Large amounts of surplus dollars are pouring into the rest of the world.
Central banks have recycled these dollar inflows towards the purchase of U.S. Treasury bonds, which serve to finance the federal U.S. budget deficit. Underlying this process is the military character of the U.S. payments deficit and the domestic federal budget deficit.
Strange as it may seem and irrational as it
would be in a more logical system of world diplomacy, the "dollar glut" is
what finances America’s global military build-up. It forces foreign central
banks to bear the costs of America’s expanding military empire: effective
"taxation without representation".
The mass media chime in, pretending that recycling the dollar glut to finance U.S. military spending is showing their faith in U.S. economic strength by sending "their" dollars here to "invest".
It is as if a choice is involved, not financial
and diplomatic compulsion to choose merely between "Yes" (from China,
reluctantly), "Yes, please" (from Japan and the European Union) and "Yes,
thank you" (from Britain, Georgia and Australia).
This is a silly anthropomorphic picture of a more sinister dynamic. The "foreigners" in question are not consumers buying U.S. exports, nor are they private-sector "investors" buying U.S. stocks and bonds. The largest and most important foreign entities putting "their money" here are central banks, and it is not "their money" at all.
They are sending back the dollars that foreign
exporters and other recipients turn over to their central banks for domestic
Yet these governments are forced to recycle
dollar inflows in a way that funds U.S. military policies in which they have
no say in formulating, and which threaten them more and more belligerently.
That is why China and Russia took the lead in forming the Shanghai
Cooperation Organization (SCO)
a few years ago.
The deficit does not stem merely from consumers
buying more imports than the United States exports as the financial sector
de-industrializes its economy. U.S. imports are now plunging as the economy
shrinks and consumers are finding themselves obliged to pay down the debts
they have taken on.
That’s the kind of "international equilibrium"
that U.S. officials love to see. "CNOOC go home" is the motto when it comes
to serious attempts by foreign governments and their sovereign wealth funds
(central bank departments trying to figure out what to do with their dollar
glut) to make direct investments in American industry.
That presumably means publishing a revised set
of balance of payments figures as well as domestic federal budget
The U.S. media somehow neglects to mention that the U.S. Government is spending hundreds of billions of dollars abroad, not only in the Near East for direct combat, but to build enormous military bases to encircle the rest of the world, to install radar systems, guided missile systems and other forms of military coercion, including the "color revolutions" that have been funded and are still being funded all around the former Soviet Union.
Pallets of shrink-wrapped hundred-dollar bills,
adding up to tens of millions of dollars at a time, have become familiar
"visuals" on some TV broadcasts, but the link is not made with U.S. military
and diplomatic spending and foreign central-bank dollar holdings, which are
reported simply as "wonderful faith in the U.S. economic recovery" and
presumably the "monetary magic" being worked by Wall Street’s Tim
Geithner at Treasury and "Helicopter Ben" Bernanke at the
So China chose a third way, which brought U.S. protests.
It turned the sale of its tangible company for merely "paper" U.S. dollars, which went with the "choice" to fund further U.S. military encirclement of the SCO. The only people who seem not to be drawing this connection are the American mass media, and hence U.S. public opinion. I can assure you from personal experience, it is being drawn in Europe.
(Here’s a good diplomatic question to discuss:
Which will be the first European country besides Russia to join the SCO?)
The U.S. economy can create dollars freely, now that they no longer are convertible into gold or even into purchases of U.S. companies, inasmuch as America remains the world’s most protected economy.
It alone is permitted to protect its agriculture
by import quotas, having "grandfathered" these into world trade rules half a
century ago. Congress refuses to let "sovereign wealth" funds invest in
important U.S. sectors.
The more "capital outflows" U.S. investors spend to buy up foreign economies’ most profitable sectors, where the new U.S. owners can extract the highest monopoly rents, the more funds end up in foreign central banks to support America’s global military build-up. No textbook on political theory or international relations has suggested axioms to explain how nations act in a way so adverse to their own political, military and economic interests.
Yet this is just what has been happening for the past generation.