[GATA] Michael Hudson: Washington can't call the shots anymore
Gold Anti-Trust Action Committee
Michael Hudson: Washington can't call the shots anymore
By Michael Hudson
Financial Times, London
Monday, June 15, 2009
http://www.ft.com/cms/s/0/16e9f3e8-5944-11de-80b3-00144feabdc0.html?nclick_check=1
Challenging the American empire will be the focus of meetings in
Yekaterinburg, Russia, today and tomorrow for Chinese President Hu
Jintao, Russian President Dmitry Medvedev, and other leaders of the
six-nation Shanghai Co-operation Organisation. The alliance comprises
Russia, China, Kazakhstan, Tajikistan, Kyrgyzstan, and Uzbekistan,
with observer status for Iran, India, Pakistan, and Mongolia.
The attendees (who will be joined on Tuesday by Brazil for trade
discussions) have assured American diplomats that dismantling the
US financial and military hegemony is not their aim. They simply
want to discuss mutual aid -- but in a way that has no role for the
US or for the dollar as a vehicle for trade among these countries.
The meeting is an opportunity for China, Russia and India to "build
an increasingly multipolar world order,",as Mr Medvedev put it in
a St Petersburg speech this month. What he meant was this: We have
reached our limit in subsidising the US military encirclement of
Eurasia while allowing the US to appropriate our exports, companies,
and real estate in exchange for paper money of questionable worth.
An "artificially maintained unipolar system," Mr Medvedev said, was
based on "one big centre of consumption, financed by a growing
deficit, and thus growing debts, one formerly strong reserve currency,
and one dominant system of assessing assets and risks."
Keen observers of America, if not effective managers of their own
economies, these countries argue that the root of the global financial
crisis is that the US makes too little and spends too much. Especially
upsetting is US military expenditure -- such as military aid to
Georgia or the presence in the oil-rich Middle East and central
Asia -- using money that foreign central banks recycle.
Overconsumption by US citizens, US buyouts of foreign companies,
and dollars the Pentagon spends abroad all end up in foreign central
banks. These governments face a hard choice: either recycle the
dollars back to America by buying US Treasury bonds or let the "free
market" force up their currencies relative to the dollar -- thereby
pricing their exports out of world markets, creating domestic
unemployment and business failures. US-style free markets hook them
into a system that forces them to accept unlimited dollars. Now
they want out.
This means creating an alternative. Rather than making merely
"cosmetic changes as some countries and perhaps the international
financial organisations themselves might want," Mr Medvedev concluded
his St Petersburg speech: "What we need are financial institutions
of a completely new type, where particular political issues and
motives, and particular countries, will not dominate."
For starters, the six countries intend to trade in their own
currencies so as to get the benefit of mutual credit, rather than
give it to the US. In recent months China has struck bilateral deals
with Brazil and Malaysia to trade in renminbi rather than the dollar,
sterling or euros.
Many foreigners see the US as a lawless nation. How else to
characterise a country that holds out a set of laws for others --
on war, debt repayment, and the treatment of prisoners -- but ignores
them itself?
The US is the world's largest debtor, yet has avoided the pain of
"structural adjustments" imposed on other debtor nations. US interest
rate and tax reductions in the face of exploding trade and budget
deficits are seen as the height of hypocrisy in view of the austerity
programmes that the "Washington consensus" has forced on other
countries via the International Monetary Fund and other vehicles.
The US tells debtor economies to sell off their public utilities
and natural resources, raise their interest rates, and increase
taxes while gutting their social safety nets to squeeze out money
to pay creditors.
It is no mystery to other countries how the US remains above the
law. Foreigners see a financial system backed by American aircraft
carriers and military bases encircling the globe. The IMF, World
Bank, World Trade Organisation, and other Washington surrogates are
seen as vestiges of a lost American empire no longer able to rule
by economic strength, left only with military domination.
The countries that are gathering today are convinced that this
hegemony cannot continue without adequate revenues and are attempting
to hasten the bankruptcy of the US financial-military world order.
If China, Russia, and their allies have their way, the US will no
longer live off the savings of others, nor have the money for
unlimited military spending.
US officials wanted to attend Yekaterinburg as observers. They were
told no. It is a word that Americans will hear much more in the
future.
----
The writer is professor of economics at the University of Missouri.
* * *
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