point out to him that though there is something to be said for this argument and that though the US is indeed in a much better position to run up debts than any European country (or indeed the Eurozone as a whole) for precisely the reasons that he was saying, his view though one shared by many Americans was in the end complacent and that it is unreasonable to expect the rest of the world to go on indefinitely lending the US money so that it can go on forever living beyond its means. Needless to say I don’t think I convinced him since his is a complacency that the overwhelming majority of Americans appear to share. If you doubt this then consider the facile nature of the debates in the Republican primaries and (from the other side of the partisan divide) the repeat denials that the US faces long term debt or inflation problems that you get in Paul Krugman’s blog.
3. There is no possibility of the euro emerging as any sort of competitor to the US dollar. This is a currency traded between a number of countries that have come together in an increasingly fractious and shaky currency union. There is no unified tax system behind it, no central finance ministry or treasury department and no government or parliament. Until 2008 the euro had a reasonable run because people were impressed by its novelty, it was the currency used by the world’s richest continent, the European Central Bank appeared to be managing it conservatively and soundly and there was a universal though misplaced and actually groundless assumption that Germany would always stand behind it so that it inherited some of the previous strength of the D-mark. Since 2008 the brittle nature of many of these assumptions has been exposed. Though the well known problems in the European banking system and the debt issues of some Eurozone states do not automatically mean that the euro is doomed (I have never understood why the default of some Eurozone states or the failure of Europe’s banks should sink the euro or indeed affect it all) the difficulties the Eurozone has in coming to grips with these problems shows why the euro can never replace the US dollar as the world’s reserve currency. .
4. The essential point about the new proposed BRICS Bank is that it is envisaged as the focus of a new international trading system that will not use the US dollar and which will cover countries that are not only trading with each other but which are economically the world’s most dynamic and which already are positioned the centre of international trade. The latter point is key. The USSR also tried to operate its own financial and trading system with its allies independently of the US dollar but the USSR and its trading partners in the Council for Mutual Economic Assistance (CMEA or COMECON) were entirely peripheral players in the system of international trade. The USSR’s trading system therefore posed no kind of threat or challenge to the US dollar and in fact towards the end of its existence the USSR was even starting to insist that its COMECON partners conduct their trade with it and with their partners in US dollars. By contrast China is today arguably the world’s biggest industrial producer and unarguably the world’s biggest and most dynamic manufacturing exporter. It is also a vast importer of both manufactured goods and primary products. Russia, in my opinion the other key member of the BRICS, is meanwhile the world’s biggest energy producer and exporter and is challenging to become one of the world’s leading food producers and exporters. This is fundamental given that it is precisely the fact that international trade in energy and food is conducted in US dollars, which is at the heart of the US dollar’s reserve status. If Iran, whose energy resources could conceivably be second only to Russia’s, were also to join the new system then the balance would shift even more, which is probably one reason (if not the main reason) why Iran at the moment is coming under so much pressure.
5. The BRICS states as Mark correctly says have been galvanised to take these steps precisely because they are becoming increasingly concerned at the way in which the US is managing its own economy and is abusing the position of the US dollar. However it is important to say that even if the US were behaving entirely properly, given the enormously greater population of the BRICS and their much greater natural resource base their economic potential is ultimately many times greater than that of the US. Given that this is so it is anyway difficult to see why they would want to go on using the US’s currency for the trade they conduct between them as opposed to using their own currencies. In other words the replacement of the US dollar as the world’s reserve currency would be only a question of time even in the best possible conditions, which of course don’t exist. We are talking about normal economic evolution. Just as sterling replaced the Spanish silver dollar as the world’s reserve currency at the beginning of the nineteenth century and the US dollar replaced sterling after 1931 so at some point a BRICS currency will replace the US dollar.
6. The trouble is that as the example of 1931 shows these things are not always managed well and given the overweening image the US has of itself I cannot imagine that they will be this time round. Obviously as Hunter says the US will remain a leading economic power for a long time and there is always a chance that one of the events that Kievite mentions (eg. a revolution in China or a collapse in Russia) will put off what the US obviously chooses to see as the evil day. Personally I don’t think that any of these things will happen and anyway even if they do as the great French historian Ferdinand Braudel once said in the long run the long run always happens. When it does happen unlike Hunter and even Kirill I suspect it will be chaotic and sudden and personally I expect it to happen much sooner than many think.
A good summary, Alex.
If the dollar is replaced as the global reserve currency, what do you think will take its place? A constellation of different national currencies? The RMB? Or an international currency directly tied to a basket of energy, mineral, and food products?
Dear Anatoly,
The short answer is whatever currency China ultimately decides to use for its international trade. China is already the dominant economic power amongst the BRICS and is the country at the centre of the new international trade system. That is surely going to remain the case for the foreseeable future. In fact the strong probability (I would call it a virtual certainty) is that its dominance will grow.
As I understand it the plan behind the BRICS Bank at the moment is for a constellation of national currencies as used by the BRICS. However I gather there is already some talk of an international currency tried to a food, energy and minerals basket and administered through the new BRICS Bank. China has previously aired the possibility of using international drawing rights on the International Monetary Funding as a form of currency, which given the structure of the Fund and the way it is dominated by the US and Europe is of course a non starter. However it could be that this is what is ultimately planned for the new BRICS Bank. If so then that would make the new BRICS Bank rather like the International Monetary Fund as it was originally envisaged by J.M. Keynes at the Bretton Woods Conference. Keynes’s idea was for world trade to be conducted in a new international currency linked to the IMF. That idea was vetoed by the Americans who insisted on the US dollar fulfilling this role.
Having said all this, if China becomes as dominant within the international trading system as I expect then I for one find it difficult to believe that it will not in the end insist on use of its own currency for payment of its international trade transactions. If so then whatever arrangements are made in the meantime will be transitional pending the eventual emergence as the new international reserve currency of the RMB.
China has, in fact, already argued for a new global currency, and their feeling that the dollar has seen its day so far as a benefit goes and crossed into the category of a jealously-guarded bone between the forepaws is clear. However, I don’t think it will be the RMB. China is (I imagine you will laugh) sensitive to the image of the conqueror, and also has learned a good deal about the headaches of having the world’s reserve currency as well as its advantages. Also, the dollar is unlikely to bow out gracefully and the USA will likely fight for such regional influence as it can retain.
I think China will likely back some other strong currency, or a new united currency of the BRICS will emerge. I believe it would probably have been the Euro if the Eurozone hadn’t been such a failure; however, Eurozone leaders were looking the wrong way, and seemed to be structuring it more from the viewpoint of preventing any one nation gaining too much power than in supporting the currency itself. I thought the Euro was a stupid idea when it came out, but I was convinced shortly after that it could work because it almost immediately acquired a strength only the most powerful of the previous currencies had held. I was right, and then wrong. But going back to the Franc and the DM and all the rest now would be crazy. They have to stick with it. But its inherent weakness has been exposed, and there is no un-seeing it.
If BRICs come up with a new global currency, I suggest they call it the “Globo”
Summary of what Keynes proposed at Bretton Woods in 1944
http://www.monbiot.com/2008/11/18/clearing-up-this-mess/
If the BRICs were to adopt this system for their international trade and invite the rest of the world to join it would solve the currency problem at a stroke and protect debtor countries from ever again having to appeal to the IMF.
I’m sorry now for everything bad I ever said about Keynes. This is brilliant, and like most brilliant concepts, simple.
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts
The above chart is, in my view, the true state of the US GDP growth. It would be very peculiar if the largest recession since the Great Depression produced only a one-year fall in US growth. The recent downturn was characterized by high and persistent unemployment figures:
http://www.frbsf.org/publications/economics/letter/2012/el2012-03.html
http://portalseven.com/employment/unemployment_rate_u6.jsp
The U6 rate hit as high as 17%.
To me it looks like trickle down is not working. All those US multinationals who are cashing in on the growth of China, etc., are not transferring the wealth home. There is a lot of hiding of profits in offshore havens just as is the case with Russian corporations. So the offshoring of well paying jobs is hitting the US economy hard.
RT opinion piece from yesterday, author = Adrian Salbuchi. He summarizes well known background to Libya war, including Gaddafi’s gold dinar thing, “rebels” setting up new Oil MInistry, and so on. New info is that the victor nations (Oil Companies) are now quarrelling over the spoils, with American/Brit giants (ExxonMobil, Texaco, Chevron, Shell, BP) trying to shut out the French/Italian companies. it goes without saying that whichever colonial power ends up with the Libyan oil will be trading for it in American dollars, not the Gold Dinars that Gaddafi envisaged, or even Euros.
http://rt.com/news/libya-all-about-oil-818/
Continuing thread from above:
“The previous reference I cited suggests the cutting off of Iran from the SWIFT system has had a significant backlash, and has forced the hand of the anti-dollar cooperative. Interesting times are ahead.”
I have also seen sources indicating that this latest set of economic sanctions against Iran have real teeth and are causing true economic hardship for the Iranians (which is obviously the intent).
Two possible scenarios: (1) Iran capitulates completely to this blackmail and signs up to be latest American colony (not likely); or (2) Iran finds wiggle room by thinking outside of the box. They can’t sell their oil for dollars or Euros, so they start selling for something else – some sources have indicated they are already resorting to barter arrangements with some buyers. By “barter”, this might include “gold”, I suspect.
I also suspect that, through the Law of Unintended Consequences, these cruel American sanctions (specifically intended to impoverish the average Iranian and turn him against his government) will turn out to be an imperial overreach and merely hasten the international decline of the Dollar. IF any of this financial collapse happens before November, or IF Obama starts then loses a major war this summer, THEN Mitt Romney will be the first Mormon Prez of USA. Remember: I predicted it HERE! (Eat your heart out, Nostradamus…)
I still say Romney is not going to be president; not now, not ever. He struggled badly in the freaking Republican primary, where he only had to compete against other nutty Republicans, and it’s clear the Republican base does not like him from the desperate attempts to find something heroic in the other candidates, all of whom enjoyed some time in the front-runner spotlight. The Mittster was never the preferred candidate; he only won out because of his money and experience – after all, he has been running for president for nearly a decade.
Oil is a notoriously difficult product on which to place sanctions; since bidding on oil futures in the current system pays no regard to the actual source of the oil and counts only production available, selling oil through third-party brokers is usually pretty easy, and creating the perception that all Iranian oil is going to be taken off the market merely drives up prices. But even that might not be necessary, as the world acknowledges it must have oil and usually cuts a deal with the sanctioned nation – such as the oil-for-food program – that permits trade in oil to continue so the pain at the pump will not be unbearable. But it’s true Obama is in a vise; he wants to be decisive on Iran, and someone must have convinced him that unplugging Iran from SWIFT was a good idea (or perhaps simply that it’s never going to be a better idea than it is right now), but on the other hand, the Republicans are using high gas prices as a club to beat him.
Western sources always pretend sanctions are “biting deep”, much more so than they actually are. Iran has a few English-language dailies: see what they are saying, and the truth is usually somewhere in the middle. But I personally believe the USA does not want to attack Iran, and hopes to frighten it into capitulation. A massive show of force before an operation coupled with a lot of tough talk is not typical of American “diplomatic” maneuvering. In many more cases the diplomatic effort is highlighted right up until it proves useless, at which point the USA metaphorically shrugs its shoulders and says, “well, then: there goes your ass”. Alternatively, the USA could be hoping to provoke Iran into some minor skirmish that would provide the justification for an all-out attack. But it must be aware there is very little appetite for an attack on Iran except from its usual coat-holders, Israel and the UK. And I doubt the UK eagerness is anything like that portrayed by the government.
Returning to Romney, he might emerge as a charismatic possibility of he offered any real hope of quickly returning America to its former role of world-dominant and wealthy leader. He can’t do that because there isn’t any way to do it. All he has left is saying he’s going to do it without offering any details as to how, because there isn’t any plan. He’s just hoping enough people will believe him without asking too many questions. Kind of sad, in a way, and I can’t imagine why anyone would fight for leadership of a great nation in decline so they could explain every day to bewildered, angry people that they just can’t run the whole show like their parents and grandparents did, and why the game ended just as their turn came up.
Still on the theme of American politics: there is a book out called “The New Jim Crow” by an author named Michelle Alexander.
I haven’t finished reading it, but it is about disenfranchisement and incarceration of African Americans (in American privatized for-profit prison Gulag complex).
The numbers are astounding. Quote from amazon book review:
“Jarvious Cotton’s great-great-grandfather could not vote as a slave. His great-grandfather was beaten to death by the Klu Klux Klan for attempting to vote. His grandfather was prevented from voting by Klan intimidation; his father was barred by poll taxes and literacy tests. Today, Cotton cannot vote because he, like many black men in the United States, has been labeled a felon and is currently on parole.”
As the United States celebrates the nation’s “triumph over race” with the election of Barack Obama, the majority of young black men in major American cities are locked behind bars or have been labeled felons for life. Although Jim Crow laws have been wiped off the books, an astounding percentage of the African American community remains trapped in a subordinate status–much like their grandparents before them.”
This prison issue is extremely important. Like the book says, a hugely disproportionate number of young African American males are behind bars. This would be astounding in any society. Sure, some of them are violent criminals, but most are not. (Vast majority are in for drug offenses.) Private companies are making huge profits from administering these prisons, there is money to be made in everything, from security services, to cafeteria services, to laundry, and other such mundane things. Lots of money being made at the expense of these young black males.
Why does Amnesty International not raise a fuss about this injustice? Instead they waste their time lobbying for a rich shit (and actual criminal) like Khodorkovsky.
Amnesty International is nothing more than a mouthpiece. Look at their track record in Thailand. Not much noise about the various draconian “Les Majeste” incarcerations. I don’t hear much from AI on Saudi Arabia either. So basically they yell about countries that are not vassal states (aka friends) of the US.
I wonder what most people on the planet think of the west’s concern for some Russian oligarch when it is clear they don’t give a f*ck about “little” people.
Greetings people, sorry for the off.
I think, that my strange feelings towards Kudrin after he left his post were not groundless.
look at this:
http://themoscownews.com/politics/20120405/189596145.html
OK, I don’t care what this group does, but look at the names of the members and compare to this:
http://www.theotherrussia.org/2008/12/31/finding-the-good-in-times-of-crisis/
Maybe he is involved with some smart government manipulations, which I don’t understand. But one thing I know: none of the mentioned members has Russian names, if you know what I mean.
I don’t really know what Kudrin do in this environment. I am really afraid, that we are losing his superb economic expertise.
“By their friends ye shall know them.” The fact that types like Vladimir Pozner and Nikita Belykh are involved says it all. I wish somebody once and for all would expose this “civil society” movement as the B.S. that it is. “Civil society” NGOs are only necessary in rigid authoritarian single-party oligocracies, like the USA, for example. In more democratic countries that have multi-party systems, such organizations are anti-democratic, because they lobby for the interests of political minorities outside the political system.
With the new rules in effect that lower the bar for running candidates, Kudrin would have every opportunity to create his own political party and try to get a deputy into the national (or regional) duma. Instead, he is building a clearly anti-democratic NGO to try to overthrow the elected government outside the political system, and I don’t believe him for one second when he says no foreign money is involved. They are ALL getting paychecks from American State Dept. How else would these parasites put food on their tables, when they have no visible job skills?
I am not sure why Kudrin is given economics accolades. He is just another monetarist drone that should have never been appointed to the post in the first place. I see a pattern. Kasyanov, Illarionov and Kudrin. For some reason Putin had pro-west stooges in his administration, probably as some sort of “compromise” with the west. These clowns have been gradually dumped since they serve no useful purpose and are in fact detrimental.
Take deficits for example. When Obama runs up a 1.5 trillion dollar deficit (which is likely 15% of the real GDP and not the inflated one) he is doing the “right thing”. When Putin/Medvedev run up some insignificant by comparison deficit we have various monetarists coming out of the woodwork to bash Russia for having no fiscal control (i.e. to trash its credit rating). Kudrin sided with the “concerns” of these malicious agents. You have to run deficits during certain periods because the opportunity cost is higher. No government on this planet has managed to implement Keynes’ idea of using the good times taxation to fill in the recession periods. Funny that monetarists are trying to push Keynes’ ideas when it suits them.
I think Kudrin did a great job during the 12 years of Putin period. He was a respected member of the team. Of course, he has his boundaries, because he thinks about numbers all the time. He is the ULTIMATE book keeper. I remember, when 2 or 3 years ago he expressed himself badly and received some dirt. His main idea was like: government should stop efforts to control the population’s alcohol and tobacco consumptions, because if the life expectancy grows it will have some problems financing retirement fees. In one word: state should let the people die young to free itself form the burden of retirees. So he doesn’t seem to care about people, only the budget. This is why he needed some kind of counterweight, who eases his fiscal prudence and thinks about social consequences. I hope Putin will find an other great economist to manage the fiscal policy just as well as Kudrin did.
I take an in between view here. Kudrin was indeed a very efficient Finance Minister. He deserves credit along with Gref for the original tax reform of the early 2000s and he was also instrumental in the government’s policy of accumulating big capital reserves to insulate the budget against falls in oil prices.
Having said this, it is important to say that these policies would not have been implemented without Putin’s support and Putin should therefore be given at least as much credit for them as Kudrin. Needless to say he never is. Instead since he resigned we have had the insinuation that Kudrin somehow “restrained” Putin’s spending instincts (how he could do that?) and that the economic success of the Putin period is not down to Putin but to Kudrin instead.
The trouble is that I get the impression that the praise Kudrin received has gone a little to his head. Moreover he does not seem to me to have grown beyond the thinking of the early 2000s. If the priority then was financial stabilisation following the orgy of mismanagement of the period 1990 to 1998, the priority now is to move the economy forward towards more dynamic growth taking advantage of the situation that now presents itself. Kudrin has nothing to say about this. Rather he seems to be one of those people who tends to think that provided the budget is balanced and taxes are kept low the economy can be left to take care of itself. I have never been a believer in this philosophy and economic history appears to me to disprove it conclusively.
As to Kirill’s point about Russia’s fiscal policies, I am totally with Kirill on this. I never cease to be bewildered by the demands that Russia tighten even further its fiscal stance and the claims that Russia’s finances are somehow in danger because of the supposed dangers of the “non oil deficit”. Given that Russia apart from a short period between 2008 and 2010, which was the worst point of the world financial crisis, has consistently run a budget surplus these concerns have always struck me as being frankly bizarre. Given the absence of a budget deficit, the country’s miniscule foreign and public debts, its very low tax rates and its accumulation of massive foreign currency reserves (bigger on a per capita basis than China’s) the reality surely is that Russia has been running fiscal policies that so far from being lax are in reality incredibly tight. Criticism of the Russian government for its supposed overspending and demands that Russia tighten its belt even more to my mind simply show how completely politicised and (yes) Russophobic western and I am sorry to say a lot of domestic Russian economic commentary about Russia is. The same of course is true of Russia’s completely preposterous international credit rating, which must take the prize for the credit rating that is least connected to economic reality. The success of Russia’s recent bond auction, which was five times oversubscribed, may be a sign that some people in the international money markets are starting to see the truth beyond all the guff.
I am going to submit that Kudrin had his place in the sun as helmsman of a burgeoning economy simply because he didn’t do anything spectacularly stupid, and market forces took their course. Nobody could reasonably argue Russia owes its present fiscal soundness to energy prices. Nobody could have argued that about Canada, either; although ours is a much more diverse economy, nobody would try to get away with an argument that Canada is currently a rich country because of its association with the U.S. auto industry, for example. Yet Jean Chretien is credited with seeing Canada through one of its longest unbroken periods of growing prosperity. He had a good finance minister, too: Paul Martin. Mr. Martin received little credit for his work, and enjoyed short shrift as a Prime Minister himself. But the point is that Alberta’s richness as an energy producer and export of Canadian electricity put a lot of the pennies in our piggy bank. Not too many people argued that we should diversify more into, say, softwood lumber (although we made good money on that, too), and few seemed to notice – or care – that Canada made most of its GDP on energy sales to the USA. And the finance minister was content to leave things alone and not mess with a good thing.
Ditto Kudrin. When he argued with the President or the Prime Minister, he was almost always wrong, and his predictions turned out to be nonsense. He sang that “can’t rely on energy prices” song all the time he was finance minister, and they went mostly up and up and up. He argued against spending money on boosting pensions and refurbishing the crumbling military, then reversed himself and argued it was just the government showing its responsible side when it became apparent these measures were popular with the people.
Economics is as much luck as it is anything else, and a smart lucky guy knows when to keep his mouth shut and look like he knew it would happen all the time. I can promise there is little chance the bottom is going to fall out of oil prices so long as western coalitions continue attacking energy-rich countries.
“Economics is as much luck as it is anything else…”
Very true. Gorbachev’s two Prime Ministers, Nikolai Ryzhkov and Valentin Pavlov, were at least as capable and as clever as Kudrin. Nothing they could do however could make up for the economically disastrous condition of the country, caused almost entirely by decisions made by others. The result was that their reputations were ruined.
One person who in my opinion deserves far more credit than he is given is Viktor Gerashchenko who was the Chairman of the Central Bank in the late Gorbachev years, in the early 1990s and again after the financial crisis of 1998. Gerashchenko’s actions in the early 1990s may have averted a total economic collapse. However because those actions contradicted the monetarist free market orthodoxies of the Yegor Gaidar crowd and their western fan club he became the target of an extraordinary campaign of vilification and abuse and got called “the world’s worst central banker”.
Kudrin used to be Putin’s boss at one time, & I suspect he never got over it. Does not seem to have the capability to realise he is just not that competent in the big picture, and like a lot of these characters that came up in the 90’s, as soon as things don’t go their way they immediately jump into the bandwagon of the Western Liberasts.
Kind of pathetic, really…
Dear Yalensis,
Whenever I see or hear Vladimir Pozner today I always find myself remembering him as he was in the 1970s and 1980s when he was constantly appearing on western television and on Radio Moscow English language broadcasts as a passionate apologist for Soviet policies. To anybody who remembers him then his metamorphosis into a liberal now is bizarre. Needless to say when someone argues with equal passion and eloquence two diametrically opposite positions one is left wondering what that person’s beliefs ultimately are or whether that person in the end has any beliefs at all.
Pozner became famous, I think in the 1980’s, because he was Soviet spokesman who was nice-looking, urbane, and spoke perfect English. So he diverged from the stereotype of the chubby Soviet clod with thick Russian accent. Pozner had grown up in New York City as son of Soviet diplomats, so he was westernized, and his English was perfect, even with American accent. (Most Soviet diplomats spoke English with British accent). He was kind of funny, though, because even though his English was idiomatic, he did not have extensive vocabulary. When appearing on American television, like Phil Donahue show, he would say things like (in perfect American accent): “So, I was walkin’ down this … uh… what do you call that thing that people down and cars drive down…. Yeah, Street! Yeah…. And so anyhow, I was on my way to the …. Uh.. what do you call this thing that people go to to buy stuff…. Yeah, Store! So I was on my way to the store….” Etc.
Dear Yalensis,
He also hosted the so called “television bridges”, which as I remember were alternatively charming or hilarious. It was during one of those television bridges that a Soviet panelist made the famous misquoted comment about there being “no sex in the USSR”. Actually as I remember it the Soviet panel was obviously highly embarrassed by the very explicit questions the Americans were making. An American panel would of course have been equally embarrassed by such questions if they had been made in say the 1950s. Needless to say nobody pointed this out and the whole incident was exaggerated and misreported.
My recollection of the television bridges was that they worked reasonably well between US and Soviet panels but failed completely on the two attempts when Soviet panels were pitched against British panels. As always happens the British panels were dominated by their middle class members who were invariably extremely aggressive and often very.
Gee, there seems to be a lot of code in that news item:
“…the respected ex-politician…”
Respected by the west’s policy and advocacy groups, and even that mostly respected for his oppositionist stance, since they never tired of ragging on how poorly Russia was doing economically while he was finance minister: you know – falling FDI, capital flight, bla bla bla. He is evidently not respected by the “ordinary Russians” the west never got tired of shouting about – the demonstrators – since that was the crowd that booed Kudrin during the largest of those demonstrations.
“Announcing the creation of his “Civil Initiative Committee”, Kudrin said he aimed to unite independent experts…”
See how many of them are associated with the government view. I’ll bet it will include RFE/RL and Open Democracy repeat buffoons Vladimir Mau, Yevsei Gurvich and several other correctly-aligned graduates of the Moscow School of Higher Economics. “Independent experts” is just a more respectable way of saying, “the discontented elite” so beloved of western social engineers.
“We will openly oppose the actions of the government, regardless of who they are or their position,” the statement said.
Regardless of their position? That should be a dog-whistle for the advocacy groups that this organization’s true purpose is opposition, not “finding the best methods to develop the country”; what a laugh. Fuck you, Kudrin, and your crowd of perpetual whiners, too.
“Kudrin said the committee would be financed by Russian businesses…”
Those who hope a change of government might bring about a new wave of privatizations and a return to the opportunities that made guys like Mikhail Prokhorov and Mikhail Khodorkovsky unbelievably rich. Once they were referred to as “oligarchs”, but now I suppose they will be referred to as … what was that title Bill Browder awarded himself? Oh, yes; “activist investors”. I wonder if Boris Berezovsky would fall under the mantle of “Russian businessman” for these purposes? Probably doesn’t matter: from what I read he hasn’t really got much money left anyway.
Thanks, Mikhail; so far that smells like my next post.
Calling Kudrin a “respected ex politician” is doubly wrong.
Until recently Kudrin was no sort of politician at all. He was originally an academic in St. Petersburg who transferred to the central government and the Finance Ministry in the 1990s and was subsequently appointed Finance Minister by Putin. As Finance Minister Kudrin was always subordinated to Putin, who was first the country’s President and then its Prime Minister. Unlike Kudrin Putin very definitely is a politician. Kudrin unlike Putin has never been elected or stood for election to anything and nor did he play any role in the country’s elections or politics. He has only within the last few months emerged from under Putin’s shadow. The right way to describe Kudrin up to the moment of his dismissal from his post as Finance Minister was as an essentially apolitical administrator and technician.
Though Kudrin was not a politician previously he has most certainly become one now. Obviously smarting from the shock of his dismissal he has been busy flirting with various oppositionists and movements and is now quite definitely moving towards outright opposition to Putin and the government even though he is for the moment still trying to hedge his bets by maintaining some sort of continuing link toPutin. The trouble is that Kudrin is completely unsuited by temperament and experience to a political role as his disastrous performance at the Sakharov Prospekt rally showed. One way or the other I do not expect Kudrin to play any major political role in the future except in the almost inconceivable event of a revolutionary crisis in which case he is exactly the sort of hapless “universally respected” person who gets called upon to fulfill an interim or caretaker role for a few weeks whilst the new authority sorts itself out. Since I consider the prospects of such a revolutionary crisis to be precisely nil I expect Kudrin gradually to fade away into bitter irrelevance before he eventually accepts some doubtless well paid academic post in Europe or the United States.
Alexander,
Still even assuming that he is no politician, his behavior that led to his dismissal looks very strange indeed and defy explanation. No self-respecting bureaucrat would allow such a foolish statement. Was this episode a bout of “Illusions de grandeur ” or what ?
This is a completely opposite impression then one that I have had viewing his appearance on one of the financial summits when he successfully argued with Summers about the restriction on sovereign funds that the USA planned to impose.
@kievite: Even the smartest person in the world can make a stupid mistake. The world is littered with the skeletons of highly intelligent people who had great jobs and threw them away in a fit of pique. Usually the fault is overblown ego. (As in, “I am such an important guy that I can say or do whatever I please and get away with it.”)
it happens when emotions take over and suppress the thinking side of the brain. All it takes is one second of poor judgement, and then you spend the rest of your life regretting what you blurted out in that one glorious moment. Kudrin could have been drinking, or he could have had a bad day and be under stress. It happens all the time. I doubt he fore-planned the blooper that lost him his job. But now he has to live with the consequences. So he will end up being an American paid “oppositionist”, just like all the others.
Basically another Kasyanov melodrama. There is a cheerleader chorus organized from the west that tries to pump up anyone who would try to bring down the independent government of Russia and return things to the way they were in the 1990s (i.e. a comprador paradise and hell for Russians).
I think all of these clowns are Karl Rove’s disciples. They think their will shall create reality. With enough barking and lying through the teeth miracles will happen. I am glad the average Russian is not buying into this obscenity.
Dear Kievite,
I have no inside knowledge but I strongly suspect that the reason Kudrin was dismissed was because he was expecting Putin to make him Prime Minister and could not face the possibility of serving under Medvedev who he obviously despises. When discussing economic questions with the likes of Summers Kudrin is in his element talking about things he knows and understands. Politics is not something Kudrin knows or understands which is why his actions as a politician have been so incompetent and hamfisted.
Please remember though my point about how Kudrin is the ideal person who could be used in some sort of transition arrangement in the event of a revolution. As I want to say again the attempts to organise a revolution in Russia that you discuss have not ended simply because the latest attempt at a revolution this winter has failed. On the contrary all the talk in Washington is of increasing funding to the opposition, which of course now includes Kudrin to pursue an agenda which is obviously intended to be (depending on which word you prefer) subversive or revolutionary. In other words another attempt at staging a revolution will be made shortly and there is no room for complacency. In such a scenario Kudrin could become useful precisely because he is vain enough to be easily manipulated and as the country’s former Finance Minister he is on the face of it a credible candidate for Prime Minister or even President in an interim or provisional administration.
An obvious parallel is with Ladislav Adamec who was used in precisely this way during the so called “Velvet Revolution” in Czechoslovakia in 1989 only to be dispensed with a few weeks later. Who even remembers him now? Another parallel is with Prince Lvov who was the first head of the Provisional Government after the Tsar abdicated in 1917. Before the February Revolution Prince Lvov had been the titular head of the Voluntary Associations based in Moscow, which were supported by the country’s most powerful business leaders. Rather like Kudrin Prince Lvov thereby acquired a wholly undeserved reputation as a political and economic leader, which meant that he could be convincingly represented as an alternative leader of the government to the ministers appointed by the Tsar. In the event he only survived in office for a few weeks.
Dear Kievite,
Since we are in contact let me again say that one of the things Putin should make his priority is the dismissal from the government of the various Orange elements you have identified and which under Medvedev have been allowed to creep into it. A starting point for me is Medvedev’s Human Rights Council which has delivered disgraceful reports on the Khodorkovsky and Magnitsky cases, which have undermined the government’s position in relation to both cases. Doubtless you can identify all sorts of other people who have wormed their way into the government. A government that is under the sort of continuous attack the Russian government is under quite simply cannot afford such openly disloyal elements within its own ranks.
Dear Kirill,
I completely agree with you that Kudrin is being puffed up by the western and liberal media in exactly the same way as Kasyanov once was. The irony (which will become even greater if the two make common cause against Putin) is that whilst the two were serving together in the government they each hated each other and were busy plotting against each other and complaining about each other to Putin. Putin has said that Kudrin and Gref both complained to him that Kasyanov was corrupt and was taking bribes (which of course he was) whilst it seems that Kasyanov acting on Khodorkovsky’s behalf and after taking bribes from him was busy trying to persuade Putin to drop tax changes that Kudrin and Gref were demanding.
The one thing I would say about Kudrin is that no one has ever accused him of the sort of corruption that Kasyanov was guilty of. However just as the economic disaster many predicted when Kasyanov was dismissed never happened so the same will be true of the similar predictions made following the dismissal of Kudrin.
A good start to weeding out the Orange elements would be Putin NOT appointing Medvedev Prime Minister. Do people think he will? They may have had a deal. I hope not.
@kirill: Human will DOES create reality. When that WILL is backed up by military might and a readiness to use it.
I think even an enamored Leni Riefenstahl understood that Hitler did not possess psychokinetic powers, that he couldn’t conquer Europe by the force of his mind alone, hence all the money spent on rebuilding German war machine. Americans understand this too, hence all their spending on a beefed up military machine.
Sure, but I don’t equate reality with political regime. To me it looks like these specimens actually believe that they are creating more than just a new order. You can see this delusion in the dismissal of resource limits on this planet. As one famous economist put it: if we run out of copper we will make some more. They should get off the crack.
Returning to the subject of Syria, here from the United Nations’ website is the text of the latest Resolution, which was unanimously supported by all the members of the Security Council and which authorises the deployment of ceasefire monitors.
http://www.un.org/News/Press/docs/2012/sc10609.doc.htm
As anybody can see, this is a far more balanced and measured document than the ferociously worded and grossly biased Resolution that was vetoed back in February or the two equally unbalanced Resolutions that were passed against Libya last year. This Resolution not only puts responsibility on both sides to observe the ceasefire but conspicuously contains no threats or ultimatums against the Syrian government and refers to a peace plan (Annan’s) that seeks a genuine peaceful resolution of the crisis as opposed to regime change and which Syria has therefore accepted. As such it represents a return to normal diplomacy intended to resolve the Syrian crisis and the abandonment officially at least of the attempt to achieve regime change.
It will be much more difficult to discredit and withdraw the UN ceasefire monitors than it was to discredit and withdraw the Arab League monitors last year. The Arab League mission collapsed when Saudi Arabia and Qatar undermined it by unilaterally withdrawing their monitors. The UN ceasefire monitors by contrast will operate under the authority of the Security Council whose unanimous agreement would be needed to bring their mission to an end. There is therefore at least some hope that this process might work. If so then this would be a triumph for Russian diplomacy, which would have prevailed.
All of this could have happened at any point last year. The Russians have been proposing a ceasefire and peace talks along the lines suggested by Annan almost from the outset of the Syrian crisis. If the western powers and the Gulf Arabs had been prepared to support the Russians’ proposals we could have been where we are now months ago. That of course didn’t happen because the agenda was not peace but regime change. This has not been without cost. Hundreds and if one believes the UN (which I don’t) even thousands of people have been killed over the last few months because a ceasefire has been delayed because the western powers and the Gulf Arabs have wanted regime change instead of peace. Please remember to point this out if anyone tells you that Russia is somehow responsible for the death of people in Syria.
Here is an Itar Tass summary of Churkin’s comments after the Security Council vote.
http://www.itar-tass.com/en/c154/392945.html
As Churkin says the test will be whether the western powers and the Gulf Arabs continue their financial and other support for the rebels.
Good for Kofi Annan. The guy has proved time and again that he is a skilled diplomat. Americans don’t like him because he is an actual neutral international diplomat, not their puppet, like Ban Ki-Moon.
This is a bit off topic, it is about Khodorkovsky/Shuvalov. And Anatoly on his blog has a piece on Khodorkovsky and is about to post a piece on Shuvalov. Unfortunately, I tried 3 times to post this comment on Anatoly’s blog, and it disappeared into spam filter. So I am posting here. But it is relevant, because, mark my words, the Shuvalov case is slated to be America’s next propaganda salvo against Russia:
Simon Shuster’s latest is about Khodorkovsky.
(NOTE: I tried to post this yesterday, but maybe got eaten in spam filter, maybe because of links? So I am re-posting with embeds. Sorry if duplication.)
Here is English :
Here is Russian translation :
Major points of interest:
Once upon a time there was a group of 3 musketeers (Igor Shuvalov, Pavel Ivlev, and Vasily Aleksanyan) who were friends from Law School and all came to power around the same time, Shuvalov serving in the Yeltsin government, the other two in Yukos.
In 2003 Yukos Affair, the group split up: Shuvalov went over to side of Putin, whereas Ivlev and Aleksanyan stayed loyal to Khodorkovsky.
When Khodorkovsky was arrested in 2003, Ivlev had to flee to USA, where he now holds American citizenship.
Shuvalov stayed in Russia and went to work for Putin. His job is to attract foreign investments.
Aleksanyan was arrested in 2006 as part of Yukos affair, and spent 3 years in prison, where he contracted AIDS, of which he died later, in 2011.
It seems to be Aleksanyan’s death that fully embittered Ivlev to go after Putin again (and Shuvalov, whom he considers a traitor to the Musketeers) from the safety of his New Jersey exile.
Ivlev stalked Shuvalov when the latter attended a Chicago forum (trying to jimmy up foreign investments in Russia), and, in a Dostoevskian scene of “grand scandal” confronted him in full public view with the horror of Aleksanyan’s death.
When the conference was over, Ivlev went up to Shuvalov’s room at the Swissôtel, where the conference was held, and informed his friend that he was joining the opposition to Putin’s regime. “I let him know that I had made my choice,” Ivlev tells TIME. “Maybe he felt some threat there, but I never threatened him.”
Two months later, Shuvalov found himself in the middle of a massive corruption scandal. Citing his family’s financial documents, Barron’s reported he had earned a fortune of $119 million through questionable loans and stock trades, including deals he had made with some of Russia’s richest oligarchs while he was serving in senior government posts. Shuvalov denied the allegations, but the Wall Street Journal and the Financial Times published similar reports on March 28 apparently citing the same documents
In other words, when an embittered Ivlev teamed up with Pavel Khodorkovsky (Kh’s son) and Aleksei Navalny, this new team of 3 musketeers decided to really go medieval on Putin’s ass by attacking his ally Shuvalov:
A lawyer by training, Navalny has since agreed to work as Ivlev’s attorney in Russia, and on March 30, he posted the Shuvalov family documents on his blog, which has a monthly readership of roughly a million people. He called on this army of followers to “declare a holy war” against Shuvalov for alleged corruption.
This week, Navalny says he will formally request that the U.S. Department of Justice open an investigation, which would be based on the fact that at least one U.S. citizen is implicated in the Shuvalov documents. He also plans to raise the issue with the U.S. ambassador in Moscow. (The embassy declined to comment on the case.) “This is the most effective campaign,” Navalny tells TIME. “These crooks couldn’t care less about complaints to the Russian prosecutors, but they are terrified of being banned from traveling to the West.”
And thus begins the next phase of American propaganda war against Putin. It still involves Khodorkovsky, just like the earlier one. It’s always about Khodorkovsky. Plus ca change, plus c’est la meme chose.
Dear Yalensis,
Thanks for this which finally and fully explains the Shuvalov affair. I have come across various explanations for it of which the most plausible seemed to be Eugene Ivanov’s, who reasonably speculated that the information about Shuvalov was leaked by the hardliners in the Russian government as part of the faction fighting prior to the formation of the new government. Your explanation, which is undoubtedly the right one, fully explains it and shows that it originates in a private feud connected to the Khodorkovsky affair.
I just want to make three quick observations:
1. Though one has to wonder about whether it is appropriate for such a rich person as Shuvalov to be a member of the Russian government, I personally have seen no evidence of actual wrongdoing on his part.
2. As I have previously said, the Financial Times account of the Shuvalov affair is being misrepresented by Shuvalov’s critics in the Russian press. The Financial Times reported the allegations but did not lend credence to them. On the contrary in an article that was sympathetic to Shuvalov it was careful to say that there is no actual evidence of misconduct by him. I cannot for the moment provide you with a link to the article because it is behind a pay wall.
3. The leaking of this sort of confidential financial information would certainly be seriously illegal were it to happen in the US or Britain. There must be a concern that some of the papers used to highlight these allegations were stolen. Even if they were not stolen they were clearly not entrusted to whoever had them so that they could be leaked in this way. By misusing private financial documents in this manner Ivlev and Navalny are playing a potentially dangerous game. One wonders whether they understand this. Even if Shuvalov does not want to bring proceedings against them in Russia he could potentially do so in Britain or the US where these documents have also been published in a way that is surely contrary to US and British law. Given that Ivlev and Navalny are both lawyers I cannot see that they have much excuse or defence for what they did.