"The enormous gap between what US leaders do in the
world and what Americans think their leaders are doing is one of the great
propaganda accomplishments of the dominant political mythology."
Michael Parenti
Most economists and financial analysts think that 'currency war' merely
refers to the competitive devaluations that nations sometimes engage in to
help boost their domestic economies, as they had done in the 1930's for
example.
This time the currency war is a much more profound confrontation of differing
agendas revolving around the historically unusual role of the US dollar,
based on nothing more than the will of the Federal Reserve and the 'full
faith and credit' of the US, as the reserve currency for global central banks
and international trade.
When a single nation begins to wield such an 'exorbitant privilege' to
underwrite the speculative excesses of a crony capitalist banking system, and
perhaps even more importantly, as an instrument in support of their
international policy, one ought not be surprised that the rest of the world
will begin to resist it.
A currency must be policy neutral, without regard to any party if it is to be
a true medium of exchange. Can this still be said of the US Dollar as
it has been managed, especially since 1990?
As Alan Greenspan once correctly pointed out, but certainly did not heed when
he was at the Fed, if a fiat dollar is managed by monetary policy such that
it emulates gold, then it will be perceived as fair, and will certainly be
above the particular domestic issues or international policy biases of a
single nation that de facto wields the reserve currency status.
"And so it is an odd situation where all the central
bankers -- while none of them are advocating a return to the gold standard --
nonetheless try to replicate the various types of interest rate policies that
the gold standard would have created. And it is an interesting question
whether you call that regulation, or basically functioning of a central bank
in stabilizing the economy."
Greenspan: Role
of Central Bankers Is To Emulate the Gold Standard
It might help one to
understand this if they were to imagine a world in which Russia, for example,
in a quirk of history had established the ruble as the benchmark currency for
the world. The ruble was recommended for use by all nations as the
means of paying for oil, and for settling international trade even when
Russia is not involved in the transaction. Each country was thereby
compelled to hold a substantial portion of its international reserves in
rubles.
And how would one be likely to react if the Russian Central Bank started
using the ruble as an instrument of their international policy and extension
of their quest for imperial power? What if they began creating more
rubles to underwrite the domestic bubbles which were created in their own
corrupted financial system to bail out their banks and oligarchs?
And let's be serious and think 'like the other guys' for a moment. What
if some other nation that held the enormous power of the world's reserve
currency was exhibiting a crop of candidates for their leader like the
current choices for the US Presidency? I would expect that some of the
rhetoric being tossed about in these debates would send a chill to the very
bottom of our toes. Who could place their confident trust in their good
and selflessly wise judgement to do the right things for other nations around
the world, even if it might not favor the powerful special interests that
give them so many millions in campaign donations?
Would you be content if your own government went quietly along with this
abusive sort of monetary system? Is this not indeed taxation without
representation when the money supply is expanded and handed over directly to
the hands of a few Bankers?
The intransigence of the Anglo-American financial establishment to recognize
the legitimate issues of the rest of the world with regards to the manner in
which they have conducted their control of the IMF, the World Bank, and the
international reserve currency has ignited a currency war that is now
becoming increasing visible, to just about everyone it seems except for those
sequestered in their ivory towers at the heart of the Empire. Or
perhaps they think it too dangerous to even acknowledge that it exists,
because then they might be compelled to render an opinion on it.
This is a 'big event' and it is all the more remarkable because the policy
makers in the US act as though it is not even happening, or is not happening
for any of the reasons for which it is. They prefer to view it as a
challenge to their authority, and to react uncompromisingly and with force.
I think that historians will find the start of the currency war in the Asian
currency crises and the fall of the Russian ruble in the 1990's, with the
roots of it in the closing of the gold window by Nixon in 1971.
But from the following essay it seems that China and a few astute
Western observers have marked it as being visible from March 2015.
But whatever the date of its commencement, this dispute over the
international monetary regime is the basis for the ongoing currency war that
seeks to rebalance the terms of international trade and finance.
It is the old story of the very powerful resisting change that benefits the
few of them inordinately. And as in so many wars of the past, those few who
benefit from it do not include the bottom 90% of their own people at the
least.
Most economists and analysts are ignoring this, or are unaware of it.
When they do finally wake up they will likely get busy finding ways to
justify it, or dismiss it as an issue, and 'prove' that there is nothing
wrong with it. And very few will acknowledge the price of it in terms
of economic stagnation and human misery. All is well.
Here is an excerpt of a recent article that was published in Chinese and then
translated into English in the journal of the International Monetary
Institute in Beijing. (It is a little funny that they published his
last name as Widdlekoop, but if you were writing in hanzi would you
know if a similar looking character is upside down?)
Has the US Lost its Role as the Underwriter of the
Economic System?
By Willem Middlekoop
The recent news that Britain aspires to become one of the founding members of
the new Asian Infrastructure Investment Bank (AIIB), has shocked many. Larry
Summers, who served as a Secretary of the US Treasury between 1999 and 2001,
immediately understood the significance of these developments, and wrote in
an op-ed for the Washington Post: 'March 2015 may be remembered as
the moment the United States lost its role as the underwriter of the global
economic system. I can think of no event since Bretton Woods comparable
to the combination of China's effort to establish a major new institution and
the failure of the United States to persuade dozens of its traditional
allies, starting with Britain, to stay out.‘
This British announcement was highly criticized by the US. The Financial
Times quoted an unnamed US official: 'We are wary about a trend toward
constant accommodation of China, which is not the best way to engage a rising
power. This decision was taken after no consultation with the US.‘
Summers was also highly critical of the US‘ strategy toward the newly founded
AIIB: 'The U.S. misjudged the situation tremendously, put pressure on
allies and developing countries to under no circumstances be part of AIIB.
Largely because of resistance from the right (neo-conservatives more
precisely), the United States stands alone in the world in failing to
approve International Monetary Fund governance reforms that Washington itself
pushed for in 2009. By supplementing IMF resources, this change would
have bolstered confidence in the global economy. More important, it would
come closer to giving countries such as China and India a share of IMF votes
commensurate with their increased economic heft.‘
With Britain and many more major European countries signing up as founding
members of the AIIB, the US economic hegemony has been dealt an enormous
blow. For the first time since the end of the Second World War, the US is not
in the driving seat during the foundation of a highly significant global
institution. Of course, this will not change the world economic system
overnight, but when we look back in five, ten or even fifteen years‘ time,
March 2015 may be remembered as a turning point in economic history...
Another criticism is that the US move to more neoliberalism and global
capitalism since the 1980‘s, has led to a change in the functions of the IMF.
Critics claim allies of the US receive 'bigger loans with fewer conditions‘.
Foreign governments who are non-allies have to sacrifice their political
autonomy in exchange for IMF-funds and often have to sell assets crucial for
their economy to foreign (often US) companies.
The former Tanzanian President Julius Nyerere, who was angered that
debt-ridden African states were forced to hand over their sovereignty to the
IMF (and World Bank), once asked: 'Who elected the IMF to be the
ministry of finance for every country in the world?‘ And now the Chinese have
openly asked for a 'new world wide central bank‘.
Joseph Stiglitz, a former chief economist at the World Bank, has also agreed
that the IMF 'was reflecting the interests and ideology of the Western
financial community‘. The 'helpful hand‘ by the IMF and World Bank
towards military dictatorships friendly to the West‘ has been criticized as
well.
It might be remembered as the start of an openly Chinese confrontation
with the US over the world‘s economic leadership. As Summers points out,
all of this has taken place because the Chinese leadership has had to wait a
full five years for a change in the IMF-voting structure...
Willem Middlekoop, International
Monetary Review, International Monetary Institute, Beijing July 2015,
page 32
