The financial crisis continues. On Monday a Wall Street Journal headline stated: “Markets at Risk for Additional Shocks.” It seems that “the world’s top banking authorities” are warning that financial markets “may suffer a relapse.” The front page of that same Wall Street Journal wrestled with another set of negatives: “New Hitches in Markets May Widen Credit Woes.” According to authors Liz Rappaport, Carrick Mollenkamp and Karen Richardson, “A widening array of financial-market problems threatens to trigger a new phase in the global credit crunch….” Ambrose Evans-Pritchard, the international business editor of the Telegraph (UK), affirmed that the credit crisis is escalating. “Defaults in the US housing market are spreading from sub-prime to … top-grade housing debt, threatening to set off a wave of even bigger losses for banks and investment funds.”
There is no reason to doubt the veracity of these reports. More losses are coming and worse news will follow. Voices are now uttering what was previously unthinkable, that the market has to sink. At the very least it will stagnate for years. Imagine what this means to baby boomers preparing for retirement. Imagine the resulting economic difficulties of Europe and Asia. In a story published by Interfax on Feb. 11, Russian energy boss Anatoliy Chubais said the world’s GDP is already falling. The process, he explained, would last “three or four years.” He predicted the demand for natural gas and oil would decline and so would Russia’s export revenue. The global financial crisis, he said, was bound to become a political crisis. He worried that Russia would blame “Western imperialism” and subsequently return to self-damaging policies of isolation and autarchy.
At a summit meeting last month Venezuelan President Hugo Chavez urged his Latin American allies to withdraw billions in currency from U.S. banks. He said the United States is about to suffer a severe financial shock. “We should begin to move our [cash] reserves here,” explained Chavez. “Why does our money have to be in the north?” At the same summit, President Daniel Ortega of Nicaragua said that the dictatorship of global capitalism “has lost control.” The “blame imperialism” crowd is ahead of curve. They know something bad is coming and they are bracing themselves. In the Great Depression, the totalitarian scapegoat was the Jews. In the present crisis the scapegoat will be America. It was no surprise, therefore, when Ortega and Chavez signed an accord that decried “the warlike attitude of the U.S. government and its attacks against our governments.”
What exists abroad, in a Marxist-Leninist context, also exists at home – in the context of the U.S. presidential race. A recent story by James Taranto alleges that “cameras from Houston's KRIV-TV caught a glimpse” of a Cuban flag and “an image of Che Guevara” hanging in a Barack Obama campaign office. What does a mainstream politician have in common with a blood-soaked icon of Cuba’s red terror? The economic crisis brings forward old ideologies under new labels. Sometimes the old labels remain stuck to some of the product. It should surprise no one if certain politicians have an unexamined Marxist underbelly. As unemployment rises, as markets fall, new political pressures and old socialist “ideas” will enter the political mainstream. Even Republican presidential hopefuls cannot help sounding like social democrats. It is too early, as yet; but those who would be king may soon be tempted to make dangerous promises. Senator Obama recently unveiled his economic program, which proposes to spend $210 billion to create jobs in infrastructure repair and “environmental industries.” It is a modest proposal, based on raiding the Pentagon’s budget. Nevertheless, here is a clue regarding the general direction of policy in the United States. Given worse economic news, the United States is ready for massive cuts in defense spending.
Coinciding with the retreat of the dollar, the retreat of U.S. military power signals a new era in which traditional U.S. allies are compelled to make concessions to Beijing and Moscow. When the power-shift begins, Saudi Arabia’s special relationship with the United States will succumb to a new “realism.” NATO will fall apart, with key nations running to Moscow ahead of others. Taiwan, Japan and South Korea will feel the heat. Old allies will detach themselves. Old dependencies and clients will seek protection elsewhere. A policy shift lies ahead for the United States. The Americans are destined to withdrawal from the Middle East. Internal tensions, within the United States, will radicalize the home front.
