THE END OF THE POST-WAR WESTERN ALLIANCE
by Gary North
The post-war Western alliance, as incarnated by the
United Nations, is finished. Its future is as shaky as Ted
Turner's investment portfolio. It needs life support. I
can honestly say that I never thought I would see this.
This week, there was a joint declaration by Germany,
Russia, and France that they will not permit the Security
Council to support the USA's war in Iraq. France and
Russia possess a veto, either of which can stop the
Security Council from taking action.
The mainstream press has not commented on the
historically unprecedented implications of this joint
statement. Up until the Cold War, the Franco-Russian
alliance had operated to keep Germany isolated. Both sides
preferred a two-front war for Germany. Now, all three are
acting in concert to challenge the legitimacy of the USA's
foreign policy in the Middle East. The Great Game of the
Middle East has entered a new phase.
Secretary of Defense Donald Rumsfeld a few weeks ago
dismissed the Franco-Germanic alliance as irrelevant.
Germany and France are part of the "old Europe," he said.
The "new Europe" is central Europe, he said. Who is he
kidding? Central Europe is a collection of nearly bankrupt
ex-Communist nations with little money, no armies, and a
crumbling infrastructure. It is rice-bowl Europe. On
their borders is Russia, which is still armed to the teeth.
The fact that these ex-Soviet satellite countries are
willing to support us verbally means about as much as the
support of Spain and Italy.
They are all part of old Europe. Old Europe is white,
ex-Christian, Enlightenment rationalist, and shrinking
fast. Italy and Spain are the models of its future.
Neither country has a reproduction rate above 1.5 children
per family, when 2.1 is necessary to maintain a stable
population. Even these culturally suicidal birth rates are
made higher statistically in both countries by the presence
of millions of Arab immigrants, who have large families.
Both countries will be Islamic in a century if present
birth rates continue.
If the European Union opens its collective border to
Turkey next year, when the vote is scheduled, Germany will
be Turkish within two centuries. There has been a Turkish-
German alliance for a century. The Germans trained the
Turkish military, beginning before World War I. There are
something in the range of 2.5 million Turks living in
Germany today.
Old Europe is dying Europe. All of it: east, west,
and central. The population statistics in Pat Buchanan's
book, THE DEATH OF THE WEST, are irrefutable. The New
Europe is Islamic, and we are about to go to war with its
cousin.
THE UNITED NATIONS
The United Nations never had any independent power.
To the extent that it had the ability to take action, it
could do so only under the auspices of the United States,
which then covered its foreign policy with the fig leaf of
international support (e.g., the Korean War). Now, that
fig leaf is gone. The UN no longer serves the interest of
American foreign policy. So, it's history.
As an anti-UN conservative, I am shedding no tears. I
always appreciated the John Birch Society's slogan, "Get
the US out of the UN, and the UN out of the US." But
understand where I am coming from, as they say. I am an
anti-Rockefeller, anti-Establishment conservative. When
the Rockefeller family donated land to the UN on which the
UN's facilities were then constructed, I saw the making of
an alliance against American national sovereignty. The
Rockefellers have been internationalists from day one.
I am not just an anti-internationalist. I am a non-
interventionist. I don't see the United States as the
world's policeman, any more than I see it as the world's
welfare agency. I have been ideologically allied to the
Taft wing -- or feather -- of the Republican Party. We
Taftites have always hated the UN because we see it as a
cover for the USA's getting involved in places where
America should never have been involved. Besides, the
Soviet Union had too much say in the Security Council to
suit us. It had a veto. Russia still does.
Today, the anti-Taft Republicans -- the Eastern
Establishment, Rockefeller, oil-industry Republicans -- are
finding that we anti-UN Republicans were right: "You can't
trust the UN." It took them a long time to figure this
out. At long last, the UN is blocking the plans of the
Eastern Establishment, Rockefeller, oil-allied Republicans.
So, we Taftites stand on the sidelines and yell, "We told
you so." Nobody listens, of course, but we deserve a
little fun every fifty years or so.
To make things really ironic, the person representing
the Establishment, George W. Bush, is a member of Yale's
secret society, Skull & Bones. So is his father. Why is
this so ironic? Because Robert A. Taft was also a
Bonesman. So was his father, President and Supreme Court
Chief Justice William Howard Taft, whose father, Alphonso
Taft, was the co-founder of Bones in 1833.
American political history is confusing until you view
it as a power-sharing oligopoly among about 300 families,
whose screening agents, the admissions committees of Yale
and Harvard, battle for control over the future of the
country against the admissions committees of Columbia,
Princeton, and Chicago, who are always trying to muscle in
on New England's turf. These universities recruit the next
generation of hirelings. The concept of the American
meritocracy is a convenient fiction and grand illusion. It
keeps corporate Vice Presidents satisfied, and the
neoconservatives, too.
[Note: The best book on this hierarchy is Philip
H. Burch's 3-volume study, ELITES IN AMERICAN
HISTORY, which traces family connections from the
Revolutionary war to the Carter Administration.
The only book I have read that gives plausible
evidence that the Old Boy Network is facing real
competition from the meritocracy is David
Brookes' BOBOS IN PARADISE, but he makes clear
how the game was played until about 1960, when
Harvard raised the SAT minimum score to get in.]
THE END OF INTERNATIONALISM
We are now seeing the disintegration of
internationalism. The very ideal is dying. The colonies
are asserting themselves. Some of them are buying weapons
that could challenge the Western oligarchy. That's what
the howl over WMD is really all about: the fuzzy-wuzzies
are about to get Gatling guns. Some of them already have:
the ones we are polite to. Diplomacy is what goes on
between nations of equal firepower or who have alliances
with nations of equal firepower. The oligopoly with the
weapons seeks to maintain a closed club. Such in the
history of weaponry.
The post-war rise of Asia was foreseen by the
internationalists in 1945, but they bet the farm on Japan,
which is also an oligopoly. Five families controlled the
country, 1868-1945. The best book on this is Carroll
Quigley's TRAGEDY AND HOPE (1966). (Quigley taught Bill
Clinton history at Georgetown, a fact that Clinton
mentioned in his 1992 acceptance speech at the Democratic
Convention.) Today, there are a few more families, but the
system is essentially unchanged.
The internationalists' bet is turning sour. Japan's
banking system is close to collapse. China, Japan's
ancient enemy, has replaced Japan as the central nation in
this century's Greater East Asia Co-Prosperity Sphere.
To put restrictions on Asia, the Western alliance must
control the oil spigots. This goal is what is now driving
the Bush Administration. When Ghadaffi stole Bunker Hunt's
oil wells in 1971, he fired a shot across the bow of the
West, whose oil companies controlled the distribution of
the Middle East's oil. The West did nothing. OPEC saw its
opportunity. The OPEC price hikes of 1973 and 1979 made it
clear that the Arabs and Iranians would henceforth take the
lion's share of the oil income.
Their big problem was where to invest this income.
They let Western banks do this for them. Then they bought
big cars, set up college scholarships for selected students
from the masses, and generally became dependent on the
West's production system. Now they are trapped by their
own social welfare states. They are dependent on American-
produced spare parts for their military. They can do
little to resist the United States, which is coming back
into the region to extract those lost oil profits.
What Quigley called the Anglo-American alliance is
about to smash its fist into what I have called the mother
of all tar babies.
321gold.com
France and Germany see what's coming -- an Islamic
reaction -- and have opted out. Russia has joined with
them. Regionalism lies ahead: Asia, Europe, and the
Western hemisphere. This is David Rockefeller's vision,
the Trilateral Commission, but without the hoped-for
cooperation. The regional blocs that he forecasted a
generation ago as inevitable are now going their own way,
just as he feared they might. The original regional
alliance -- the United States and Great Britain -- still
has a special relationship, but the large continental
European powers have officially broken ranks.
The glue that holds the system together today is
fractional reserve banking. The Bank for International
Settlements in Basle cleared central bank accounts all
through World War II. For central bankers, world war was a
side issue, an inconvenience. But without a gold standard,
the international system has moved to currency blocs. The
United States dollar is the central factor. Central banks
have 70% of their foreign currency reserves invested in T-
bills and T-notes. But Greenspan's FED and the sagging US
economy have combined to push interest rates to about 1%.
It's getting almost as cheap to hold gold.
The glue is the dollar. If the world's central
bankers could decide on an alternative currency, they would
start selling dollars and investing in that currency's T-
bills. I think the French-German alliance is a political
move against the pound and the dollar. The split is not
complete yet. No central banker wants to be the first to
dump dollars and move to an untried currency, such as the
euro. But the longer the euro survives, the more likely
that move will be.
If China ever makes the Yuan convertible into gold,
the dollar will be abandoned. China now constitutes about
5% of all world trade. The growth curve is heading up
fast. See chart #7, "World Shifts Production to China's
Export Platforms," prepared by Jeff Rubin of the Canadian
Imperial Bank of Commerce.
research.cibcwm.com
When China's currency finally reflects this, and its
central bank abandons its fixed ratio with the dollar
(price controls always break down), the run against the
dollar will begin.
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-----------------------
SNOW'S JOB
Jim Rogers, the multimillionaire "investment biker,"
has sounded the warning.
In late January, the Senate confirmed John Snow
as our new U.S. Treasury Secretary, the 73rd in
the government agency's two-hundred plus year
history. Snow, like Paul O'Neill and Robert
Rubin before him, promised to follow a strong
dollar policy and take steps to help spur on a
U.S. economic recovery and long-term growth.
Well, I know you've just started your new job,
Mr. Snow, but I've got some sobering news for
you. You and your pals can keep talking about
this alleged "strong dollar policy" until you're
blue in the face, but it's not going to make a
lick of difference if you don't start managing
our currency more responsibly. The dollar is not
just in decline; it's a mess. If something isn't
done soon, I believe the dollar could lose its
status as the world's reserve currency and medium
of exchange, something that would lead to a huge
decline in the standard of living for U.S.
citizens like nothing we've seen in nearly a
century.
Rogers is not some loose canon. He is a careful
observer of the international scene. Who else would tour
the world on a motorcycle, staying in touch with the
markets by satellite phone? Not Mr. Snow, certainly.
Rogers warns:
A sound currency, after all, reflects solid
economic fundamentals: little to no debt, a trade
surplus, a stable balance of payments -- the
difference between a nation's receipts of foreign
currency and its expenditures of foreign currency
-- and growing international reserves.
That's not exactly the picture you get when you
look at the U.S. balance sheet. Our national
debt to foreigners is now around $6.4 trillion,
with interest payments alone last year totaling
$333 billion. We're importing far more goods
than we are exporting. International reserves
remain around $60 billion, but we're attracting
far less direct foreign investment every year.
Our current account deficit runs at roughly $500
billion a year, or five percent of our gross
domestic product. Think of it this way: It costs
us about $1.3 billion a day in the foreign
markets just to keep the dollar afloat. Our $60
billion of reserves against our obligations would
last 3 minutes if creditors begin cashing in.
We're like the untrustworthy brother-in-law who
keeps borrowing money, promising to pay it back,
but can never seem to get out of debt.
Eventually, people cut that guy off. . . .
What's worse, little is being done by
Washington's economic gurus to pull us out of our
economic quagmire. Faithful readers know I
believe Alan Greenspan is the grand maestro of
this economic debacle. Our esteemed Federal
Reserve chairman is the first to "buy any assets"
or lower interest rates to pump money into the
economy and give investors the illusion that
things aren't as bad as they really are.
Greenspan is ringing the bell signaling to sell
dollars. Sometimes I wonder if our central bank
is just going to print money until we run out of
trees. People say that inflation is a dead
issue, but you wouldn't guess that shopping where
most of us buy things or checking reality over on
the commodity pages.
Rogers knows the problem: all currencies are
manipulated. None is reliable. The dollar reigns supreme
in a world of fiat money. But. . . .
How long does the dollar have? A year? A
decade? I'm not so sure. As long as there's no
other currency stepping up to the plate and EU
continues to struggle with the euro, the U.S.
government will likely be able to continue to
jiggle the books, essentially floating our
enormous tab on the backs of the rest of the
world. No country in history which has gotten
itself into such a situation has escaped without
at least a semi-crisis eventually.
But remember: Whenever there has been an economic
crisis like this, a new player has always emerged
on the economic landscape. A century ago, few
people would have believed that the dollar was
going to emerge out of the 19th century as the
dominant world currency. There's always a
phoenix that rises from the ashes. Who will it
be for the 21st century? My guess is the Chinese
yuan may eventually have its day in the sun --
certainly if the euro fails. The nation has a
recipe for a sound currency -- a huge population,
an enormous balance of payments surplus, and a
sizeable GDP to match. China is now the world's
largest importer and the world's second largest
creditor (Japan is first). For the moment, its
currency is not convertible, which must change
now that it has been admitted to the World Trade
Organization. There are still a lot of cultural
barriers to get over -- rampant xenophobia and
fear of capitalist interests -- but nothing
assuages fears like steady flows of money into
your coffers.
Thus, he concludes, "Despite proclamations from
Washington about a strong dollar policy, I see no reason to
believe that the dollar won't continue to decline, that we
won't continue to borrow like beggars and put Band-Aids on
gaping wounds in our fiscal, monetary and tax policies.
That is, until the day when our creditors say enough is
enough. And that day may not be far off."
jimrogers.com
CONCLUSION
We are witnessing the end of the post-war Western
alliance. Internationalism is today a cooked goose. The
UN is its symbol, and the UN is in disarray. The General
Assembly is a collection of about 150 nations. The
Security Council is the last emblem of the West's hegemony
over the world. Now the Security Council is paralyzed.
The day the invasion of Iraq begins is the day of
judgment for the UN and all that it represents. I say good
riddance, but I wonder about the future. Regionalism is
better than internationalism, and nationalism is better
than regionalism. Localism is best of all. "Support your
local sheriff." But, in the meantime, where should we put
our money?
My answer: the closer to home, the better. |
