Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: End of American Empire

Dollar Hegemony Decline Watch

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On September 17, 2024

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So, nice little chart here:

Seems… bad. At least for America and Europe.

Let’s lay this out:

  1. Most of what you want to buy you can buy from China, you don’t need to get it from the West, so why use dollars?
  2. China almost never uses sanctions or seizes foreign currency. The US often does. US dollars are risky, the right to use them can and is often taken away, and so often are the dollars themselves.

So why use the dollar, except that it’s still easier in some cases?

What happens when it’s no longer easier? The BRICS are spending a lot of time on an international banking system which bypasses the West and it’s allies (Japan and South Korea, basically). As that system becomes easier to use, why use the Western system or the dollar? It only exposes you to risk.

This is similar to what happened after the Huawei sanctions. Chinese firms saw the damage that was done to Huawei (they’ve roared back, but it was touch and go for a couple years.) The cry in Chinese business was “delete America.” If you bought anything important from the US you needed to find another source outside of the West, which for manufactured goods usually meant domestically, and for resources meant Africa, South America and Russia.

For a long time the way the banking system was set up you had to use the dollar, but more and more you don’t. And for a long time some key providers, like oil producers, would only take dollars, but now they’ll take Yuan.

So, again, why use the dollar when there is a safer alternative which can be used to buy or sell almost anything you want?

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China Continues To Crush In Science & Intel Falters In Chips

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On August 2, 2024

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Well, this is practically nail in the coffin news:

Meanwhile Intel is laying off 15,000 workers, slightly over 15% of its workforce and announced yield issues with its new “Meteor Lake” semiconductors. Its last two generations of chips have hardware problems which cause and crashes and have no software fix. (Buy AMD for your next computer.)

The CHIPS act was supposed to cause a rebirth of US chip manufacturing, but so far this seems unlikely. The US no longer has the necessary skills. Meanwhile, China is roaring on chips, taking over the legacy end of the market and pushing hard on the rest of it.

The end result of semiconductor sanctions is going to be that China will become the dominant player in semiconductors, a field which American allies dominate.

This wasn’t necessary. Chinese companies preferred foreign semiconductors before the sanctions: they sneered at domestic made ones and felt the quality was inferior, which it was. But what was done to Huawei told every Chinese company and China’s leadership that they couldn’t rely on foreign suppliers under Washington’s thumb.

A little history, because sanctions and CHIPS were aimed just at China.

Back in 1986 the US dollar was very high due to Volckers high interest rates. The great powers of the time got together and agreed to intervene to depreciate the dollar. The great loser was Japan, and the great winner in Semiconductors were Intel and Micron: Japan had previously been clearly in the lead. The Plaza accord later contributed to Japan’s crash, and the real end of its post war golden age. Doing so may have helped America, but it weakened the American alliance system’s overall power significantly.

CHIPS and sanctions can be seen as an attempt to return the lead from Taiwan and South Korea to America, but this is failing and it will also lead to American allies losing the lead.

As Kissinger once said, It may be dangerous to be America’s enemy, but to be America’s friend is fatal. This is especially true as American hegemony ends. America is cannibalizing or trying to cannibalize its allies: much of German industry crushed by anti-Russia sanctions, for example, has moved to America.

But America no longer has the real engineers (not software engineers) and factory know-how to scoop up cutting edge semiconductor production.

We’ll see if China, which is now more powerful than the US in every way that matters except deployed military, is better to its allies.

Smart nations will cut deals with the Chinese and re-align towards it if they can get anything close to a good deal. The West is going down and the decline will not be halted any time soon.

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Get Out If You Can. If Not, Prepare

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On July 16, 2024

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Starting in 2009 and especially after Citizens United, I’ve been advising Americans who can get out to do so. I recognize that many people can’t: you have to “shelter in place”, but for those who are able to leave America and haven’t, well, the advice is the same, but more urgent.

The US is no longer meaningfully a Democracy. The funneling of wealth and income to oligarchs continues unabated and even accelerated during the pandemic. Official economic statistics from the US are now almost entirely fantasy based: completely unrelated to reality due to how inflation and other statistics are “calculated” and due to the over-reliance of GDP, which is no longer tracking welfare.

The massive increases in necessities like food is a very very bad sign.

The possibility of civil war is real, and so is the chance of collapse. Nothing is going to get better for the majority of Americans; everything is going to get worse.

So, at the least, if you can get a second passport, do it. If you don’t have any passport, apply for one. If you can go somewhere reasonable and make a decent living, consider it. If you’re rich enough to set up a second citizenship and home, get it done.

Where to go is difficult. If you speak Mandarin and they’ll let you in, China’s not a bad choice. Avoid the UK unless you have no other options: Britain is in terminal decline. In general Europe is in decline and the chance of the Atlantic Meridian Overturning Current (AMOC) stopping makes it questionable for those who are younger or who have children, but while Europe is going down, the welfare state still exists and will take longer to go away, so long as you choose your destination carefully. (Obviously Greece is out of the question.)

Canada is trending right hard, and is “too close” to America, but if you can’t get anywhere else and have money or skills in demand, it might work for you. This is especially true if you’re healthy, younger and comfortable on the frontier, of which there is still plenty.

The truth is that there are no longer any completely “safe” choices. But there are places where government and society are more functional and more caring, and where the destruction of the welfare state (which includes, oh, universal healthcare, functioning power and sewage) is less far along.

If you have to stay and indeed if you’re in many countries, do what you can to improve your “grid collapse resistance.” Brownouts and blackouts and failures of water systems will become worse. A couple of big camping batteries + solar recharging may keep key electrical appliances running. Find some way to store or produce water and keep some surplus food around. If you’ve got power, water and a way to boil said water, something as simple as a lot of vacuum packed rice and beans can keep you going for quite a while.

In general, take measures. Assume that things are going to keep getting worse for the rest of your life. There will be some exceptions, but there’s no way the majority of people can or will avoid these trends.

Don’t sleep on this. Back in 2009 it wasn’t urgent, but we’re now at the point where local collapse or violence is a real possibility: we don’t know when exactly, but we do know the conditions have been met. Once that happens, when is hard to predict, but bad is dead simple to predict.

Dead being the operative word.

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The Dollar Is Impregnable & The West Will Always Control International Banking (Honest)

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On July 11, 2024

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What is geopolitical risk, you ask, and the Saudis answer:

Saudi Arabia warned it could sell off some European debt holdings in retaliation to a move by the G-7 to seize almost $300bn in frozen Russian assets, according to a report by Bloomberg.

The veiled threat was passed along from Saudi Arabia’s finance ministry earlier this year to some G-7 counterparts, as the group weighed seizing Russian assets designed to support Ukraine.

Saudi Arabia specifically signalled out the euro debt issued by France, according to Bloomberg.

Riyadh has been concerned about western efforts to seize the Kremlin’s assets for months. In April, Politico reported that Saudi Arabia, along with China and Indonesia, was privately lobbying the EU against confiscation.

Notice that Indonesia is also involved. China is less surprising, they know that freezing and even confiscation is in the cards for them when things heat up between the West and china.

China has been reducing its risk:

Edit: (Or perhaps they aren’t?)

No one wants to do business with nations that will simply take away their money. Freezing was bad, but normal. Seizure is not. Since no one seized or freezed America’s overseas assets when it invaded, say, Iraq, and no one ever seizes or freezes West European assets, it might be thought that this isn’t about “law” but about “power.” For that matter, why haven’t Israel’s overseas assets been seized?

The level of geopolitical risk from doing business in the dollar or using the Western banking system is just too high. Freezing, seizure and sanctions, plus the US applying its law extra-territorially simply because a transfer happened to go thru an American bank even though the sender and end party were both outside of America.

This abuse is long-standing, you can read accounts from the fifties, but it really picked up in the 90s. Indeed there’s an entire book, Treasury’s War, about the phenomenon.

And this is what all the economists and similar pundits who go on about how the dollar can’t be replaced don’t understand: that they are right that the costs of replacing the dollar are significant; that it’s hard, and that it’s not really worth it.

Except it is worth it, because if the cost of trade and money transfers goes up slightly under a non-dollar regime, and even a slight increase is massive when multiplied by the number and amount of transactions, it’s still worth it because of the massive reduction in geopolitical risk. And nattering on about how the Yuan can’t be used because the Chinese can’t accept the costs of using the Yuan is stupid: that’s not what the BRICS are trying to do: the idea is to create a central, multinational currency, and to simply use local currencies whenever possible, while avoiding the Western banking system entirely.

Everyone knows that the dollar and the Western banking system are guns, and that everyone who uses the dollar and the Western banking system are under those guns and can be hit at any moment if D.C. or Brussels desires it.

When this was hardly ever done, it was a risk worth taking. When China was the main industrial power who you could buy almost everything you wanted from, and the West was the only option for most technological goods, well, you had no choice.

But now nations see a way out from under the guns, and they’re going to take it, even if it costs them, because the potential cost of not doing so is catastrophic.

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If You Believe Either Biden Or Trump Will Halt Decline You’re A Fool

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On June 14, 2024

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There are those, even some smart people whom I otherwise respect, who think that Trump is a way to halt and reverse American decline.

This is delusional.

 

As for Biden, his claims to success are based on statistics that only a toddler or an economist would believe reflect reality, leaving aside the fact that he’s overseeing the loss of the US dollar as the primary trade currency, which will hurt the US worse than an Israeli shoving a red hot metal rod up a Palestinian civilian’s ass.

I’m on team tariff. I think they’re often a good thing. But tariffs alone cannot fix the US economy. America has too many economic pathologies. Without crushing the rich, dropping housing prices, making Private Equity illegal, forbidding share buybacks, ending stock options for executives, massive anti-trust enforcement and huge number of other policies, the US cannot take advantage of being hidden behind tariffs, especially when China is now producing more scientific and engineering advances than America.

People want hope. They need it. And they will find it, or what passes for it. We saw that with Obama, the ultimate neoliberal wannabe, who immunized bankers from their crimes and helped them steal millions of houses with fraudulent documents, then expanded fracking and bragged about, not just giving up the last chance to slow or stop climate change, but actually lighting gas on fire to speed it up.

Then Obama bragged about how much he had increased oil and gas production. Bragged.

No one is coming to save you if you are American, or, indeed Western. LePen will me a garbage fire. Starmer is one of the most mendacious neoliberal politicians of the past 50 years, an impressive feat.

If you want to do politics, you have to stop pretending that you can fix the major parties, and go third party. Yes, it’s a long shot, but it’s your only shot.

More realistically, national politics isn’t going to save your ass. You’re going to have to do it yourself, ideally with the help of other citizens. Perhaps thru a church, perhaps through a neighbourhood association, perhaps through a maker group: whatever, find a way to get like minded non-idiots together and support each other and start making the necessary changes so that you, your family and your friends have a better chance of getting thru the bad times.

It’s up to you. Climate change will not be stopped. My bet is that it is now into self-reinforcing growth. If it isn’t yet, it will be. The West’s hegemony is collapsing. As I have written repeatedly, Europe is going back to what it was for most of its history: a peripheral shithole on the edge of the Asian continent. The US is losing its empire and when it no longer had dollar privilege or a military that other countries are in terror of, Americans will find out the cost of sending their industrial base to China because if you can’t make it, other countries are going to demand a pound of flesh to send it to you.

Hell is coming and both Biden and Trump lead there, just by slightly different routes.

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Did The Houthis Hit The USS Eisenhower May 31st?

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On June 4, 2024

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Well, the Houthis said they did. And it would seem unlikely, except that immediately after the Eisenhower withdrew north at top speed.

Aircraft carries are incredibly difficult to take out, but it wouldn’t be difficult to mess up the flight deck and at a guess, that’s probably what happened.

On top of that “it’s been five days since the Ike’s regular twice-a-day cargo deliveries via C-2 transport have taken place.”

I don’t know if the Eisenhower got hit, but—its actions are rather suspicious.

If the Houthis can get in even a slight hit, or scare off an aircraft carrier, what do you think China, Russia, Iran or even Hezbollah could do?

Put me on team “aircraft carriers are floating ducks in the modern missile environment.” And since the US Navy is built around aircraft carriers, well…

The thing is that everyone who was likely to fight a war against America knew that the US’s big gun was aircraft carriers and they’ve spent thirty years figuring out how to defeat them.

America is a maritime Empire and it can’t even defend trade against a bunch of tribesmen.

 

Now it can’t even keep an aircraft carrier on station to try and protect traffic.

Another nail in the coffin of American Empire.

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