Detroit, New York
the stork in the heaven knoweth her appointed times; and the turtle and the crane and the swallow observe the time of their coming; but my people know not the judgment of the LORD—Jeremiah 8:7
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Falafel for the Soul
They define commercial companies, corporations, and municipalities as if they were persons.** Moreover, American cities are organized almost as corporations and can bankrupt under Chapter 9, Title 11 of the United States Bankruptcy Code.
"I don't get it," the falafel-eater said, "Is Detroit a Mr. or a Ms.?"
WWII profoundly changed American industry. It became militarily-oriented. Metal toys disappeared forever, giving birth to a culture of feeble items for civilian use. A powerful Detroit replaced cars by planes, and then unsuccessfully attempted to regain its place as the world's main car factory. Nowadays, you can buy a state-of-the-art killer drone at the nearest shopping mall, but the transport system is old, inefficient, and clumsy.
Like China, the USA is thirsty for raw materials. China is a civilized country; it just keeps peacefully buying Australian ores. In contrast, America gained access to cheap raw materials, especially oil, by war. Much of the military industry depends on rare earth minerals; recently, the USA had gained access in Afghanistan to one of the largest rare earth deposits on earth.
During the second American attack on Iraq, I was fascinated by the American administration's rhetoric. We all remember the "Weapons of Mass Destruction" lies, but there was much more than that. "Financing the war" was also a key phrase said by frenzied politicians while looking for juice to run their toys of mass destruction.
There was no better testimony to the fact that this was a war of choice, and thus unacceptable, aimed to create financial profits through cheap oil and the revival of American military industries than this mantra. The phrase also reflected the American mindset as a world financial center and the main printer of a fiat money known as American dollar, the world's reserve currency at that moment in time.
With a growing population and a military-oriented industry, the USA can keep afloat only by warring around, Genghis Khan-style. In the coming years, the military will continue to grow, together with the deficit.
The USA won't disappear as a significant player in the international arena as a result of a military defeat. Granada won't retaliate for the American crimes; neither Afghanistan nor Iraq will. Attacking the weak is another characteristic of America.
By the end of 2010, the media were full of articles announcing that China had become the second largest economy, bypassing Japan. The same number of articles tried to predict when China would bypass America. Some said 2020, others 2015.
All of them ignored a rapidly changing financial situation which would control the economic development in the near future. Most economists use linear models in their predictions while reality is often non-linear and non-derivative. The result of this overlook will be dramatic; probably all predictions will fail.
America's economy is the world's #1 only because economic output is measured in the current reserve money, i.e. American dollars. There is a simple way of describing the problematic of these statistics. Bolivia is a producer of coffee. A pound of average coffee here costs around one American dollar. In the US, a coffee of similar quality would probably cost around $4. Let's say that both economies sell just one pound of coffee per year. If measuring the production of each economy in dollars, then the US economy could be claimed as being four times larger than the Bolivian one; however, if measuring by weight, both economies would be the same size.
The world's economy is measured in US dollars and thus it is highly biased toward the American economy, presenting it as much larger than it is.
To keep this illusion of economic size, a key goal of the US government is to keep its currency as the global monetary measurement unit. However, this won't last. It makes no sense calculating the trade between China and India in US dollars; the distortions in such a case are multiple. In the case of Thai products reaching Nepal via India, measuring the events in American dollars is ridiculous.
One solution would be to adopt a basket of carefully balanced measurements methods; this would probably happen in the next decades. Measuring under a more accurate system, the US would probably rate as the third largest economy in the world. If measuring the EU as one economic unit, then the US would be just fourth.
In 2009, Russia and China scrapped the dollar in their mutual transactions. The same applies for other Asian countries. At the beginning of February 2011, the IMF issued a report on a possible replacement for the dollar as the world's reserve currency. The report recommends using Special Drawing Rights that could help stabilize the global financial system.
Heavily indebted, America cannot provide a stable currency anymore. Roughly at the same time, the Asian Development Bank said in a joint study with Columbia University's Earth Institute that the Chinese Yuan could rapidly become an internationally used currency and serve as an alternative to the US dollar in central bank reserves.
In fact, China owns not only a substantial part of the American debt, but also the debt of European countries as Spain, forcing a future in which the Yuan would grow in importance. The opening of the Yuan as a floating currency that can be traded everywhere is almost inevitable. Despite some decentralization in its trading during recent years, the Yuan is still heavily controlled by the Chinese government, who seems to be preparing a dramatic move in the near future.
In November 2010, the World Gold Council released its third-quarter Gold Demand Trends report, which showed a 12% year-on-year rise in gold demand in the third quarter of 2010. The rise was a result of an ongoing increase in the purchase of gold by China and India. In the fourth quarter, the demand increased by another 9%, driven by the same markets. This accumulation of gold is stable along time, China has become the fifth largest holder of gold reserves and it seems it aims at growing them even more. To keep the prices in line, China cannot announce this as its policy.
Economies of such a size cannot change overnight. That means all planned changes can be seen much before they are implemented. Is the ongoing gold accumulation by the Chinese a sign they would peg the Yuan to a gold standard in the near future? Probably so.
If that happens the financial situation would change overnight; economics would change in the following year or so. The American dollar would sink (would it be pegged to the Mexican peso?) and be dropped as reserve money.
America doesn't produce much these days, a few cars and military weapons; a worthless dollar won't change much the exports' attractiveness of this market. Overnight, America would drop a few notches and China would become the world's #1 economy. Dollar-measured statistics would be as relevant as British farthings.
The collapse of America's Motor City is just one more swallow arriving just before a freezing spring that announces the last summer.
* Swallows, also known as martins, are migrating birds. In the Holy Land they are known to be the spring announcers, since they are the first to arrive from Africa in their way back to Europe.
** Once upon a time, there was a Kingdom of Justice and Light. The kings served there in periods of four years and insisted on being called “Mr. President.” That was true until the year 2000, when the son of a former king was chosen to office by the voice of a single Justice who had been appointed by his father. From that moment onwards, it had become pretty close to a formal kingdom. Yet, they didn’t define themselves as such; they claimed that they were the world’s most powerful country, and prided themselves on their democracy. They weren’t exactly a democracy of the people; they left such a title to backward countries like North Korea. They were a democracy of corporations. These organizations were recognized by the kingdom as judicial persons, and were those guiding and funding the government’s behavior. Many of these soulless persons were rather innocent, busying themselves in the science of preparation of greasy hamburgers and similarly useless tasks. However, the largest and most powerful among them made money out of war. For over half a century they had run amok around the globe attacking any target they knew would not react. This created jobs at home and kept the powerful military busy and happy. Once upon a time, there was a Kingdom of Justice and Light; of course, it wasn’t exactly a kingdom, justice was reserved to corporations, and the only lights were the interrogation lamps constantly aimed at the people by their paranoiac, illegitimate government. Once upon a time, this looked like an unbeatable scheme; then, things changed.
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