COVID and the world balance of power - an unholy relationship?

 

Two separate threads came together in my mind yesterday when reading an interesting article at Unz.  It's titled "Eurasia Takes Shape: How the SCO Just Flipped the World Order".  Here's how it opens.  Bold, underlined text is my emphasis.

The two defining moments of the historic 20th anniversary Shanghai Cooperation Organization (SCO) summit in Dushanbe, Tajikistan had to come from the keynote speeches of – who else – the leaders of the Russia-China strategic partnership.

Xi Jinping: “Today we will launch procedures to admit Iran as a full member of the SCO.”

Vladimir Putin: “I would like to highlight the Memorandum of Understanding that was signed today between the SCO Secretariat and the Eurasian Economic Commission. It is clearly designed to further Russia’s idea of establishing a Greater Eurasia Partnership covering the SCO, the EAEU (Eurasian Economic Union), ASEAN (Association of Southeast Asian Nations) and China’s Belt and Road initiative (BRI).”

In short, over the weekend, Iran was enshrined in its rightful, prime Eurasian role, and all Eurasian integration paths converged toward a new global geopolitical – and geoeconomic – paradigm, with a sonic boom bound to echo for the rest of the century.

That was the killer one-two punch immediately following the Atlantic alliance’s ignominious imperial retreat from Afghanistan. Right as the Taliban took control of Kabul on August 15, the redoubtable Nikolai Patrushev, secretary of Russia’s Security Council, told his Iranian colleague Admiral Ali Shamkhani that “the Islamic Republic will become a full member of the SCO.”

Dushanbe revealed itself as the ultimate diplomatic crossover. President Xi firmly rejected any “condescending lecturing” and emphasized development paths and governance models compatible with national conditions. Just like Putin, he stressed the complementary focus of BRI and the EAEU, and in fact summarized a true multilateralist Manifesto for the Global South.

Right on point, President Kassym-Jomart Tokayev of Kazakhstan noted that the SCO should advance “the development of a regional macro-economy.” This is reflected in the SCO’s drive to start using local currencies for trade, bypassing the US dollar.

There's much more at the link.  It's worth reading in full.

This has been building for a long time, driven by Russian and Chinese interests in diminishing the international role of the United States and taking its place as dominant powers in Asia and Eastern Europe.  Now that the USA is riven by internal dissent, governed by an administration that took office through electoral fraud and is utterly incompetent to do its job, and shadow-governed by oligarchs and internationalists who are determined to destroy America's history and reduce it to the same miserable state as the rest of the First World . . . it looks like Russia and China are moving openly and rapidly to cement their positions, and shut out US interests for the foreseeable future.  Everything the USA has tried to achieve - shutting Iran out of the international community, preventing a Taliban takeover in Afghanistan, controlling rising Third World powers and keeping them under American rather than other influence - has now been, or is in the process of being, nullified.

One can't blame them, of course.  There's an old saying in physics, dating back to Aristotle, that "Nature abhors a vacuum".  It means that a vacuum - the absence of anything, to put it simplistically - is not found in nature, because something always moves in to fill the void.  The same principle has long been applied to politics and geopolitics.  Throughout human history, when one power loses influence, another power steps up to take its place - or take it away and cling to it until an even stronger power comes along.

In recent centuries, the influence of the British Empire of the 19th century was supplanted by the influence of the American Empire in the 20th.  That, too, is now waning, and Russia and China are determined to take its place in Afghanistan, and also in as much of the rest of the world as they can manage - particularly if they can do it quickly, before a more competent, capable administration takes over here.  (That assumes it can or will happen, of course.  With our democratic elections undermined, perhaps fatally, by electoral fraud, that may no longer be possible by peaceful means.)  Once presented with a fait accompli, they hope America will find it too troublesome to resist - not to mention being too distracted with internal divisions to be able to give the problem the attention it deserves.

However, the Unz article raises another specter - that the whole COVID-19 crisis may have been engineered by international forces, and by their allies in the US establishment, to facilitate this change of power.  A couple of weeks ago, Vox Day highlighted an August article by Fabio Vighi titled "A Self-Fulfilling Prophecy:  Systemic Collapse and Pandemic Simulation".  It's profoundly disturbing in its implications.  Briefly, the author argues that the COVID-19 pandemic was deliberately engineered to allow the powers that be to use it as cover to finagle their way out of the economic dead-end to which they'd condemned the economies of the First World.  Here's an excerpt.

Joining the dots is a simple enough exercise. If we do so, we might see a well-defined narrative outline emerge, whose succinct summary reads as follows: lockdowns and the global suspension of economic transactions were intended to:

1) Allow the Fed to flood the ailing financial markets with freshly printed money while deferring hyperinflation; and

2) Introduce mass vaccination programmes and health passports as pillars of a neo-feudal regime of capitalist accumulation.

As we shall see, the two aims merge into one.

In 2019, world economy was plagued by the same sickness that had caused the 2008 credit crunch. It was suffocating under an unsustainable mountain of debt. Many public companies could not generate enough profit to cover interest payments on their own debts and were staying afloat only by taking on new loans. ‘Zombie companies’ (with year-on-year low profitability, falling turnover, squeezed margins, limited cashflow, and highly leveraged balance sheet) were rising everywhere. The repo market meltdown of September 2019 must be placed within this fragile economic context.

When the air is saturated with flammable materials, any spark can cause the explosion. And in the magical world of finance, tout se tient: one flap of a butterfly’s wings in a certain sector can send the whole house of cards tumbling down. In financial markets powered by cheap loans, any increase in interest rates is potentially cataclysmic for banks, hedge funds, pension funds and the entire government bond market, because the cost of borrowing increases and liquidity dries up. This is what happened with the ‘repocalypse’ of September 2019: interest rates spiked to 10.5% in a matter of hours, panic broke out affecting futures, options, currencies, and other markets where traders bet by borrowing from repos. The only way to defuse the contagion was by throwing as much liquidity as necessary into the system – like helicopters dropping thousands of gallons of water on a wildfire. Between September 2019 and March 2020, the Fed injected more than $9 trillion into the banking system, equivalent to more than 40% of US GDP.

The mainstream narrative should therefore be reversed: the stock market did not collapse (in March 2020) because lockdowns had to be imposed; rather, lockdowns had to be imposed because financial markets were collapsing. With lockdowns came the suspension of business transactions, which drained the demand for credit and stopped the contagion. In other words, restructuring the financial architecture through extraordinary monetary policy was contingent on the economy’s engine being turned off. Had the enormous mass of liquidity pumped into the financial sector reached transactions on the ground, a monetary tsunami with catastrophic consequences would have been unleashed.

As claimed by economist Ellen Brown, it was “another bailout”, but this time “under cover of a virus.” Similarly, John Titus and Catherine Austin Fitts noted that the Covid-19 “magic wand” allowed the Fed to execute BlackRock’s “going direct” plan, literally: it carried out an unprecedented purchase of government bonds, while, on an infinitesimally smaller scale, also issuing government backed ‘COVID loans’ to businesses. In brief, only an induced economic coma would provide the Fed with the room to defuse the time-bomb ticking away in the financial sector. Screened by mass-hysteria, the US central bank plugged the holes in the interbank lending market, dodging hyperinflation as well as the ‘Financial Stability Oversight Council’ (the federal agency for monitoring financial risk created after the 2008 collapse), as discussed here. However, the “going direct” blueprint should also be framed as a desperate measure, for it can only prolong the agony of a global economy increasingly hostage to money printing and the artificial inflation of financial assets.

At the heart of our predicament lies an insurmountable structural impasse. Debt-leveraged financialization is contemporary capitalism’s only line of flight, the inevitable forward-escape route for a reproductive model that has reached its historical limit.

Again, more at the link.  I'm very grateful to Vox for linking to the article;  without that, I might have missed it.  I think it's going to become a seminal analysis of the whole COVID-19 episode that informs future scholars for decades, perhaps generations.  Highly recommended reading.

If you put those two articles together - the replacement of US influence with Russian and Chinese leadership in Eastern Europe and Asia, and the use of the COVID-19 pandemic to manipulate economic problems in the First World and postpone what would otherwise have been inevitable collapse - they take on new depth and meaning.  I postulate the following:

1. First World governments and the powers/oligarchs/whatever behind them (in North America and Europe) are facing, and know they are facing, an economic impasse that cannot continue.  There is no way the old economic models of tax-and-spend, borrow-and-deficit-spend, financialization of debt, etc. can continue, except in the fevered imagination of progressive far-left ideologues.  They've led to ever-increasing deficits and an economic strait-jacket that now cripples the administration of most First World economies.  This not only hampers effective government, it forces First World governments to concentrate on their internal problems and give less attention to the international spheres of influence they previously dominated.
2. Russia and China are not blind to this.  They've both been through economic and political hard times, one through the collapse of the Soviet Union, the other through the "Great Leap Forward" and the decades of economic ruin it fostered.  Both nations have clawed their way out of the mire, and are forging ahead based on their own interests, rather than those of the rest of the First World.  China is now the economic engine of the world, without question;  and Russia, although very much playing second fiddle to China in that sense, retains a strategic perspective and international influence that China can't (yet) do without.  It's in China's interests to promote Russia's interests, and vice versa, so that both nations have a trustworthy ally in each other.  (Needless to say, neither of them regards the USA or Europe in that light.)
3. Russia and China will therefore take advantage of the internal preoccupations of Europe and North America to take control of as many economic and natural resources as they can, using diplomatic means, economic pressure, and any other tools that come to hand to do so.  They calculate that by the time the "Old World" comes to its senses and sorts out its internal woes (if, indeed, it's capable of doing so at all), they will dominate the rest of the world, have a "lock" on its resources, and be able to dictate terms to the newly beggared economies of their former rivals.  Frankly, it's hard to see how they're wrong.

There are many signs pointing to what's going on, dating back over many years.  For a start, I encourage economics buffs to examine the enormous purchases of gold made by Russia and China in recent decades, boosting their reserves of the precious metal to unprecedented highs (and, not coincidentally, soaking up almost all available supplies, so that the rest of the world is finding it very hard to get its hands on the metal).  If they plan to destabilize the dollar as the world's reserve currency, they know they'll need an alternative store of wealth - and now they have one.  At the same time, they're trying to reduce their holdings of US dollars (still the world's reserve currency, but of diminishing importance), and trying to position their own currencies to take over the dollar's place in international commerce.  (I'll be very surprised if the Chinese renmimbi doesn't do that within the next decade.  By now, it's probably inevitable, given the wholesale expansion of the US money supply by reckless, feckless Federal Reserve money-printing.)

I think it's clear that the USA and Britain, at least, understand what's going on.  They can't stop it, but they're turning to other nations threatened by it in an attempt to cement relations with them, and build up some sort of counter-weight.  Consider their recent so-called AUKUS partnership with Australia - forging a diplomatic and military alliance to offset the growth of a rival's power base, even at the expense of causing a rift with an older, long-term ally.  If they move fast, the three nations can offer important short-term economic and military assistance to each other.

I think these two articles, taken together, offer no comfort whatsoever to the USA or the European Union.  Those of us with an eye to the future should read them both very carefully, and more than once;  think about them;  and consider our personal exposure to whatever risks may flow from them and the events they predict.  We won't be able to stop what's coming, but we can at least try to protect ourselves and our families from the worst effects by choosing jobs and careers, educations, areas to live, etc. that won't be crippled by such developments.

What's more, we'd better be prepared to defend what we've got against the mass of people who are going to be left stranded when the structures and support on which they currently rely are no longer there.  That applies to nations, and communities, and individuals.

Peter