The Inside Assyria Discussion Forum #5

=> U.S. Global Hegemony – The Beginning … And the End

U.S. Global Hegemony – The Beginning … And the End
Posted by Tiglath (Guest) - Monday, April 20 2009, 2:28:57 (CEST)
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By Andy Hoffman



Introduction



The financial market madness we are currently witnessing is difficult to put into words. So much so, that for the first time in years, I find myself at times speechless.



Irrespective, I have untied my tongue long enough to put together some thoughts describing my view of what is going on from the highest-level, macroeconomic sense.



In essence, what we are seeing today is the death throes of U.S. global hegemony, as described below.



In my opinion, September 11th marked the beginning of the end of U.S. global hegemony, or in simple terms its role as a global superpower. Not because of the damage done by Islamic terrorists, which was trivial, but to itself by the powers that be in Washington and Wall Street. Since that day, the forces pushing the U.S. down the slope of the global power chain accelerated, with the 9/11 attacks essentially lighting the fuse.



The History of U.S. Hegemony



The U.S. has been the lone global superpower for roughly 20 years, probably the shortest period of such hegemony by a major economic power in the world’s history. If you combine that period with the previous 45 years when the U.S. shared that status with the Soviet Union, we are talking about a total of 65 years, still a tiny drop in the bucket of time. If you want to think in terms of significant superpowers, counted in centuries rather than decades, think of the Egyptians, Greeks, Romans, Ottomans, Shangs and Zhous (of China), or even the British and Spanish of the 13th to 19th centuries.



The U.S. and Russia were fortunate enough to find themselves in that position because the major European powers nearly destroyed themselves during World War II. At that time, Japan’s economic advancement had not yet commenced, while China remained mired in the throes of unproductive communism.



In the post World War II era, the United States, through a combination of ingenuity, financial strength, and a (now long-gone) work ethic, managed to secure a major share of global manufacturing market share, reaching a golden age in the 1950s and 60s which marked the peak of its standing in the world. Russia similarly was in a strong financial position following the war, but its leadership instead promoted the closed-minded communist policies which yielded growth (and ultimately collapse) in but one area, its nuclear arsenal.



But even as America was flourishing, the inevitable competition from the “Rest of World” was smoldering behind the scenes. Once the aftermath of World War II passed, which in Europe took many years, these forces started to gain momentum. Remember, the U.S. possesses less than 3% of the world’s population but consumes roughly 30% of its energy, and is not particularly blessed with natural resources. Thus, it was only a matter of time before the “Rest of World” caught up.



By the 1960s, little Japan, with barely one-third of the U.S. population, one-twentieth the land, and even less natural resources, had already snagged a major share of global manufacturing market share, particularly in the automotive industry, one of America’s truly “own” creations and sources of pride. And all the while, completely under the radar, the seeds of domination were growing in China, India, and Southeast Asia.



These indomitable forces have gained strength over the past five decades, but in my view two key events served to accelerate them exponentially, yielding the situation where, here in 2009, the U.S. has lost essentially ALL of its superpower status.



The 1st Flashpoint - Vietnam



The first of the two events was the Vietnam War in 1965 (and the consequential end of the gold standard in 1971), and the second was September 11th, 2001.



All empires peak when arrogance rears its ugly head, and in the U.S.’s case it was Vietnam that triggered it. As someone too young to have been around during the era of the “Red Peril”, it is hard to envision the fear of the spread of Communism that existed in America. But it most certainly did, yielding numerous standoffs, skirmishes, and wars (such as the Korean conflict and the Cuban missile conflict) before the real damage occurred in Vietnam.



Part of the rationale for Vietnam was the fear of communism, particularly the Russians, but an equal part was the growing U.S. belief that, thanks to just 20 years of global hegemony, its beliefs and ideals, politically, economically, and socially, should be foisted onto the rest of the world, at any cost.



That line of thinking is what made the Egyptians and Romans into global empires, and even the British for that matter. But those were different times, when worldwide communications and technologies were more limited and protected, unlike today where ideas and processes are instantaneously transferred around the world with the click of a mouse.



Thus, Vietnam was a critical point in U.S. history, representing the point that it started to squander its financial advantage, spread its military too thin, and sow the seeds of global resentment. Not to mention, just like Iraq it was a completely unprovoked war, started by propaganda in Washington targeted at stirring up “patriotism.”



In Iraq, it was about the utter lies that Saddam Hussein was behind 9/11 and held dangerous WMDs, while in Vietnam it was about two obscure naval skirmishes in Vietnamese waters, the latter of which (the U.S.S. Turner Joy) was proven to be a lie after we had already joined the war. In other words, we had no reason to invade either Vietnam or Iraq (heck, in Iraq Congress didn’t even vote on it), but the powers that be in Washington had their own agendas and thus lied to the American people to advance them. And we see how both of these matters have turned out.



Anyhow, the 1944 Bretton Woods agreement effectively made the U.S. dollar the world’s reserve currency. Until 1971 the dollar was pegged to gold, and what a surprise this period represented the heights of U.S. economic advancement and the depths of inflation. Equally importantly, the majority of global transactions were now executed in U.S. dollars, yielding dramatic increases in dollar currency reserves for all the world’s major economic powers, including the Europeans, Japanese, and in recent years the Chinese, Russians, Indians, and Southeast Asians.



When U.S. government spending in Vietnam accelerated in the late 1960s (signified by Lyndon Johnson’s “Guns and Butter” fiscal policy), the gold standard threatened to bankrupt America. In other words, other nations rightfully demanded the U.S.’s gold stocks due to our violation of the currency/gold ratios imposed by Bretton Woods. But the U.S. would have none of those restrictions on its printing of money, and thus Richard Nixon “closed the gold window” in 1971, in other words ending the gold standard which had for 27 years imposed monetary discipline on the world’s economy.



Following the end of Vietnam in 1975, the U.S. faced a very painful recession in the late 1970s as it endured its own “post-war aftermath”, exacerbated by heightened Middle Eastern tensions which yielded soaring energy prices and rising anti-Arab (and anti-Jewish) sentiments across America.



Which is precisely the time that “Wall Street” took over.



The Beginnings of Financial Terrorism



When Ronald Reagan became President, the U.S. was at the tail end of the traumatic post-Vietnam period. U.S. pride was seriously wounded by the decisive military defeat and its financial position significantly compromised by massive government spending and the resultant inflation, particularly following the end of the gold standard. Thus, the U.S. government decided that it needed to “try something new” if it wanted to put the U.S. back at the top of the global map.



So “Version 1.0” of financial engineering began with Reagan’s simply-termed “supply-side economics”, which were nothing more than lowering taxes (despite fiscal deficits) and reducing regulation so that businesses could fully display their entrepreneurial spirit. Does lowering interest rates and regulation sound familiar?



Back then, supply-side economics was hailed a big success because the U.S. economy turned around shortly afterward. However, in actuality it turned around for several other reasons, one being the end of a long economic down cycle (yes, in unmanipulated economies things go up and down), two the end of the draining Vietnam War, and three the decline in global inflation brought on by the demise of the Soviet Union. Not to mention, even after the gold standard was ended, nearly all the world’s economic powers held the majority of their currency reserves in dollars, so it was in everyone’s best interest to keep the dollar’s purchasing power strong.



Thus started the era of competitive currency devaluation which has infected the world’s financial system for nearly 30 years like the plague, causing so many of the problems we face today. The Japanese, Germans, Chinese, etc., all realized that by artificially keeping their currencies weak (by printing money and selling it), they could increase their manufacturing cost advantage and simultaneously sucker Americans into buying more of their goods with the increased purchasing power of a stronger dollar. This global “confidence” in the dollar is what spawned the explosion of the U.S. credit industry, which itself ingrained itself into U.S. consumers’ psyche that Americans were invincible and invulnerable, and that they “deserved” to spend beyond their means due to their political, economic, military, and social superiority.



In fairness, America had one more brief moment of dominance, as the technology revolution of the 1980s and 1990s was clearly spawned in Silicon Valley. The birth of the modern age of electronics and internet applications was clearly an American phenomenon, and for a brief time spurred the 1990s hype that the age of the Jetsons was upon us. This myth, combined with massive monetary stimulus following the brief 1987 stock market crash, was what created the stock market bubble that ended in 2000. Oh, and guess who took over as head of the Federal Reserve in 1987, and was the brains and brawn behind this indiscriminant money printing? Yep, you guessed it, the one and only Alan Greenspan.



Another event occurred in 1987 that few realized would have such an incredibly detrimental impact on America; the creation of the innocently termed “President’s Working Group on Capital Markets”, aka the “Plunge Protection” team. Back then, its purpose was solely to protect the financial market from the near-term impact of a market crash, such as what happened in October 1987. However, under the tutelage of the “Maestro” Alan Greenspan, it morphed into an unimaginable evil over the next two decades….



After the stock market crashed in 2000, the U.S. economy began to contract. While the early part of the 1990s economic growth was real, the latter half was all about hyperactive stock markets and insane financial deals (such as multi-billion dollar mergers of companies with no revenues and limited assets). It took some time for the bubble to burst (about 12-18 months), and then, by pure coincidence, September 11th occurred.



The 2nd Flashpoint – 9/11



In many ways, the aftermath of September 11th was not different than what happened after the aforementioned U.S.S. Turner Joy incident in Vietnam. The leaders in Washington created a ruse to start a “patriotic war”, while the masses swallowed all the spoon-fed propaganda due to nationalistic pride. Not to mention, the declining economy and stock market served as the perfect backdrop for a new “cause” to believe in, especially one that would entail massive government spending.



Sound familiar? If not, look up “Naziism, post-World War I Germany” and, frankly, dozens of other similar political situations in global history.



However, there were significant differences between the U.S. in 1965 and the U.S. in 2001. In 1965, the U.S. had a large share of global manufacturing market share, a strong balance sheet, a positive trade balance, and the global goodwill engendered by its positive contributions to the end of World War II.



Conversely, in 2001, the U.S.’s manufacturing base was greatly diminished, with Japan alone having commandeered the automotive and electronics businesses. Moreover, the “giant sucking sound” that Ross Perot warned of in 1992 had not only sent millions of American jobs to Mexico, but by then those jobs had already been sucked out of Mexico into China and points East.



For a brief moment of time, the U.S. had a budget surplus. However, that moment came and went in a flash in the early 2000s. Given the rising levels of U.S. debt and unsustainable levels of foreign dollar currency reserves, the post-9/11 landscape yielded an avalanche of U.S. deficits and the historic peak of dollar purchasing power. Moreover, the “political capital” earned in World War II was gradually being forgotten, in no small way due to damage done by our failed involvement in Vietnam.



Confronted by the burst stock market bubble, declining economy, massive financial burdens of the Iraqi war, a plummeting dollar, and rising budget and trade deficits, the powers that be in Washington (by now controlled by Wall Street thanks to the massive profits earned in the fake internet bubble) once again turned to their “Maestro”, Alan Greenspan.



And what do you think he did? Yep, you guessed it, he lowered interest rates to 1%, printed more money, and reduced financial market regulations further. Sound anything like “supply-side economics”, (which not coincidentally commenced at the same time Greenspan was appointed head of the Federal Reserve)?



To this day, Greenspan is still somehow revered as a great financial mind, which is yet another example of the “black is white” thinking in today’s America. In my view, he will one day be remembered for the catastrophic effects of these decisions, in my mind the single most responsible individual for what we are enduring today. In fact, he encouraged borrowers to take out Adjustable-Rate Mortgages (ARMs) when mortgage rates were at all-time lows, and actually stated that derivatives are a great invention because they serve to spread out risk.



Well, what happened next?



Not surprisingly, a combination of historically low interest rates, reduced regulation on the credit industry and Wall Street financial engineering, global competitive currency devaluations, and massive monetary and fiscal stimulus created credit and housing bubbles that dwarfed the stock market bubble before it, as well as the explosion of publicly-traded and OTC derivatives, which more than anything else are the source of the financial catastrophe that is tearing apart America.



Which brings me to the final part of this missive, the one describing what we are seeing TODAY.



The End of the End



The U.S.’s brief reign as world superpower has been marked by the continuing application of short-term “band-aids” to try and buy time, with the hope that things will get better. No long-term strategies, no game plans, nothing. Just politicians being politicians, doing what it takes to get re-elected.



All along the “foundation” of U.S. global hegemony was its manufacturing base. This area was rock-solid during the 50s and 60s, but has proven to be fleeting in the 90s and 00s due to the decline in America’s finances, the weakening of its military due to a series of unproductive, draining wars, and the growth of more significant manufacturing powers such as Japan, China, and others.



Thanks to the natural weakening of this foundation, as well as the horribly counterproductive actions taken during Clinton/Bush/Obama, Rubin/Summers/Lindsay/Snow/Paulson/Geithner, and Greenspan/Bernanke administrations, there are no longer anymore viable “band-aids” to apply.



Thus, the only thing left has been the 24/7 rigging of markets and printing, printing, printing of money.



Does anyone realize that the reason Citibank and Wells Fargo were able to report “profits” was because the Financial Accounting Standards Board (FASB) last month decided that banks can now value their “toxic assets” at whatever they’d like, even if similar assets have recently sold for fractions of this amount? Or, in JP Morgan’s case, due to exceptional “trading profits”, which based on simple statistical analysis could not possible occur without some insider knowledge of where markets are going.



And then there are outright lies, such as Wells Fargo having the gall to state that its mortgage origination business was extremely profitable this past quarter. You mean during an historical collapse in the stock market, the housing market, and employment, during which Wells Fargo itself was handed $25 billion of free, taxpayer money to enable survival, that they made profits on its housing business? Not to mention that accounting rules enable banks to record “profits” simply from originating a mortgage, despite the fact that it will not be known for decades whether the loan will actually be paid back, much less in today’s environment where loan defaults are at record (and accelerating) rates, mortgage foreclosures and unemployment are exploding, and housing prices are declining at double-digit rates.



Moreover, in Citibank’s case, the $1.6 billion of “profits” recorded in the first quarter stands against a balance sheet of close to $1 trillion of assets, many of which are hopelessly insolvent and would be massively written down NOW if the FASB hadn’t suddenly changed its mark-to-market accounting rules, as described above. This “band-aid” will not make these hundreds of billions of assets worth more, not now, not in six months, not EVER.



Current “Economic Policy”



President Obama’s “economic plan” is built on sand. Or worse, as there does not appear to be any “plan” at all.



It is just a series of such band-aids created by Wall Street and spearheaded by his head economic advisor, Larry Summers, and Treasury Secretary Geithner. Two of Obama’s top three campaign contributors were JP Morgan and Goldman Sachs, as was the case for most (if not all) of the Congressional figures involved in engineering the bailouts.



Larry Summers, as Treasury Secretary back in the Clinton Era, actually penned the “Gibson’s Paradox” essay that describes how keeping interest rates low fosters low inflation expectations, and the best way to keep interest rates low is to hold down the gold price. Meanwhile, Geithner, in his previous post as head of the NY Federal Reserve, was a key point man in the actions of the PPT and gold Cartel, a disciple of none other than Alan Greenspan. Fed Chairman Bernanke, by the way, has been so discredited by his ineptitude that he is hardly worth mentioning.



Right now, the only plan I see is a series of lies, frauds, and manipulations of financial markets and the public’s perception. “Operation Confidence Con”, as I have heard it described, is nothing more than an acceleration of the bastardized economic policies of the past three decades, aided and abetted by massive corruption from the Wall Street masters than now run Washington, and an exponential increase in the 24/7 activities of the PPT/Gold Cartel to try and fool the masses into believing that Obama’s “plan” is working, which it is not and which logically cannot work, EVER.



Regarding gold and silver, I have been watching these markets trade every day for the past seven years. Each day the manipulation in these markets has gotten worse, but nothing like what I’ve seen in the past month, particularly around the Fed’s “quantitative easing” announcement last month and the conclusion of the “G-20” meeting two weeks ago. Can you believe that, following these massively gold-bulliish announcements, that gold and silver are actually lower?



For those reading this missive; if you believe that the economy has turned, banks are now profitable, inflation is not a concern, jobs are about to become plentiful, and the dollar is a smart place to be, continue as you were.



But if not, which I suspect represents 99% of you, continue to PROTECT YOURSELF. Gold and silver are a gift at these levels, as are foodstuffs and other necessary consumables before accelerating (or god forbid) hyperinflation hits in the not so distant future. And continue to participate in “tea parties” or anything that enables you to assert your rights, while you still have them.



U.S. hegemony was significant. And real. But alas, for just a very brief period in the annals of history. It is nearly gone, and when it is, you will wish you have protected yourself. Life will go one, just not in the same way we have been accustomed to.



Andy



P.S. For those that want to read about this topic from a slightly different angle, please read the below, wonderfully written article from last week’s Christian Science Monitor.



http://www.csmonitor.com/2009/0408/p09s01-coop.html



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