Watching an empire crumble is a slow process. The inertia of so much money, infrastructure and so many people makes the unraveling seem to go quite slowly.
But that same inertia, once in motion, also makes the motion formidable and harder and harder to stop as times goes on.
The world’s order is changing and the United States is slowly dying as a super power. But, it is still early days and most folks haven’t gotten the news. Certainly, most of the U.S.’s public are innocent of such awareness.
Today, I read a financial newsletter I follow and I read the following:
“The Moscow stock exchange will soon issue nearly $1 billion-worth of yuan-denominated bonds. It could become the start of a new financial system not based on the US dollar, analysts say.
Russia will issue the 6 billion yuan (about $900 million) bonds with a five-year maturity in December or January. The Central Bank says it is testing the water for future investments.”
The analyst writing the newsletter went on to say that the U.S. has been bringing this situation upon itself for a long time with its relentless deficit spending.
I’ve been listening to this slowly developing story for years now and it is not hard to understand once you get past the fact that following it is like watching paint dry.
The U.S. creates and sells bonds that are treasured (no pun intended) around the world because the power of the U.S. economy backs them and the U.S. has never, never defaulted on a bond.
But, every year the U.S. goes more into debt.
And every year, the U.S. sells more bonds than last year and then uses the proceeds from the new year’s sales to pay off the bonds from earlier cycles.
Do you know the phrase, “Check Kiting”? You should look it up, if you don’t.
And as the U.S. goes more and more into debt, the probability rises that one day it will not be able to pay the bonds due from previous cycles.
This is a real and growing concern for some nation states who hold large amounts of their funds in the forms of (supposedly) safe U.S. bonds. China is certainly tangled in this web.
If the U.S. defaults, the money they hold in U.S. bonds goes ‘poof’!
The U.S. dollar is the world reference currency. Most large international transactions are done using U.S. dollars as the common medium of exchange.
As I said, the world is changing and major players are slowly initiating changes to get away from:
(1) U.S. Hegemony via its currency
(2) The growing danger that the U.S. will default
They are setting up mechanisms which allow exchanges of goods and services without using the U.S. dollar as the common medium of exchange.
Countries are working to reduce their risk through exposure to U.S. bonds.
BUT WAIT – THERE”S MORE (as they shout on infomercials)
There’s another even more insidious story running through the historical narrative developing in the U.S.
The U.S. is quite literally being looted by its own 1%’ers.
The gap between the wealthiest and the middle and lower class is growing rapidly in the U.S.
The new Tax Law that President Trump and the U.S. Republicans are so excited to be passing just now is a blatant legislative device to further disenfranchise the middle and lower classes of their slice of the American pie.
Something as large and powerful as the U.S. will not crumble quietly. Their military is still the most powerful on the planet. Their currency is still the global reference currency. Their bonds are still held by much of the world.
Sometimes, when I sit by the beach in Sumner, which is a beach town adjacent to Christchurch, New Zealand, where I live, I look out at the vast South Pacific stretching away and I think to myself that I ‘m so glad that I’m here so very far away from the conflicts and power-centers of the world.