DOLLAR

When Trump left office, he had a personal low public opinion poll of 34% amid the January 6th quasi-coup attempt, whereas Biden in a middle of an enemy that most Americans love to hate, and have done for more than century, has approval rating 1% lower than Trump when the latter left office in January 2020. The question is why do only one-third of the voters polled approve of a president trying to blame Russia and/or China for all calamities befalling the US?

  1. Stagflation – A recession cycle was as inevitable as the Federal Reserve was due to raise interest rates to slow down speculative financialization on Wall Street. Biden exacerbated the problem by arrogantly assuming that “punishing” Russia with sanctions that would have minimal impact on the world economy with which the US is intertwined. Trump tried tariff wars with China and the net economic loser was the US; a lesson one would assume that Biden’s advisors would have learned and provided a bit of realistic analysis to the White House dreaming of a return to the Cold War of the 1950s. Instead, they have been willing to sacrifice the US and world economy to “punish” Russia, as though it were ever a possibility that Putin would actually change his mind and abandon his war aims in Ukraine. Calling the high cost of living the “Putin inflation” is about as “cute” as Trump calling COVID-19 “the China virus” and indicative of why Beijing criticizes the US leadership for conducting policy from a realistic perspective.
  1. Another reason for Biden’s low polling numbers is that the Progressive wing of the Democratic Party and rank and file feel betrayed. Biden had promised a pro-labor agenda. Instead, he has continued some of the Trump economic policies both in fiscal measures as well as corporate subsidies, favoring Wall Street and the richest 1%. Despite the Progressive Caucus’ urging to push the Build Back Better program, to do something about college student debt, and support labor unions and higher federal minimum wage, he and the mainstream Democrats engage in patronizing rhetoric, but have done nothing to deliver on policy.
  2. Biden has placed militarism above environmentalism and the environmentalists have taken notice that he has abandon the promise of a green economy. Nationalism works up to a certain point when people’s material needs are satisfied. Biden has used nationalism to justify not seeking a diplomatic solution, while benefiting the defense sector industries, but above all, the fossil fuel which he had promised that he would not be supporting. On the contrary, he has given the industry the green light and provided corporate subsidies, all in a desperate effort to create an Atlantic bloc economy that would minimize the role of Russia and China. This has meant tossing out all campaign promises about green energy.
  3. While remaining true to symbolic gestures like choosing the first black woman for the Supreme Court, he has done absolutely nothing to lift living standards among minorities, as he promised when he insisted that a massive infrastructure program would create high paying jobs. The cost of living was climbing higher before Russia’s invasion of Ukraine, and reached new heights thereafter. People are judging Biden based on their living standards, not his policy intended to replace Russian natural gas and oil market in Europe with US exports.
  4. Focusing on a war in a distant land where Americans feel a general sense of empathy does work for a brief period, very brief when the realities of paying bills are confronting working families. Biden has failed to deliver for working families, as he had promised in 2020 and this is the main reason only one-third of those polled support him. Every few days, people find out that there are hundreds of millions of their tax dollars going to military aid in Ukraine whose chances of winning the conflict were always ZERO and are unlikely to improve. They also discover that Biden has proposed the highest defense budget in US history. Meanwhile, the country’s debt is reaching new highs, as a percent of GDP, while the IMF is warning that US GDP growth will be in the low 1% in 2022 and the dollar’s future is looking very grim.

In March 2022, the IMF issued a warning about the global demise of the dollar owing to US-NATO-led global sanctions on Russia’s the world’s largest producer of commodities. A few days later Goldman-Sachs followed the IMF with a more dire warning about the dollar’s future as a reserve currency, arguing that it will be somewhat analogous to the British pound, given that the US has chosen to place military-based geopolitics above economic considerations, or rather risk using military means as economic leverage.

This week, CREDIT SUISSE issued an even more pessimistic scenario than either the IMF or Goldman-Sachs, arguing that bloc-trading geopolitics in essence disengages a segment of the world economy, forcing countries at odds with US policy to go their own way and drop the dollar as a reserve currency. Right now, there is really no problem, other than inflation and stagnation, cyclical in nature with a good possibility for a recession exacerbated by the Russian invasion of Ukraine and US-NATO sanctions regime, and combined with the adamant US refusal for a diplomatic solution based on accommodating Russia’s security concerns.

After the Russian war, the recession will remain and after the recession, the dollar will continue the long slide to oblivion, exactly as the IMF, Goldman-Sachs and CREDIT-SUISSE have warned. This was not inevitable, but rather a decision by Washington to rely on “military Keynesian” policy, as it has since the Truman presidency, to the detriment of the civilian economy under the neoliberal model that has already debilitated the middle class and working class.

China has been watching NATO and the US weakened economically by their own sanctions, while they are and taking down the world economy. Prolonging the conflict provides nothing but destruction for Ukraine, a weaker global economy, which inadvertently benefits China, and nuclear-powered Russia becomes more distant from the West. Following a path contrary of the US, on 14 April, China asked banks to keep less cash on reserve and make more credit available. This was in anticipation of a global economic contraction and a means of stimulating internal demand to substitute for the anticipated drop in exports. Undermining that policy, US Treasury Janet Yellen called on China to stop undermining US-led sanctions against Russia, while hinting that the US wants to avoid a split with China. In reality, the US and EU have been pursuing bloc trading and the so-called split that Yellen mentioned is manifested in the East-West approach to the war in Ukraine.

Jon V. Kofas, Ph.D. – Retired university professor of history – author of ten academic books and two dozens scholarly articles. Specializing in International Political economy, Kofas has taught courses and written on US diplomatic history, and the roles of the World Bank and IMF in the world.


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