Sunday, March 22, 2015

The New Order Emerges. Is A New Political System Emerging?

The New Order Emerges

China and Russia have taken the lead in establishing the Asian Infrastructure Investment Bank (AIIB), seen as a rival organisation to the World Bank and the Asian Development Bank, which are dominated by the United States with Europe and Japan.

These banks do business at the behest of the old Bretton Woods order. The AIIB will dance to China and Russia's tune instead.

The geopolitical importance was immediately evident from the US's negative reaction to the UK's announcement this week that it would join the AIIB. And very shortly afterwards France, Germany and Italy also defied the US and announced they might join. In the Pacific region, one of America's closest allies, Australia, says she is considering joining too along with New Zealand. The list of US allies seeking to join is growing. From a geopolitical point of view China and Russia have completely outmanoeuvred the US, splitting both NATO and America's Pacific alliances right down the middle.

This is much more important than political commentators generally realise. We must appreciate that anything China does is planned well in advance. Here is the relevant sequence of events:

• In 2002 China and Russia formally adopted the founding charter for the Shanghai Cooperation Organisation, an economic bloc that today contains about 35% of the world's population, which will become more than 50% when India, Pakistan, Iran, Afghanistan and Mongolia join, which is their stated intention. Russia has the resources and China the manufacturing power to develop the largest internal market ever seen.
• In October 2013 George Osborne was effectively summoned to Beijing because China wanted London to be the base to develop renminbi-denominated financial instruments. London has served China well, with the UK Government even issuing the first renminbi-denominated foreign (to China) government bond. The renminbi is now on the way to being a fully-fledged international currency.
• The establishment of an infrastructure bank, the AIIB, will ensure the lead funding is available for the rapid development of road, rail, electric and electronic communications throughout the SCO, ensuring equally rapid economic development of the whole of the Asian continent. It could amount to the equivalent of several trillion dollars over time.

The countries that are applying to join the AIIB realise that they have to be members to access what will eventually become the largest single market in the world. America is being frozen out, the consequence of her belligerence over Ukraine and the exercise of her hegemonic power through the dollar. America's allies in South East Asia are going with or will go with the new AIIB, and in Europe commercial interests are driving America's NATO partners away from her, turning the Ukraine from a common cause into a festering liability.
The more one thinks about it, the creation of the AIIB is a masterstroke of tactical genius. The outstanding issue now is China and Russia will need to come up with a credible plan to make their currencies a slam-dunk replacement for the dollar. We know that gold may be involved because the SCO members have been accumulating bullion; but before we get there China must manage a deliberate deflation of her credit bubble, which will be a delicate and dangerous task.

Unlike the welfare-driven economies in the west, China has sufficient political authority and internal control to survive a rapid deflation of bank credit. When this inevitably happens the economic consequences for the west will be very serious. Japan and the Eurozone are already facing economic dislocation, and despite over-optimistic employment numbers, the US economy is faltering as well. The last thing America and the dollar needs is a deflationary shock from China.
The silver lining for us all is a peace dividend: it is becoming less likely that America will persist with a call to arms, because support from her allies is melting away leaving her on her own.

Let me make my case, however minimally, based on five areas in which at least the faint outlines of that new system seem to be emerging: political campaigns and elections; the privatization of Washington through the marriage of the corporation and the state; the de-legitimization of our traditional system of governance; the empowerment of the national security state as an untouchable fourth branch of government; and the demobilization of "we the people."
Whatever this may add up to, it seems to be based, at least in part, on the increasing concentration of wealth and power in a new plutocratic class and in that ever-expanding national security state. Certainly, something out of the ordinary is underway, and yet its birth pangs, while widely reported, are generally categorized as aspects of an exceedingly familiar American system somewhat in disarray.
After all, a grim new American system is arising before our eyes.  Everything we once learned in the civics textbooks of our childhoods about how our government works now seems askew, while the growth of poverty, the flatlining of wages, the rise of the .01%, the collapse of labor, and the militarization of society are all evident.

The Birth of a New System

Otherwise, a moment of increasing extremity has also been a moment of -- to use Fraser’s word -- “acquiescence.”  Someday, we’ll assumedly understand far better how this all came to be.  In the meantime, let me be as clear as I can be about something that seems murky indeed: this period doesn’t represent a version, no matter how perverse or extreme, of politics as usual; nor is the 2016 campaign an election as usual; nor are we experiencing Washington as usual.  Put together our 1% elections, the privatization of our government, the de-legitimization of Congress and the presidency, as well as the empowerment of the national security state and the U.S. military, and add in the demobilization of the American public (in the name of protecting us from terrorism), and you have something like a new ballgame.
While significant planning has been involved in all of this, there may be no ruling pattern or design.  Much of it may be happening in a purely seat-of-the-pants fashion.  In response, there has been no urge to officially declare that something new is afoot, let alone convene a new constitutional convention.  Still, don’t for a second think that the American political system isn’t being rewritten on the run by interested parties in Congress, our present crop of billionaires, corporate interests, lobbyists, the Pentagon, and the officials of the national security state.
Out of the chaos of this prolonged moment and inside the shell of the old system, a new culture, a new kind of politics, a new kind of governance is being born right before our eyes. Call it what you want. But call it something. Stop pretending it’s not happening.

When ISIS invaded much of Iraq and unleashed their reign of terror over Christians, Shiites and Yazidis, the western world was terrified at such violence. Beheadings, crucifixions, horrific immolations, all of this scared and disturbed.
Now Iranian Shiite militias are invading Iraq and explosively vanquishing ISIS and retaking the lands that they conquered. But, before we begin to praise these Shiites as heroes, let us remind ourselves that the rebels in revolutionary France were far more brutal than the monarchy everybody wanted to topple. ISIS is brutal — yes — but the Iranians will be far more worse. And Obama is backing them up.

General Petraeus, who was fired by the Obama Administration, has already given this warning, that the Iranians are a greater threat than ISIS:

We need to recognize that the #1 long term threat to Iraq’s equilibrium — and the broader regional balance — is not the Islamic State, which I think is on the path to being defeated in Iraq and pushed out of its Iraqi sanctuary… The most significant long term threat is that posed by the Iranian-backed Shiite militias. 
…If Daesh is driven from Iraq and the consequence is that Iranian-backed militias emerge as the most powerful force in the country — eclipsing the Iraqi Security Forces, much as Hezbollah does in Lebanon — that would be a very harmful outcome for Iraqi stability and sovereignty, not to mention our own national interests in the region
There are literally thousands of Shiite militants overrunning Iraq, and according to Hamed al-Mutlaq, they are too powerful for the US-backed Iraqi government to control. Al-Mutlaq continued on to say:
They have committed crimes like killing, stealing, displacing people from their homes… Meanwhile, the government has not been able to have any sort of pressure on the militias, to stop them from committing more crimes. …I don’t think the government is satisfied with them, or supports them, but they have grown stronger over time, they have followers, money and are empowered and supported by third parties
After US-air strikes drove ISIS out of certain areas, Shiite militias entered these very liberated regions and unleashed a wave of horrors, bulldozing and burning thousands of homes. In the area around Amerli 3,800 buildings in 30 towns and villages were destroyed by the Shiite militias.

When I look at [President Barack] Obama’s reaction to the behavior of these militias, I feel he supports them or is satisfied with them… The U.S. promised that it would stand with Iraqis but it did not.

The Obama Administration, while not aiding the Shiite incursions, have characterized the violence of the Iranian militias as “a positive development.”

Expect the Shiite Muslims to begin slaughtering the Christian population in Iraq, with more brutality and viciousness than ISIS.

Israeli Officials In France For Last-Ditch Bid To Sway Iran Talks

Intelligence Minister Yuval Steinitz flew to France on Sunday to try to influence the next round of talks on a deal over Iran’s nuclear program, his spokesman said.

Steinitz was “on a mission from Prime Minister [Benjamin Netanyahu] for a short visit to Europe in an attempt to influence the details of the emerging agreement on the Iran nuclear issue,” a statement from Eyal Basson said.

Steinitz traveled to the French capital with National Security Adviser Yossi Cohen for a closed-door diplomatic blitz to convince mediators to harden their positions on Iran, even at the expense of a breakdown in negotiations, Israeli media reported.

Steinitz was expected to meet French Foreign Minister Laurent Fabius and members of the French negotiating team in the Iran talks, the Haaretz daily reported.

According to the Reuters report, among the negotiating powers, France’s position vis-à-vis Iran’s nuclear project has been the closest to Israel’s, with Steinitz crediting French diplomats for “helping us a great deal.”

Germany Gives Greece One Final Ultimatum After Friday's 'Optimistic' Talks Devolve Into Disagreement And Confusion

Now, courtesy of reporting by the FT, we can also rule out any of the so-called optimism in the aftermath of Thursday's talks because as Peter Spiegel reports, not only was there no real consensus, but the talks "ended in disarray", and even though "Greece’s prime minister and fellow Eurozone leaders emerged from a meeting early on Friday morning touting a breakthrough agreement to unlock much-needed bailout funds for Athens — only to fall into disagreement hours later about what it all meant."

Two days of intensive and occasionally heated negotiations at an EU summit in Brussels amounted to little more than a repeat of talks a month ago between eurozone finance ministers that officials then also hailed as the definitive agreement to get the final bailout review under way.

The underlying problem for Greece, as we have been writing ever since October, is that the country is not only out of money, but it is now almost $4 billion in the hole. It is, in effect, insolvent. Which is why Greece is now desperate to walk back on all of its election promises because having lost the one trump card it had, namely to default on its Eurosystem debt (precisely what the infamous Varoufakis "middle finger" speech was all about), or exist the Eurozone on its own terms, Greece is now scrambling to survive day to day, even as its bank run threatens to implode its banks at any given moment. 

As a result the biggest problem for Syriza's government, which still has preserved its pre-election popularity, is that any minute now both Merkel and Tsipras will make the formal announcement that the hated Troika is coming back. That, together with the realization that the current government is nothing but a continuation of the Samaras regime, will likely lead to a new round of social unrest culminating perhaps with another general election.

According to people briefed on the talks, Mr Tsipras opened with demands for additional cash with few strings attached, acknowledging his government may not make it to the end of April without an injection of bailout funds. But his push lasted only the first 10 minutes before the other leaders convinced him it was unachievable. Instead, much of the session focused on logistical arrangements in Athens, where Greek officials have thrown up hurdles to international bailout monitors seeking to access data to evaluate the country’s reform efforts.

Mr Draghi was particularly incensed, telling Mr Tsipras he believed the inspectors — from the ECB, European Commission and International Monetary Fund — had been badly treated by their hosts. Mr Tsipras countered that allowing such access would be a violation of Greek sovereignty. But he relented after Ms Merkel noted all IMF members are subject to annual reviews involving access to a country’s books.

The Greek finance ministry, meanwhile, signalled it was adopting a new conciliatory stance, saying officials “look forward to receiving” requests from the inspectors and would respond “in the same constructive spirit”.

As for tomorrow's critical, and potentially make or break, meeting between Tsipras and Merkel in Berlin, here is what Kathimerini said earlier:

In a statement to Sunday’s Kathimerini, Tsipras said the meeting was an opportunity for the two leaders to talk without pressure. The meeting “will not be pressurized by negotiations,” the premier said. “And this is very significant because we can both discuss the important issues that are burdening Europe as well as improving bilateral relations between the two countries.”

What he really means is that tomorrow is when the lies and can kicking end, and either Tsipras capitulates fully, and irrevocably, in public, without a hint of any doubt as to who is calling the shots thereby burning all pre-election promise bridges, or Greece will be out of the Eurozone in a matter of days if not hours.

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