USA and EU conducting negotiations to join their markets (TTIP). Though it may sound reasonable at a first glance, EU has to consider several facts before doing so, in order to avoid a decrease rather than increase of overall quality of life.
Similar to the problems which occurred when less developed eastern countries joined the EU, much bigger problems may arise when USA and EU will join its markets, since the differences in culture, politics, legal frame work, environmental consciousness, sustainability approach, political system, and last but not least the difference of political agendas and the global roles two entities are playing may lead to serious problems for both, especially for the EU.
Why that is this way, here some insight:
Undoubtedly, both partners have a highly developed economies. But it should be never forgotten, that the US’s currency is the main world reserve currency as of now. OPEC sells by agreement it’s crude oil for US Dollar only, as well as most of commodities are traded in US Dollar only. Therefore, the US’s role in the world economy is two fold:
a. As a normal economy, competing with others for market shares, and
b. As a currency middle man, which has positioned it self on the supra national level between the respective trading partners.
It has the effect, that the demand for the US Dollar on international markets is by far higher, than if it would be expressed by the real strength of the US economy only. After all, every country has to by the US Dollar first before conducting an international transaction.
So far so good, but what effect has it on the US economy and its political system?
Taking a look at the economical system one can find advantages as well as disadvantages for a country, which provides for the world the main reserve currency.
The disadvantages were mentioned already by the French economist Triffin in the sixties.
Since the US in its role has to supply the world economy with the needed liquidity, and the world economy is growing annually at a rate of ca. 3-5%, the United States are running annualy a deficit of this magnitude since 1971. This is the same year, in which the gold standard for the US$ was dropped.
Therefore, in order to maintain the growth of the world economy based on world wide increase in productivity and population growth the US is supplying the needed liquidity by exporting it’s currency.
It happens by importing more goods than exporting.
The dis-balance in trade happens automatically, since in its thirst for the reserve currency number one the US Dollar the world economies have to under price US American producers to gain market shares within the US in order to earn the Dollar.
Therefore, the US manufacturers are always on the lost side in this battle, unless they have a unique product. This can be seen by the fact that though the US economy is still producing many goods, the manufacturing base suffered a tremendous decline in recent decades.
On the other hand, the fact that the world holds its reserves in US Dollar has contributed to a raise in financial sector in the US economy – which expanded far beyond the basic demand of the US economy and serves now both, the USs and much of the worlds demand in this regards.
This over extended financial industry is at risk to get a substantial blow in case another currency, be it Euro or Yuan, would some day become to a more formidable competitor.
Another impact of the “artificial” strength of the US Dollar is the access of the US government and its whole economy to those extra funds other economies simply don’t have.
As described above, this is based on the middle man position the US economy has as a provider of the main trade currency world wide.
It’s like a house hold of a rich person in comparison to a normal house hold. Both will have the essential features a house hold needs, but in addition the rich one will have several more expansive cars, better alarm system, will be able to travel more, may have an private jet, and afford all other goodies normal house holds could not afford.
This fact explains many inconsistencies the USA system reveals. It affords for it self in a seemingly illogical way a whole array of inefficient systems. One can see the ineffective health system, which spends almost three times more per capita, than in other industrialized countries.
The legal system, the educational system, the energy efficiency, the military, which is more expensive than the armed forces of the entire rest of the world together, the millions imprisoned US Americans – ten times more that in other countries! They all need to be be fed and contained in highly expensive facilities.
Another side effect of this status is the wrong image it provides for the world – it shows the US managers and economy in much too brighter colors!
Many positive results attributed to the so much glorified entrepreneurship and flexibility of the American Spirit is in fact the result of much easier access to the credit market due to the described over flow with foreign capital and many other advantages resulting from abundance of funds.
Since the world is flooding the US economy with its Dollars to be invested for, it is more opportune for the US political class to spend this “easy” money domestically instead of squeezing the national subsystems in the needed economy mode for better competitiveness, which would hurt it’s own folks on much higher scale, and diminish the ability lavishly to finance science, NASA, the overly expanded military, the ability to influence international politics by funding allies, etc.
One can say, that the US is keeping the social peace in it’s highly spoiled society by subsidizing almost the entire system by this extra income other nations simply don’t have.
This is definitely an undue advantage in a competitive market.
This development has lead over years to a high degree of dependency of the US economy and government to the established constellation of the financial world market.
As a consequence one can conclude – if the US Dollar would loose its attraction as a main reserve currency world wide, the US economy would loose its status as a world power right away.
The degree of the implosion can only be estimated, and it will be not only significant in terms of numbers expressed in US Dollar, but will make the deficiency in production capacities which were lost to other countries right away eminent.
This shows in the same token the main motivation for all deeds of the US foreign policy since WWI:
To replace the UK Fund as a main reserve currency, and since WWII – The maintenance of the Status Quo!
Though this conclusion may not be as surprising for many informed readers, it is also fact, that the main players in the US political system are very well aware of this situation and use the means at its disposal to keep the system in place, or to prevent the collapse of it if signs of weakness appear.
One may ask at this point what keeps the US Dollar in its role as the main reserve currency?
Without going to deep in history we may identify several stadiums of different pillars of the US Dollar dominance:
At first it was the accumulation of the gold reserves during WWII – On a big scale, the US financed the German industry after Hitlers empowerment in 1933, which lead to a destructive war on the European continent to the advantage of the US.
Further more, not only continued the US industry to make profits during the active phase of the war by running big part of Nazi Germanys corporations, which was controlled from the neutral Switzerland, like GM (Opel), and many more, it also supplied the allies in the famous Land and Lease agreement, which lead to an accumulation of 80% of all world wide gold reserves in the US after WWII (Edwin Black, Nazi Nexus).
After WWII the US, based on the gold reserves it had accumulated, dictated to the world the acceptance of the US Dollar to become the main and only reserve currency, which was based on gold (Gold Standard, Bretton Woods system). (Only Stalin rejected this notion, which turned the former allies in to foes and the need for the Soviets to keep a buffer zone around its borders, which lead to the encapsulation of east Europe, division of Germany, with all its unfortunate consequences).
According to the Bretton Woods agreement all other western currencies were bound to the US Dollar by +/-3%, which the US started to exploit right away by financing the Korean war with the printing machine.
This lead to the necessity of the western allies to purchase the freshly printed US$ from the flooded financial markets to maintain the 3% corridor agreed upon.
However, soon after the European countries began to complain about the accumulations of huge amounts of US Dollars in their Reserve Banks and demanded from the US to pay out the guaranteed gold equivalent for the US Dollars according to the Bretton Woods agreement.
Not surprisingly the US administration canceled one sided the Bretton Woods agreement and the Dollar became to a FIAT currency since 1971 (Nixon Shock), means it was not backed up by gold any more.
In a second phase of the US Dollar dominance, in order to keep up the demand for the US Dollar still, the US closed an agreement with the OPEC, which committed it to sell crude oil for US Dollar only!
In exchange the US guaranteed the safety of the dictatorial regimes in Middle East – that explained why Saudi Arabia is a no go zone for Amnesty International, Green Peace, and all other NGO’s which supposedly promote equality and democracy every where else.
Further more, to enhance the discipline of the Western European countries the USSR was portrait as the Evil Empire, which drives the scared nations in to the arms of NATO and therefore US military industrial complex and keeps the US Dollar as an indispensable instrument of the world economy.
History research however shows, that it was the US which started the cold war by bombing the civil population in Japan with nuclear weapons to scare the USSR, and by planning to attack USSR and China with nuclear weapons. Only the totally unexpected acquisition of the same weapon by USSR in 1949 prevented the catastrophe (Untold History of the US, Oliver Stone).
After the USSR dissolved, Russia became the escape goat, despite becoming a democracy with a capitalistic economy, yet again.
This all happens in the same context mentioned above – the places change, the motive and pattern stay, be it Georgia, Ukraine or Syria.
Libya was destroyed because Gaddafi planned to introduce a gold based currency in Africa.
Iraq was invaded because Saddam started to sell crude oil in Euro. The list can go on and on.
Obviously this kind of political agenda is not very well compatible with the spirit of the US population, who are expecting their government to export freedom and democracy.
In deed, in order to be able to pursue its main objective to defend the US dollar position in the world the US government has to do some nasty things.
Deeds like financing extremists in Ukraine in order to over through the shaky government and to provok, and to harm, and to contain Russia.
Therefore, it came as it had to come – the US administration is dissociating from it’s electorate to hide its deeds more and more.
The political system is offering little choices, new, fresh political parties are being muted, the laws and regulations allow for concentration of the political forces in the industrial/political establishment.
Media is being tightly controlled and are not allowed to touch above mentioned topics in main stream, which “Undermines National Security”, means to seriously cover the deeds of the US government.
CIA, NSA and many other services more are spying on every one and every thing to detect and if needed to intervene on time.
It may happen by influencing decision makers or their election, be it in the USA or abroad, to name just a simple way of manipulation.
Same is true for control of media, which is dependent on cooperation of the government and major corporations.
Bloggers and late night AM radio can cover controversial topics in so called talk radios shows – from fantastic Conspiracy Theories up to 9.11. fallacies and moon landings, which creates a lot of noise and confuses most of the audience to a degree, that they don’t understand the most simplest concepts of the US foreign policies.
Similar to the old Rome, the people are fed well and are receiving entertainment en mass, meanwhile CIA agents are helping to over throw the legitimate government in Ukraine and assisting the “regular” Ukrainian army in fighting unarmed civil population with tanks and mortars.
Seeing this picture may make some European politicians wonder whether they want to sit with such a companion in the same boat!
As Nuland said recently “Fu..k the EU” – why did she say it?
Possibly because the EU doesn’t want to play these games – And still it does, considering the European main stream coverage of the Ukrainian conflict and the absolutely cynical blame game on Russia and it’s president Putin.
One can only imagine which games the EU will have to play once the common boat takes of and will be floating in mid of the ocean.