by Michael Hudson posted past permission

Empires often follow the course of a Greek tragedy, bringing nigh precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow movement.

The basic assumption of economic and diplomatic forecasting is that every country will act in its own cocky-interest. Such reasoning is of no help in today's world. Observers across the political spectrum are using phrases similar "shooting themselves in their ain pes" to describe U.S. diplomatic confrontation with Russian federation and allies akin. Simply nobody idea that The American Empire would self-destruct this fast.

For more than a generation the most prominent U.S. diplomats accept warned about what they thought would stand for the ultimate external threat: an brotherhood of Russia and China dominating Eurasia. America's economic sanctions and armed services confrontation have driven these two countries together, and are driving other countries into their emerging Eurasian orbit.

American economic and financial ability was expected to avert this fate. During the half-century since the United States went off aureate in 1971, the globe's central banks accept operated on the Dollar Standard, holding their international budgetary reserves in the form of U.S. Treasury securities, U.Southward. bank deposits and U.S. stocks and bonds. The resulting Treasury-beak Standard has enabled America to finance its foreign military spending and investment takeover of other countries only by creating dollar IOUs. U.South. residue-of-payments deficits end up in the central banks of payments-surplus countries every bit their reserves, while Global S debtors need dollars to pay their bondholders and acquit their foreign merchandise.

This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the residual of the world, without having to apply much military forcefulness of its own except to grab About Eastern oil.

The recent escalation of U.South. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China has imposed enormous opportunity costs – the toll of lost opportunities – on U.S. allies. And the recent confiscation of the gilt and foreign reserves of Venezuela, Afghanistan and now Russia,[1] along with the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, enticed by the promise for the return of their sequestered accounts), has ended the idea that dollar holdings – or at present also assets in sterling and euro NATO satellites of the dollar – are a safety investment oasis when earth economic weather condition become shaky.

Then I am somewhat chagrined equally I watch the speed at which this U.Southward.-centered financialized organisation has de-dollarized over the bridge of just a year or 2. The basic theme of my Super Imperialism has been how, for the past 50 years, the U.S. Treasury-bill standard has channeled foreign savings to U.S. financial markets and banks, giving Dollar Diplomacy a free ride. I thought that de-dollarization would be led by China and Russia moving to take command of their economies to avert the kind of financial polarization that is imposing thrift on the United States.[2] But U.Due south. officials are forcing Russia, China and other nations not locked into the U.S. orbit to run across the writing on the wall and overcome whatever hesitancy they had to de-dollarize.

I had expected that the end of the dollarized imperial economic system would come most past other countries breaking away. Just that is not what has happened. U.Due south. diplomats themselves have chosen to end international dollarization, while helping Russia build upwardly its own ways of self-reliant agricultural and industrial production. This global fracture process actually has been going on for some years, starting with the sanctions blocking America's NATO allies and other economical satellites from trading with Russia. For Russia, these sanctions had the same effect that protective tariffs would have had.

Russia had remained too enthralled by gratuitous-marketplace neoliberal credo to take steps to protect its ain agriculture and industry. The United States provided the help that was needed by imposing domestic self-reliance on Russia. When the Baltic states obeyed American sanctions and lost the Russian market for their cheese and other subcontract products, Russia chop-chop created its ain cheese and dairy sector – while becoming the world's leading grain exporter.

Russia is discovering (or is on the verge of discovering) that it does not need U.Southward. dollars as bankroll for the ruble's exchange rate. Its central banking company tin can create the rubles needed to pay domestic wages and finance capital germination. The U.S. confiscations of its dollar and euro reserves may finally lead Russian federation to end its adherence to neoliberal monetary philosophy, every bit Sergei Glaziev has long been advocating, in favor of Modern Monetary Theory (MMT).

The same dynamic of undercutting ostensible U.S aims has occurred with U.S. sanctions against the leading Russian billionaires. The neoliberal shock therapy and privatizations of the 1990s left Russian kleptocrats with simply one fashion to greenbacks out on the assets they had grabbed from the public domain. That was to comprise their takings and sell their shares in London and New York. Domestic savings had been wiped out, and U.Due south. advisors persuaded Russia's central bank not to create its own ruble coin.

The result was that Russia'due south national oil, gas and mineral patrimony was not used to finance a rationalization of Russian industry and housing. Instead of the revenue from privatization being invested to create new Russian means of protection, information technology was burned up on nouveau-riche acquisitions of luxury British real estate, yachts and other global flight-capital letter assets. But the event of sanctions making the dollar, sterling and euro holdings of Russian billionaires hostage has been to brand the City of London too risky a venue in which to hold their assets – and for the wealthy of any other nation potentially subject to U.S. sanctions. By imposing sanctions on the richest Russians closest to Putin, U.Due south. officials hoped to induce them to oppose his breakaway from the W, and thus to serve effectively every bit NATO agents-of-influence. Just for Russian billionaires, their ain country is starting to expect safest.

For many decades at present, the U.Southward. Federal Reserve and Treasury have fought against gold recovering its office in international reserves. Just how will India and Kingdom of saudi arabia view their dollar holdings as Biden and Blinken endeavor to strong-arm them into following the U.Due south. "rules-based lodge" instead of their own national self-interest? The recent U.S. dictates have left little alternative but to outset protecting their own political autonomy by converting dollar and euro holdings into aureate as an asset free from political liability of being held hostage to the increasingly plush and disruptive U.S. demands.

U.S. diplomacy has rubbed Europe's nose in its abject subservience by telling its governments to take their companies dump their Russian assets for pennies on the dollar after Russia's strange reserves were blocked and the ruble's substitution rate plunged. Blackstone, Goldman Sachs and other U.S. investors moved quickly to purchase upward what Shell Oil and other foreign companies were unloading.

Nobody thought that the postwar 1945-2020 globe gild would give manner this fast. A truly new international economic order is emerging, although information technology is not yet articulate just what grade it will take. But the confrontations resulting from "prodding the Behave" with the U.S./NATO aggression confronting Russia has passed critical-mass level. It no longer is just nigh Ukraine. That is only the trigger, a catalyst for driving much of the world away from the U.s.a./NATO orbit.

The next showdown may come up inside Europe itself as nationalist politicians seek to atomic number 82 a pause-abroad from the over-reaching U.S. power-grab over its European and other allies to go along them dependent on U.S.-based trade and investment. The price of their standing obedience is to impose cost-inflation on their industry while subordinating their autonomous balloter politics to America'south NATO proconsuls.

These consequences cannot really be deemed "unintended." Too many observers have pointed out exactly what would happen – headed past President Putin and Strange Minister Lavrov explaining only what their response would exist if NATO insisted on backing them into a corner while attacking Eastern Ukrainian Russian-speakers and moving heavy weaponry to Russia'southward Western border. The consequences were anticipated. The neocons in control of U.Southward. strange policy simply didn't care. Recognizing Russian concerns was accounted to brand one a Putinversteher.

European officials did not feel uncomfortable in telling the world about their worries that Donald Trump was crazy and upsetting the apple cart of international diplomacy. But they seem to accept been blindsided past the Biden Administration's resurgence of visceral Russian federation-hatred via Secretarial assistant of Country Blinken and Victoria Nuland-Kagan. Trump'southward fashion of expression and mannerisms may have been uncouth, but America's neocon gang have much more globally threatening confrontation obsessions. For them, it was a question of whose reality would emerge victorious: the "reality" that they believed they could make, or economic reality exterior of U.S. command.

What foreign countries have non done for themselves to replace the IMF, World Bank and other strongarms of U.Due south. diplomacy, American politicians are forcing them to practise. Instead of European, About Eastern and Global Southward countries breaking away as they summate their own long-term economic interests, America is driving them away, as it has done with Russia and China. More than politicians are seeking voter support by asking whether their countries would be better served by new monetary arrangements to replace dollarized trade, investment and fifty-fifty strange debt service.

The energy and food toll squeeze is hitting Global South countries especially difficult, coinciding with their own Covid-19 problems and the looming dollarized debt service coming due. Something must give. How long will these countries impose austerity to pay foreign bondholders?

How will the U.S. and European economies cope in the face of their sanctions against imports of Russian gas and oil, cobalt, aluminum, palladium and other bones materials. American diplomats accept made a listing of raw materials that their economic system desperately needs and which therefore are exempt from the merchandise sanctions beingness imposed. This provides Mr. Putin a handy list of U.S. force per unit area points to use in reshaping world diplomacy and helping European and other countries break away from the Iron Curtain that America has imposed to lock its satellites into dependence on high-priced U.Due south. supplies?

The Biden Inflation

Only the last breakaway from NATO'due south adventurism must come up from within the United states itself. As this year'south midterm elections arroyo, politicians volition find a fertile basis in showing U.South. voters that the price inflation led by gasoline and free energy is a policy byproduct of the Biden Administration'southward blocking of Russian oil and gas exports. (Bad news for owners of large SUV gas guzzlers!) Gas is needed not only for heating and energy production, simply to make fertilizer, of which in that location already is a globe shortage. This situation is exacerbated by blocking Russian and Ukrainian grain exports to the United States and Europe, causing food prices already to soar.

There already is a striking disconnect between the financial sector's view of reality and that promoted in the mainstream NATO media. Europe's stock markets plunged at their opening on Mon, March 7, while Brent oil soared to $130 a barrel. The BBC's morn "Today" news broadcast featured Bourgeois MP Alan Duncan, an oil trader, warning that the nearly doubling of prices in natural gas futures threatened to bankrupt companies committed to supplying gas to Europe at the erstwhile rates. But returning to the military machine "Two Minutes of Hate" news, the BBC kept applauding the brave Ukrainian fighters and NATO politicians urging more military support. In New York, the Dow Jones Industrial Average plunged 650 points, and golden soared to over $2,000 an ounce – reflecting the fiscal sector's view of how the U.South. game is probable to play out. Nickel prices rose by even more – 40 pct.

Trying to strength Russian federation to respond militarily and thereby wait bad to the residue of the world is turning out to exist a stunt aimed simply at ensuring Europe contribute more to NATO, buy more U.Due south. military hardware and lock itself deeper into merchandise and monetary dependence on the United States. The instability that this has acquired is turning out to take the consequence of making the United States look as threatening every bit Russian federation is claimed to be by the NATO West.

  1. Libya'southward golden also disappeared later NATO's overthrow of Muammar Gaddafi in 2011. ↑
  2. See most recently Radhika Desai and Michael Hudson (2021), "Beyond Dollar Creditocracy: A Geopolitical Economy," Valdai Social club Paper No. 116. Moscow: Valdai Society, 7 July, repr. in Real World Economical Review (97), https://rwer.wordpress.com/2021/09/23. ↑

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