It’s early days yet, but the farce surrounding the ‘debt ceiling’ debate and a clear crisis of governance in USA have some inevitable consequences that bode well for the rest of the world (especially for Iran and BRICS), but not for the US, especially not in the medium term.
For a start, it is hard to refute a strong suspicion of rampant racism among Republicans. Racism in itself is not surprising or unexpected, particularly from the likes of McCain, Palin, Romney and Tea Party members.
What is surprising is their willingness to sacrifice the well being of all Americans in order to hurt a black president.
This extremist tendency is also evident in some Republicans’ determination to crush ‘big government’ without a clear agenda on what their libertarian alternative might be.
Worse still, their determination is not bound by any democratic principles as they have clearly shown that being in a minority (in terms of popular vote count or public opinion) does not hold them back from a willingness to crash the whole economic system.
In fact, their tactics are Mafioso in style and involve blackmail and extortion.
Such extremist idealists are in a position to cause serious hurt to the world economy, and this is a matter that the rest of the world cannot take lightly.
The prime problem for the world is the dollar.
In absolute terms, USA is the world’s most indebted nation by a huge margin. Its current budget farce is about the extent to which its debt ceiling should be raised and for how long.
It is not about how the debt will be repaid. That option apparently is not even on the table.
And the ‘solution’ announced today only covers the next 3 months, after which they are back to square 1.
How can the currency of the world’s most highly indebted nation with such inept management remain the reserve currency of other countries and the currency for international trade for much longer?
Well, the dollar isn’t what it used to be. Many countries have been lowering their dollar liabilities quietly since year 2008.
Reuters today claims:
“The political dysfunction has worried U.S. allies and creditors such as China, the biggest foreign holder of U.S. debt, and raised questions about the impact on America’s prestige. The Treasury has said it risks hurting the country’s reputation as a safe haven and stable financial center.“
What some Chinese were saying during the Washington budget farce was rather more direct:
“Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.“
And their remedy?
“For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.”
“Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized.”
“Apart from that, the world’s financial system also has to embrace some substantial reforms.”
“What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”
And the purpose of all this?
“Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs.“
“To that end, several corner stones should be laid to underpin a de-Americanized world.“
Just a couple of days later, several opeds started to openly call on world leaders and China in particular to ‘Dump the dollar‘.