New
World Disorder: Emerging
Division Between East And West Threatens To Plunge The Globe Into
Chaos
|
July
21, 2014
|
Source:
Michael
Snyder, BLN Contributor
In
general, over the last several decades the world has experienced an
unprecedented era of peace and prosperity. The opening up of relations
with China and the "end of the Cold War" resulted in an extended period of
cooperation between east and west that was truly unique in the annals of
history. But now things are shifting.
The civil
war in Ukraineand the crash of MH17 have created an enormous amount of
tension between the United States and Russia, and many analysts believe that
relations between the two superpowers are now even worse than they were during
the end of the Cold War era. In addition, the indictment of five PLA
officers for cyber espionage and sharp disagreements over China's territorial
claims in the South China Sea (among other issues) have caused U.S. relations
with China to dip to their lowest point since at least 1989. So could the
emerging division between the east and the west ultimately plunge us into a
period of global chaos? And what would that mean for the world economy?
For
as long as most Americans can remember, the U.S. dollar and the U.S. financial
system have been overwhelmingly dominant. But now the powers of the east
appear to be determined to break this monopoly. Four of the BRICS nations
(China, Russia, India and Brazil) are on the list of the top ten biggest
economies on the planet, and they are starting to make moves to become much less
dependent on the U.S.-centered financial system of the western world. For
example, just last week the BRICS nations established
two new institutions which are intended to be alternatives to the
World Bank and the IMF...
So
in their summit, from July 14 to 16, the five BRICS announced two major
initiatives aimed
squarely at increasing their power in global finance.
They announced the launch of the New Development Bank, headquartered in
Shanghai, that will offer financing for development projects in the emerging
world. The bank will
act as an alternative to the Washington, D.C.-based World Bank.
The BRICS also formed what they're calling a Contingent Reserve Arrangement, a
series of currency agreements which can be utilized to help them smooth over
financial imbalances with the rest of the world. That's
something the IMF does now.
Clearly,
the
idea is to create institutions and processes to supplement - and perhaps
eventually supplant - the functions of those managed by U.S. and
Europe.
And they would be resources that they could control on their own, without the
annoying conditions that the World Bank and the IMF always slap on their loans
and assistance.
This
comes at a time when both China and Russia are seeking to emphasize their own
currencies and move away from using the U.S. dollar so
much.
Even
in the western media, it is being admitted that China's yuan is "a
growing force in global finance", and according to CNBC
the use of Chinese currency in international trade is growing very
rapidly...
Of
the German companies profiled, 23 percent are using the renminbi to settle trades, up from 9 percent last year,
while usage in Hong Kong rose to 58 percent from 50 percent and to 17 percent
from 9 percent in the U.S.
Usage
of the renminbi among French companies - a new
addition to this year's list - was high at 26 percent.
And
of course Russia has been actively pursuing a "de-dollarization strategy" for
months now. Each new round of economic sanctions pushes Russia even
further in the direction of independence from the U.S. dollar, and Gazprom has
been working hard to get large customers to switch from paying for natural gas
in dollars to paying for natural gas in euros and other currencies. For
much more on this, please see my previous article entitled "Russia
Is Doing It - Russia Is Actually Abandoning The
Dollar".
At
this point, it seems clear that Russia plans to permanently decouple from the
U.S. economy and the U.S. financial system. Just today we learned that
Vladimir Putin plans to make Russia less
dependent on U.S. companies such as IBM and Microsoft, and any future
rounds of sanctions are likely to cause even more damage to U.S. firms that do
business in Russia.
But
potentially much more troubling for the U.S. economy is the startling
deterioration in the relationship between the Obama administration and
China. Some analysts are even describing this as "a
tipping point"...
One
day, the United States indicts five PLA officers for cybercrimes; the next, the
United States claims victory in WTO disputes over car tariffs and rare earth
minerals. All this is happening while the United States promises enduring
support for Asian allies, and it has moved openly to challenge the legitimacy of
Chinese territorial claims in the South China Sea. Meanwhile, China
is busy creating facts on the ground and water. Last month, a $1
billion Chinese oil rig set up operations in territorial waters claimed by
Vietnam. In the East China Sea,
Chinese SU-27 fighter jets have come within 100 feet of Japanese surveillance
aircraft.
This
was all capped at the recent Shangri-La Asian Security dialogue in Singapore
(Asia's annual defense-ministers meeting): Defense Secretary Chuck Hagel bluntly
described China's behavior as "destabilizing, unilateral actions." The PLA
deputy chief of staff, Lt. Gen. Wang Guanzhong,
accused the United States of "hegemonism."
The
mood has soured, more than the usual ups and downs of big-power relationships.
The question now is not whether a "new type of relationship" is in the offing,
but rather, whether U.S.-Chinese relations have reached a tipping
point.
Most
Americans could not care less about what China is doing in the South China Sea,
but to the Chinese this is a very, very big deal. In fact, China
just sent
a surveillance vessel to Hawaii as a bit of payback for what they
regard as U.S. "provocations" in the region.
In
the old days, China would have probably never have done such a thing. But
China is gaining confidence as the gap between the U.S. military and the Chinese
military rapidly
closes...
Away
from the Chinese military's expanding capabilities in cyberspace and electronic
warfare, Beijing is growing the size and reach of its naval fleet, advancing its
air force and testing a host of new missiles, the Pentagon said
Thursday.
An
annual report to Congress on China's evolving military capability concluded that
the modernization was being driven in part by growing territorial disputes in
the East and South China seas, as well as by Beijing's desire to expand its
presence and influence abroad.
In
fact, the Chinese military has grown so powerful that we are now seeing
headlines such as this one in
The Week: "China thinks it can defeat America in
battle".
And
the Russian military has made tremendous strides as well. Putin has been working
hard to modernize the Russian nuclear arsenal, the Russians now have a
"fifth generation" fighter jet that is supposedly far superior to the
F-22 Raptor, and they have nuclear submarines that are so incredibly quiet that
the U.S. Navy refers to them as "black
holes".
If
Russia and China stay united, they are more than capable of providing a
counterbalance to U.S. power around the globe.
But
even if military conflict is not in our immediate future, the breakdown in
relations between east and west could still have a dramatic impact on the global
economy.
Over
the years, the U.S. and China have developed a highly symbiotic relationship
that fuels a tremendous amount of economic activity all over the planet.
Each year, we buy hundreds of billions of dollars of products from the
Chinese. Just imagine what our stores would look like if we took
everything that was "made in China" out of them. And after we send them
giant piles of our money, we beg the Chinese to lend it back to us at ultra-low
interest rates. This arrangement has allowed China to become extremely
wealthy and it has allowed Americans to enjoy a massively inflated standard of
living fueled by ever increasing amounts of debt.
So
what happens if this relationship starts breaking down?
Without
a doubt, it could potentially lead to global chaos.
So
keep a close eye on this emerging division between the east and the west.
It could end up being far more important than most Americans would ever dare to
imagine
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