Wednesday, April 13, 2022

The power pendulum swings from West to East.- by Jonathan Mohan

This epoch we are witnessing is not a simple recalibration of the world order. We are at the end of a unipolar hegemony and its reserve currency status.

The rise and fall of empires throughout recorded history were periods of volatility and conflict. When plotting a historical timeline showing the ‘life-span’ of consecutive empires, each empire forms a sinusoidal peak. The decline of the prevailing empire and the rise of the emerging empire intersects at a point, depicting a transition period. That transition is a multiyear process ushering in the ‘changing of the guards’, which results in a tectonic shift of economy and culture. This trend of transitions has similar parallels pertaining to war and reserve currency status.

Let us examine the past 400 years of world reserve currencies. The first cycle marks the rise and fall of the Dutch Empire which was dominated by the use of a gold/silver backed guilder standard.  The second cycle began with the rise of the British Empire where it crossed with the decline of the Dutch Empire marking an intersection point. One of the major events at that point was the 4th Anglo-Dutch war during the 1780’s. This second cycle of the British Empire cycle at its peak, was dominated by the use of a gold/silver backed sterling pound standard. The third cycle began with the rise of the American ‘liberal democracy’ hegemony which then intersected with the decline of the British Empire. The transition at this intersection point is marked by WWI and WWII, with the USD gold backed at its peak.

Please note, the previous paragraph is considerably simplified. This article focuses more on economic power and world order dominance. After the fall of the Spanish Empire in the 17th century, the Spanish silver Real remained a trading currency in the American colonies. Prior to the 4th Anglo-Dutch War, the gold/silver backed French Livre was a dominant trading currency during the 18th century. This currency failed, in the late 18th century due to debasement. After the 4th Anglo-Dutch War, the gold/silver backed French germinal Franc was a dominant trade currency during the 19th century. During the rise of the British Empire, France was also rising as a military superpower. Both the British and French were vying for economic dominance during that era. The British Empire won and became a world power.

Post WWII, the world reserve currency was based on the Bretton Woods system of a gold backed US dollar. During the 1960's, many began to question its authenticity as a reserve currency. French President Charles De Gaulle, embodied a sovereign nation-state perspective and was most vocal in 1965. He awakened the world to see that the US was not operating a gold standard with due diligence. In the following years, cracks began to appear in the US wanton management of the US dollar forcing parties to demand gold instead of dollars. In a desperate move to shield the US dollar's reserve currency status, an emergency measure was taken. A temporary suspension of interchangeability from US dollars into gold was declared. This was done in 1971, by then US President Richard Nixon under the claims that speculators were trying to make a run on the dollar. Soon after, major oil producers such as Saudi Arabia entered an agreement with the US to trade oil, denominated in USD only. In exchange for this agreement, the US promised in return, security in the Middle East. This placed the USD reserve currency status on life support by making it the petrodollar. Over half a century later, that ‘temporary’ suspension of interchangeability into gold is still in place. Also, the US accumulated over $30 trillion USD in debt and had no independent audit conducted of the US gold reserve holdings since.

In 2017, I uploaded a video of Russia and China 'hammering nails into the coffin' of the USD reserve currency status. These actions had become quite noticeable in the last few months of 2017. Of course, these nails were being hammered since 2012. Those nails were of different sizes and shapes. Examples included:

  • Development of yuan-ruble payment systems bypassing SWIFT.

  • Russia’s allies willing to trade energy commodities in gold.

  • Russia paving the road for bilateral currency trade agreements between ideological rivals, such as Turkey and Iran.

  • Launching oil futures contracts on the Shanghai Energy Exchange redeemable in yuan, with room in the trading system to include future gold redemption.

  • Ruble only payments at Russian seaports.

These developments only intensified and acknowledgement of it resulted in derision by westerners. People were ridiculed as conspiracy theorists, Putin apologists or Russian disinformation agents. Fast forward to March 2022, and Russia is implementing an arsenal of financial architecture to bypass the SWIFT system. This architecture is the basis for alternatives to the western financial system, as mentioned in my last article. Time will tell if these western economic warfare tactics will work as intended. The intention of the west's economic war is more than curtailing Russia's kinetic war. Western economic warfare at this scale is intended to destroy the Russian economy. Any failing economy will generate enough dissatisfaction among citizens resulting in destabilization. This form of regime change is standard US/NATO playbook tactics. The west's form of regime change for Russia will be to balkanize it as the west does in every region it spreads ‘liberal democracy’.

The end of a world reserve currency status, (not the currency itself), is historically accompanied with a shift in world order. Over the past decade, Russian and Chinese statecraft, have been leading in the creation of a multi-polar world order framework. They plan to promote regions comprised of sovereign states co-existing and competing for mutual benefit. The case for this multi-polar world order is antithetical to the ideology of liberal democracy touted as the best form of governance. The eastern partnership towards a multi-polar world order is quite evident today. Their multi-lateral economic, military, trade and cultural developments in Eurasia attest to this. Some of these developments include:

  • The BRICS nations group comprising of Brazil, Russia, India, China and South Africa.

  • The Eurasian Economic Union (EAEU).

  • The Collective Security Treaty Organisation (CSTO).

  • The Shanghai Cooperation Organisation (SCO).

  • The Commonwealth of Independent States (CIS).

  • The Asian Infrastructure Investment Bank (AIIB)

  • The One Belt One Road, (OBOR) Silk Road initiative.

The preservation of nation-state sovereignty is considered in these partnerships. The ethos of these organisations, is not founded upon a unipolar rules-based international order. These countries view multi-polarity as a function of their civilizational posterity. These institutions do not dictate policy to nation-states as in the west. An example of western institutions imposing counter-productive policies is the ‘Troika’. The 'Troika' oversaw the debt restructuring post 2008 for Portugal, Italy, Ireland, Greece and Spain (PIIGS nations). Those countries today remain in excessive and perpetual debt with even worse socio-economic problems. See my article on the Troika from over a decade ago.

Chess moves by Chinese and Russian statecraft are unassertively played. They trained themselves to be humble in their actions, based on the lessons learnt from the fate of Iraq’s Saddam Hussein and Libya’s Muammar Gaddafi. There are consequences for running around the Middle East, offering the concept to trade oil in a currency other than the USD. Even more, for questioning why Middle East oil trades in New York and London. Saddam was guilty of both these actions. There are ramifications for pleading with Arab and North African leaders to create sound money. Even more, for planning to back the Libyan dinar with hundreds of tons of gold in the Libyan Central Bank. There will be conflict for going further to suggest the use of a gold dinar for Libya’s oil trade. Eyebrows raise, when one preaches that poor black people of Africa must use their own resources for African development. Gaddafi was culpable of saying all this.  ‘Pride cometh before the fall’, even if you’re an authoritarian with a brilliant idea.

Russian statecraft has also made their chess moves with patience. One of the chief architects of an economic plan designed to commence an industrial revolution in Eurasia is Sergey Glazyev. He is a high-ranking economic advisor to Russia’s leadership and the EAEU’s economics minister. Many years ago, he wrote two books that forecasted what is happening today. His predictions cover western sanctions, war and an unreliable USD reserve currency system. His proposals can shift Eurasia and its allies towards a sovereign nation-state trade system. One based on using a monetary and financial system, that excludes the use of an individual national currency or USD. For years, his team have been organising and patiently waiting for this moment to implement their plans. He has already proposed removal of exchange controls for cross-border settlements within the EAEU and China. As a result, their national currencies or a new international currency will be used instead of the USD. The information in the public discloses that the international currency will be a basket of national currencies. This currency can be incorporated into a blockchain payment system. The national currencies would be backed by commodities such as gold, oil, metals, grains and natural gas.

The east is fundamentally altering the entire working assumptions of the global trade system. Russia has recently made moves to begin linking the ruble to gold. The Central Bank of Russia is offering to buy gold from Russian banks at a fixed price of 5000 rubles per gram. Adding gold to the national reserves, while having energy payments transacted in rubles, is enough for us to know where this is heading. Disregard the western media’s joy, in reporting that the ruble is crashing post western sanctions. It’s over, the ruble has now recovered to pre-sanction levels. A yuan redeemable oil contract is being traded on the Shanghai Energy Exchange. The inter-convertibility into gold for this oil contract is in the works. When the east begins using gold as a unit of account in trade, physical gold demand will increase. As a result, what happens to the paper gold markets at the London Bullion Market Association (LBMA) and the US based Commodities Mercantile Exchange (COMEX)? Rehypothecated futures contracts and derivatives of exchange traded funds (ETF’s) exchanged at the LBMA and COMEX will ‘blow-up’. Boom! This will detach the gold market from the USD system giving the east an ability to set a gold price floor denominated in their own currencies.

This multi-polar world economic and security architecture is led by power structures in Russia and China. This architecture has the fundamentals to guarantee a high probability for its realisation. Their unique form of ‘Lex Mercatoria’ (Latin – ‘Merchant Law’) serves, two main functions. Firstly, it represents an autonomous legal order of international economic relations for trade. Secondly, it exists independently from national legal orders and has rules for settling disputes. ‘Lex Mercatoria’ also covers fundamental legal principles for trade. It provides a basis of how money and currencies function in relationship to trade and private property rights.

Russia is setting an example for its allies by honouring natural gas contractual agreements during turmoil. They are giving a preview of to expect in the multi-polar world. The plethora of actions against Russia could have been computed as sufficient for Russia to declare ‘force-majeure’. Claiming 'force-majeure' on natural gas contracts with Europe and Ukraine, should have resulted in turning off the gas valves. The economic actions taken against Russia fulfilled the pre-requirements for ‘force-majeure’. Those actions materially and economically affected Russia's ability to perform their obligations. These actions were:

  • Being financially cut-off from inter-bank transfer messaging system SWIFT.

  • Economically, shut-in with a load of sanctions from the west.

  • Shipping companies having stop trade with Russian ports.

  • Russia’s hundreds of billions in sovereign foreign exchange reserves ‘frozen’ by the west. Note, Russia’s reserves are protected under sovereign immunity, so freezing it is equivalent to stealing.

The natural gas has not stopped flowing. Russia, being cut-off from the international financial system, still fulfils gas contractual obligations. When Russia asks for payment in rubles, what do the European leaders do? They hysterically demonise Russia even more and refuse to pay in rubles. Russia responds to Europe by creating a mechanism within Russia's financial system for payments. Europe can now deposit their payment in a currency of choice to a bank, get it converted into rubles and credited back, to then pay Russian gas suppliers. This compromise even provides cover for European leaders to tell their citizens that they are not paying in rubles, when in the end they are. In this case, which party shows themselves to be a reliable and trustworthy trading partner? Also, note that citizens of China, Africa, the Middle East and the global south are all paying attention. 

The US and their allies have thoroughly undermined the essence of the concept of the nation-state order. The modern idea of a nation-state was ascertained by the Treaty of Westphalia in 1648. This idea is based on territoriality and the exclusion of external actors from domestic authority structures. US/NATO are known for funding and arming rebel groups to destabilise unfriendly countries. This is a prime example of using non-state actors to undermine a nation-state. The US trained and used the Mujahideen who evolved into Al-Qaeda terrorists. Similarly, the same way the US along with NATO armed ‘moderate freedom fighting rebels’, who evolved into ISIS extremists. The west uses NGO’s and aid organisations to sow dissatisfaction among a target population. Two examples of such NGO's are, the National Endowment for Democracy (NED) and the Open Society Foundation. The created dissatisfaction then results in political instability, so as to usher in regime change. Colour revolutions are used at most times to sway an election or overthrow a government. These actions undermine nation-statehood derived from the Treaty of Westphalia.

Russia, China and their allies see this utilisation of non-state actors as a threat to their sovereignty. As a result, these countries are pushed further towards building alliances against non-state actors. The multi-polar world, need to offer preservation of nation-state sovereignty to all countries. Nations will exist within regions, using integration as an ethos for mutual advancement. Such an international order may not have an agenda to maintain a unipolar hegemony through the use of non-state actors. Nation state sovereignty, is the code that will make economic constructs like the OBOR initiative work. In a multi-polar world, there is no ‘privileged’ state going around dictating terms. Nation-state sovereignty is safeguarded by every state having a right to seek its own national self-interest. This system will give regions a sense of self-determination and is based on the ‘balance of power’ which provides stability.

            In the field of diplomacy, the East is leading. The international relations skill that commenced this multi-lateral trading architecture is underestimated. Simultaneously, western leaders over the years, have shown themselves to be ‘non-agreement capable’. Most western politicians and diplomats when conducting political discourse, acquiesce to political correctness. Such approach proves to be kabuki theatre when contrasted with Russian statesmen. President Vladimir Putin with ease, can orate an unscripted one-hour dissertation on the rise and fall of the USSR. He then can top it off with a philosophical thesis on how that impacted Russian culture. The best western politicians can do, is read virtue signalling talking points for ten minutes off a teleprompter. They virtue signal on any social engineering topic convenient to their audience. Such topics include; BLM, LGBTQI+/abortion ‘rights’, diversity, transgenderism or Russophobia. These are the people proclaiming to the world that “Putin is mad”. The realisation of this contrast has driven changes in attitudes towards the west. Recently, in the space of a week, the Saudis and the UAE declined calls from Biden, and India shunned an entire UK diplomatic trade delegation. India instead met the Chinese FM with his team to discuss security.

The intellectual state of western leaders, raises a question. Are they capable of understanding the Thucydides Trap? The Thucydides Trap has been publicly discussed deeply by Russian intellectuals. They have made their justifications known, about shifting to a multi-polar world without total war. It would be unwise to underestimate, what Sergey Lavrov and his team have amassed in their arsenal to avoid all out total war. Both Russia and China lead in the transition towards a multi-polar world order, and must consider their actions carefully. The Thucydides Trap, refers to the observation that war is almost always the result when one rising power threatens to displace the prevailing power. However, it doesn’t always have to be this way. Misunderstandings between both powers’ actions and intentions, could lead to the trap of war. This was first identified by the ancient Greek historian Thucydides. Human emotions of fear and hubris made conflict inevitable between the rising power of Athens and the existing power of Sparta. This human miscalculation led to the 5th century BC Peloponnesian wars.

Today we observe a proxy war for the future of a multi-polar world order. The US and NATO have used Ukraine as a proverbial stick to poke the bear. Russia’s retaliation, would then justify planned attacks on Russia resulting in regime change. 'Balkanization' would be the end of Russian civilization as we know it. The Chinese understand fully well that their civilization will be next to hang if this happens. Some of the actions of poking the bear include:

Ukraine has been a US vassal state since 2014 with puppets like Zelensky acting the role of a president. Russia considers these actions of Ukraine as a forfeiture of their statehood. In the eyes of Russia, this is seen as Ukraine's abdication of sovereignty because vassals have no authority. As a vassal state, Ukraine in this post-2014 form fulfil neither conditions, of being a state forming people nor a system forming state. The US supporting Neo-Nazis in its vassal state Ukraine, is not done secretly. On the 16th of December, 2020, the UN voted on resolution A/RES/75/169. This resolution was titled, “combating glorification of Nazism, neo-Nazism and other practices that contribute to fuelling contemporary forms of racism”. The US and Ukraine were the only two countries in the world voting against the resolution. The ‘collective west’ abstained from voting.

Countries in Africa, Latin America and South Asia see all these developments, hoping Russia and China avert the Thucydides Trap of total war. The countries outside the west, can then shake off the shackles of a unipolar hegemony and run towards a multi-polar world. An international order geared towards political stability and self-determination of destiny. The state ideology of political correctness venerated by western leaders is abhorrent to many in the Russian civilization and their allies. In reality, political correctness is the cultural-Marxism of the Frankfurt school. Christians are horrified by the destruction of western culture and the Christian religion. This ideology of political correctness reminds Orthodox Christians of bolshevism. Many Russians and allies of Russia know the threat to the Russian civilization is real. They see parallels between the Russophobia presented on western corporate media and ‘Carthāgō dēlenda est’. The oratorical phrase, ‘Carthage must be destroyed’, was used by the Roman politician, Cato the Censor, when he concluded his speeches. This phrase was used as a form of 'manufacturing consent' before the Third Punic War of 149-146 BC between Rome and Carthage. Now replace Russia for Carthage.

The reality of the multi-polar world order is no longer a theory and is now being admitted in the open. Recently, Russian Foreign Minister Sergei Lavrov said, "A new reality is taking shape; the unipolar world is irretrievably receding into the past and a multipolar world is being born. This is an objective process that cannot be stopped. There won't be one single ruler in this new reality.... Nobody on earth will be considered a second-rate player. All nations are equal and sovereign.".

We should not conflate the system of multi-polarity with the “new world order”, mentioned many times by western leaders. The World Economic Forum, Council on Foreign Relations and Trilateral Commission's prospect for the world is centralised governance. The proposed ‘new world order’ "utopia" is fundamentally, technology-based technocratic serfdom. This is the governance model recommended by the west at their annual Davos Forum and World Government Summit. This governance model, is often portrayed to the public as ‘The Global Public-Private Partnership’. Such a system requires countries to transfer sovereignty and independence to unelected technocrats. The ‘new world order’ is a system where one central authority controls policy making for all countries. It’s serfdom, while citizens give up civil liberties in exchange for a balanced distribution of resources. 

Today we are witnessing a great paradigm shift in the world order of civilizations. The east has unambiguously affirmed that multipolarity is compatible with their civilization. They see the west's unipolar rules-based system and the proposed 'new world order' as an existential threat. Whatever the cost, including war will be on the table for the East to use in an attempt to preserve their sovereignty. The fate of the west will be determined by its own actions towards the east. The more the west 'doubles-down' to force their unipolar world order, the east will increasingly resist.