As the new millenium dawned, the ‘Anglosphere’ had a seemingly well-established grip over the finances of the world. This financial dominance – vastly out of proportion to the populations of the English-speaking nations – was reflected in military muscle. The dominant USA was considered by all and sundry to be the sole remaining ‘Superpower’: politically, militarily and economically.

It seems so long ago. Yet until 2007, the Old Order remained essentially intact. Since then, what we’ve come to know as the ‘World Financial Crisis’ has been akin to a new deal in a global poker game. As the cards are flipped face up in mid-2009, it’s apparent there’s been a phenomenal shift in world power. New players have joined the table. They’re outclassing former high rollers.

The two graphs below show the top twenty banks in the world by market capitalization, in 1999 and 2009 respectively. The author/s of my source for these graphs also points out that last month, for the first time, China became Brazil’s largest trading partner. Trade with Brazil has long been an indicator of financial power  The USA held the No 1 position from the 1930′s; before that, Britain had been the dominant trading partner for several generations.

Dramatic shifts are currently underway – yet there’s no real sign yet that the English-speaking countries intend to put their bloated military spend into reverse and rejoin the rest of the world. If they did, others would be greatly enouraged to do the same. As it is, the rest of the world is likely to view warily the real intentions of nations with a long track record of illegal invasions, imperialism and starting new wars.

The last thing the world needs now is a ramped up arms race. Another major war could well be the last, as Einstein warned.

Curtailment of Anglo-American imperialism is a benefit  – for people in those countries, as well as for the world as a whole. The children of the generation that ‘Lost the British Empire’ experienced unparalled prosperity. The same thing can happen within the USA.

Aside from the interests of war profiteers, economic prosperity is based on peace. It’s possible for Empires to fade gracefully, but only by relinquishing imperial pretensions.

The World's Biggest Banks, 1999

The World's Biggest Banks, 2009

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Update: Readers of this article may also be interested in The trillion dollar question: China or America? by Niall Ferguson in the Daily Telegraph, 1st June 2009.

Jim Lobe: serious journalism

Chas Freeman: independent intelligence

IPS Journalist Jim Lobe interviewed Chas Freeman recently – providing readers with a fascinating insight into the kind of views that scare the most entrenched vested interests that retain an inordinate amount of power in Washington DC, even under the new Obama Administration.

Mr Freeman was proposed by the US Director of National Intelligence, Admiral Blair, as the new Chair the National Intelligence Council (NIC). Freeman’s nomination was subjected to a vicious, sustained attack from the Zionist lobby and he ultimately withdrew – but landed some punches of his own on the way out.

Intelligence agencies in the western world have been largely hijacked by special interests, with the Israel Lobby and closely-related financial and military-security interests at the top of the foodchain. Freeman shows there are still practioners of the real Art of Intelligence in the USA.

Below are two extracts I found especially interesting. The whole interview is well worth a read.

On ‘Intelligence’

In general, I would’ve tried very hard to encourage members of the intelligence community to use classified information as a form of corroboration for information that is not classified, or is not terribly sensitive even if it is classified. In other words, I would urge analysts to write down rather than write up terms of levels of classification. The theory here is that, whereas many people in the (NIC) have tended to see the value of intelligence as directly proportional to its level of classification, this, in fact, misunderstands the nature of intelligence. Intelligence is simply information that is relevant to statecraft or decision-making. If it’s on the front page of the (Financial Times) or Inter Press or has been stolen out of the Kremlin safe, the key question is what is its reliability and how much can you rely upon it in understanding the situation you confront and in forming policies to deal with that situation.

In other words, I would have liked to have tried to change the culture to value lower levels of classification rather than higher in terms of output – obviously, to take advantage of all of the secret information one has, but to use it basically to corroborate (or test) what alert minds in the open-source world have been able to figure out. The purpose of this would be to build some checks and balances into the system and reduce the chances of sycophancy and the trimming of intelligence to fit the politically correct or politically convenient conclusions.

I must say much of the criticism of my appointment focused on the apparently horrifying possibility that I might actually produce intelligence that might not conform to political convenience or correctness but reached some other conclusion – intelligence that wouldn’t fit the preconceptions or policy preferences of its consumers. And that would be unacceptable. In other words, instead of being simply a supply of ammunition for political polemics and argumentation in favor of policies that have been cooked up without regard to the facts, intelligence might actually be a guide to decision-making. This notion is apparently very threatening.

The Future of the Dollar

At Bretton Woods, the dollar became the global reserve currency, backed by gold. A quarter century later, Nixon eliminated the gold backing for our currency. Dollar hegemony has been central to our ability to basically go off the tracks fiscally and financially here. It has enabled us to avoid addressing all sorts of problems with which we’re now afflicted, and it has enabled us to avoid having financial discipline being imposed on us of the sort we have insisted be imposed on every other country under IMF (International Monetary Fund) guidelines.

The role of the dollar as a universal currency for reserve and trade settlement purposes is absolutely central to our international power and reach. (…) Furthermore, we have used the fact that the dollar is an extension of our sovereignty to impose unilateral sanctions all over the place and to manipulate the global banking sector to enforce our policies, even when those policies — say, with respect to Iran — are not supported by others. So we have a big stake in this, and when we get the dollar into trouble, as we have done, this is very, very fundamental. We now have China, Russia, Brazil, India, South Korea, at least, and very likely others, calling for the gradual elimination of the dollar as a reserve currency and its replacement by stages with something else — in the case of the Chinese proposal, with special drawing rights under the IMF. I’ve seen this coming for well over a year, and have been talking about it. It’s now upon us, and it is not a problem you can send the fleet to solve. In the end, if you create a situation where people don’t want dollars, there’s nothing you can do about that…

See also China is right: we need a Global Currency.

Snitched from Private Eye…

George and Bernie - can you tell the difference?

It’s hard to conceptualize world economic affairs in all their complexity. Yet some of the fundamentals of the economic crisis are not too hard to grasp. The careful use of analogy can help. Here’s a neighbourhood analogy. To keep it simple, I’ll mention only two important households…

Imagine you are the head of a poor but very large household. Your family works hard over many years to make cheap products for neighbours to enjoy. One very rich neighbour in particular buys vast amounts of your produce.

It's not easy being brave

In return for your family’s sweated labour, you’re paid wages in the form of personal IOUs. The guy who buys most of your goods pays by personal cheque. He has the biggest, most expensive house on the block, so you consider his IOUs/cheques are good. You cash some cheques, but being a thifty type, you save many of his payments too. Over time, your savings accumulate.

Your big and wealthy neighbour spends a lot of money on extravagances. You think it unwise, but consider that’s his business. He employs huge numbers of security guards armed with powerful, expensive weapons – spending far more on this than anyone else on the block. Indeed, he spends nearly as much on ‘security’ as all the other households put together. From time to time, some of his henchmen invade other people’s houses. You think that’s wrong and say so… but he does command a lot more heavy firepower than you could ever afford, so you don’t complain too loud. Meanwhile, you work harder and harder to make more things for him to enjoy. Your savings keep accumulating…

Currency Reserves of Industrialized and Developing Nations - via the Wall Street Journal

Then the ‘system’ comes adrift. Last year, it became apparent that your ‘rich’ neighbour is in severe financial trouble. Abruptly, he stops buying lots of your products. His reduced purchasing power affects your own household and many members of your family lose their jobs.

At least you have savings to fall back on… but there’s a catch. Those savings are in the form of your powerful neighbour’s personal cheques. Yet now he is barely solvent. He’s not completely broke; nevertheless, he can’t honour the cheques he paid you before if you present too many at once. Like a bank in crisis, he asks that you ration yourself, drawing only a little of your hard-earned cash at a time. If not, he may default on all the other IOUs.

Meanwhile, this reckless neighbour keeps spending like there’s no tomorrow on his ‘security’. You feel the real purpose of all those henchmen is to bully and intimidate. Perhaps he’s out to intimidate you?

A neighbourhood meeting has been called for next month to help sort out this ‘crisis of confidence’, which is affecting all households on your block.

You suggest that from now on, your high-spending, heavily-armed neighbour pays his bills in a neutral common currency. No more personal cheques: you want real cash! After all, your abrasive neighbour wants to keep paying you with his cheques – but never accepts YOUR cheques. Only his IOUs are used as a ‘reserve currency’. Infuriatingly, he also insists on his right to keep spending as much as he likes on security guards and weapons.

Your name is China. You want a new world currency. Your wastrel neighbour is called the USA. He wants US dollars to be used long into the future as the world’s reserve currency – just as they are today.

You will doubtless cop a bucketing from bought-and-paid for talking heads throughout the ‘western world’ – but you are right! Stand on principle!

Zhou Xiaochuan, Governor of the People's Bank of China: seeks a global reserve currency

Time is up for America’s dollar extortion racket. The world needs safe, stable currency. We simply can’t afford not to have it any longer.

The advantages of The Global are many – as long as a global currency is implemented with wisdom and in the interests of all (not just the rich and powerful). I’ll list just a few:

1. Backed by the entire world economy – or the overwhelming preponderance thereof – a global currency would be safe and secure in a way no other currency before has been. Humanity as a whole becomes the lender of last resort. Which human – or group of humans -  can question our collective credit-worthiness?
2. In times of deflation (which prevails throughout much of the poorer countries of the world, even in times of relative economic boom) liquidity could be achieved by issuing money which, matched by an increase in productive output, is non-inflationary in its impact.
3. There would be no need for the world to borrow money from banks or other financial institutions. Who or what, after all, is more financially secure than the world as a whole? Global currency should be issued directly. Debt-free expansion of the economy, therefore, becomes achieveable.
4. The world as a whole has no incentive to undergo ecological destruction. As a whole, it has a disinterested interest in ensuring that further economic growth is decoupled from ecological impact. Funds created in Globals by a global authority should, without fear or favour, be subject to ecological strictures. The global objective is not economic growth at any ecological price, but rather economic growth that’s directed towards achieving global ecological sustainability.
5. By general agreement, the military sector should never be funded by Globals. Sci-fi aside, the world has no external enemy. It has no need for a bloated military. On the contrary, it urgently needs to redeploy resources on peaceful, constructive objectives. If sub-global entities seek military ‘defense’, they should pay for it themselves. The ability of bankrupt nations to do so would, of course, be very limited. That is as it should be. In such circumstances, a revival of President Kennedy’s plan for global disarmament would be the best route to follow. That’s the plan JFK presented in person to the UN General Assembly in 1961 that you’ve probably never heard about before. It’s taken 48 years, but the time for global disarmament has now arrived.
6. Transnational corporations, by definition, trade across national borders. They should be required to use Globals in all transactions. They should be taxed – at a standard rate – by a global economic authority. Goodbye transfer pricing. Hello fairness in taxation. It’s time to take the TNCs off welfare! TNCs must pay share of the global tax burden. The use of Globals would greatly facilitate this.

It goes without saying that there are many potential pitfalls. Crucially, such a scheme must be accompanied by real democratic reform. The Global Issuing Authority must operate with complete transparency and under genuine democratic control – meaning that the interests of each person on earthare equitably represented in finanical decision-making.

John Maynard Keynes: back in the 1940s he proposed a global reserve currency

A year ago, anyone suggesting a global currency was considered a fool and dreamer. Now the leadership of the most populous country on earth has proposed it (supported by Russia, the world’s largest nation). The discussion we need to have about the proposal originally floated by John Maynard Keynes two generations ago can no longer be deferred.

China is right. We do need a global reserve currency. We can build a sustainable global economy – but only through co-operation. We need a financial system that isn’t a scam run by the wealthy, for the wealthy.

In the mid 1940s, Keynes’ proposal for a global reserve currency (he called it ‘bancor’, but I think the Global has a better ring) was torpedoed by a greedy US Administration, flexing its muscles as a superpower, whose economic policies were dominated by the interests of finance capital. The situation in the USA hasn’t changed much since then – except that America is now effectively bankcrupt and its bargaining power is much reduced.

Humanity needs a financial system that works for humanity – not the other way round. Keynes’ bancor model has merit, but must be updated. At minimum, it needs an ecological dimension added that was beyond the awareness of most people in the 1940s.

If the super-rich, the banking elite and their militarist allies want to play Monopoly, perhaps they should find another planet to continue their selfish game? On this planet, it’s time to stop playing games with the world’s prosperity.