The American empire self-destructs

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By MICHAEL HUDSON*

US actions could end up making them look as threatening as they want Russia to look

Empires often follow the course of a Greek tragedy, attracting the very fate they were meant to avoid. This is certainly the case with the American empire, as it is falling apart, and at a not-so-smooth pace.

The basic assumption of all economic and diplomatic forecasts is that each country will always act in its own interest. Such reasoning does not lend itself much to understanding today's world. Observers across the political spectrum are beginning to use expressions like “shooting yourself in the foot” to describe the US diplomatic confrontation with Russia and its allies.

For more than a generation, America's most prominent diplomats have warned of what they believed posed the ultimate external threat to US hegemony: an alliance between Russia and China dominating Eurasia. Now economic sanctions and US military confrontations have brought them together, and are driving other countries into their emerging Eurasian orbit.

It was hoped that American economic and financial power would avert such a fate. For half a century, since the US left the gold standard in 1971, the world's central banks have operated on the dollar standard, holding their international currency reserves in the form of US Treasuries, bank deposits, stocks and US bonds. -Americans. The resulting standard, based on US Treasury issues, allowed that country to finance its military spending abroad, as well as its investments in other countries, just by printing federal promissory notes in dollars. Deficits in the US balance of payments thus end up in the central banks of countries with surplus reserves, while debtors in the Global South continually need dollars to pay their bondholders and carry on their foreign trade.

This monetary privilege – the dollar's seigniorage – allowed US diplomacy to impose neoliberal policies on the rest of the world, without needing to use much military force of its own, other than to seize Middle Eastern oil.

The most recent escalation of US sanctions, which blocked Europe, Asia and other countries from trade and investment with Russia, Iran and China, imposed enormous opportunity costs – the cost of missed opportunities – on the US's own allies. And the recent confiscation of gold and overseas reserves from Venezuela, Afghanistan and now Russia, along with the targeted theft of wealthy foreigners' bank accounts (in hopes of winning their hearts and minds when they came to retrieve their hijacked accounts), has put put an end to the idea that a dollar, sterling or euro portfolio would be a safe haven for investments whenever global economic conditions become unstable.

So I feel a little sorry to see the speed with which this US-centric financial system has increased de-dollarization in just a year or two. The basic theme of my book Superimperialism (Islet, 2021) is exactly how, over the last fifty years, the pattern based on US Treasury bonds has channeled foreign savings to US financial markets and banks, serving as a mainstay for “dollar diplomacy”. I thought that de-dollarization would be led by China and Russia as they move to take control of their economies and avoid the kind of financial polarization that even imposes austerity on the United States. But US officials are forcing them to overcome any hesitation they may have had to dedollarize.

I expected the end of the dollarized imperial economy to happen with other countries simply pulling out. But that is not what is happening. US diplomats seem to have chosen to fulminate against international dollarization, as they began to help Russia build its own self-sufficient means of agricultural and industrial production. This process of global fracture [which some have lately been calling, beyond the field of economics, the “great decoupling”, that is, a movement in the opposite direction to globalization], has actually been happening for some years now, and it started with sanctions that prevented NATO allies and other economic satellites from trading with Russia. For the latter, sanctions had the same effect as protective tariffs would.

Russia would remain enormously fascinated with free market ideology to eventually have to come to the point of taking measures to protect its own agriculture or industry. But the United States provided the necessary push in the opposite direction by imposing domestic self-confidence on Russia… through sanctions. When the Baltic states lost the Russian market for cheese and other agricultural products, Russia quickly created its own cheese and dairy sector, while also becoming the world's largest grain exporter.

Russia is discovering (or is about to discover) that it doesn't need US dollars to back up the ruble exchange rate. Its central bank can generate the rubles needed to pay domestic wages and fund capital formation. Confiscations carried out by the United States, therefore, may finally lead Russia to end its adherence to the neoliberal monetary philosophy, as Sergei Glaziev has long advocated, in favor of Modern Monetary Theory (MMT).

The same dynamic of undermining America's ostensible goals has also played out with regard to US sanctions against big Russian billionaires. Neoliberal shock therapy and the privatizations of the 1990s in Russia left local kleptocrats with only one alternative to liquidate the wealth they had subtracted from the public domain: turning their assets into equity and selling their shares in London and New York. Domestic savings were eliminated and US advisers persuaded Russia's central bank not to generate its own funds in rubles.

The result was that Russia's national oil, gas and mining assets were not used to sponsor the rationalization of Russian industry and housing. Instead of privatization revenue being invested in creating new Russian hedges, it was toasted in the nouveau riche's purchases of luxury British real estate, yachts and other volatile capital global assets (flight-capital). However, the effect now of the sanctions that held Russian dollars, pounds and euros hostage is also to make the City of London a very risky place for someone to keep their assets. By imposing sanctions on wealthy Russians closest to Putin, US officials hoped to induce them to oppose the rift with the West and thus effectively serve as NATO's agents of influence. But for Russian billionaires, their own country is starting to look safer.

For many decades, the Federal Reserve and the US Treasury struggled to prevent gold from regaining its former role in international reserves. But how can India and Saudi Arabia value dollar investments while Biden and Blinken are willing to force them to follow the “rules-based order”… American rather than their own national interests? The recent dictates of the United States left little alternative but to start protecting its own political autonomy, converting a portfolio in dollars and euros into gold reserves, to dispose of an asset free from the political responsibility of being hostage to increasingly demanding demands. costly and disruptive actions in the United States.

US diplomacy has rubbed Europe's abject subservience in Europe by telling its governments that their companies must dump Russian assets for a pittance of dollars, once Russia's foreign reserves have been blocked and the exchange rate of the ruble plummeted. blackstone, Goldman Sachs and other American investors moved quickly to buy what the Shell Oil Anglo-Dutch and other European companies were falling apart.

Nobody thought that the post-war world order from 1945 to 2020 would give way so quickly. A truly new international economic order is emerging, although what form it will take is not yet clear. But “teasing the bear” (prodding the bear) through the US/NATO confrontation with Russia has crossed the threshold of critical mass. It is no longer just about Ukraine. It is no more than a trigger, a catalyst for pulling much of the world out of the US/NATO orbit.

The next confrontation could take place within Europe itself. Local nationalist politicians could promote a break with the forces that prescribe their countries' obedience to the United States, when they do so in a vain attempt to keep them dependent on trade and investments centered on the latter. The price of this stubborn obedience is to impose cost inflation on its own industry, while at the same time relinquishing its own democratic dynamics in favor of subordination to NATO's US pro-consuls.

Such consequences cannot, in fact, be considered “unintended”. Already, many observers have pointed out exactly what might happen – with Putin and Lavrov at the forefront, explaining precisely what the response would be if NATO insisted on cornering them, while attacking the Russian-speaking population of eastern Ukraine and transporting heavy weaponry to Russia's western borders. . The consequences were anticipated. You neocons in control of US foreign policy simply shrugged. Acknowledging those Russian concerns was enough to make one a Putinversteher (“Putin sympathizer” in German).

European officials did not feel uncomfortable expressing to the world their concerns that Donald Trump was insane and was thwarting the course of international diplomacy. But they seem to have been caught off guard by the Biden administration's resurgence of visceral hatred of Russia fueled by Secretary of State Blinken and Undersecretary Victoria Nuland-Kagan. Trump's mannerisms and mannerisms may be rude, but the american neoconservative gang has a global obsession with confrontation that is far more threatening. For the latter, it is simply a question of which reality will emerge victorious: the “reality” they believe they can build, or the economic reality beyond US control.

What countries around the world have not done on their own to replace the IMF, World Bank and other strong arms of US diplomacy, US policymakers are now forcing them to do. Instead of European, Near Eastern and Global South countries breaking with the world order based on their own calculations and long-term economic interests, it is the United States that is leading them out of it, as it has exemplarily done with Russia and China. More and more politicians can find support from their constituents by asking them whether they would be better served by new monetary arrangements to replace dollarized trade, investment, and even foreign debt service.

The squeeze in energy and food prices is hitting countries in the Global South especially, coinciding with their local Covid-19 woes and the looming dollarized cost of debt service. Something can happen. How long will these countries impose austerity on their economies to meet foreign creditors?

How will the US and European economies deal with sanctions against imports of Russian gas and oil, cobalt, aluminum, palladium and other basic materials? US diplomats have drawn up a list of raw materials that their economy desperately needs and which are therefore exempt from imposed trade sanctions. This provides Putin with a useful list of pressure points to mobilize both in reshaping world diplomacy and in the eventual process of helping European (and other) countries break through the iron curtain imposed by the United States to maintain dependence on its satellites in expensive US supplies.

But the final break with NATO adventurism may come from within the United States itself. As this year's midterm elections approach, politicians will find fertile ground to show American voters that gasoline and energy-led price inflation is a byproduct of the Biden administration's policy to block Russian oil and gas exports. Gas is needed not only for heating and energy production, but also to produce fertilizers, which are already in short supply worldwide. And this is all exacerbated by the blockade of grain exports from Russia and Ukraine, driving up food prices in the US and Europe.

Attempting to force Russia to respond militarily and thereby appearing as a bogeyman to the rest of the world is becoming nothing more than a ploy designed to corroborate the need for Europe to contribute more to NATO, to buy more equipment. US military and to shackle itself even more severely in commercial and monetary dependence on the United States. The instability this produces could end up making the United States look as threatening as they want Russia to look.

*Michael Hudson is a professor at the University of Missouri, Kansas City. Author, among other books by Super Imperialism: The Economic Strategy of the American Empire (Island).

Translation: Ricardo Cavalcanti-Schiel.

Originally published on the portal OpEdNews.

 

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