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Why we are seeing a slow motion decline of the US-led world order

Of dominoes and contagion.

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In contrast to the US decline, a rising China, particularly in the Asia Pacific and Eurasian regions. The current “America First” US policy contrasting with positions stated at the 19th Party Congress in China (CPC) have demonstrated that regional dynamics are changing.

While the realignment and trade tariff tiffs between DC and Beijing may be headline grabbers, the global financial balancing act is not limited to these two heavyweights in isolation.

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Washington and Beijing have at the core two differing views on what constitutes geo-economic “order”. The US has based their vision on certain security assurances, US Dollar-friendly economic policies and a distinctly American brand of “values”. Beijing on the other hand has stressed economic development and human inter-relations.

Both positions contrast clearly when in the beltway the budget mantra keeps circling around increasing US military capabilities, against China’s efforts to boost its sphere of influence via the Belt and Road Initiative, and developing closer bilateral ties with Russia, India, Pakistan, Iran, Turkey and quite a few more including many of  the nations within the African continent.

Trade volume between ASEAN member nations and China hit a record high in 2017, as China has become the largest trading partner for almost all member states. Similarly, ASEAN is the main foreign direct investment area and the fourth largest export market for the United States.

That being said, and despite territorial disagreements between ASEAN members and Beijing’s views on the South China Sea, the contrast with the US administration with its trade war with China and it’s on again off again mercurial policies throughout the region does not give confidence within ASEAN that the US will  be a reliable partner in the future.

This being the case, there is a strong effort to diversify away from geo-economic and geopolitical dualities choosing either a US or China umbrella. This diversification opens the door for other regionally significant countries to play constructive roles such as Russia, Japan, India and Australia in shaping regional economic order.

Internationally, China is not the only challenger the US brand of world order is facing. There is also Russia to consider especially in view of the strengthening economic relationship between Moscow and Beijing. Russia has become China’s biggest supplier of crude oil in 2017 and both have secured more oil and gas supplies for the future. This is a distinct break from the petrodollar, which plays no role in this. They are also actively having regular joint military exercises throughout their several regions of influence.

Beijing and Moscow share a multipolar worldview, which simply is not US-centric, and revolves around the concept embracing polycentric spheres-of-influence as the basis for international order. Much therefore is at stake worldwide both economically and politically on whether, when and how the US finally decides to normalize relations and on what multilateral economic and political terms.

For decades the primacy of the US Dollar has underpinned US foreign policy and been supportive of projecting US policies and power on the international stage. The fierce bull elephant in the room is the “real cost” of using the US Dollar, as opposed to relying more on national currencies. This is now quite apparent to a number of sovereign countries, particularly the emerging markets. Weakness vs. the dollar throughout all the Emerging Markets (EM) continues, and it looks to be with us for a while. The list of EM’s affected is growing steadily with South Africa now joining Turkey, Argentina or similar others in showing initial recession signs.

The Central Bank of India has and is conducting several interventions in an attempt to protect their national currency from contagion. The Philippine peso also dropped to lows last seen in 2007. Indonesia too has seen it’s Rupiah severely battered. It looks like the investing world is getting ever jitterier as evidenced by a continued outflow of capital from emerging markets mostly back into US dollar instruments as a default “safe haven”. Yet this safe haven is being increasingly clouded and questioned when viewed from the perspective of the massive US debt.

As I am working out of Moscow, this EM’s outflow is affecting the Russian ruble as well, although reasons for ruble weakness are quite different from most of the EM’s.  The weakness is not due to questionable financial management or past overindulgence at the US Dollar trough – that has been laudable and conservatively solid. Much of the negative impact is due to the various pressures directed against Russia through sanctions and the possibility of enlarging them with yet more pressure from the US.

Weighing on the Russian ruble is also the Syria situation where comments from all sides involved indicate that most countries currently on the ground there will maintain their strategies and military presence ongoing in Syria. This serves to maintain a high international anxiety quotient that weighs down most non-dollar markets, and supports a stronger US dollar.

Investors in Russia will therefore continue to monitor discussions about the package of impending new “Syrian” sanctions against the Russian Federation by the US Congress. Assumptions are that they may affect some of Russia’s largest Russian banks, which may increase risks for foreign partners of the Russian Federation in the event these new sanctions restrict financial settlement processes.

The above, added to the pressure EM’s have been under because of the Fed ratcheting up U.S. interest rates and a stronger dollar have dampened investor interest in the EM’s. The appeal of many of the EM’s are their higher relative yields when compared to the established developed markets. When that differential narrows due to the U.S. Federal Reserve raising borrowing costs, emerging markets in consequence become less attractive.

A cycle feeds on itself, and as some have observed may lead to a domino effect of contagion. That in turn again serves to underscore the need to diversify away from having so many sovereign financial eggs so dependent on a unipolar US Dollar basket. It may also be the spark that could very well form a very real, long sought after serious foundation for other lead currencies or even select cryptocurrencies to play a serious future role on the world stage. That however is another story for a different time.

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John NolanYou can call me ALRobert BertrandTjoeVera Gottlieb Recent comment authors
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Vera Gottlieb
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Vera Gottlieb

Is there any way to speed up this slow motion decline? Before all of us end up in this abyss?

Tjoe
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Tjoe

It is speeding up. M3 if it were still kept would scare the poo out of the mommy’s and daddy’s with it’s ever increasing rate of debt growth that is the FED Dollar system we live under. The “money supply” (amount of money in US dollar denomination) follows the simple math curve of compounding interest from 1913 when the FED was made. Graph $1.00 borrowed at 6% interest, with the debt not paid so the interest is capitalized in, and do it for 110 years (to 2023). The end is exponentially growing….that’s a simple model to show why a system… Read more »

Robert Bertrand
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Others need to live their ways. America is not in war any place. Américains are back to work again. It’s not that bad !
Talks and discussions are active between practically all Countries.

You can call me AL
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You can call me AL

“America is not in war any place. ” ?????????. Are you joking ?.

John Nolan
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John Nolan

The banker’s DEBT system, where money is created, out of nothing, by the bankers, not the government, as a debt to the community, is the most criminal rort which has ever been pulled over the eyes of the citizens. Money is a representation of work, it has no intrinsic value of its own, but is simply a means of transaction, by which we can interact with suppliers of products we wish to purchase. ‘The love of money is the root of all evil’1Tim-6:10, The economic system under which we are now trapped is a satanically inspired snare, invented by greedy… Read more »

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Parliament Seizes Control Of Brexit From Theresa May

Zerohedge

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Schaeuble, Greece and the lessons learned from a failed GREXIT (Video)

The Duran Quick Take: Episode 117.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris examine a recent interview with the Financial Times given by Wolfgang Schäuble, where the former German Finance Minister, who was charged with finding a workable and sustainable solution to the Greek debt crisis, reveals that his plan for Greece to take a 10-year “timeout” from the eurozone (in order to devalue its currency and save its economy) was met with fierce resistance from Brussels hard liners, and Angela Merkel herself.

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Via FT

“Look where we’re sitting!” says Wolfgang Schäuble, gesturing at the Berlin panorama stretching out beneath us. It is his crisp retort to those who say that Europe is a failure, condemned to a slow demise by its own internal contradictions. “Walk through the Reichstag, the graffiti left by the Red Army soldiers, the images of a destroyed Berlin. Until 1990 the Berlin Wall ran just below where we are now!”

We are in Käfer, a restaurant on the rooftop of the Reichstag. The views are indeed stupendous: Berlin Cathedral and the TV Tower on Alexanderplatz loom through the mist. Both were once in communist East Berlin, cut off from where we are now by the wall. Now they’re landmarks of a single, undivided city. “Without European integration, without this incredible story, we wouldn’t have come close to this point,” he says. “That’s the crazy thing.”

As Angela Merkel’s finance minister from 2009 to 2017, Schäuble was at the heart of efforts to steer the eurozone through a period of unprecedented turbulence. But at home he is most associated with Germany’s postwar political journey, having not only negotiated the 1990 treaty unifying East and West Germany but also campaigned successfully for the capital to move from Bonn.

For a man who has done so much to put Berlin — and the Reichstag — back on the world-historical map, it is hard to imagine a more fitting lunch venue. With its open-plan kitchen and grey formica tables edged in chrome, Käfer has a cool, functional aesthetic that is typical of the city. On the wall hangs a sketch by artists Christo and Jeanne-Claude, who famously wrapped the Reichstag in silver fabric in 1995.

The restaurant has one other big advantage: it is easy to reach from Schäuble’s office. Now 76, he has been confined to a wheelchair since he was shot in an assassination attempt in 1990, and mobility is an issue. Aides say he tends to avoid restaurants if he can, especially at lunchtime.

As we take our places, we talk about Schäuble’s old dream — that German reunification would be a harbinger of European unity, a step on the road to a United States of Europe. That seems hopelessly out of reach in these days of Brexit, the gilets jaunes in France, Lega and the Five Star Movement in Italy.

Some blame Schäuble himself for that. He was, after all, the architect of austerity, a fiscal hawk whose policy prescriptions during the euro crisis caused untold hardship for millions of ordinary people, or so his critics say. He became a hate figure, especially in Greece. Posters in Athens in 2015 depicted him with a Hitler moustache below the words: “Wanted — for mass poverty and devastation”.

Schäuble rejects the criticism that austerity caused the rise of populism. “Higher spending doesn’t lead to greater contentment,” he says. The root cause lies in mass immigration, and the insecurities it has unleashed. “What European country doesn’t have this problem?” he asks. “Even Sweden. The poster child of openness and the willingness to help.”

But what of the accusation that he didn’t care enough about the suffering of the southern Europeans? Austerity divided the EU and spawned a real animus against Schäuble. I ask him how that makes him feel now. “Well I’m sad, because I played a part in all of that,” he says, wistfully. “And I think about how we could have done it differently.”

I glance at the menu — simple German classics with a contemporary twist. I’m drawn to the starters, such as Oldenburg duck pâté and the Müritz smoked trout. But true to his somewhat abstemious reputation, Schäuble has no interest in these and zeroes in on the entrées. He chooses Käfer’s signature veal meatballs, a Berlin classic. I go for the Arctic char and pumpkin.

Schäuble switches seamlessly back to the eurozone crisis. The original mistake was in trying to create a common currency without a “common economic, employment and social policy” for all eurozone member states. The fathers of the euro had decided that if they waited for political union to happen first they’d wait forever, he says.

Yet the prospects for greater political union are now worse than they have been in years. “The construction of the EU has proven to be questionable,” he says. “We should have taken the bigger steps towards integration earlier on, and now, because we can’t convince the member states to take them, they are unachievable.”

Greece was a particularly thorny problem. It should never have been admitted to the euro club in the first place, Schäuble says. But when its debt crisis first blew up, it should have taken a 10-year “timeout” from the eurozone — an idea he first floated with Giorgos Papakonstantinou, his Greek counterpart between 2009 and 2011. “I told him you need to be able to devalue your currency, you’re not competitive,” he says. The reforms required to repair the Greek economy were going to be “hard to achieve in a democracy”. “That’s why you need to leave the euro for a certain period. But everyone said there was no chance of that.”

The idea didn’t go away, though. Schäuble pushed for a temporary “Grexit” in 2015, during another round of the debt crisis. But Merkel and the other EU heads of government nixed the idea. He now reveals he thought about resigning over the issue. “On the morning the decision was made, [Merkel] said to me: ‘You’ll carry on?’ . . . But that was one of the instances where we were very close [to my stepping down].”

It is an extraordinary revelation, one that highlights just how rocky his relationship with Merkel has been over the years. Schäuble has been at her side from the start, an éminence grise who has helped to resolve many of the periodic crises of her 13 years as chancellor. But it was never plain sailing.

“There were a few really bad conflicts where she knew too that we were on the edge and I would have gone,” he says. “I always had to weigh up whether to go along with things, even though I knew it was the wrong thing to do, as was the case with Greece, or whether I should go.” But his sense of duty prevailed. “We didn’t always agree — but I was always loyal.”

That might have been the case when he was a serving minister, but since becoming speaker of parliament in late 2017 he has increasingly distanced himself from Merkel. Last year, when she announced she would not seek re-election as leader of the Christian Democratic Union, the party that has governed Germany for 50 of the past 70 years, Schäuble openly backed a candidate described by the Berlin press as the “anti-Merkel”. Friedrich Merz, a millionaire corporate lawyer who is the chairman of BlackRock Germany, had once led the CDU’s parliamentary group but lost out to Merkel in a power struggle in 2002, quitting politics a few years later. He has long been seen as one of the chancellor’s fiercest conservative critics — and is a good friend of Schäuble’s.

Ultimately, in a nail-biting election last December, Merkel’s favoured candidate, Annegret Kramp-Karrenbauer, narrowly beat Merz. The woman universally known as “AKK” is in pole position to succeed Merkel as chancellor when her fourth and final term ends in 2021.

I ask Schäuble if it’s true that he had once again waged a battle against Merkel and once again lost. “I never went to war against Ms Merkel,” he says. “Everybody says that if I’m for Merz then I’m against Merkel. Why is that so? That’s nonsense.”

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The conclusion of Russiagate, Part I – cold, hard reality

The full text of Attorney General William P Barr’s summary is here offered, with emphases on points for further analysis.

Seraphim Hanisch

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The conclusion of the Russiagate investigation, led by Special Counsel Robert Mueller, was a pivotal media watershed moment. Even at the time of this writing there is a great deal of what might be called “journalistic froth” as opinion makers and analysts jostle to make their takes on this known to the world. Passions are running very high in both the Democrat / anti-Trump camps, where the reactions range from despondency to determined rage to not swallow the gigantic red pill that the “no collusion with Russia” determination offers. In the pro-Trump camp, the mood is deserved relief, but many who support the President are also realists, and they know this conflict is not over.

Where the pivot will go and what all this means is something that will unfold, probably relatively quickly, over the next week or two. But we want to offer a starting point here from which to base further analysis. At this time, of course, there are few hard facts other than the fact that Robert Mueller III submitted his report to the US Attorney General, William Barr, who then wrote and released his own report to the public Sunday evening. We reproduce that report here in full, with some emphases added to points that we think will be relevant to forthcoming pieces on this topic.

The end of the Mueller investigation brings concerns, hopes and fears to many people, on topics such as:

  • Will President Trump now begin to normalize relations with President Putin at full speed?
  • In what direction will the Democrats pivot to continue their attacks against the President?
  • What does this finding to to the 2020 race?
  • What does this finding do to the credibility of the United States’ leadership establishment, both at home and abroad?
  • What can we learn about our nation and culture from this investigation?
  • How does a false narrative get maintained so easily for so long, and
  • What do we do, or what CAN we do to prevent this being repeated?

These questions and more will be addressed in forthcoming pieces. But for now, here is the full text of the letter written by Attorney General William Barr concerning the Russia collusion investigation.

Dear Chairman Graham, Chairman Nadler, Ranking Member Feinstein, and Ranking Member Collins:
As a supplement to the notification provided on Friday, March 22, 2019, I am writing today to advise you of the principal conclusions reached by Special Counsel Robert S. Mueller and to inform you about the status of my initial review of the report he has prepared.
The Special Counsel’s Report
On Friday, the Special Counsel submitted to me a “confidential report explaining the prosecution or declination decisions” he has reached, as required by 28 C.F.R. § 600.8(c). This report is entitled “Report on the Investigation into Russian Interference in the 2016 Presidential Election.” Although my review is ongoing, I believe that it is in the public interest to describe the report and to summarize the principal conclusions reached by the Special Counsel and the results of his investigation.
The report explains that the Special Counsel and his staff thoroughly investigated allegations that members of the presidential campaign of Donald J. Trump, and others associated with it, conspired with the Russian government in its efforts to interfere in the 2016 U.S. presidential election, or sought to obstruct the related federal investigations. In the report, the Special Counsel noted that, in completing his investigation, he employed 19 lawyers who were assisted by a team of approximately 40 FBI agents, intelligence forensic accountants, and other professional staff. The Special Counsel issued more than 2,800 subpoenas, executed nearly 500 search warrants, obtained more than 230 orders for communication records, issued almost 50 orders authorizing use of pen registers, made 13 requests to foreign governments for evidence, and interviewed approximately 500 witnesses.
The Special Counsel obtained a number of indictments and convictions of individuals and entities in connection with his investigation, all of which have been publicly disclosed. During the course of his investigation, the Special Counsel also referred several matters to other offices for further action. The report does not recommend any further indictments, nor did the Special Counsel obtain any sealed indictments that have yet to be made public. Below, I summarize the principal conclusions set out in the Special Counsel’s report.
Russian Interference in the 2016 U.S. Presidential Election.
The Special Counsel’s report is divided into two parts. The first describes the results of the Special Counsel’s investigation into Russia’s interference in the 2016 U.S. presidential election. The report outlines the Russian effort to influence the election and documents crimes committed by persons associated with the Russian government in connection with those efforts. The report further explains that a primary consideration for the Special Counsel’s investigation was whether any Americans including individuals associated with the Trump campaign joined the Russian conspiracies to influence the election, which would be a federal crime. The Special Counsel’s investigation did not find that the Trump campaign or anyone associated with it conspired or coordinated with Russia in its efforts to influence the 2016 U.S. presidential election. As the report states: “[T]he investigation did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities.”
The Special Counsel’s investigation determined that there were two main Russian efforts to influence the 2016 election. The first involved attempts by a Russian organization, the Internet Research Agency (IRA), to conduct disinformation and social media operations in the United States designed to sow social discord, eventually with the aim of interfering with the election. As noted above, the Special Counsel did not find that any U.S. person or Trump campaign official or associate conspired or knowingly coordinated with the IRA in its efforts, although the Special Counsel brought criminal charges against a number of Russian nationals and entities in connection with these activities.
The second element involved the Russian government’s efforts to conduct computer hacking operations designed to gather and disseminate information to influence the election. The Special Counsel found that Russian government actors successfully hacked into computers and obtained emails from persons affiliated with the Clinton campaign and Democratic Party organizations, and publicly disseminated those materials through various intermediaries, including WikiLeaks. Based on these activities, the Special Counsel brought criminal charges against a number of Russian military officers for conspiring to hack into computers in the United States for purposes of influencing the election. But as noted above, the Special Counsel did not find that the Trump campaign, or anyone associated with it, conspired or coordinated with the Russian government in these efforts, despite multiple offers from Russian-affiliated individuals to assist the Trump campaign.
Obstruction of Justice.
The report’s second part addresses a number of actions by the President most of which have been the subject of public reporting that the Special Counsel investigated as potentially raising obstruction-of-justice concerns. After making a “thorough factual investigation” into these matters, the Special Counsel considered whether to evaluate the conduct under Department standards governing prosecution and declination decisions but ultimately determined not to make a traditional prosecutorial judgment. The Special Counsel therefore did not draw a conclusion one way or the other as to whether the examined conduct constituted obstruction. Instead, for each of the relevant actions investigated, the report sets out evidence on both sides of the question and leaves unresolved what the Special Counsel views as “difficult issues” of law and fact concerning whether the President’s actions and intent could be viewed as obstruction. The Special Counsel states that “while this report does not conclude that the President committed a crime, it also does not exonerate him.”
The Special Counsel’s decision to describe the facts of his obstruction investigation without reaching any legal conclusions leaves it to the Attorney General to determine whether the conduct described in the report constitutes a crime. Over the course of the investigation, the Special Counsel’s office engaged in discussions with certain Department officials regarding many of the legal and factual matters at issue in the Special Counsel’s obstruction investigation. After reviewing the Special Counsel’s final report on these issues; consulting with Department officials, including the Office of Legal Counsel; and applying the principles of federal prosecution that guide our charging decisions, Deputy Attorney General Rod Rosenstein and I have concluded that the evidence developed during the Special Counsel’s investigation is not sufficient to establish that the President committed an obstruction-of-justice offense. Our determination was made without regard to, and is not based on, the constitutional considerations that surround the indictment and criminal prosecution of a sitting president.
In making this determination, we noted that the Special Counsel recognized that “the evidence does not establish that the President was involved in an underlying crime related to Russian election interference,” and that, while not determinative, the absence of such evidence bears upon the President’s intent with respect to obstruction. Generally speaking, to obtain and sustain an obstruction conviction, the government would need to prove beyond a reasonable doubt that a person, acting with corrupt intent, engaged in obstructive conduct with a sufficient nexus to a pending or contemplated proceeding. In cataloguing the President’s actions, many of which took place in public view, the report identifies no actions that, in our judgment, constitute obstructive conduct, had a nexus to a pending or contemplated proceeding, and were done with corrupt intent, each of which, under the Department’s principles of federal prosecution guiding charging decisions, would need to be proven beyond a reasonable doubt to establish an obstruction-of-justice offense.
Status of the Department’s Review
The relevant regulations contemplate that the Special Counsel’s report will be a “confidential report” to the Attorney General. See Office of Special Counsel, 64 Fed. Reg. 37,038, 37,040-41 (July 9, 1999). As I have previously stated, however, I am mindful of the public interest in this matter. For that reason, my goal and intent is to release as much of the Special Counsel’s report as I can consistent with applicable law, regulations, and Departmental policies.
Based on my discussions with the Special Counsel and my initial review, it is apparent that the report contains material that is or could be subject to Federal Rule of Criminal Procedure which imposes restrictions on the use and disclosure of information relating to “matter[s] occurring before grand jury.” Fed. R. Crim. P. 6(e)(2)(B) Rule 6(e) generally limits disclosure of certain grand jury information in a criminal investigation and prosecution. Id. Disclosure of 6(e) material beyond the strict limits set forth in the rule is a crime in certain circumstances. See, e.g. 18 U.S.C. 401(3). This restriction protects the integrity of grand jury proceedings and ensures that the unique and invaluable investigative powers of a grand jury are used strictly for their intended criminal justice function.
Given these restrictions, the schedule for processing the report depends in part on how quickly the Department can identify the 6(e) material that by law cannot be made public. I have requested the assistance of the Special Counsel in identifying all 6(e) information contained in the report as quickly as possible. Separately, I also must identify any information that could impact other ongoing matters, including those that the Special Counsel has referred to other offices. As soon as that process is complete, I will be in a position to move forward expeditiously in determining what can be released in light of applicable law, regulations, and Departmental policies.
* * *
As I observed in my initial notification, the Special Counsel regulations provide that “the Attorney General may determine that public release of” notifications to your respective Committees “would be in the public interest.” 28 C.F.R. § 600.9(c). I have so determined, and I will disclose this letter to the public after delivering it to you.
Sincerely,
William P. Barr
Attorney General

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