It certainly beats any dreary Group of 20 (G-20) communique. Everything one needs to know about the US Federal Reserve’s quantitative easing (QE), currency wars and the mudslinging tsunami that passes for the current global financial system can be found at this animated rap video by Taiwan-based Next Media Animation (see the video here)
If only the G-20 summit in Seoul this week had released a ”making of”. The summit was billed as a lofty last rampart of antiprotectionism, supporting the global economic recovery while alleviating widespread deficit and debt problems. As the meeting was taking place on Thursday and Friday, the final declaration had been hammered out on Wednesday. And what a mud-wrestling match that was.
After much sweating, a draft communique was arrived at, stating that nations should let markets determine currency rates and ”refrain from competitive devaluation” (a veiled reference to the US). But until the last minute the sherpas, the officials whose keen sense of hazards and secure routes help to guide their leaders to a safe if banal conclusion at any summit) also kept in brackets crucial alternative wording – ”competitive undervaluation” (a veiled reference to China).
As a consolation prize to global public opinion, at least it was heartening to see the BRIC countries – Brazil, Russia, India and China – and the European Union (EU) finally getting their act together to produce a declaration stressing the – almost general – political will that nations should not adopt policies (such as the Fed’s latest round of quantitative easing, or QE2) that seriously mess with other nations’ economies.
Every central bank in the world had been asking the Fed for days to come clean on QE2. To believe that the G-20 would gladly accept US President Barack Obama’s offer to embrace yet another tsunami of US paper dollars that the US cannot pay for is to live in Oz. No wonder many a diplomat would confirm, tersely or not, that this was indeed the G-19 to 1 summit.
Yet to exhibit as a G-20 success only a promise that the much-scorned International Monetary Fund (IMF) should monitor what the G-20 is doing is slightly less than appalling (although the IMF now dreams that a coordinated G-20 action to “save” the world economy could generate 52 million jobs in the medium term). Not to mention that Washington refuses to undergo the “structural adjustment” that its baby, the IMF, has always imposed on any other budget deficit patient.
The new model army
How could it be otherwise? Take the letter Obama sent to the G-20 leaders ahead of the summit. He tried to convince the other 19 that the US is keeping its “commitment to refrain from undervaluing currencies for competitive purposes” – when all of them were practically screaming that QE1 and QE2 are nothing less than US dollar devaluation. Obama’s letter practically laid the blame for the 2008 financial crisis on China and the emerging markets. And as he defended the Fed’s action in India on Monday, he in fact was stating that what is good for the US is good for the world.
Brazilian President Luiz Inacio Lula da Silva’s response was certainly more measured than many an angry European central banker, who were accusing the US of “treason”; Lula suggested that the BRIC countries should start using fewer US dollars while trading among themselves (and that’s already the case).
Even the mineral kingdom is aware that since the US under Richard Nixon in 1971 unilaterally declared the end of a link between gold and the US dollar, the Bretton Woods system introduced at the end of World War II has been dead. What has been going on to this day is the unending coma of the global monetary system. Washington/Wall Street has embraced a take-no-prisoners law of the jungle – endless manipulating of the US dollar as the global reserve currency. For emerging nations, the only possible counterpunch is to coordinate an array of public investment works, to guarantee jobs and incomes in their internal markets, and to protect their local industries.
It’s enlightening to compare the current situation with what happened under Franklin Delano Roosevelt. To reverse the Great Depression, the US government took over the economy. President Roosevelt did not resort to “the markets”; he unleashed a state-conceived developmentalist package – public works mixed with social action.
As much as the impasse at the G-20 is real, the current Washington rhetoric of striving for global coordination to beat the crisis is nonsense: what matters to Washington/Wall Street today is to smash any political alternative to its unilateral adjustment. The University of Missouri’s Michael Hudson has explained it in a nutshell: “Essentially, you’ll have America’s financial system and the banks acting as an army to raid foreign currencies.”
It’s still full spectrum, stupid
So what will happen in the US after QE2 and this G-20? Business as usual – that is, the return, in full force, under the auspices of a Republican-dominated US Congress, of the full primacy of the Pentagon’s Full Spectrum Dominance doctrine. Republicans will hysterically try to cut every budget in sight – but definitely not the Endless War budget.
Thus the ”honeymoon” with China is over. China more than ever will now see its position solidified at the top of the Pentagon’s strategic competitor/enemy list. The uneasily quantitative trillion-dollar question remains how, in which terms, and until when will Beijing agree to keep financing the non-stop build-up of Washington’s overwhelming war machine.
The Full Spectrum Dominance-driven Washington/Wall Street plutocracy would interpret Obama’s trip to Asia as serving essentially to warn China that the US intends to remain a formidable Asian power. India – a US nuclear partner – was charmed to kingdom come. And so was Indonesia. Those 40,000 US troops in Japan plus the Okinawa base, as well as the 28,000 US troops in South Korea, are not going anywhere.
The US internal situation – exhibiting every possible woe from the total debacle of the middle class to the rise of fascistic tendencies – is not even an afterthought for the Full Spectrum Dominance-driven Washington/Wall Street plutocracy.
As for the G-20, this is roughly the bottom line: nothing can stop the US dollar going down. Big banks will have a ball getting money for nothing in the US and chicks for free all over emerging markets. Average Americans will be left with housing prices and wages down. China won’t be lectured: by the way, the yuan has actually appreciated since 2005 from 8.2 to the US dollar to 6.6; and it will appreciate another 15% up to 2015, following a timeline established by Beijing, not Washington.
South America, with its string of progressive governments now with much better coordination capacities, may show the world how to dance the integration shuffle, and how to escape the US dollar dictatorship, doing deals in their own currencies. Brazilian Finance Minister Guido Mantega has been saying out loud what his colleagues have been whispering: the time of the US dollar as reserve currency is over. The move is toward a basket of currencies. The BRICs will become increasingly more coordinated. And with China liberalizing the offshore yuan market, sooner or later the Hong Kong-US dollar peg will become history.
France is next in holding the G-20 presidency. It’s no secret that the embattled, mega-unpopular, micro-Napoleonic and macro-narcissistic Nicolas Sarkozy will pull all stops to come up with “his” Bretton Woods II next year in Paris, and thus save the world, not to mention his reelection in 2012.
Now that’s a soap opera worth waiting for. Till then, let’s rap. From the Mao to the Deng to the Jiang to the Hu/ You think you can keep on telling us what to do…