On February 15 2006, the second issue of the GlobalEurope Anticipation Bulletin (GEAB) was released. This publication represents a new tool for the strategic political debate that embraces a distinct vision from that proposed by the hegemonic think tanks of Britain and the United States, and is promoted by the Laboratorio Europeo de Anticipación Política (LEAP – European Laboratory of Political Anticipation), which is rooted both geographically and geopolitically in Central Europe.
On this date, nearly seven years ago, the bulletin presented its analysis: The end of the West as we knew it since 1945, and announced "an economic and financial crisis comparable in size to that of 1929." They underlined seven aspects of the crisis that was impending: loss of confidence in the dollar, the explosion of US financial imbalance, the oil crisis, the loss of global leadership of the United States, the mistrust of the Arab and Islamic world, the inefficiency of world government and the growing uncertainty in the European Union.
In the light of events of the past seven years, there are two initial conclusions: what we are seeing here is not so much an extraordinary predictive capacity, as simply the rigorous employment of analytical tools, among which the capacity to look at the long range with respect to observable tendencies, which are not evident if we look at few data and this in the short range. The second conclusion is that in moments of confusion such as the present, we can trust this kind of analysis, which, even though it is not infallible, can give us some direction in moments of uncertainty.
Euphoria in the midst of chaos
In February of 2006 the GEAB began to work with the notion of a "global systemic crisis", perhaps the most consistent among the tools of their theoretic arsenal. Later, in February of 2009, they began to speak of the "dismantling of world geopolitics", referring to the profound change in the political architecture established by the winners after the Second World War, as manifested in the Breton Woods agreements (including the creation of the World Bank and the International Monetary Fund) and in the creation of the United Nations, among other things.
When the GEAB revealed the crisis with its epicentre in the United States, the Federal Reserve (FED) was about to cease publication of the data on M3, referring to the mass of currency that allows for measurement of liquidity or money in circulation. For the analysts it was a moment of inflection: in nine years the amount of money in circulation had doubled. In addition, the FED ceased publishing data concerning long-term deposits, agreements on redemption and data on dollar deposits in banks outside the United States. According to European analysts this decision "could convert investments on the other side of the Atlantic into an exercise of blind faith in the declarations of the FED, rather than in an exercise in decision-making based on concrete economic data" (Mario Mueller in oroyfinanzas.com, November 14, 2005).
A small fact such as this was capable of revealing the profound weakness of the dollar and of the U.S. economy. This was a situation that was "an indicator and a central factor in the global systemic crisis." By this they understood a change in the system that, to speak rigorously, began in 1989 with the fall of the Berlin wall and the end of the United States-Soviet Union bipolar system. The fact that they understood that a systemic crisis was under way enabled them, "at a moment when all the public economic indicators were euphoric" to anticipate the crisis in virtue of a "transdisciplinary analysis" by a team of researchers.
Chaos in chaos
These seven years saw an ensemble of facts that led to the weakening of the position of the United States in the world. Perhaps the greatest of these was the crisis of 2008 (anticipated by a handful of analysts, among them the GEAB), which resulted in a number of global transitions. It is sufficient to recall some of the most outstanding ones: in 2010, for the first time since data was collected, emerging economies outperformed the developed economies as receptors of direct foreign investment, according to the annual report of UNCTAD. This was not an exceptional year, since the tendency was upheld over the following three years, but rather an about-turn with deep repercussions in the global order.
In 2010, China dethroned the United States as the biggest manufacturing power, since its industrial production represented 19,8 per cent of world production, while that of its competitor was 19,4 per cent (France Presse, March 14, 2011). The principal industrial indicators show a profound change: China produces over 20 million vehicles annually, double the production of the United States that had always been the leader (in 2000, the US manufactured 10 million vehicles while China had produced only two million).
In 2011, China became the second scientific power in the world, behind only the United States, whose position is eroding, bigger than all the countries of Europe, while countries such as Iran and Turkey have developed their scientific sector with rhythms as vertiginous as those of China (El País, March 29, 2011).
In mid-2011 the S&P agency demoted the qualification of the United States, which should be considered as a moment of inflection that confirmed the fact that "the impossible is happening," (GEAB, December 17, 2011). In 2013 we saw the bankruptcy of the City of Detroit, indicating that other cities would follow suit.
More recently, the deterioration of Washington’s capacity for leadership is being recognized by an astounding variety of media that had previously ignored this fact. The Russian intervention in the Syrian crisis, forcing the West to put off indefinitely any military intervention, was seen as a major symptom of U.S. decadence. At the beginning of October analysts laughed when they found that the "Asia Pacific pivot", defined pompously by the White House as the key to their strategic repositioning to contain China, had crashed on landing.
The meeting of the Asia Pacific Forum (APEC), in Bali, was the grand finale for China when it should have been the staging of the "pivot" by Barack Obama. The internal situation prevented him from travelling. The lack of consensus between Democrats and Republicans had consumed all the energies of the White House. Presidents Xi Jingpin (China) and Vladimir Putin (Russia) were the stars of the APEC meeting in Bali, where the Chinese leader reminded the White House of its duties, in the sense that it could not allow a default.
According to Pepe Escobar, in the Asia Times, "China was the star of the show at APEC", an alliance of 21 countries representing half of world production and commerce (Asia Times, October 8, 2013). China is the major trading partner in the region, something that stands in contrast to the Trans-Pacific Partnership (TPP) proposed by Obama, which is “a big corporate racket that will reduce duties for the unique benefit of U.S. multinationals”.
Remember that APEC was in the beginning a forum deeply tied to the United States, when in the Indonesia Summit, in 1994, "an unchallenged Bill Clinton appeared to dictate the future of Asia Pacific." In contrast, "Obama has been too occupied with personal issues to occupy himself with Asia." Because of this, when the next APEC summit takes place, in 2014 in Peking, Obama may have found time to look towards Asia, but "by then it will be too little, too late."
The slide of the dollar
The extremely circumspect Financial Times, the voice of financial capital, published an article under the headline: "A System based on the dollar is inherently unstable" (Financial Times, October 2, 2013) (1). The article, under the signature of Ousméne Mandeng, present director of the investment management group Pramerica, former director of the UBS Bank and a former divisional head of the IMF, maintains that the international monetary system is not functioning as it should, and puts the blame on the dollar.
The problem, in his opinion, is that the Federal Reserve "probably will not subordinate its national objectives to the needs of the international economy" and that with the dollar a dominant national currency in the world, there should be a convergence between the issuing institution and the rest of the world, something "that is obviously not the case." The destabilizing exchange war now underway is unable to find international entities (IMF, G-20) capable of bringing it to an end, while "the politicians lack the courage to reform the bases of the system and are inclined to play on the margins of the system."
In the face of this panorama, Mandeng sees a need to "reduce dependence on the dollar" in order for the world economy to function better, and in this way avoid "recurring exchange rate crises and the high volatility of share prices." In a word, he says that "the international economy needs more currencies" and that such diversification will enable the world economy to sustain itself on a wider base and "protect itself against the vicissitudes of U.S. national politics." This is a suggestive vision, above all because it comes from the heart of the financial system.
This is exactly what an increasing number of countries in the world are doing. A few days ago it appeared that India was looking at “the possibility of paying Iran for petroleum with currencies such as the ruble, the yuan or the yen in order to avoid the sanctions imposed by the United States and the European Union against the Republic of Iran, which impede any transaction for Iranian crude in dollars or euros” (Russia Today, October 5, 2013).
The agreement between the European Central Bank and the Chinese Central Bank for the interchange of yuans and euros is even more important, that is, to engage in trade without involving the dollar (CNN Money, October 10, 2013). The European Union is the major market for China and agreements of this kind (a similar agreement was signed in June with the Bank of England) weaken the dollar and increase the power of the yuan which is already the ninth most traded currency in the world and is moving towards a growing internationalization.
The replacement of the dollar by other currencies as reserve currencies is no longer taboo and is openly debated in world circles. This is in no way an ideological debate, but involves the growing lack of confidence that the United States could pay its enormous debt of some 17 trillion dollars, which is greater than their annual GDP. What is debated is "the capacity of the United States and the United Kingdom to finance their public deficits, which are now out of control" (GEAB, June 18, 2009).
Not having reformed their financial system, which was at the root of the crisis of 2008, things have only gotten worse. The strategic view is clear: "Over 40 years of U.S. unstable commercial affairs and of brusque changes in the exchange rate, the dollar as a pillar of the international monetary system was the vehicle for the transmission of all the colds the United States has transmitted to the rest of the world, and this pillar that is becoming destabilized is the nucleus of the world problem, since today the United States is not afflicted with a cold but with a bubonic plague." (GEAB, June 16, 2013).
In effect, with an economy in deficit accustomed to be financed by the rest of the world, but which in turn was a guarantee of stability, they are now unable to perform this latter function because of the deterioration of their position in the world. When things come to this pass, there is nothing to do but to kick the ball forward. This was what happened with the attack on the euro, decided by a group of U.S. bankers in February of 2010 (The Wall Street Journal, February 26, 2010). The second measure taken to put off the crisis was that of "Quantitative Easing" by the FED, through which 45 billion dollars per month were injected into the economy through the purchase of public bonds. The problem is that any indication that these stimuli will cease would have serious impacts on "the markets" that have become dependent on these stimuli.
Unpayable debt and the political crisis
In December of 2011 the GEAB published its conclusions with reference to the future of the superpower. The title of the bulletin says it all: "USA – 2012-2016: An insolvent and ungovernable United States." The conclusion is that what was once the flagship of the world has become a ship adrift. One of the central features of the analysis carried out two years ago, is what has been called the "U.S. institutional paralysis and the unraveling of traditional bipartisanship." As can be seen, this analysis appears to be based on the script that Democrats and Republicans are playing out in recent weeks, against the background of recession and economic depression.
The analysis maintains that the principal institutions of the country, the Presidency, the Congress and the FED "are unable to decide or to execute significant policies." This authentic "institutional blockage" is manifesting the breakdown of Republican-Democrat bipartisanship in face of the seriousness of the crisis, which cannot be resolved through half measures and, above all, because over the last decade there has been "no permeability between the political visions of both parties." In effect, the emergence of the Tea Party among the Republicans and of Occupy Wall Street on the fringe of the Democratic Party represents a fissure between the two groups that is based on irreconcilable interests.
"The President is unable to do very much when the Congress lacks a stable majority and is profoundly divided concerning the basic orientations of the country," which appears to be moving towards a division into four distinct social forces, notes the GEAB. What is possible appears to be limited to last minute agreements, but no basic solution is possible in the face of the incapacity to achieve new balances in the budget. Behind the Tea Party and OWS there are two incompatible proposals: sacrifice health reforms and other social programmes of the Obama Government, or sacrifice military spending.
Between the elections of 2014 and the presidential elections of 2016, they estimate that the situation may involve the most critical moment for the country. The interests of the powerful, behind the Military Industrial complex, could play a “saviour” role to escape from the present chaos. General David Petraeus could be a good candidate. Everything indicates that the worst is yet to come: even as last-minute negotiations may reach (and did reach) an agreement to temporarily raise the debt ceiling, the damage to the credibility of the country has already been done.
Beyond the fight between Republicans and Democrats, the basic problem is something else again: "The country is not facing a ‘normal’ crisis, even a ‘serious’ one such as that of 1929, but a historical crisis of a kind that happens only once in four or five centuries" (GEAB, December 17, 2011). Perhaps it was this awareness that led the Chinese authorities to think that "perhaps the moment has come for the astonished world to consider the construction of a de-Americanized world" (Xinghua, October 13, 2012).
(Translation by Jordan Bishop for ALAI)
Raúl Zibechi, an Urugayan journalist, writes in Brecha and La Jornada, and is a collaborator with ALAI.
(1) NdT: The original English language quotes are retranslated here from the Spanish translation, so are not textual.