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The Thucydides Trap or the Coming War with China
The Thucydides Trap or the Coming War with China
Editor’s Note: Bill is still up on the family ranch in northern Argentina. And his satellite Internet link is down. So there is no new update from him today. Instead, we republish a classic piece from Bill on the potential for a war between the US and China.
Athenian historian, political philosopher and general Thucydides (c. 460 – 395 BC). He authored The History of the Peloponnesian War, which recounts the war in the 5th century BC between Sparta and Athens. Today Thucydides is considered the father of scientific history (he was the first historian to focus on meticulously gathering evidence and leaving intervention by the gods out of historical accounts) as well as the father of the school of political realism, who was the first to study relations between nations on the basis of their relative economic and military power.
From Hegemon to Also-Ran
Somehow, like it or not, the world turns. Today’s hegemon becomes tomorrow’s also-ran. Today’s reserve currency becomes tomorrow’s toilet paper. Today’s cock o’ the walk becomes tomorrow’s dinner.
Hey, we didn’t create this system. We don’t even especially like it. But that’s just the way it is.
Whether you already have made a fortune, or are trying to build one, you need to be very careful about what currency … or currencies … your wealth is denominated in.
…click on the above link to read the rest of the article…
China Completes SWIFT Alternative, May Launch “De-Dollarization Axis” As Soon As September
China Completes SWIFT Alternative, May Launch “De-Dollarization Axis” As Soon As September
One of the recurring threats used by the western nations in their cold (and increasingly more hot) war with Russia, is that Putin’s regime may be locked out of all international monetary transactions when Moscow is disconnected from the EU-based global currency messaging and interchange service known as SWIFT (a move, incidentally, which SWIFT lamented as was revealed in October when we reported that it announces it “regrets the pressure” to disconnect Russia).
Of course, in the aftermath of revelations that back in 2013, none other than the NSA was exposed for secretly ‘monitoring’ the SWIFT payments flows, one could wonder if being kicked out of SWIFT is a curse or a blessing, however Russia did not need any further warnings and as we reported less than a month ago, Russia launched its own ‘SWIFT’-alternative, linking 91 credit institutions initially. This in turn suggested that de-dollarization is considerably further along than many had expected, which coupled with Russia’s record dumping of TSYs, demonstrated just how seriously Putin is taking the threat to be isolated from the western payment system. It was only logical that he would come up with his own.
There were two clear implications from this use of money as a means of waging covert war: i) unless someone else followed Russia out of SWIFT, its action, while notable and valiant, would be pointless – after all, if everyone else is still using SWIFT by default, then anything Russia implements for processing foreign payments is irrelevant and ii) if indeed the Russian example of exiting a western-mediated payment system was successful and copied, it would accelerate the demise of the Dollar’s status as reserve currency, which is thus by default since there are no alternatives. Provide alternatives, and the entire reserve system begins to crack.
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The Threat to the Dollar as the World’s Primary Reserve Currency
The Threat to the Dollar as the World’s Premier Reserve Currency
…but does it really matter?
By Patrick Barron
My answer is that, “Yes”, it really matters. And that is why we need to take action today to protect all of our interests. The source of the threat may surprise you.
We refer to the dollar as a “reserve currency” when referring to its use by other countries when settling their international trade accounts. For example, if Canada buys goods from China, China may prefer to be paid in US dollars rather than Canadian dollars. The US dollar is the more “marketable” money internationally, meaning that most countries will accept it in payment, so China can use its dollars to buy goods from other countries, not solely the US. Such might not be the case with the Canadian dollar, and China would have to hold its Canadian dollars until it found something to buy from Canada. Multiply this scenario by all the countries of the world who print their own money and one can see that without a currency accepted widely in the world, international trade would slow down and become more expensive. Its effect would be similar to that of erecting trade barriers, such as the infamous Smoot-Hawley Tariff of 1930 that contributed to the Great Depression. There are many who draw a link between the collapse of international trade and war. The great French economist Frederic Bastiat said that “when goods do not cross borders, soldiers will.” No nation can achieve a decent standard of living with a completely autarkic economy, meaning completely self-sufficient in all things. If it cannot trade for the goods that it needs, it feels forced to invade its neighbors to steal them. Thus, a near universally accepted currency is as vital to world peace as it is to world prosperity.
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Why the Reserve Currency Status is America’s “Achilles Heel”
Why the Reserve Currency Status is America’s “Achilles Heel”.
Ned Goodman (born in 1937) is a successful entrepreneur (by background a geologist) and a philanthropist who also happens to be a billionaire, thanks to his Dundee Group of Financial, Resource and Real Estate Investments, which he founded in 1991.
He is also a deep thinker, and a man with common sense and a vast knowledge. Every year, Goodman airs his insightful views in a lengthy paper (the 2013 write-up was over 90 pages) published as part of Dundee’s annual report. In the 2013 report, he explains:
In Dundee’s initial Annual Report for the year 1991, dated May 11, 1992, I wrote that our investment philosophy encompassed fundamental principles and was totally oriented toward value. I stated that it was essential that we understood the business before we invested, and that we looked to purchase assets that were likely to increase in value by at least 150% over a five-year period.
We knew from past experience that we must understand how to sell before we buy, and that always requires the establishment of a selling target along with a plan of action for achieving that target… The Clarkson Centre for Business Ethics and Board Effectiveness (CCBE) report of 2013 showed that we were able to achieve a 20- year share price return of 18% per annum for our shareholders, while increasing the market price of our stock by more than 30 times over that period. I can assure current shareholders that not one part of our process and philosophy has changed since 1991…
Of the US economy, which he calls (appropriately, in my view) the “Botox” economy, he writes:
…click on the above link to read the rest of the article…
Yuan Strength Seen as Message to Obama as Talks Loom: Currencies – Bloomberg
Yuan Strength Seen as Message to Obama as Talks Loom: Currencies – Bloomberg.
China is using the yuan to make the case that it’s a responsible economic powerhouse before President Xi Jinping meets Barack Obama in Beijing tomorrow.
The People’s Bank of China yesterday raised its yuan reference rate by the most since 2010. In doing so, strategists say it’s distancing itself from the stimulus policies ofJapan and the euro region, which have resulted in the kind of currency weakness that’s attracted the ire of U.S. officials concerned about unfair trading practices.
“With the depreciation in the yen, Xi wants China to be providing some stability in an environment of general weakness,” Tim Condon, the head of Asian research at ING Groep NV in Singapore, said yesterday by phone. “It’s more about stability than strengthening.”
Whether or not a stronger currency is the goal, a higher exchange rate may help policy makers promote the yuan as a currency of global trade to rival the dollar and euro. With Xi due to meet the U.S. president at the Asia-Pacific Economic Cooperation forum, an appreciating yuan may also help assuage American criticism that China derives an unfair economic advantage from an artificially weak currency.
…click on the above link to read the rest of the article…
Ron Paul Says: Watch the Petrodollar | Casey Research
Ron Paul Says: Watch the Petrodollar | Casey Research.
The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.—Ron Paul
Dr. Paul is referring to the petrodollar system, one of the main pillars that’s been holding up the US dollar’s status as the world’s premier reserve currency since the breakdown of Bretton Woods.
Want to know when the fiat US dollar will collapse? Watch the petrodollar system and the factors affecting it. This is critically important, because once the dollar loses its coveted reserve status, the consequences will be dire for Americans.
At that moment, I believe Washington will become sufficiently desperate to enforce the radical measures that governments throughout world history have always implemented when their currencies were threatened—overt capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.
…click on the above link to read the rest of the article…
How The Petrodollar Quietly Died, And Nobody Noticed | Zero Hedge
How The Petrodollar Quietly Died, And Nobody Noticed | Zero Hedge.
Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assetsand printed US currency) loop.
The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, “developed world” status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today’s FT, why China’s Renminbi offshore market has gone from nothing to billions in a short space of time.
…click on the above link to read the rest of the article…
The dollar decline continues: China begins direct convertibility to Asia’s #1 financial center
The dollar decline continues: China begins direct convertibility to Asia’s #1 financial center.
This morning some of the biggest financial news of the year made huge waves all over Asia.
Yet in the Western press, this hugely important information has barely even been mentioned. (CNBC.com, for example, has yet to report on this story as of 11:45am Eastern…)
So what’s the news?
The Chinese government announced that the renminbi will become directly convertible with the Singapore dollar… effective tomorrow morning.
…click on the above link to read the rest of the article…
The End Of An Era: Is The US Petrodollar Under Threat?
The End Of An Era: Is The US Petrodollar Under Threat?.
Recent trade deals and high-level cooperation between Russia and China have set off alarm bells in the West as policymakers and oil and gas executives watch the balance of power in global energy markets shift to the East.
The reasons for the cozier relationship between the two giant powers are, of course, rooted in the Ukraine crisis and subsequent Western sanctions against Russia, combined with China’s need to secure long-term energy supplies. However, a consequence of closer economic ties between Russia and China could also mean the beginning of the end of dominance for the U.S. dollar, and that could have a profound impact on energy markets.
Rein of the USD
Before the 20th century, the value of money was tied to gold. Banks that lent money were constrained by the amount of their gold reserves. The Bretton Woods Agreement of 1944 established a system of exchange rates that allowed governments to sell their gold to the U.S. Treasury. But in 1971, U.S. President Richard Nixon took the country off the gold standard, which formally ended the linkage between the world’s major currencies and gold.
…click on the above link to read the rest of the article…
Total War over the Petrodollar | Casey Research
Total War over the Petrodollar | Casey Research.
The conspiracy theories surrounding the death of Total SA’s chief executive, Christophe de Margerie, started the second the news broke of his death. Under mysterious circumstances in Moscow, his private jet collided with a snowplow just after midnight. De Margerie was the CEO of Total, France’s largest oil company.
He’d just attended a private meeting with Russian Prime Minister Medvedev, at a time when the West’s relationship with Russia is fraught, to say the least.
One has better odds of being struck by lightning at an airport then a snow plow, or any other ground support vehicles hitting a plane and killing all inside the plane, in my opinion. And I say that as someone who’s familiar with airports, having worked at Vancouver International Airport when I was in university; I was the one who would bring the plane into its parking bay.
If it weren’t for those short odds, a snowplow on the runway with an allegedly drunk driver would be the perfect crime. But who would benefit from his death?
…click on the above link to read the rest of the article…
Replacing the Dollar | Armstrong Economics
Replacing the Dollar | Armstrong Economics.
The conspiracy crowd keep swearing the dollar has to collapse and remain clueless that the world is in serious trouble. The impact of debt is far worse outside the USA than inside yet their myopic vision blinds them to the truth. Taxes are so high in Europe and this renders it is impossible to grow the economy out of recession. Debt use to be debt and the theory was it would be less inflationary to borrow than to print. However, after 1971, debt became merely currency that paid interest as it began in the 1860s. The dollar is now the reserve currency and not even the USA can prevent that – there is no alternative !!!!!!!!
It is now MORE inflationary to borrow than to print for now the currency just pays interest. You trade markets and post TBills as collateral. So TBills are now cash paying interest. Moving toward electronic money to collect even more taxes will divide the economy with a greater division between above and below ground. If you could not borrow on government paper, then government could not sell it. So they are trapped in a doomed system that cannot be sustained and the press is controlled to ensure the public remain blinds, death, and dumb about the crisis.
Many insurance companies and pension funds buy government debt for it is considered “riskless”. We are facing a monumental crisis of tremendous proportion. However, this isNOT about the dollar, it is about global debt and taxes. We have reached the peak of the bell curve that Art Laffer articulated correctly. The higher the taxes the lower the growth and the greater the debt. Rising interest rates expand government debt. Government debt defaulting takes down all pension funds. This is a huge problem. We are not in a position to handle the massive uprising when people wake up and realize they have been really is been living a dream.
…click on the link above for the rest of the article…
