Friday, October 17, 2008

The Global Bully


The Dinosaur's Next Dirty Trick

A highly successful Sydney based financial analyst, Lincoln Lok (not his real name) is fed up with the way the US is turning its current meltdown into a global burden. Even worse, he believes the plan to introduce a world currency is imminent. This will be manipulated in a way that enriches the US at the expense of the rest of the world.

After more than sixty years, the global bully is found to be incompetent. Just as the Cold War ended suddenly and unexpectedly in 1989, the American nightmare is imploding in 2008, even though it could take another twenty years to give up the ghost completely.

The trouble is that in the hands of this clueless giant are most of the weapons sufficient to obliterate the planet. But America wants more, ever more, and running out of credit could trigger a psychotic breakdown. We should be terrified. Not just because of the economic chaos to come, but because of what will happen when this highly armed political dinosaur starts thrashing about in its death spasms.

This time, will the world say "No" when the crunch comes?

The self- appointed international sheriff has created a world order where the need for growth is absolute, where everybody must be better off every year. Where Capitalism is triumphant, the need for free trade undisputed. Where consumers have to get it now, and more every year. Where there is the myth of selfless multinationals who will abolish poverty and rehabilitate the environment.

Reality is very different. The US became a service centre decades ago, a non-productive borrower that recklessly spent the hoarded wealth of the American forefathers, only to move on to put future generations into hock.

The complexity of the emerging debt structures combined with greed didn't tolerate simple analysis which would have shown up the utter fiscal unreality. But then sense and prudence don't come with a commission cheque.

The US debt is said to exceed 13 trillion and growing. Last year alone is thought to have cost at least 1.3 trillion, the debt growing each time they recast the number. The electronic debt counter already running at dizzying speed, finally ran out of digits last weekend. News bulletins treated it as a cute soft item.

Trade may be free, but it certainly isn't fair. Without global co-operation the world will have no answers to trade disputes, and none to breaches of human rights, poverty, terrorism, and war. And finally, the world will simply pollute itself to death.

Let's look at the senior financial players in the world. The IMF and World Bank have been acting as stooges for US governments and multinational interests. Few will accept their expertise as relevant any longer. Now the talk is that IMF will introduce a new world currency to replace the dollar. What they have not mentioned is that this would enable the USA to get rid of all their US$ obligations at full domestic price, which - down the track - will devalue the world currency and reap Uncle Sam a profit. Here's how:

1) Assume US owes China US$1 billion.
2) Assume the World agrees US$ and WC parity on day one.
3) Thus China has an asset of 1 billion WC and the US has a liability of 1 billion WC.

So China has a paper asset backed by all the loans in WC, which will be repaid in full in WC. But as the world realises over the next 5 years that it is stuffed, that economic activity is shrinking, the value of financial assets deteriorates (as with subprime assets, when it was evident they had no substance, and had to be written down, in some cases to nil). In such a case, the value of WC in terms of other currencies, US/GBP/Yen/Euro, deteriorates. So when China gets its one billion back in World Currency, it has bought a pup. While the US will pay less in domestic currency terms to pay off its WC 1 billion. The loss is borne by China, and the US makes a profit on paying off its world currency obligations. This is the hidden logic. It's not enough to get the US taxpayer to cover the party, it's also ... let's dump the bill on the rest of the world.

In place of the American diktat we should look at the possibility of a representative democracy through civic engagement - a place of open and profound discussion where determination of action can be created. Active citizenship and collective deliberation is needed to achieve positive results from the political community. The United Nations in co-operation with all countries, including the US, needs to be empowered to establish real democratic mechanisms and processes that generate proper ethical and moral standards for human beings to interact with each other

Simplistic? Maybe, and hard for the elites to accept.

But remember: we are only tiny specks on a little rock whizzing around the sun. But it is our rock, and our only one. If co-operative and moral action does not prevail we will be one of the lost species. Gaia will happily adjust without us.

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