The dollar is fair game coming out of the G20 meeting of finance ministers. In morning London trading, the dollar is losing ground across the board, most decisively against the yen. … The dollar's weakness … stems from the declaration of "no currency wars" coming out of the G20 meeting. Loosely translated, that means countries won't intervene to tamp down their own currencies. At least not for a little while. – Wall Street Journal
Dominant Social Theme: Trading continues. Life goes on. The dollar goes up and down.
Free-Market Analysis: The dollar was knocked down on Monday, apparently by the perception that BRIC countries would not be buying dollars to weaken their own currencies. This is of course a kind of knee-jerk professional trading reaction. But most traders work for big bank currency desks, so what can you expect? The currency marts themselves are entirely artificial entities; the idea is to give people a perception that fiat currencies are worth something – worth trading anyway. Sub dominant social theme: Take the paper money and run.
Something much bigger is going on nowadays, however, bigger than the fiat currency trading this article (excerpted above) alludes to, bigger even than the idea of a single, global fiat currency. What is going on in our estimation is that the Western power elite itself is struggling and even failing. The Anglo-American axis has had the idea that it could soon, or fairly soon, create some sort of Western-based global governance, but that animating goal seems to be receding faster than a Eurozone recovery.
Now there are plenty of conflicting reports about the health of "money power." And here at the Bell we combat them as best we can. Money power in the commonest definition is indeed WESTERN. Even if one goes back a thousand years, one still finds the West (and Italy) at the heart of money power. Go back 2000 years and you will find it in Rome, launching a hostile takeover of Christianity (in our view). Money power, of the kind we discuss, has always been Western, or at least for several millennia.
Lately, the idea that money power is not a regional entity has emerged. Read any article (of a certain kind) on the Internet, and you may find the suspicion that Western money power runs Asia and China, especially. This is a kind of myth-making in our view; we find it present in the idea that Western money power has sought to lose its wars in Iraq and Afghanistan. Every loss handed to money power, in this analysis, is a victory. Every problem is merely a slyly configured solution. Every difficulty, every challenge, every setback is planned for some nefarious purpose.
But as we have pointed out, sometimes a defeat is just a defeat. In Afghanistan, the Anglo-American axis that has pursued this war of Islamic domination is making a last ditch effort to intimidate Pakistan into invading Pashtun/Taliban strongholds along the border. While the Pakistani leadership is making cooperative noises (and may even launch an operation), we have trouble seeing how it will work out in the long run. The Pakistani elite has made it plain that it needs the Taliban more than it needs the dubious goodwill of the West. And what is money power, ultimately, to do about it?
No, this is not the 1800s. The Pakistan Punjabis, all 120 million of them, are united mostly in one thing – a dislike, even a hatred of the West and its murderous incursions. In fact, there is nothing that the West CAN do about it, short of invading Pakistan itself (a terrible idea in our view). The British learned this 100 years ago when they slunk out of Afghanistan after failing to conquer the Pashtuns. That was the high water mark of the British Empire. They have tried again, in our view, using the US as the proxy, and the enterprise has fared little better. Perhaps the tribes understand the true vision of the Western elites and want no part of it. We don't blame them; in fact we would suggest this is a far bigger truth than whatever "war on terror" the West claims to be fighting in that tortured land.
And now the Anglo-American axis has embarked on its most ambitious battle, which is to stitch together a global currency using the resources of the BRIC countries. But the trouble the axis is running into, and it is an obvious trouble, is that the axis does not control the decision-making process of the BRIC countries. For instance, we have read much speculation about how India could build an anti-nuclear missile defense that would give it primacy over US armaments. Brazil didn't even bother to attend the recent G20 meetings and China, for all its publicly accommodating face, has bluntly refused to abide by any numerical cap that would hinder its ability to respond to market forces with appropriate revaluations.
There are other problems that the Western monetary elite has run into in the past two years, especially. The global warming promotion that was supposed to result in some sort of international carbon currency is not seemingly going to come to any sort of near-term fruition. It was supposed to result in a UN tax – the first of its kind – but perhaps that will not take place either. The other themes that the warming promotion was supposed to spawn – food and water scarcity – have seemingly made little headway as well (at least for now) because there is no justification for them. The global warming theme was to provide the rationale but it is likely in terminal decay.
It gets even worse. A basic building block of elite promotions was total control over the mainstream Western media. But in the 21st century, the Internet has entirely unraveled that control. If the 20th century was like a yo-yo winding up, then the 21st century is like one spinning in the other direction. Every single historical untruth foisted on a writhing Western population during the 20th century is coming unwound now, from the progressive "heroics" of Woodrow Wilson and the two Roosevelts, to the installation of the Keynesian financial system itself after World War II, to the larger Pax Americana.
The Internet is full of all sorts of debunking, and as the economic situation continues to worsen, the anger rises and the promotions put in place by the Anglo-American axis – whether historical or current – continue to lose credibility in our humble view. The response of the elite, especially in America, has been to reset the Hegelian "goal posts" of the promotional conversation. "Conservative" media figureheads such as Sarah Palin and others have adopted many of the talking points of the Internet-inspired free-market conversation now taking place.
But as the truth-telling of the Internet has continue to make inroads, the elite has found itself in the ludicrous position of in a sense endorsing all but the most radical free-market thinking. In other words, in order to maintain credibility, the elite has adopted so many of the more radical libertarian ideas that its positions are not often indistinguishable from the rhetorical perspectives it is trying to co-opt. This is not, one would think, a satisfactory situation for an Anglo-American axis that for at least 150 years has sought to undermine the idea that civil society can exist without the murderous beneficences of the state.
But it is still worse. Only 60 years ago, the Anglo-American axis controlled the greatest empire ever known to man. After World War II, the globe was virtually prostrate at its feet. An entire global infrastructure was initiated at this time. The BIS, the World Bank and the IMF were all reconfigured and positioned around the crown jewel – the United Nations itself. At the same time an obscure trade-treaty was initiated in Europe, one that was to become, of course, the European Union.
But something happened on the inevitable march to full globalization under the control of the Anglo-American axis. The Internet appeared – first merely an annoyance and now a full-fledged and seemingly uncontrollable (pointy) weapon aimed directly at Leviathan. Like the Gutenberg press before it, it has entirely undone the culture of control that was so painstakingly wrapped round the world after two world wars. What is taking place today in our view is truly a New Enlightenment.
We realize this flies in the face of the doom and gloom that propagates itself within the generous confines of the alternative 'Net press. But in fact, the old order is collapsing just as we have predicted for a decade now. Of course, we are well aware that the Renaissance, the Reformation and the Enlightenment were not entirely peaceable movements. But here is another point: For whatever reason we sense a certain weariness affecting the Western elites. Many of those in vanguard, for whatever reason, seem to be old men and the younger ones meanwhile may be slightly abashed at how savagely the veil of secrecy has been ripped away from money power. They read the Internet too.
So perhaps the power elite will take a step back – and perhaps that retreat will be less bloody than resigned. We don't know of course. How are we to know? It is all speculation based on pattern analysis, creating a paradigm and then applying it over and over to the real world to see it if it holds and is, in some sense predictive. Hey, that's what we got! We apply it every day.
We watch. Here's Timothy Geithner, the Treasury Secretary, pursuing various ranking members of the Chinese communist party around the world. Watch Timmy run. His grim mission: harry the Chinese into voluntarily raising the value of the yuan. He pursues and pursues. He talks and talks. (He plays basketball with his hosts and hits three-point shots.) But he has no way of imposing the Anglo-American vision of how the world should work. One hundred years ago, the Anglo-American elite dominated a prostrate China, but that is not the case now. China has for the most part always gone its own way. Like Islam, it is not especially permeable to Western advances, except occasionally under duress. The time that Western elites could intimidate China militarily is probably long gone.
So what is the West to do? Wall Street banks scramble to settle the Chinese business transactions in yaun; the alternative press is abuzz with reports that the yuan will therefore take over from the dollar as the world's reserve currency. This strikes us as somewhat improbable; more revealing of the elite's desperation than some nefarious plan to replace the dollar with Chinese paper. It begs the question of why India, Brazil and Russia would cooperate with China in so strengthening the yuan.
In fact, what is going on is fairly simple in our view. The West is losing control of the global economy. Just as it is losing in Afghanistan, so the Anglo-American elites are losing when it comes to the great game of economic domination. The sad thing is that only 60 years ago it seemed as if nothing could stand in the way of Western elites.
But the point then, as now, was not to build a civil society but to plunder and dominate – first its own countries and then the world. This the Anglo-American axis has been doing with relative efficiency for the past half century. But unfortunately it seems that it has mostly undermined its OWN middle class. It has raped and ruined its OWN Western economies. It has miscalculated. And now it faces the BRIC countries without the resource base it needs to impose its will on such increasingly powerful opponents. The irony is blinding.
Money power, as we (and others) define it and track it, is ubiquitously Western. It is the West that has engaged in wars of domination. It is the West that has had the ambition to bestride the world and dictate all its thoughts and moods. But now Western money power is greatly weakened. It has been undermined from within by the truth-telling of the Internet and by a variety of external (free-market) forces that it did not anticipate.
And yet … China is no more capable of running the world than India, Russia or Brazil. The era of fiat currencies, in our estimation, may come to an end sooner rather than later. We are surprised, in fact, at how fast events are moving. But in our view there likely will be no grand deal. We cannot see the world's fractious leaders agreeing to a single IMF basket of currencies; these are players who cannot even agree on coordinating interest rates.
We have maintained for a decade (and now for more than two years on these modest pages) that the world's Pax Americana might simply degrade over time. At some point, China or Russia could decide to start to back their currencies with gold or gold and silver. The movement could spread, a defacto gold standard eventually evolving. It's not something the increasingly desperate elites of the West would seek, of course. Not after spending a century trying to build a Western-style New World Order. The 20th century was all about structure. The 21st is about entropy, perhaps – and increasing freedom as a result. That's our best guess, anyway (right now). We could be wrong.