INTERNATIONALIZATION
OF THE YUAN, THE OPENING OF SAUDI
ARABIA, THE IMPLOSION OF THE EU, AND THREE
OF THE LAST PILLARS OF THE DOLLAR CRUMBLE
By GEAB - N°79
“It was night, and the rain fell; and,
falling, it was rain, but, having fallen, it was
blood.” These words of Edgar Allan Poe (1) apply perfectly
to the slow process
of global dislocation now in progress, where seemingly
innocuous events – like
the “rain” – combine to undermine the foundations of an
international system
that is dying, hence the “blood.” If the process is slow, if
the events seem trivial,
it is paradoxically because the crisis is the first truly
global systemic crisis, one
much deeper than the one in 1929, affecting all countries
and overwhelming the
heart of the system. Whereas 1929 was the adolescent crisis
of a new world
power, the US, we now experience the last days of an
incurable, and incurable
that had been the world’s sole superpower since 1945. But
the whole
organization of the world was built around the US, and it is
no one’s interests for
it to collapse before a complete decoupling. So it is for
everyone to safeguard
the usual appearances while ensuring a smooth transition,
which explains the
slow crash in progress.
It’s a little like the parent who sneaks out of the nursery,
hoping to avoid waking
the baby and starting up the bawling again, but the baby is
the dollar, and the
parents are unworthy, for they are abandoning it altogether.
China is the master of this art, but we can see that all
other countries are
moving away from the US, in a more or less subtle fashion,
like Saudi Arabia for
example. (2) For the EU, one of the last Americanist
bastions outside the US
itself, the task is more difficult. Our team anticipates
that the European elections
of 2014, along with the inevitable rise of extreme
right-wing and euro-skeptic
forces, will lead to an implosion of the current EU
framework, with the possibility
for Euro-land to fill in the place. We analyze in detail the
case of Europe in this
issue.
The rapid internationalization of the Yuan, causing a decline
in the central role
of the dollar; the loss of Saudi support, a key part of the
petrodollar edifice; and
the loss of the Americanist bastion of the EU, replaced by a
Euro-land relying
on the Euro, are all threats to the three remaining
essential pillars of American
power, which will disappear in 2014, precipitating
considerable global upheaval.
The US is betting that the potential barrier (3) between the
status quo and the
world thereafter is too painful to go through, and that
countries, despite all of the
benefits that would accrue in the new organization of the
world, will not cross
that Rubicon. One example is China, with its mountains of
dollars in reserve
which would not be worth much if it moves too pointedly;
another is Saudi
Arabia, which would lose a good customer and assured
security if it let go of the
US. But these are neither more nor less than cold
calculations of costs and
benefits, and for a number of stakeholders the benefits will
exceed the costs.
According to LEAP/E2020, the American wager has already been
lost.
IN THE WEST, NOTHING
NEW (4)
The markets can rest easy, as Janet Yellen, who will succeed
Ben Bernanke at
the Fed in January, suggested that she wants to continue the
quantitative
easing program of her predecessor (QE3). (5) That said, she
has little choice,
for the illusion that the US is still upright is maintained
by this program, which
artificially boosts the real estate and financial markets,
and keeps US
government financing costs low.
But the markets alone celebrate the news. Foreign countries
wonder when the
bubble exported by the Fed will cease, how it will end, and
how to wean the US
from QE, and if they have not sufficiently decoupled, what
will be the
repercussions for them. Civil society already knows that the
“benefits” of QE
never come to pass, (6) rather as if an entire New Deal per
year (7) was
absorbed by the markets and never benefited the population
itself. And the real
economy asks when interest rates will go back to a normal
value, so that
investors are encouraged to fund real projects with non-zero
earnings once
again.
As for the Fed, then, nothing new. Nothing new, either, when
it comes to the
problems of the country, which are gathering and worsening.
One hears of
hunger in the mainstream press, (8) of crime rates steadily
rising for two years,
(9) exploding drug use, (10) and despite budget cuts forcing
prisons to release
prisoners, (11) there are more prisoners in the US than
engineers or secondary
school teachers (see the figure below). Despite encouraging
official statistics,
mass unemployment persists (12), infrastructure is
sacrificed, (13) scientific
research lacks proper funding (14), etc.
Number of prisoners, engineers, nurses, secondary school
teachers, etc., in the US. Source :
Huffington Post.
THE IMPOSSIBLE US RECOVERY
The problems of the US cannot be solved within the country’s
existing
framework, due to a dilemma: if the economy recovers, the
Fed will end its
program of support, but the markets will panic, as seen back
in September,
which will end the come-back...
More generally, if an ounce of real US growth showed its
face, the mountains of
dollars printed by the Fed and exported to emerging
countries would return to
enjoy the windfall, causing high inflation and nipping the
recovery in the bud.
(22) These “oscillations” between hope and despair will
continue until the crisis
is confronted with the tools of the world after, or until a
shock causes a
catastrophe. For it is not the QE that will save the
economy, since its best result
is the sort of artificial life that supports zombie
economies and inflated asset
bubbles.
EUROPE IS DEAD, LONG
LIVE EUROPE (39)
Conflict resolution, trade, finance...we can see a widening
gap with the West.
Nevertheless, with the image of the new Silk Road connecting
Asia and Europe,
the latter can get into step with the world, depending on
its ability to cut the cord
with the US, after the 2014 elections that will serve as a
catalyst.
The rise of the far-right and of euro-skeptic parties, the
democratic deficit, the
power of lobbies and the weakness of citizens, the
centralization in Brussels,
the bureaucracy and technocracy...the European Union is
dying. (40) According
to our team, the 2014 elections will set the current
framework ablaze, and will
initiate a re-politicization of the EU, initiating a major
debate on the future of
Europe. This questioning has already begun, with for example
the Greens
establishing joint candidates throughout EU territory, (41)
thereby starting a
“real” European election process, or the socialist parties
that are pushing Martin
Schulz as a serious candidate to head the Commission. (42)
But according to LEAP/E2020, this overhaul, if successful,
will take a lot of time,
and the real deadline for a democratic EU will be 2019. We
will analyze in detail
the fate of Europe in the Telescope section.
This dying European Union is a Europe inspired by, and
infiltrated by, US
interests. It is a Europe reduced to a vast common market
which constantly
expands. It is a Europe that lays down before Monsanto, (43)
leaving the field
open to the American multinational. The sock-puppet of
Anglo-Saxon politics,
that third American crutch, is collapsing. But the decisions
dictated by the
American cousin are becoming costly and difficult. (44)
Another example is
Turkish EU accession, pushed by an American agenda and not
by EU or
Turkish citizens (45). Already in difficulty, it will be
permanently cast off after the
far-right invests the European Parliament in 2014.
But the continent will not wait for 2019 to reorganize, and
questions remain
about the form Europe will take. Meanwhile, as we will see
in the Telescope section, Euro-land has the ability to build a political
project that will fill the void
left by the EU.
NOTES:
1 Taken from "Silence", 1837.
2 Something inconceivable before.
3 In physics, this refers to a barrier that a particle
cannot cross until it has
sufficient energy.
4 Title of a novel by Erich Maria Remarque (1929).
5 Source: Business Insider, 13/11/2013.
6 See the edifying piece “Confessions of a Quantitative
Easer” (Wall Street
Journal, 11/11/2013).
7 New Deal spending is estimated at $50 billion in total
between 1933 and 1940
(source: Forbes. With inflation, this represents
approximately 850 to 900 billion
current dollars (cf. US inflation calculator, while the Fed
injects 1.02 trillion per
year, more in one year than in the New Deal. See also
Answers.com.
It should be noted though that QE3 represents 6% of GDP,
while at the time of
the New Deal 50 billion dollars represented 50% of GDP, which,
when spread
over 8 years, is also 6% per year.
8 America’s new hunger crisis, MSNBC (30/10/2013). See also
Reuters,
12/09/2013.
9 Source: Time, 24/10/2013.
10 Source: Bloomberg, 13/11/2013.
11 Source: par exemple CBS, 27/02/2013.
12 Sources: CNS News (22/10/2013), ZeroHedge (08/11/2013).
13 Source: Business Insider, 01/11/2013.
14 Sources: ThinkProgress (30/08/2013), The Tech
(07/05/2013), etc. Even the
prestigious MIT is affected: Boston Globe, 20/05/2013.
22 On this subject, see this analysis by Andy Xie, Caixin
(05/11/2013).
39 In reference to the phrase “le roi est mort, vive le
roi!” pronounced first with
the succession of Charles VI in 1422. Source: Wikipédia.
40 It is interesting to note that all the “unions” (EU, UK,
US) are all in grave peril; in particular, the choice of name reflects
principles of governance suited to
our times, where a decentralized network of governance
becomes necessary to
manage large regional blocs.
41 Source: EU Observer, 11/11/2013.
42 Source: Huffington Post, 10/10/2013.
43 Source: Die Zeit, 06/11/2013.
44 Thus, Monsanto corn mentioned above ought to be blocked
by many
countries.
45 Only 20% of Europeans and 44% of Turks think integration
of Turkey would
be “a good thing” (source: Hurriyet, 19/09/2013). While
Hillary Clinton said in
November 2010: “the United States [...] support the
membership of Turkey
inside the EU. [...] We don’t have a vote, but if we were a
member, we would be
strongly in favour of it”.
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