THE END OF INTERNATIONALISM

We are now seeing the disintegration of internationalism. The very ideal is dying. The colonies are asserting themselves. Some of them are buying weapons that could challenge the Western oligarchy. That’s what the howl over WMD is really all about: the fuzzy-wuzzies are about to get Gatling guns. Some of them already have: the ones we are polite to. Diplomacy is what goes on between nations of equal firepower or who have alliances with nations of equal firepower. The oligopoly with the weapons seeks to maintain a closed club. Such is the history of weaponry.

The post-war rise of Asia was foreseen by the internationalists in 1945, but they bet the farm on Japan, which is also an oligopoly. Five families controlled the country, 1868–1945. The best book on this is Carroll Quigley’s Tragedy and Hope (1966). (Quigley taught Bill Clinton history at Georgetown, a fact that Clinton mentioned in his 1992 acceptance speech at the Democratic Convention.) Today, there are a few more families, but the system is essentially unchanged.

The internationalists’ bet is turning sour. Japan’s banking system is close to collapse. China, Japan’s ancient enemy, has replaced Japan as the central nation in this century’s Greater East Asia Co-Prosperity Sphere.

To put restrictions on Asia, the Western alliance must control the oil spigots. This goal is what is now driving the Bush Administration. When Ghadaffi nationalized British Petroleum's oil in1971, he fired a shot across the bow of the West, whose oil companies controlled the distribution of the Middle East’s oil. The West did nothing. OPEC saw its opportunity. The OPEC price hikes of 1973 and 1979 made it clear that the Arabs and Iranians would henceforth take the lion’s share of the oil income.

Their big problem was where to invest this income. They let Western banks do this for them. Then they bought big cars, set up college scholarships for selected students from the masses, and generally became dependent on the West’s production system. Now they are trapped by their own social welfare states. They are dependent on American-produced spare parts for their military. They can do little to resist the United States, which is coming back into the region to extract those lost oil profits.

What Quigley called the Anglo-American alliance is about to smash its fist into what I have called the mother of all tar babies.

France and Germany see what’s coming – an Islamic reaction – and have opted out. Russia has joined with them. Regionalism lies ahead: Asia, Europe, and the Western hemisphere. This is David Rockefeller’s vision, the Trilateral Commission, but without the hoped-for cooperation. The regional blocs that he forecasted a generation ago as inevitable are now going their own way, just as he feared they might. The original regional alliance – the United States and Great Britain – still has a special relationship, but the large continental European powers have officially broken ranks.

The glue that holds the system together today is fractional reserve banking. The Bank for International Settlements in Basle cleared central bank accounts all through World War II. For central bankers, world war was a side issue, an inconvenience. But without a gold standard, the international system has moved to currency blocs. The United States dollar is the central factor. Central banks have 70% of their foreign currency reserves invested in T-bills and T-notes. But Greenspan’s FED and the sagging US economy have combined to push interest rates to about 1%. It’s getting almost as cheap to hold gold.

The glue is the dollar. If the world’s central bankers could decide on an alternative currency, they would start selling dollars and investing in that currency’s T-bills. I think the French-German alliance is a political move against the pound and the dollar. The split is not complete yet. No central banker wants to be the first to dump dollars and move to an untried currency, such as the euro. But the longer the euro survives, the more likely that move will be.

If China ever makes the Yuan convertible into gold, the dollar will be abandoned. China now constitutes about 5% of all world trade. The growth curve is heading up fast. See chart #7, "World Shifts Production to China’s Export Platforms," prepared by Jeff Rubin of the Canadian Imperial Bank of Commerce.

When China’s currency finally reflects this, and its central bank abandons its fixed ratio with the dollar (price controls always break down), the run against the dollar will begin.