The root cause of the crisis and the big game
Those who have ruled the world economy from centers such as London, New York and Frankfurt so far have begun understanding that they have reached the end of the line. Therefore, they are in a struggle for dragging developing countries to the brink of the abyss with them and for making the fall happen as a whole in a short period of time like the Great Depression of 1929. With this purpose, the media is the most important instrument they can use. Through the media outlets they have, they are conducting operations against countries that were not affected by the 2008 crisis and that turned the crisis into an opportunity, day in and day out. They keep saying that the economies of Turkey, South Korea and BRIC (Brazil, Russia, India and China) will soon collapse. When they cannot find anything negative with inflation, current account deficit and other data in these countries, they resort to political turmoil and terror. If this fails too, they publish made-up news in headlines, claiming that these countries will soon start capital controls. In fact, even the denial of such news means that you take them seriously. So, they think they can defeat you through such news. Joseph E. Stiglitz says the 2008 crisis is the product of the U.S. and explains the "brilliant" solutions that Americans found to resolve the crisis as follows: "Borrow and consume as your income rises." Americans borrowed and their saving rate went down to zero. When we look at the U.S.'s internal and external borrowing, we can see the cause of the global crisis.
As of December 2016, the U.S. has a total of $19.9 trillion in debt, excluding the private sector debts, against $18.5 trillion in annual income. There are $58.3 billion worth of U.S. bills and bonds in Turkey's reserves. According to the U.S. Treasury data, as of December 2016, per capita debt in the world's largest economy exceeds $61,000.
The largest part of the country's debts, corresponding to $14 trillion, is to its own citizens, state governments, banks, insurance companies, mutual funds, pension funds and the U.S. Federal Reserve (Fed), and the remainder, $6 trillion, is to foreign countries having U.S. bills and bonds.
Here, we can ask two questions. First, although this is the U.S.'s problem, why does it concern other parts of the world? Second, the U.S. produces the basic reserve currency that is used in global trade; it can exercise the right to seigniorage and pay its debts by printing dollars; so, is this a problem for the U.S.? First of all, the consequence of the U.S.'s insistence on maintaining this fake empire concerns all of us. Therefore, the U.S.'s external debt or total debt is as important as Turkey's external debt for us. This is because the U.S. can do two things to roll over its debt: First, it can forcefully maintain the political hegemony that was given to it through the agreement of the developed countries that were the victors of World War II, and highlight the dollar and war-based politics although the dollar is not based on gold or silver. This is what the U.S. has done so far. Although the world did not experience a total war as a result of this, it spent 71 years, from 1945 to 2016, full of civil wars, regional wars and terror. Second, it can act in accordance with economic rationality, declare a new New Deal and abandon consolidation with the overvalued dollar. It can highlight advanced technological areas, especially the information sector, within the framework of the new industrial revolution and develop a new export-based economic rationality. This means it must share its hegemony with developing countries. This is an order where the world's energy and mineral resources are not exchanged with the worthless U.S. dollar and bills and do not turn into income for the U.S. For almost a century, all energy-rich countries, especially the Gulf region, have financed the U.S. The petro-dollar system produced not only distorted wealth, but also war and terror-based politics. Today, China and Japan have more than $1 trillion in U.S. treasury bills and bonds. China is the factory of the world, while Japan is the developed technology base of the world. China comes to the fore in labor productivity, while Japan stands out with its technological productivity. In other words, the profit gained from the world's labor and technological productivity is flowing to the U.S. through the worthless dollar mechanism and, from the U.S., they are distributed to the whole world as debt. Another portion of this money goes to offshore banking centers such as the Cayman Islands which are hedge fund havens. A total of 60 percent of the world's rogue funds is in the Cayman Islands, while the amount of U.S. bills is $262 billion here. If we consider that this figure is $207 billion in the U.K., we can understand what kind of a financial game is played in centers like the Cayman Islands. This circulation of the rogue and worthless dollar could easily enter the economies that are dependent on the dollar and imports and conduct operations as it wanted there.
This is now a rotten economic paradigm, and it will not recover by repeating old practices. So, what kind of a strategy should the southern part of the world, namely the developing countries, follow?
First of all, we have to object to the concepts of developed country and developing country. Today, capitalism is experiencing a much heavier crisis than the crises in the 19th and 20th centuries, and this time it cannot be resolved without a total systemic change. The fact that such a big overturn does not occur with a total war is up to eastern and southern countries, which are called developing countries, keeping up with western and northern countries in technology. We are facing a new détente like the one in the Cold War period. The 20th century détente was between the U.S. and the Soviet Union. Now, it is on the way to occur between the West and East. So, the West is doing two things: First, it lessens its burden by exporting its crisis to the East. To this end, it resorts to a post-conventional war (terror) and triggers a new crisis by using the dollar-based financial system. Second, it is striving to set developing axis powers against each other and inciting sectarian wars in the Middle East. On the other hand, the Russia-Turkey example (the downing of Russian fighter jet and the assassination of Russian ambassador to Turkey) is quite striking.
Eastern and southern countries must uncloak such operations directed against themselves and construct a new democratic, open and competitive economy. I will continue the issue in the next column.
As of December 2016, the U.S. has a total of $19.9 trillion in debt, excluding the private sector debts, against $18.5 trillion in annual income. There are $58.3 billion worth of U.S. bills and bonds in Turkey's reserves. According to the U.S. Treasury data, as of December 2016, per capita debt in the world's largest economy exceeds $61,000.
The largest part of the country's debts, corresponding to $14 trillion, is to its own citizens, state governments, banks, insurance companies, mutual funds, pension funds and the U.S. Federal Reserve (Fed), and the remainder, $6 trillion, is to foreign countries having U.S. bills and bonds.
Here, we can ask two questions. First, although this is the U.S.'s problem, why does it concern other parts of the world? Second, the U.S. produces the basic reserve currency that is used in global trade; it can exercise the right to seigniorage and pay its debts by printing dollars; so, is this a problem for the U.S.? First of all, the consequence of the U.S.'s insistence on maintaining this fake empire concerns all of us. Therefore, the U.S.'s external debt or total debt is as important as Turkey's external debt for us. This is because the U.S. can do two things to roll over its debt: First, it can forcefully maintain the political hegemony that was given to it through the agreement of the developed countries that were the victors of World War II, and highlight the dollar and war-based politics although the dollar is not based on gold or silver. This is what the U.S. has done so far. Although the world did not experience a total war as a result of this, it spent 71 years, from 1945 to 2016, full of civil wars, regional wars and terror. Second, it can act in accordance with economic rationality, declare a new New Deal and abandon consolidation with the overvalued dollar. It can highlight advanced technological areas, especially the information sector, within the framework of the new industrial revolution and develop a new export-based economic rationality. This means it must share its hegemony with developing countries. This is an order where the world's energy and mineral resources are not exchanged with the worthless U.S. dollar and bills and do not turn into income for the U.S. For almost a century, all energy-rich countries, especially the Gulf region, have financed the U.S. The petro-dollar system produced not only distorted wealth, but also war and terror-based politics. Today, China and Japan have more than $1 trillion in U.S. treasury bills and bonds. China is the factory of the world, while Japan is the developed technology base of the world. China comes to the fore in labor productivity, while Japan stands out with its technological productivity. In other words, the profit gained from the world's labor and technological productivity is flowing to the U.S. through the worthless dollar mechanism and, from the U.S., they are distributed to the whole world as debt. Another portion of this money goes to offshore banking centers such as the Cayman Islands which are hedge fund havens. A total of 60 percent of the world's rogue funds is in the Cayman Islands, while the amount of U.S. bills is $262 billion here. If we consider that this figure is $207 billion in the U.K., we can understand what kind of a financial game is played in centers like the Cayman Islands. This circulation of the rogue and worthless dollar could easily enter the economies that are dependent on the dollar and imports and conduct operations as it wanted there.
This is now a rotten economic paradigm, and it will not recover by repeating old practices. So, what kind of a strategy should the southern part of the world, namely the developing countries, follow?
First of all, we have to object to the concepts of developed country and developing country. Today, capitalism is experiencing a much heavier crisis than the crises in the 19th and 20th centuries, and this time it cannot be resolved without a total systemic change. The fact that such a big overturn does not occur with a total war is up to eastern and southern countries, which are called developing countries, keeping up with western and northern countries in technology. We are facing a new détente like the one in the Cold War period. The 20th century détente was between the U.S. and the Soviet Union. Now, it is on the way to occur between the West and East. So, the West is doing two things: First, it lessens its burden by exporting its crisis to the East. To this end, it resorts to a post-conventional war (terror) and triggers a new crisis by using the dollar-based financial system. Second, it is striving to set developing axis powers against each other and inciting sectarian wars in the Middle East. On the other hand, the Russia-Turkey example (the downing of Russian fighter jet and the assassination of Russian ambassador to Turkey) is quite striking.
Eastern and southern countries must uncloak such operations directed against themselves and construct a new democratic, open and competitive economy. I will continue the issue in the next column.