Friday, August 20, 2010

You've Been Warned

"China turns back on dollar" -- yes folks, it has finally happened. China seems to have decided that the dollar is passe as an investment, and has started investing heavily in... the euro! You remember the euro? That currency that was walking tall a year ago, but more recently was pronounced DOA? Well guess what, all of that is going to change based on China's decision... and just to show that they're serious, their representatives have been touring Europe of late -- to counterbalance, I'm sure, George Soros' advice, which is, basically, for Europe to start acting like the U.S. because that's what will net him the most profit.

So what else has China done? It has, according to the article, "cut its holdings of U.S. government debt by... 11 percent". So they're letting us down easy, as would be the case if they were interested in preserving their capital rather than trashing our economy; we can breathe a sigh of relief on that score, at least. And! Other Asian nations are following suit: Korea, Malaysia, and India. So the rats are deserting a sinking ship, sure enough... but not so fast that they wind up sinking with it (yeah, I know, it's a tough metaphor to visualize, but I think you get my meaning).

And what does this say about the world's financial power centers, in terms of where they are and who is in charge? Well -- the least one can say is that the U.S., which was lured into two too many wars that had nothing to do with its national security, is about to be abandoned, financially. In other words, we have been fooled, exploited, looted, and are now about to become second-class citizens in the world of finance. Oh, the thanks we get for being so willing to sacrifice everything for the sake of democracy! But guess what, the rest of the world, and especially Europe, is laughing their asses off. Poor old America -- so big, so strong, so impulsive, so foolish. Sooner or later we had to be farmed out to the rest home for failed enterprises -- and I see this move by China as a warning sign of that, and of much more besides. You see, the Chinese, and the Europeans as well, have the decided advantage of being amoral -- not "immoral" or evil, necessarily... just completely jaded, cynical, and post-ideational... whereas we're still stuck in the crusader mode, and thus highly vulnerable to being taken advantage of. Just about our only reliable ally left (if you discount all the places that profit handsomely from hosting our military bases) is Israel, which is -- no surprise -- also highly ideational. Their idea is the survival of Zionism at all costs... and ours is... well... the survival of Zionism at all costs. Because as much as we mouth words about "democracy", it's curious that the only places on earth that we are still worried about, and trying to force the blessing of democracy on, are Israel's enemies. And what's amazing about all this is that we've already seen that democracy per se doesn't always fill the bill; a democratically-elected government in the Near East might hate Israel every bit as much as a kingdom or dictatorship. But "democracy" is a fetish for us, and when you have a fetish, it's like a drug addiction -- you're just asking to be exploited by everyone else.

But all of that aside, it's time to start getting rid of dollars, if you haven't already done so... and buying, well... euros? I mean, China isn't putting it all in Swiss francs, or gold -- so maybe they're on to something. Or, maybe they realize that the true international financial power center is in Europe, and they will never let their favored currency become too distressed. Plus, there are probably too few Swiss francs available to satisfy China's investment needs -- and too little gold as well. And if you invest in something that's in short supply, the price is going to go up faster than you might like. The advantage of the euro is that there's a lot of it... and, despite the high-jinks of the "PIGS", it's clearly seen as having a more sound future than the dollar, which has just barely started absorbing all the major blows of failed American empire building, massive government spending, and borrowing. An investor with any sense would have bailed on the dollar a long time ago... except that they had to wait until the euro got over the cold it caught from us. So now they've recovered, and we're coming down with pneumonia -- but it was all quite predictable, it seems to me. I never did think that the "PIGS" could bring down the euro all by themselves; they were more than counterbalanced by the countries that had sound fiscal policies. So in that sense, the Greek "crisis" was probably just another hoax that made a few people a lot of money. But in any case, the Chinese aren't stupid, and they aren't going to shift their portfolio into something that's about to crash. Besides, they probably have a very good idea of where the financial power centers are, and who runs them. For all I know, they have come up with some sort of gentleman's agreement -- but one that, basically, leaves the U.S. out of the loop.

And thus, the twilight of democratic idealism, to the extent that it involves massive funding and borrowing. We could, if truly chastened, go back to the ideal of merely setting a good example... or we could continue to fight losing battles and wind up not only snubbed, but cast into the outer darkness by the cynical, sophisticated money changers of Europe and China. It's hard to know which it will be, but in these times anyone who bets on catastrophe is making, let's say, a fairly safe bet.

No comments: