An article by the Master himself, Professor the author of many books, among others, "". He is possibly the economist with the most apt and coherent knowledge to decipher the "liberal capitalism" and to explain it in English to the general public nowadays. Just peruse below article, so concise yet so heavy with substances. One will need to read it multiple times, over and over to grasp the whole essence!
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The American Empire self-destructs. But nobody thought that it would happen this fast
By
posted by permission - 07 MARCH 2022
Empires often follow the course of a Greek tragedy, bringing about precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow motion.
The basic assumption of economic and diplomatic forecasting is that
every country will act in its own self-interest. Such reasoning is of no help in today’s world. Observers across the political spectrum are using phrases like
“shooting themselves in their own foot” to describe U.S. diplomatic confrontation with Russia and allies alike.
But nobody thought that The American Empire would self-destruct this fast.
For more than a generation the most prominent U.S. diplomats have warned about what they thought would represent the ultimate external threat: an alliance of Russia and China dominating Eurasia. America’s economic sanctions and military confrontation have driven these two countries together, and are driving other countries into their emerging Eurasian orbit.
American economic and financial power was expected to avert this fate. During the half-century since the United States went off gold in 1971,
the world’s central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds. The resulting Treasury-bill Standard has enabled America to finance its foreign military spending and investment takeover of other countries
simply by creating dollar IOUs. U.S. balance-of-payments deficits end up in the central banks of payments-surplus countries as their reserves, while Global South debtors need dollars to pay their bondholders and conduct their foreign trade.
This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the rest of the world, without having to use much military force of its own except to grab Near Eastern oil.
The recent escalation of U.S. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China
has imposed enormous opportunity costs – the cost of lost opportunities – on U.S. allies. And the recent confiscation of the gold and foreign reserves of Venezuela, Afghanistan and now Russia,[1] along with the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, enticed by the hope for the return of their sequestered accounts),
has ended the idea that dollar holdings – or now also assets in sterling and euro NATO satellites of the dollar –
are a safe investment haven when world economic conditions become shaky.
So I am somewhat chagrined as I watch the speed at which this U.S.-centered financialized system has de-dollarized over the span of just a year or two. The basic theme of my Super Imperialism has been how, for the past fifty years, the U.S. Treasury-bill standard has channeled foreign savings to U.S. financial markets and banks, giving Dollar Diplomacy a free ride.
I thought that de-dollarization would be led by China and Russia moving to take control of their economies to avoid the kind of financial polarization that is imposing austerity on the United States.[2]
But U.S. officials are forcing Russia, China and other nations not locked into the U.S. orbit
to see the writing on the wall and
overcome whatever hesitancy they had to de-dollarize.
I had expected that the end of the dollarized imperial economy would come about by other countries breaking away. But that is not what has happened.
U.S. diplomats themselves have chosen to end international dollarization, while helping Russia build up its own means of self-reliant agricultural and industrial production.
This global fracture process actually has been going on for some years, starting with the sanctions blocking America’s NATO allies and other economic satellites from trading with Russia. For Russia, these sanctions had the same effect that protective tariffs would have had.
Russia had remained too enthralled by free-market neoliberal ideology to take steps to protect its own agriculture and industry.
The United States provided the help that was needed by imposing domestic self-reliance on Russia. When the Baltic states obeyed American sanctions and lost the Russian market for their cheese and other farm products, Russia quickly created its own cheese and dairy sector – while becoming the world’s leading grain exporter.
Russia is discovering (or is on the verge of discovering) that it does not need U.S. dollars as backing for the ruble’s exchange rate. Its central bank can create the rubles needed to pay domestic wages and finance capital formation. The U.S. confiscations of its dollar and euro reserves
may finally lead Russia to end its adherence to neoliberal monetary philosophy, as
Sergei Glaziev has long been advocating, in favor of Modern Monetary Theory (MMT).
The same dynamic of undercutting ostensible U.S aims has occurred with U.S. sanctions against the leading Russian billionaires. The neoliberal shock therapy and privatizations of the 1990s left Russian kleptocrats with only one way to cash out on the assets they had grabbed from the public domain. That was to incorporate their takings and sell their shares in London and New York. Domestic savings had been wiped out, and
U.S. advisors persuaded Russia’s central bank not to create its own ruble money.
The result was that Russia’s national oil, gas and mineral patrimony was not used to finance a rationalization of Russian industry and housing.
Instead of the revenue from privatization being invested to create new Russian means of protection, it was burned up on nouveau-riche acquisitions of luxury British real estate, yachts and other global flight-capital assets. But the effect of sanctions making the dollar, sterling and euro holdings of Russian billionaires hostage
has been to make the City of London too risky a venue in which to hold their assets – and for the wealthy of any other nation potentially subject to U.S. sanctions. By imposing sanctions on the richest Russians closest to Putin, U.S. officials
hoped to induce them to oppose his breakaway from the West, and thus to serve effectively as NATO agents-of-influence. But for Russian billionaires, their own country is
starting to look safest.
For many decades now, the U.S. Federal Reserve and Treasury have fought against gold recovering its role in international reserves. But how will India and Saudi Arabia view their dollar holdings as Biden and Blinken try to strong-arm them into following the U.S. “rules-based order” instead of their own national self-interest? The recent U.S. dictates have left little alternative but to start protecting their own political autonomy
by converting dollar and euro holdings into gold as an asset free from political liability of being held hostage to the increasingly costly and disruptive U.S. demands.
U.S. diplomacy has rubbed Europe’s nose in its abject subservience by telling its governments to have their companies dump their Russian assets for pennies on the dollar after Russia’s foreign reserves were blocked and the ruble’s exchange rate plunged.
Blackstone, Goldman Sachs and other U.S. investors moved quickly to buy up what Shell Oil and other foreign companies were unloading.
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