[Marxism] Analysis of the G20 Summit

peripatetic barmy_basket at yahoo.es
Fri Apr 3 11:40:14 MDT 2009

This is much better IMHO (from a newsletter for investors):

G20: US$ Funeral, US Failed Debtor
from the latest Hat Trick Letter by Jim Willie 
<http://www.goldenjackass.com/>. Extract:

"... Why is the G20 Meeting a turning point? First of all because the 
US$-based global financial structure is broken. In plain words, the 
USDollar is totally broken as the global reserve currency, fully 
discredited, and the anchor dragging down the national banking systems 
in scores of countries. Also, because the Elite G7 or G8 Meetings, where 
the banking power has been greedily and maliciously and jealously 
guarded, is replete with bank leaders whose countries are crippled by 
insolvent banks and outsized national debts. Who owns the largest 
portion of the G8 national debts? The G20 countries, the developing 
nations, the upstarts who up to now have owned zero voice in global 
banking, PERIOD! Imagine a bankruptcy hearing where the creditor (guy 
who owns the debt) does not have a seat at the bankruptcy court, has no 
attorney to argue on its behalf, and must listen to rigged outcomes from 
a rigged game. The global forces toward deep change have never been 
greater. Thus a turning point. Creditors have the option of simply 
refusing to purchase any more USTreasury Bond debt. To a great extent, 
that is what is occurring right now. The US responded last week, as its 
Federal Reserve announced $1050 billion in monetized USTreasury Bond and 
USAgency Mortgage Bond purchases. At least $1 trillion will be printed 
for monetized bond purpose each and every quarter from here onward, as 
is my forecast. *The USGovt will destroy the credibility of the 
USDollar, but at least offer lifeblood to the crippled USEconomy, at the 
cost of upcoming price inflation.* The United Kingdom has no such 
privilege. They suffered an important Gilt Bond failed auction last 
week, one which brought great embarrassment upon them.

Last week, China was highlighted at turning the global USDollar tables. 
They have begun to displace the US$ within their domestic banking 
system, in favor of the Chinese yuan. Actually, they will soon be 
issuing Chinese Govt debt securities denominated in yuan currency. Doing 
so involves wave after wave of conversion of USTBond securities into 
cash, then conversion further in to Yuan Debt securities, which still 
need a new name. How about Dragon Bonds for a name??? The Chinese will 
then wear and presumably use the great currency boot, since all 
economies that wish to purchase Chinese products must purchase Chinese 
Govt bonds!!!

The Chinese are also leading a movement to create an Emergency Fund for 
the Assn of Southeast Asian Nations (ASEAN), one which will assist in 
defense of any hotmoney attacks against a smaller Asian nation. In 1997, 
the Asian Meltdown was triggered by hotmoney attacks waged against 
Thailand and South Korea. *My personal belief is that the Emergency Fund 
will blossom into a pan-Asian Regional Bond Fund for economic 
development.* The Asian-only fund will essentially serve as a gigantic 
regional savings account, free from Western control and pressures, 
independent from Western currency risk, and operate as a regional 
economic development fund.

The latest big currency news is between the central banks of China and 
Argentina. They reached an agreement for a three-year, $10 billion 
currency swap, disclosed by the Chinese Central Bank Governor Zhou 
Xiaochuan. One can rest assured that their USTreasury Bonds will supply 
the funds. The move follows swap accords between China and Indonesia, 
South Korea, Hong Kong, Malaysia, and Belarus. The agreement broadens 
Argentina's access to foreign currency reserves in order to achieve 
stability. Argentina was excluded last autumn 2008 from the USDollar 
Swap Facility program created by the USFed for emerging markets, which 
were designed to aid Brazil and Mexico. Watch Venezuela and Iran be next 
for Chinese swap stations. *One can conclude that China is expanding its 
stations globally for creating the Chinese yuan as a global reserve 
currency in competition with the USDollar.* See the Bloomberg story 

Strange but meaningful additional challenges have come, these centered 
upon the Intl Monetary Fund. For years, the IMF has granted loans 
denominated not in USDollars but in Special Drawing Rights, which often 
function within various currency denominations, if not a basket of such 
currencies. The SDR formally is an international reserve asset already 
in usage. The SDR has been put in focus, if not under the microscope 
lately. *Russia has formally suggested that the IMF be used to establish 
a new global currency system, to replace the defunct and broken USDollar 
system, and to use the SDRights as a new formal basket for global 
banking and commercial settlements.* My belief is that Russia has used 
the concept as a straw man, just to place emphasis away from the 
USDollar. Once accepted, the concept can morph to another new currency 
suddenly. China has endorsed the SDR concept raised by Russia as well, 
to gain credibility.

My view has been consistent for months. Unless and until the foreign 
creditor nations distance themselves from a US$-based banking and 
commercial system, they run enormous risks. Their banking system, their 
financial markets, their economies, their standard of living, even their 
political stability, will all remain at chronic heightened risk. 
Alternatives are extraordinarily difficult, challenging, and daunting to 
design, construct, and implement. A system built after World War II was 
perverted in profound manner when in 1971 Nixon abrogated the Bretton 
Woods Accord in a single betrayal stroke. That maneuver was one of the 
most important violations of a treaty in modern history. It declared the 
United States as global financial dictator, enforced by a powerful 
USMilitary, aided by a large strong economy. It perversely invited all 
major economic nations of the world to join in managing free money off a 
printing press, of course with inherent risk.


For many years recently, the G20 Meeting has served as a forum for 
paying mere lipservice to the raft of foreign creditor nations. They 
have been enlisted by the G7 and G8 countries to continue to purchase 
USTreasury Bonds, UK Gilts, even German Bunds. They have been invited to 
invest in US, British, and European companies, and to become partners in 
major international commodity supply corporations, including energy 
is the revolution triggered in London this week.

For the last decade, China has been given an insult at G7 and G8 
Meetings of finance ministers. They have been guests, who essentially 
sit in the hallway quietly until invited to enter for briefing sessions. 
The largest creditor nation in the world must sit in the hall while 
debtor bankers make decisions, issue orders, change structural 
procedures, and pretend to be in charge. Never in financial history have 
debtors remained in power, and this is no exception.

* Creditor nations demand a more solid reliable global reserve currency, 
or currencies. * They demand some hard asset component to the new 
reserve currency to be installed, like one backed by a basket that 
includes at least gold and crude oil. This would be sufficient to lift 
the gold price substantially, far above its current range, and far 
higher than a mere $1000 per ounce. The Chinese are the clear spearhead, 
uninhibited by US threats. The crowning blow against the USDollar 
supremacy will come when Persian Gulf nations install a new hard asset 
currency. At that time, one quarter of the world will pay for crude oil 
in a hard asset currency with a gold component. That is a spike in the 
heart for the USDollar founded in a unipolar world. The G20 Meeting 
intends to make the statement that the unipolar world is dead on the 
financial stage. That is their agenda. The US agenda is to preserve the 
system through reform.


The clear challenge facing the G20 Meeting is to bring awareness to the 
United States that the system is broken, that the US is no longer 
dictating policy, and that the US must integrate many more countries 
into important global banking bodies. However, much bigger tasks come. 
The United States must accept that the USDollar can no longer function 
as before, cannot serve as the primary and only global reserve currency, 
and must share reserve currency status with other regionally crucial 
currencies. *The new multi-polar currency world must be hatched and 
launched. Defiance and stubbornness by the USGovt can no longer be 
tolerated. The United States admits to operating a Shadow Banking System 
that is abhorrent to any credible or justifiable system.* THE JIG IS 
UP!!! If the USGovt does not cooperate with alternative global reserve 
currency usage, then it will be bypassed, with associated cost. That 
cost will be lost respect, lost creditor cooperation, and certain 
economic consequences within the USEconomy. If not careful and 
cooperative, the US will find itself increasingly isolated, which is 
precisely my forecast. This direction is consistent with a shove down 
the staircase into the Third World, where credit shortages and supply 
shortages and poverty persist.

* The quintessential problem, plainly stated, is the United States Govt 
leaders and officials insist on sitting apart from the debtor nations. * 
They must join the debtors, and be treated in similar fashion. They must 
accept terms dictated to them. They must accept and endure a much lower 
standard of living. They must institute policies to rebuild the 
industrial base of the USEconomy. *They must write off trillion$ in bad 
debt, including some USTreasury debt.* They must liquidate failed banks 
and corporations that are not in the least functional or competitive. 
They must redirect priorities away from military and defense, and toward 
capital formation, industrial production, and job creation, even if 
initially at prison facilities. The entire economic structure and 
financial structure has suffered a death experience, one not properly 
acknowledged. In my view, the US banking system died in September 2008, 
never to be revived from its terminal insolvent state. In my view, the 
USEconomy suffered a death experience, but with a lagged time period. We 
are witnessing the death now. Its downward spiral is unmistakable. Each 
month shows worse data than the previous. The degree of doctoring data 
has escalated to unseen levels, like with seasonality adjustment that 
amplify raw data many-fold, not just many percent.

* My analysis has frequently described over the last two to three years 
the deep risk of internal dynamics called vicious cycles with nasty 
feedback loops. * We are witnessing them now in full force. The bank 
losses have not ended, not even close. Prime mortgages are defaulting. 
Commercial mortgages have finally begun to default. Job cuts, home 
foreclosures, and retail shutdowns result in feedback loops. The 
underlying millstone remains US housing prices, down a record 19% in 
January. The jobless rate is 17% if one counts those without jobs. An 
expected 125k retail shops are expected to shut down in 2009. Aid to 
mortgage holders on Main Street stands at a trickle. The bankers must 
prevent revelations of trillion$ in mortgage bond fraud and counterfeit, 
so the mortgage assistance is mostly talk. And Geithner wants the power 
to kill whichever financial firms he sees fit. Things are careening 
downhill. The USDollar deserves no respect. Gold deserves it instead. 
Foreign creditors harbor growing gold accounts and greatly dislike what 
the US does to suppress its price as it continues to hold it in 
contempt...." Source <http://www.goldenjackass.com/>


Jscotlive at aol.com wrote:
> _http://counterpunch.org/wight04032009.html_ 
> (http://counterpunch.org/wight04032009.html) 
> ________________________________________________

More information about the Marxism mailing list