One of the ways we are losing the global economic war is simple arrogance.
We assume that the world wants dollars and will always want dollars. But the truth is that no reserve currency lasts forever. And, much of the world resents our control of the global monetary system. We are viewed as abusing power even as we take advantage of the world by running up huge debts with little prospect for repayment. One global oil company head recently questioned the importance of the dollar. He died in a plane crash in Moscow.
We assume that the world wants to be like America. But to many, America is a society on decline. The nation once seen as a "shining city on a hill" has, many believe, degraded into a cesspool of immorality. They see that a nation of entrepreneurs once free to create and build has become over regulated, overtaxed, and unwieldy. America has replaced the freedom to build with self-expressions once considered taboo such as legal marijuana use and redefined marriage. Freedom of speech has been questioned, especially if such speech goes against the new moral codes or the existing political class. How else can you explain an attempt to censor sermons in Houston (or at least chill any political content) or a Senate attempt to amend the Constitution to limit political activity? Or recent attempts to censor the internet?
Whether we know it or not, much of the world sees America as too arrogant, too immoral, and even too weak to lead for much longer. As a result, we can and should expect multiple challenges across multiple fronts, especially economic.
First, it is important to understand how weak the current government appears. The president has suffered dismal poll ratings for over a year. Opinions of Congress are even worse among Americans. Both left and right have lost respect for the Administration. Americans know we have diminished on the world's stage. Our allies are disgruntled. Russia sees us as weak. Even the Iranians said that they believe that Obama is "the weakest of U.S. Presidents." Of course, this rhetoric may well be designed to denigrate the U.S. position in the world. But it is likely what they truly believe as well:
The Iranian president's senior advisor has called President Barack Obama "the weakest of U.S. presidents" and described the U.S. leader's tenure in office as "humiliating," according to a translation of the highly candid comments provided to the Free Beacon.
The comments by Ali Younesi, senior advisor to Iranian President Hassan Rouhani, come as Iran continues to buck U.S. attempts to woo it into the international coalition currently battling the Islamic State (IS, ISIL, or ISIS).
And with the deadline quickly approaching on talks between the U.S. and Iran over its contested nuclear program, Younesi's denigrating views of Obama could be a sign that the regime in Tehran has no intent of conceding to America's demands.
"Obama is the weakest of U.S. presidents, he had humiliating defeats in the region. Under him the Islamic awakening happened," Younesi said in a Farsi language interview with Iran's semi-official Fars News Agency.
"Americans witnessed their greatest defeats in Obama's era: Terrorism expanded, [the] U.S. had huge defeats under Obama [and] that is why they want to compromise with Iran," Younesi said.
The criticism of Obama echoes comments made recently by other world leaders and even former members of the president's own staff, such as Former Defense Secretary Robert Gates.
Perceptions of strength or weakness are important. Remember how the Iranians held American hostages captive under Carter but released them immediately after Reagan's election? Many observers are confident that perceptions of American weakness have provoked Putin.
We see American power being directly confronted in multiple areas. Here are two direct examples from just last week:
October 23, 2014
Moscow's military provocations signal return to Cold War-era gamesmanship
By Guy Taylor and Maggie Ybarra – The Washington Times – Thursday, October 23, 2014
Russian military provocations have increased so much over the seven months since Moscow annexed Crimea from Ukraine that Washington and its allies are scrambling defense assets on a nearly daily basis in response to air, sea and land incursions by Vladimir Putin's forces.
Not only is Moscow continuing to foment unrest in Eastern Ukraine, U.S. officials and regional security experts say Russian fighter jets are testing U.S. reaction times over Alaska and Japan's ability to scramble planes over its northern islands — all while haunting Sweden's navy and antagonizing Estonia's tiny national security force.
[To CONTINUE READING at The Washington Times…]
October 23, 2014
(Reuters) – China wants to have closer military ties with Iran, the Chinese defense minister told the visiting head of the Iranian navy on Thursday, state media reported, reaffirming diplomatic links despite controversy over Iran's nuclear plans.
Chinese Defense Minister Chang Wanquan told Iranian Navy Commander Rear Admiral Habibollah Sayyari that the two armed forces have seen "good cooperation on mutual visits, personnel training and other fields in recent years", China's official Xinhua news agency reported.
"Exchanges between the two navies have been fruitful and their warships have paid successful visits to each other," it cited Chang as saying.
"Chang … stressed China is willing to work with Iran to further pragmatic cooperation and strengthen military-to-military ties."
[To CONTINUE READING at Reuters…]
These challenges to America and the American position are at a level almost unprecedented in the post-Cold War era. The Chinese are well aware that military ties with Iran are a direct assault on American power in the region. We should understand that these are coordinated efforts. Russia has been supported by China in regards to the Ukraine. China has been supported by Russia in regard to Hong Kong. Russia and Iran have long worked together. Now, China is coordinating at a military level with Iran. And, we know that Russia and China have joined together to undermine the Western financial structure. Now, Russia plus Iran and China?
Second, despite perceptions of American weakness, there are also those who see the exercise of American power, once viewed as legitimate and necessary, to now be illegitimate, an overreach, and to some approaching outright terrorism. We've not only lost respect, we've also lost credibility on the world's stage. Some of this can be connected back to active campaigns by the likes of Putin. But the message has resonated in Latin America as well with Argentina as a case in point. Consider these excerpts from RT (Russia Today) on October 24 (be sure to click on the link and read the whole article as it addresses many of the points we are making from the other side's view):
October 24, 2014
by Mahdi Darius Nazemroaya, a sociologist, award-winning author and geopolitical analyst
Is it a coincidence that the vulture funds are putting increasing pressure on Argentina as it prepares to develop the world's second largest shale gas reserves? Are the vultures instruments of foreign policy?
Paranoia or insightfulness in Buenos Aires?
Hours after the US Embassy in Buenos Aires issued a security warning to US citizens either already inside or traveling to the South American country, Argentinian President Cristina Fernandez de Kirchner accused the US of plotting to overthrow or kill her. Speaking during a television broadcast from the Casa de Gobierno on September 30, she explained that "if something happens to me, don't look to the Mideast, look north" to Washington, DC. She told the Argentine people not to believe anything that the US government was saying, even going as far as dismissing the ISIL/ISIS threat as a US bogeyman…
Economic and financial terrorism: Deadlier than the ISIL?
In front of the sixty-ninth session of the UN General Assembly and UN Security Council and a meeting of the UN Security Council chaired by US President Barack Obama, Argentina argued that terrorism is not only committed by violent groups that plant bombs, but also by financial entities and organizations that destabilize national economies and make whole societies destitute through speculation and financial manipulation. In Cristina Kirchner's words, "terrorists are not only those who set off bombs, but also those who destabilize economies, causing hunger, misery, and poverty."…
The crux of the Argentine thesis was simple: terrorism is also economic and financial, and this form of terrorism is much more lethal. The destruction of economies and the destitution of societies unlock the doors for a toxic mix of anger, ignorance, and blame. This is why Buenos Aires argued that the economic and financial terrorists targeting national economies needed to be identified, challenged, and stopped.
Meet the vultures
Not only was Argentina indignant on September 24, but it was defiant at the UN against the dominant structures of the global system. The Argentines were upset with the US and ten other countries that voted against the establishment of a universal legal formula for dealing with sovereign debt a few days earlier, on September 9.
President Kirchner derided the neoliberal economic policies of the Bretton Woods Institutions—the World Bank and International Monetary Fund (IMF) – and essentially the Washington Consensus. She explained how previous Argentinean governments had followed the recipes and "conditionalities" of the IMF, saying that the IMF's economic medicine was what economically ruined Argentina in 2001.
So who are the "economic and financial terrorists" that were being condemned by Argentina?
Part of the answer was mentioned above. The other part has to do with the US hedge funds NML Capital Ltd., which is based in the Cayman Islands, and Aurelius Capital Management.
Since its economic crisis in 2001, Buenos Aires renegotiated its debts, in 2005 and 2010, through new repayment schedules and a reduction of the face values of the debt(s) by 70% to about $13 billion with 92.4 percent of its creditors. A 7 percent minority of the bondholders, however, held out and rejected Argentina's proposals. These holdouts are hedge funds that have been dubbed as vulture funds. Like real vultures circling and hovering around a dying carcass these bondholders strike distressed economies and take advantage of fiscal crises to make windfall profits.
These predatory hedge funds and private equity funds operate by buying debt at bargain discounts and wait for distresses and defaults. Their strategy is to profit off the defaults and to amplify their profits through maximizing the interest returns on what debtors owe them or to use litigation to sue debtors for even larger amounts that would they would have received if the debt was paid in full….
Using the US legal system, the vulture funds got Thomas Griesa, a federal judge for the United States District Court for the Southern District of New York, to make an unprecedented ruling to their benefit in 2012. Griesa had ordered Argentina to pay the vultures in full for a recalculated and unrealistic sum. Argentina lost the appeal and the US Supreme Court refused to even hear Argentina's appeal in June….
Under the circumstances brought about by the vulture funds through Judge Griesa, the other bondholders have the right to demand higher payouts that are the equivalent of what the vulture funds are getting. In other words, the negotiations of 2005 and 2010 were effectively nullified by Griesa and an unworkable amount of interest added to the other debts. If the other bondholders evoke the "rights upon future offers" clause, there will be a serious economic meltdown in Argentina.
Standard & Poor's declared Argentina in default on July 30, after Buenos Aires was prevented from making its debt payments. Not only were investors scared away and Argentina's access to global capital markets hurt, but the threat of default at the end of October 2014 also put additional pressure on both Argentinean economy and the Argentine peso.
Petro-Politics: Argentine shale gas and the Gazprom connection
Turning to another angle of the story, it has to be noted that Argentina has been in a state of economic recovery since 2002. This recovery has included government repurchases of national companies that had been privatized. Key to this is the renationalization of Yacimientos Petrolíferos Fiscales (YPF) on March 3, 2012. The renationalization of YPF angered Spain, because the Argentine energy company had been purchased by the Spanish oil conglomerate Repsol.
Regaining control over YPF has been important because Argentina has the second largest recoverable shale gas reserves in the world, after the Chinese, and Buenos Aires has been planning on becoming a natural gas exporter in the global market.
The petro-politics of an energy war are part of the equation. It was not an accident that Cristina Kirchner finished her speech, during the discussion on terrorism at the UN Security Council, by turning to the US delegation and saying that her country had vast hydrocarbon reserves that could end up becoming a curse because of the problems that go along with them. Kirchner was tacitly saying that she feared Washington would meddle in Argentina, as it has done elsewhere, to control its energy resources.
It is also worth noting that Russia is Argentina's partner in its project to become a natural gas exporter. Before Kirchner spoke at the UN, Russian President Vladimir Putin had paid a state visit to Argentina during his tour of Latin America. In Buenos Aires he announced that Argentina was one of Moscow's strategic partners. Moscow and Buenos Aires signed important trade deals and agreements on energy, information, and military cooperation on July 12. Months later, via a teleconference, Putin and Kirchner would inaugurate the broadcasting of RT en Español (RT Spanish) or RT Actualidad in Argentina on October 9—this is clearly a move to challenge US influence and interference in Argentina….
Vulture funds as "Eagles of Empire"
The Argentinians have cried foul. They have been upset by statements made beforehand in the US about Argentina defaulting and accused the US legal system and federal government of complicity in an attempt to economically destabilize the Argentine economy.
After refusing to submit to the court rulings, Argentina tried to negotiate with the vulture funds in July 2014. The Argentines would eventually reject the court-appointed mediator, Daniel Pollack, as incompetent and biased. The deadlock in the court-mediated negotiations eventually led to a breakdown when Pollack made a statement against Argentina. The Argentine government's attorney, Jonathan Blackman, protested that Pollack's July 30 statement about Argentina defaulting was"harmful and prejudice to the Republic in connection with the market and in connection with other persons, such as holders of credit default swaps." On August 1, the Argentine government said that it had lost confidence in the mediation. After this, Griesa blocked Argentina from paying its other debts and an emergency court hearing was held in Manhattan on August 8.
During all this time Buenos Aires had been asking the US government to clarify that its domestic court could not hold Argentine's independence as a sovereign state hostage. Washington did nothing. The week prior to President Kirchner's appearance at the UN, her government was angered when a US official said that Argentina was in default. Argentina has viewed this and the US government's refusal to intervene as an act of complicity. On August 7, Buenos Aires even asked the International Court of Justice to hear its case against Washington for allowing the US legal system to violate its independence as a sovereign state. When the Argentine National Congress passed the Sovereign Debt Payment law on September 11 to bypass the banking system in the US and to start repaying its debts locally or in France, Judge Griesa declared it illegal. After Griesa threatened to hold Argentina in contempt of court, Argentine Ambassador Cecilia Nahon sent US Secretary of State John Kerry a letter warning Washington that it would be responsible for the consequences of the US court's rulings on Buenos Aires.
The vulture funds are being used to blackmail Buenos Aires as an instrument of US pressure. This was hinted at by Kirchner while she spoke at the UN. No wonder that the Kirchner had alluded to Washington as a supporter of economic terrorism while she spoke there.
Later Cristina Kirchner spoke more directly. "I'm not naive, this is not an isolated move by a senile judge in New York," Kirchner has even publicly stated about the fiasco. In Kirchner's words, these hedge funds "look a lot like the eagles of empires" that are doing Washington's bidding.
World leaders are picking up on this economic terrorism and blackmail. This is why Bolivian President Evo Morales has referred to the US sanctions against the Russian Federation as an act of economic terrorism.
It is clear that an intricate game is being played here. Argentina's row with the vulture funds is being used to exert pressure on Buenos Aires. One way or another the vultures are acting as the "eagles of empire."
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT. [To CONTINUE READING at RT...]
Notice the language and its intensity: hedge funds, credit default swaps, energy wars, economic terrorism. These are the same issues we have been discussing since 2008 in our reports and writings. This is the new battlefield. And, don't miss the reality that Putin is actively encouraging Venezuela to access shale gas in our hemisphere. This is the same Putin accused by NATO's Secretary General of undermining European Shale Gas by funding Environmental Protests against the practice. While there are plenty of denials, funding environmental groups was a long-standing KGB practice and Putin knew the playbook personally And, there are even suggestions that efforts are being made against the Texas shale gas industry.
This single article demonstrates how Russia has made massive inroads into a neighbor to our south with talk of economic warfare. If Washington truly understood the global economic war raging, as Russia does, would they readily allow Argentina to slip to the other side following Venezuela? Or, are our leaders so arrogant regarding the permanence of American hegemony? In the past, America directly confronted Soviet efforts in our hemisphere. Now, Russia has made tremendous inroads. China has as well. Consider this article today from China Daily:
2014-10-25 By ZHANG FAN in Sao Paulo(China Daily USA)
China's tie with Latin American countries have exceeded from trade to security cooperation as China National Electronics Import & Export Corporation (CEIEC) is helping Local countries to build their national security control centers.
"We can say now, very proudly, that Ecuador is one of the most security countries in Latin America,"said Ecuadorian President Rafael Vicente Correa Delgado this September.
CEIEC, the state-owned company specialised in engineering and defence electronics, built an ECU-911 system for the Latin American country including two national centres, five regional centres and eight provincial command and control centers…
Besides Ecuador, CEIEC also signed contracts with Venezuela and Bolivia last year in Beijing to build public and information security network for these countries.
Russian media reported this April that Venezuelan company Veximca CA also signed an agreements with CEIEC to import 26 radars and 11 control stations, with the specific information remains unrevealed.
Gilmar Masiero, a professor with the Asian Studies program at the University of Sao Paulo, said the cooperations show that Latin American countries have the necessity of improving their security conditions and the cooperation with China is one of the better choices.
"There is a strong pressure for Brazil, Argentina and Venezuela facing the security problems," said Masiero,"I think to have a common security agenda for South America is important. According to my sources, these countries are discussing the issue at Union of South American Nations."
However, China's increasing participants in Latin American countries aroused certain considerations from the region's traditional cooperators, especially the United States. Forbes.com, an American leading business website owned by Forbes Inc, recently published a story arguing that the US is losing its influence in Latin America to China.
"Time is running out. China has quickly become the largest trading partner for many South American nations and Chinese trade deals are much more amenable to Latin Americans," the article quoted America's Quarterly.
email@example.com [To CONTINUE READING at China Daily…]
Frighteningly, the Russians and Chinese seem to be working together in Latin America. From the Associated Press on July 18, 2014:
During overlapping visits to Latin America, the leaders of China and Russia have been welcomed with open arms by governments that are among the most hostile to Washington, including Cuba, Nicaragua and Venezuela. Together with stops in Argentina and Brazil, which both have distanced themselves from the U.S. in recent years, the tours underscore the mix of ideology and economics that's allowing the two superpowers to expand their influence in America's backyard.
Now, when you understand that Russia and China have together made major inroads in Europe, Africa, and the Middle East (with the dual connection to Iran as well). And, there should be little doubt at this point that Russia and China have set aside many of their differences to join in confronting the United States. Now consider excerpts from this story from last week at CNBC:
Dina Gusovsky | @DinaGusovsky Wednesday, 22 Oct 2014 | 10:20 AM ET
As Russia and China continue to forge trade pacts, including the huge $456 billion gas deal with Russian state-owned energy giant Gazprom signed in May, many Westerners are wondering whether this cozy relationship between the two nations is anything to be concerned about.
"Right now China's biggest goal is to deflate American dominance, and what better way than to partner with Russia?" said David Silverstein, a global business consultant whose clients include Siemens, Philips and Credit Suisse. "The biggest risk is to the U.S. dollar."…
Gordon Chang, author of "The Coming Collapse of China," has been covering the region for almost two decades. According to him, a China-Russia alliance is America's No. 1 foreign policy challenge. "The United States has not had to confront two peer competitors since the end of World War II, and we have not faced a united China and Russia since the last days of the 1950s," Chang said.
"They are, in deeply troubling ways, changing the world by shaking the foundations of an order that has ensured the absence of major conflict and paved the way for unprecedented prosperity."
Chang believes that the growing cooperation between the two countries will only serve to escalate tensions with the United States, with both Russia and China finding less incentive to cooperate with America.
Johns Hopkins University fellow Donald Jensen echoed those sentiments. He noted: "China and Russia can leverage the global community against the U.S. and Europe, either through vetoes at the United Nations or by using energy as a weapon."
Jensen said China has huge leverage in the global economic order and is trying to overturn it, at least in the monetary sense.
"Both are interested in a multipolar world instead of the U.S. dictating the international sphere," Stratfor's Goodrich said. "Neither Moscow nor Beijing can challenge the U.S. on their own, but together they might."
Considering the trend, corporate America is trying to assess the risk to its interests in China and Russia. Eurasia Group president Ian Bremmer describes a ‘cold war on business' and points out that the United States should pay close attention to what he calls the unwinding of business ties with Russia and China as China cracks down on Fortune 500 companies. He expects that escalating tensions with Russia will continue.
"As China and Russia pivot toward each other, American businesses—and their universal economic values—will struggle to maintain a global foothold," Bremmer wrote.
Only time will tell if there will be a major rebalance in geopolitics and global trade due to the strengthening alliance between China and Russia. Chang sums it up nicely: "If they do in fact form an enduring partnership, it could mean the end of the post–Cold War era. What follows next, for better or worse, will surely be momentous." [To CONTINUE READING at CNBC…]
We've covered this aspect in great detail. But, it is absolutely essential to recognize that Russia and China are working together to carve up the world to their mutual liking. This is in character for Putin and China seems opportunistic. Ironically, before World War II, Hitler and Stalin were prepared to carve up Poland between them. Now, according to an interview with Poland's former Foreign Minister, in 2008, Russia offered to split the Ukraine with Poland.
When we first suggested a Russia/China alliance to undermine America, few seemed to believe us. Most argued that China needs the U.S. so much that they would never side with Russia. Now, just a few years later and we see headlines like these:
Many in the national security community and the investing world are starting to understand as these articles indicate. Yet, the current leadership in Washington seems to be ignoring this reality.
Putin is maximizing the opportunity. And he is taking his "case against America" to the broadest possible audience. Take a look at Tweets from his most recent speech: The Putin Bullet Points. His speech was viewed as a direct attack on the U.S. and the dollar. And consider this report from Reuters:
Reuters By Alexei Anishchuk October 25, 2014
LAURA Russia (Reuters) – Russian President Vladimir Putin accused the United States on Friday of endangering global security by imposing a "unilateral diktat" on the rest of the world and shifted blame for the Ukraine crisis onto the West.
In a 40-minute diatribe against the West that was reminiscent of the Cold War and underlined the depth of the rift between Moscow and the West, Putin also denied trying to rebuild the Soviet empire at the expense of Russia's neighbors.
"We did not start this," Putin told an informal group of experts on Russia that includes many Western specialists critical of him, warning that Washington was trying to "remake the whole world" based on its own interests. [To CONTINUE READING at Reuters…]
To be certain, there are multiple opinions regarding Russia's recent actions. On one hand, George Soros has been vocal that Russia's incursion into the Ukraine directly threatens the European Union and cannot be allowed to stand. He warns of dire financial consequences and possibly even the destruction of the EU itself. On the other hand, there are others who believe that Russia is severely threatened unless Russia escalates and the Ukraine is occupied. Igor Strelkov even shares that Putin may not personally survive unless he escalates. Russia is in dire economic straits and desperately needs geopolitical victory.
Of course, Putin remains very popular at home. Recent reports even indicate that more Russians trust Putin than believe in God (Link is to a Russian report, you can copy and paste the text into Google Translate). Even as the ruble has been collapsing, the majority of the people continue to have faith. How long can this continue? History has shown that shrewd dictators can hold power for a long time. Now, if Putin is gaining the support of the world, starting with China, Putin's position will strengthen.
Some in Washington believe that the right approach will be to continue in arrogant ignorance, waiting for Russia's implosion. What they are missing is that America has serious economic weakness also. And, a wounded Russia could be even more of a threat.
We have been warned that Russia can crash our stock market at will. As we have shared before: The NSA has admitted the Russians (among others) have that capability–not only to crash the stock market but destroy the whole financial system. Russia has hacked the NASDAQ. Russia hacked JP Morgan and up to 10 other banks and the hack went undetected for a long period. Russian criminals have planned a billion-dollar bank heist. Russia has hacked governments and just about everything in the West. This has gone on for years. Let there be no doubt—Putin and his aides have been telling us that the economic war can escalate at a moment's notice with catastrophic consequences:
"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system."–Kremlin economic aide Sergei Glazyev.
The economic war has been fully globalized. Russia feels threatened and is prepared to respond. Putin has built alliances around the world, isolating America to a large degree. American arrogance has led to ignorance. It's time we started to humbly and intelligently respond. We must recognize the economic war being waged. We must reach out and rebuild alliances. Most of all, we must regain the moral authority we once had. The best way to do this is to repent of our sins of arrogance and greed and follow the truths of 2 Chronicles 7: 14. The stakes are too high to do anything else.