Tuesday, May 12, 2015

War Threat Rises As Economy Declines

[This article represents one of the best reviews of the 'current situation' seen in quite a while]

Keynote Address to the Annual Conference of the Financial West Group, New Orleans, May 7, 2015
The defining events of our time are the collapse of the Soviet Union, 9/11, jobs offshoring, and financial deregulation. In these events we find the basis of our foreign policy problems and our economic problems.
The United States has always had a good opinion of itself, but with the Soviet collapse self-satisfaction reached new heights. We became the exceptional people, the indispensable people, the country chosen by history to exercise hegemony over the world. This neoconservative doctrine releases the US government from constraints of international law and allows Washington to use coercion against sovereign states in order to remake the world in its own image.
To protect Washington’s unique Uni-power status that resulted from the Soviet collapse, Paul Wolfowitz in 1992 penned what is known as the Wolfowitz Doctrine. This doctrine is the basis for Washington’s foreign policy. The doctrine states:

“Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed formerly by the Soviet Union. This is a dominant consideration underlying the new regional defense strategy and requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power"

In March of this year the Council on Foreign Relations extended this doctrine to China.
Washington is now committed to blocking the rise of two large nuclear-armed countries. This commitment is the reason for the crisis that Washington has created in Ukraine and for its use as anti-Russian propaganda. China is now confronted with the Pivot to Asia and the construction of new US naval and air bases to ensure Washington’s control of the South China Sea, now defined as an area of American National Interests.
9/11 served to launch the neoconservatives’ war for hegemony in the Middle East. 9/11 also served to launch the domestic police state. While civil liberties have shriveled at home, the US has been at war for almost the entirety of the 21st century, wars that have cost us, according to Joseph Stiglitz and Linda Bilmes, at least $6 trillion dollars. These wars have gone very badly. They have destabilized governments in an important energy producing area. And the wars have vastly multiplied the “terrorists,” the quelling of which was the official reason for the wars.
Just as the Soviet collapse unleashed US hegemony, it gave rise to jobs offshoring. The Soviet collapse convinced China and India to open their massive underutilized labor markets to US capital. US corporations, with any reluctant ones pushed by large retailers and Wall Street’s threat of financing takeovers, moved manufacturing, industrial, and tradable professional service jobs, such as software engineering, abroad.
This decimated the American middle class and removed ladders of upward mobility. US GDP and tax base moved with the jobs to China and India. US real median family incomes ceased to grow and declined. Without income growth to drive the economy, Alan Greenspan resorted to an expansion of consumer debt, which has run its course. Currently there is nothing to drive the economy.
When the goods and services produced by offshored jobs are brought to the US to be sold, they enter as imports, thus worsening the trade balance. Foreigners use their trade surpluses to acquire US bonds, equities, companies, and real estate. Consequently, interests, dividends, capital gains, and rents are redirected from Americans to foreigners. This worsens the current account deficit.
In order to protect the dollar’s exchange value in the face of large current account deficits and money creation in support of the balance sheets of “banks too big to fail,” Washington has the Japanese and European central banks printing money hand over fist. The printing of yen and euros offsets the printing of dollars and thus protects the dollar’s exchange value.

On the foreign policy front, the hubris and arrogance of America’s self-image as the “exceptional, indispensable” country with hegemonic rights over other countries means that the world is primed for war. Neither Russia nor China will accept the vassalage status accepted by the UK, Germany, France and the rest of Europe, Canada, Japan and Australia. The Wolfowitz Doctrine makes it clear that the price of world peace is the world’s acceptance of Washington’s hegemony.
Therefore, unless the dollar and with it US power collapses or Europe finds the courage to break with Washington and to pursue an independent foreign policy, saying good-bye to NATO, nuclear war is our likely future.
Washington’s aggression and blatant propaganda have convinced Russia and China that Washington intends war, and this realization has drawn the two countries into a strategic alliance. Russia’s May 9 Victory Day celebration of the defeat of Hitler is a historical turning point. Western governments boycotted the celebration, and the Chinese were there in their place. For the first time Chinese soldiers marched in the parade with Russian soldiers, and the president of China sat next to the president of Russia.

The Saker’s report on the Moscow celebration is interesting
. Especially note the chart of World War II casualties. Russian casualties compared to the combined casualties of the US, UK, and France make it completely clear that it was Russia that defeated Hitler. In the Orwellian West, the latest rewriting of history leaves out of the story the Red Army’s destruction of the Wehrmacht. In line with the rewritten history, Obama’s remarks on the 70th anniversary of Germany’s surrender mentioned only US forces. In contrast Putin expressed gratitude to “the peoples of Great Britain, France and the United States of America for their contribution to the victory.” 
For many years now the President of Russia has made the point publicly that the West does not listen to Russia. Washington and its vassal states in Europe, Canada, Australia, and Japan do not hear when Russia says “don’t push us this hard, we are not
your enemy. We want to be your partners.”
As the years have passed without Washington hearing, Russia and China have finally realized that their choice is vassalage or war. Had there been any intelligent, qualified people in the National Security Council, the State Department, or the Pentagon, Washington would have been warned away from the neocon policy of sowing distrust. But with only neocon hubris present in the government, Washington made the mistake that could be fateful for humanity.

The forces at work today are somewhat different than when the recession took hold in 2008. In some states, revenue growth has been stagnant, missing projections and making it difficult to keep pace with expanding populations and rising costs for health care and education. Other states have been hurt by a steep decline in oil prices or seen their efforts to promote growth through tax cuts fail to work as anticipated...

A majority of states have failed to climb back to their pre-recession status, in terms of tax revenue, financial reserves and employment rates, said Barb Rosewicz, who tracks the fiscal health of states for The Pew Charitable Trusts.

Alabama, for example, faces a $290 million shortfall after a voter-approved bailout expires at the end of the current fiscal year. If nothing is done, the courts will not have the staff to send jury notices, monitor juvenile delinquents, process protection orders and collect and distribute child support payments, he said.

"This is an insane proposition," Hobson said. "The public would suffer."

Nationally, total tax revenue coming to the states has been rising, but the pace has been slow as employment continues to lag pre-recession levels in more than half the states, according to the Pew Charitable Trusts. Pew also found that 30 states are collecting less revenue than at their peak.

The Census Bureau recently reported that total state government tax collections in fiscal year 2014, which in most states ended last June, increased 2.2 percent over the previous fiscal year. That represented the fourth consecutive overall increase, but 17 states reported declines in tax revenue from the previous fiscal year, according to the report. Alaska saw the biggest drop, of $1.7 billion.

The events of recent months are an indication of how spectacularly Obama has failed to fulfill his 2008 promise. This week comes the news that Saudi Arabia’s newly installed King Salman and three of the other six Gulf monarchs are boycotting Obama’s Camp David summit – a meeting called by Obama to reassure the Arab states that the forthcoming nuclear deal with Iran was not a betrayal of their longstanding security relationship with the United States. Beyond their fears of Iran’s nukes, the Gulf states see the rise of an aspiring Persian hegemon – in Yemen, in Syria, in Iraq – taking advantage of, if not actively conspiring with, a retreating America.  In this case “no show” means “no confidence.”

While the Middle East is where Obama has done the most damage to traditional U.S. alliances, the situation in Europe is not much better. The failure to respond to Vladimir Putin’s land grabs – which, to be fair, began with Georgia in the twilight of the Bush years – exposes NATO’s senility. The story of the post-Cold War Atlantic alliance, its late and limp performances in the Balkans, Iraq and Afghanistan, and now in Europe itself, is one of continuous decline. Even with the victory of David Cameron’s Tories, Britain continues to shed whatever elements of greatness it retains; with the nationalists wiping out all opposition in Scotland, another secession vote is more than possible, and Britain’s army is on course to be smaller than the NYPD. While Europe deserves most of the blame for its disarmament and indecision, the Obama Pentagon is pressing forward with plans to further reduce America’s military posture in Europe. The president came to office figuring the peace of Europe was eternal and self-sustaining, and thus there was no need to maintain the alliance that has been the key vehicle for U.S. global leadership since World War II. It is no wonder that Eastern Europeans doubt the credibility of NATO’s Article V, collective-defense guarantees.

Which brings us to East Asia and Obama’s supposed “rebalance” or “Pacific Pivot.” To say that things aren’t quite so bad there would be the soft bigotry of low expectations, except it was the president who raised expectations of more energetic American leadership there. Further, as expressed in the 2012 Defense Guidance, the pivot marks the sole “doctrinal” bit of Obama thinking; it was more than a reaction to Bush-era policies. Our East Asian allies cheered the initiative but now regard more as rhetoric than a strategic reality. It’s not just that the administration’s efforts – such as the repositioning of Marines to northern Australia, the attempt to build a strategic partnership with Burma or to revive the stalled partnership with India – have been underwhelming. Indeed, since trumpeting the rebalance to Asia the administration has distanced itself from allies’ enthusiasms. Obama’s pledge of a “new era” in U.S.-Japan relations barely survived the departure of Prime Minister Abe for Tokyo. The visit of reformist Indian leader Narendra Modi was a decidedly low-key affair. More tangibly, the Chinese have resumed their various encroachments into the South China Sea. At the end of the day, the U.S. position in the region is no better now than in 2008, and arguably worse: an empty pivot is worse than no pivot.
Over six years in office, Barack Obama has gone along way to unraveling the alliances – both formal and informal – that have been the framework for American geopolitical leadership since the end of World War II. Watching the Gulf states, in particular, try to fend for themselves in the absence of American power – as the Saudis are trying to do in Yemen and Syria – is painful and looks as though it will make things worse rather than better. King Salman’s decision to pass up Camp David may be less an insult than a recognition that it would be a waste of time.

Saudi King Salman’s last-minute cancellation of his White House summit with US President Obama and his decision to send Crown Prince Mohammed bin Nayef in his place, is seen as a calculated snub for the president’s policies on Iran and the Middle East. Two senior Gulf rulers then opted out of the Camp David summit Obama scheduled for Wednesday, May 13 at Camp David: Bahrain’s King Hamad bin Isaa Al Khalifa and UAE Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan, leaving only the rulers of Qatar and Kuwait.
Saudi Foreign Minister Adel al-Jubeir announced Monday, May 12, that the king could not make the one-on-one White House summit Tuesday, May 12, because the five-day humanitarian truce in Yemen was due to start on that day.

But every informed source agrees that this was just an excuse to back out of the promise made to US Secretary of State John Kerry, when he visited Riyadh last week, that he would attend both the White House and the Camp David events.” 
Gulf sources reported that Obama’s Gulf summit teetered after Kerry failed to sell King Salman the president’s plan for a new US-led regional defense system for guarding against Iranian missiles. It was to be a shared response to Iran’s nuclear program and regional expansion, and allay Gulf allies’ concerns over the forthcoming nuclear deal with Tehran.

The other bone the Saudis had to pick with the Americans was the Yemen war. They maintained to the Secretary of State that, while Obama was offering the region a hypothetic defense shield against Iran, at the same time, American assistance fell short of Saudi needs for beating back the Houthi rebels sponsored by Tehran. They complained especially about the lack of US naval protection in the Strait of Hormuz, the Strait of Bab el-Mandeb and the Gulf of Aden.

In Riyadh’s view, the Obama administration is trying to walk a fine line between irreconcilable positions: Saudi Arabia’s requirements, on the one hand, and Iran’s illicit seizure of merchant ships in international waters, on the other. By accepting Tehran’s demand for Iranian ships and planes to deliver “humanitarian aid” to Yemen, the Obama administration is opening the door to arms supplies for the Houthis and deeper Iranian intervention in Yemen.

But the most vexing issue between Washington and Riyadh continues to be the nuclear deal between Washington and Tehran which Obama is pushing to the exclusion of almost any other consideration.

Gulf sources note that had Kerry been able to build Saudi and Gulf support for this deal, Israel’s Prime Minister Binyamin Netanyahu would have been left hanging alone. By refusing to attend the summit convened by Barack Obama, Saudi King Salman is signaling that he is not going to default on the Middle East front lined up against the US president’s Iranian venture.

Iran’s recent seizure and release of the Marshall Islands flagged M/V Maersk Tigris could be what Iran claims it is, a reaction to a decade-long dispute over shipping containers that were diverted to the UAE and never delivered to Iran. More likely however, it is a thinly veiled attempt at brinkmanship to remind the United States of the kind of trouble that Iran can stir up in the Strait of Hormuz.
The beef with Maersk over undelivered containers likely provided Iran with just enough plausible deniability to create an incident in the Strait of Hormuz at a time when many U.S. 5th Fleet assets were reportedly preoccupied with operations against Islamic State in Iraq and Syria (ISIS) in the northern Persian Gulf, and while monitoring the crisis off the coast of Yemen. Iran conveniently took the opportunity to exploit its unique geographic position astride the strait to put a spotlight on the strategic king on their chessboard—control of the Strait of Hormuz. U.S. naval forces are now confronted with competing requirements in the troubled region.
During the Cold War the United States and the Soviet Union would ramp up military activity during nuclear arms negotiations. While political leaders met in Moscow, Washington, or Iceland, U.S. and Soviet forces would often face off in the air, on, and under the sea, and stare each other down over artillery tubes along the Iron Curtain. This brink-of-war saber-rattling became known as “brinkmanship.” The exercises were an attempt to leverage for a better position at the negotiations.

The Maersk Tigris seizure presents a strategic dilemma for the United States, which, among other things, needs access to the northern Persian Gulf to sustain combat operations against ISIS forces in Iraq and Syria. In cooperation with Iraq’s Shia-led government, Iran is also operating against ISIS. However, it is noteworthy that Iran’s operations against ISIS are not dependent upon the sea for access to the fight. The often troublesome IRGN forces remain focused on their A2/AD mission in the Gulf.
As with Cold War–era brinkmanship, the real target of Iran’s massive naval exercise and seizure of the Maersk Tigris are the political leaders who are weighing the merits of the P-6 nuclear deal with Iran.
As such, this latest episode in the Strait of Hormuz should serve as a reminder that if the Iranian nuclear deal fails in a way that humiliates Iran, or leads to military strikes against Iran’s nuclear targets, access to the Persian Gulf will be, at a minimum, severely hampered for months.
A more immediate strategic dilemma for the United States will be the loss of access to the northern Persian Gulf for operations against ISIS, and the United States will also lose Iran’s tacit cooperation against fighting ISIS. In short, American naval operations in the northern Gulf will no longer occur in the low threat environment that is enjoyed today. Instead, U.S. forces will face a lethal array of A2/AD threats when operating in the Persian Gulf. he sea-based fight against ISIS from the gulf will be brought to a halt for months.
The Maersk seizure and the recent Great Prophet 9 exercise should remind U.S. leaders that Iran’s asymmetric A2/AD forces can and will exact a cost if war should come to Iran’s shores. In a growing list of bitter paradoxes confronting the United States in the region, in such a conflict where the United States “rolls back” Iran, ISIS and other Sunni extremists ironically will grow stronger as the U.S. shifts its focus to Iran. Iraq’s army will also be weakened when Iranian Shia forces that are backing them are recalled to defend their own country. Discerning what is the greatest threat to U.S. national security—Iran’s nuclear program, or ISIS—is really the pivotal strategic question.

Beijing has voiced “strong opposition” to a US Department of Defense (DoD) report which accused China's military of being a threat and lacking transparency. It also urged the US to abandon its Cold War mentality and stop jeopardizing bilateral relations.
The US report, published on Friday, criticized the actions of China's military in the disputed South China Sea – particularly the rapid construction of artificial islands in the strategic waters.
“Most analysts outside China believe that China is attempting to change facts on the ground by improving its defense infrastructure in the South China Sea,” the US report said.

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