Sunday, November 07, 2004

An intriguing counter-balance emerges

The UN, and its predecessor League of Nations were based on two key assumptions. First, that "power" was defined in physical and military terms. Second, that more than one major power exists in the world, each acting as a counter balance to the other.

Today, we see ourselves looking at a world where the United States is the sole remaining 'superpower' state. This, along with the fracturing of other power blocs into small, bickering states that seldom agree on the time of day, much less how to counteract the overwhelming clout that the US has emerged with.

At first blush, this seems to be all too worrisome a prospect, and given the hawkish nature of the Whitehouse administration this past 4 years, those that worry about the rise of the American Empire seem well-justified.

However, America's heavy-handedness in the world has come at a price. The US Federal Deficit for the 2004 fiscal year threatens to approach $700 Billion (USD). Deficit at the end of a year rolls into a country's total foreign debt. Even the US, with its mammoth economy cannot afford to extend its international debt indefinitely.

China, now in possession of the world's fastest growing economy, may have just placed the world on notice that it intends to exercise its political clout. It has asked that the Iran "file" not be forwarded to the UN security council yet.

Now, one looks at China, and says - well, they're a developing nation; they have all these social problems etc. However, China has _MONEY_, and lots of it. Recent discussions around China's "Minmetals" state corporation purchasing Noranda, and apparently purchasing interests in Australia speak to a country with some serious cash to throw around.

In several dimensions, this is interesting. China allegedly holds a sizable chunk of the US deficit in the form of US Treasury Bills. The American government is in the position that sooner or later, someone is going to start using the debt held in foreign hands as a club for diplomatic maneuvers. Since few nations pose a serious military threat to the US, the only plausible threat that they will listen to is financial.

Can you imagine the conversation between the American State Department and a foreign Diplomat:

[SD]: If country xxxx doesn't put down its , we'll go in and remove that government.

[FD]: Ah, very good Mr. Secretary. I applaud your resolute desire to ensure the safety of the world.

[SD]: I'm glad you agree.

[FD]: But, if you invade country xxxx, we will be forced to call in $X billions in loans that we hold.

[SD]: You can't stop me from doing what I damn well please!

[FD]: Yes, but if your foreign debt is suddenly subject to demand repayment, where do you think you are going to find the funds to prosecute another war?

[SD]: The American Economy is strong, we can afford it.

[FD]: It might be strong, but the last several years have run up deficit and debt. That suggests an economy living beyond its means.

...


Perhaps, we are moving into an era where cash is the weapon of choice in foreign affairs, not nukes.

No comments:

Collective Punishment

Ever since Pierre Poilievre opened his mouth and declared that Trans Women need to be banned from washrooms and locker rooms , there's b...