The New Great Game Moves From Asia-Pacific To Indo-Pacific

Authored by Pepe Escobar via The Asia Times,

Is the world"s center of gravity shifting to the heart of the Indo-Pacific – a new pivot to Asia?

In the context of the New Great Game in Eurasia, the New Silk Roads, known as the Belt and Road Initiative (BRI), integrates all of China’s instruments of national power – political, economic, diplomatic, financial, intellectual and cultural – to shape the 21^st century geopolitical/geoeconomic order. BRI is the organizing concept of China’s foreign policy for the foreseeable future; the heart of what was conceptualized, even before President Xi Jinping, as China’s “peaceful rise.”

The Trump administration’s reaction to the breath and scope of BRI has been somewhat minimalistic. For the moment, it amounts to a terminological switch from what was previously known as Asia-Pacific to “Indo-Pacific.” The Obama administration, up to the former president’s last visit to Asia in September 2016, always referred to Asia-Pacific.

Indo-Pacific includes South Asia and the Indian Ocean. So, from an American point of view, that does imply elevating India to the status of a rising global superpower able to “contain” China.

US Secretary of State Rex Tillerson could not have stated it more bluntly: “The world’s center of gravity is shifting to the heart of the Indo-Pacific. The United States and India – with our shared goals of peace, security, freedom of navigation, and a free and open architecture – must serve as the eastern and western beacons of the Indo-Pacific. As the port and starboard lights between which the region can reach its greatest and best potential.”

Attempts to portray it as a “holistic approach” may mask a clear geopolitical swerve where Indo-Pacific sounds like a remix of the Obama era “pivot to Asia” extended to India.

Indo-Pacific directly refers to the Indian Ocean stretch of the Maritime Silk Road, which as one of China’s top connectivity routes, features prominently in “globalization with Chinese characteristics.” As much as Washington, Beijing is all for free markets and open access to commons. But that must not necessarily imply, from a Chinese point of view, a single, vast institutional web overseen by the US.

‘Eurasifrica’?

As far as New Delhi is concerned, embracing the Indo-Pacific concept entailed quite a tightrope act.

Last year, both India and Pakistan became formal members of the Shanghai Cooperation Organization (SCO), which is a key element of the Russia-China strategic partnership.

India, China and Russia are BRICS members; the president of the BRICS New Development Bank (NDB), headquartered in Shanghai, is Indian. India is a member of the China-led Asia Infrastructure Investment Bank (AIIB). And until recently India was also participating in BRI.

But then things started to unravel last May, when Prime Minister Narendra Modi refused to attend the BRI summit in Beijing because of the China-Pakistan Economic Corridor (CPEC), a key BRI node that happens to traverse Gilgit-Baltistan and the sensitive region Pakistan defines as Azad Kashmir and India as Pakistan-occupied Kashmir.

And right on cue, at an African Development Bank meeting in Gujarat, New Delhi unveiled what might be construed as a rival BRI project: the Asia-Africa Growth Corridor (AAGC) – in partnership with Japan. AAGC could not be more “Indo-Pacific,” actually delineating an Indo-Pacific Freedom Corridor, funded by Japan and using India’s know-how of Africa, capable of rivaling – what else – BRI.

For the moment, this is no more than an avowed “vision document” shared by Modi and his Japanese counterpart Shinzo Abe to do some very BRI-like things, such as developing quality infrastructure and digital connectivity.

And adding to AAGC comes the Quadrilateral, which the Japanese Foreign Ministry spins as projecting “a free and open international order based on the rule of law in the Indo-Pacific.” That once again pits the “stability of Indo-Pacific region” against Tokyo’s perception of “China’s aggressive foreign policy” and “belligerence in the South China Sea” which imperils what the US Navy always describes as “freedom of navigation”.

As much as Xi and Abe may have recently lauded a new start of Sino-Japanese relations, reality says otherwise. Japan, invoking the DPRK threat but actually fearing China’s fast military modernization, will buy more US weapons. At the same time, New Delhi and Canberra are also quite worried about China’s economic/military onslaught.

Essentially, AAGC and the Quadrilateral link India’s Act East Policy with Japan’s Free and Open Indo-Pacific strategy. Reading these documents in tandem, it’s not far-fetched to qualify the Indo-Japanese strategy as aiming for a “Eurasifrica.”

In practice, apart from the expansion in Africa, Tokyo is also driven to expand infrastructure projects across Southeast Asia in cooperation with India – some in competition or overlapping with BRI. The Asian Development Bank (ADB), meanwhile, is mulling alternative financing models for infrastructure projects away from BRI.

As it stands, the Quadrilateral is still a work in progress, with its “stability of Indo-Pacific region” pitted against Beijing’s avowed desire to create a “community with a shared future” in the Asia-Pacific. There are reasons to worry that this new configuration might actually evolve into a stark economic/military polarization of Asia.

A split at the heart of BRICS

Asia needs a whopping $1.7 trillion in infrastructure projects a year, according to the ADB. In theory, Asia as a whole would benefit from an array of BRI projects coupled with some others that are ADB-financed and AAGC-linked.

Considering the extremely ambitious breath and scope of the whole strategy, BRI enjoys a substantial head start. Beijing’s vast reserves are already geared towards investing in Asia-wide infrastructure in tandem with exporting excess construction capacity and improving connectivity all around.

In contrast, New Delhi barely has enough industrial capacity for India’s own needs. In fact India badly needs infrastructure investment; according to an extensive report, India’s needs amount to at least $1.5 trillion over the next decade. And on top of it India holds a persistent trade deficit with China.

A tangible would-be success is the Indian investment in Chabahar port in Iran as part of an Afghan trade strategy (see part two of this report). But that’s about it.

Apart from energy/connectivity projects such as the national digital ID Aadhaar system (1.18 billion users) and investing in an array of solar power plants, India has a long way to go. According to the recently published Global Hunger Index (GHI), India ranks at 100 out of 119 countries surveyed on child hunger, based on four components: undernourishment, child mortality, child wasting, and child stunting. That’s an extremely worrying seven notches below the DPRK. And only seven notches above Afghanistan, at the bottom of the list.

New Delhi would hardly lose if there were a conscious bet on building up on India-China cooperation under the BRICS framework. And that includes accepting that BRI investment is useful and even essential for India’s infrastructure development. The doors remain open. All eyes are on December 10-11, when India will host a trilateral Russia-India-China – all BRICS members – at the ministerial level.

Next: China and India slug it out, from the Gulf of Oman to the Arabian Sea

Michael Hudson: America"s Monetary Imperialism

Authored by Michael Hudson via Counterpunch.org,

In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and “foreign aid” (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity.

The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it.

Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains. The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the International Monetary Fund (IMF), World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II.

The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

Imposing Austerity on Germany After World War I

After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange market. The currency declined, import prices soared, raising domestic prices as well. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the Untied States held some 75 percent of the world’s monetary gold stock. That established the U.S. dollar as the world’s reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.

It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial “stability” thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States.

These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)

U.S. Treasury Debt Replaces the Gold Exchange Standard

The foreign military spending that helped return American gold to Europe became a flood as the Vietnam War spread across Asia after 1962. The Treasury kept the dollar’s exchange rate stable by selling gold via the London Gold Pool at $35 an ounce. Finally, in August 1971, President Nixon stopped the drain by closing the Gold Pool and halting gold convertibility of the dollar.

There was no plan for what would happen next. Most observers viewed cutting the dollar’s link to gold as a defeat for the United States. It certainly ended the postwar financial order as designed in 1944. But what happened next was just the reverse of a defeat. No longer able to buy gold after 1971 (without inciting strong U.S. disapproval), central banks found only one asset in which to hold their balance-of-payments surpluses: U.S. Treasury debt. These securities no longer were “as good as gold.” The United States issued them at will to finance soaring domestic budget deficits.

By shifting from gold to the dollars thrown off by the U.S. balance-of-payments deficit, the foundation of global monetary reserves came to be dominated by the U.S. military spending that continued to flood foreign central banks with surplus dollars. America’s balance-of-payments deficit thus supplied the dollars that financed its domestic budget deficits and bank credit creation – via foreign central banks recycling U.S. foreign spending back to the U.S. Treasury.

In effect, foreign countries have been taxed without representation over how their loans to the U.S. Government are employed. European central banks were not yet prepared to create their own sovereign wealth funds to invest their dollar inflows in foreign stocks or direct ownership of businesses. They simply used their trade and payments surpluses to finance the U.S. budget deficit. This enabled the Treasury to cut domestic tax rates, above all on the highest income brackets.

U.S. monetary imperialism confronted European and Asian central banks with a dilemma that remains today: If they do not turn around and buy dollar assets, their currencies will rise against the dollar. Buying U.S. Treasury securities is the only practical way to stabilize their exchange rates – and in so doing, to prevent their exports from rising in dollar terms and being priced out of dollar-area markets.

The system may have developed without foresight, but quickly became deliberate. My book Super Imperialism sold best in the Washington DC area, and I was given a large contract through the Hudson Institute to explain to the Defense Department exactly how this extractive financial system worked. I was brought to the White House to explain it, and U.S. geostrategists used my book as a how-to-do-it manual (not my original intention).

Attention soon focused on the oil-exporting countries. After the U.S. quadrupled its grain export prices shortly after the 1971 gold suspension, the oil-exporting countries quadrupled their oil prices. I was informed at a White House meeting that U.S. diplomats had let Saudi Arabia and other Arab countries know that they could charge as much as they wanted for their oil, but that the United States would treat it as an act of war not to keep their oil proceeds in U.S. dollar assets.

This was the point at which the international financial system became explicitly extractive. But it took until 2009, for the first attempt to withdraw from this system to occur. A conference was convened at Yekaterinburg, Russia, by the Shanghai Cooperation Organization (SCO). The alliance comprised Russia, China, Kazakhstan, Tajikistan, Kirghizstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. U.S. officials asked to attend as observers, but their request was rejected.

The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking to break free from America’s financial free ride.

The IMF Changes Its Rules to Isolate Russia and China

Aiming to isolate Russia and China, the Obama Administration’s confrontational diplomacy has drawn the Bretton Woods institutions more tightly under US/NATO control. In so doing, it is disrupting the linkages put in place after World War II.

The U.S. plan was to hurt Russia’s economy so much that it would be ripe for regime change (“color revolution”). But the effect was to drive it eastward, away from Western Europe to consolidate its long-term relations with China and Central Asia. Pressing Europe to shift its oil and gas purchases to U.S. allies, U.S. sanctions have disrupted German and other European trade and investment with Russia and China. It also has meant lost opportunities for European farmers, other exporters and investors – and a flood of refugees from failed post-Soviet states drawn into the NATO orbit, most recently Ukraine.

To U.S. strategists, what made changing IMF rules urgent was Ukraine’s $3 billion debt falling due to Russia’s National Wealth Fund in December 2015. The IMF had long withheld credit to countries refusing to pay other governments. This policy aimed primarily at protecting the financial claims of the U.S. Government, which usually played a lead role in consortia with other governments and U.S. banks. But under American pressure the IMF changed its rules in January 2015. Henceforth, it announced, it would indeed be willing to provide credit to countries in arrears other governments – implicitly headed by China (which U.S. geostrategists consider to be their main long-term adversary), Russia and others that U.S. financial warriors might want to isolate in order to force neoliberal privatization policies.

Article I of the IMF’s 1944-45 founding charter prohibits it from lending to a member engaged in civil war or at war with another member state, or for military purposes generally. An obvious reason for this rule is that such a country is unlikely to earn the foreign exchange to pay its debt. Bombing Ukraine’s own Donbass region in the East after its February 2014 coup d’état destroyed its export industry, mainly to Russia.

Withholding IMF credit could have been a lever to force adherence to the Minsk peace agreements, but U.S. diplomacy rejected that opportunity. When IMF head Christine Lagarde made a new loan to Ukraine in spring 2015, she merely expressed a verbal hope for peace. Ukrainian President Porochenko announced the next day that he would step up his civil war against the Russian-speaking population in eastern Ukraine. One and a half-billion dollars of the IMF loan were given to banker Ihor Kolomoiski and disappeared offshore, while the oligarch used his domestic money to finance an anti-Donbass army. A million refugees were driven east into Russia; others fled west via Poland as the economy and Ukraine’s currency plunged.

The IMF broke four of its rules by lending to Ukraine: (1) Not to lend to a country that has no visible means to pay back the loan (the “No More Argentinas” rule, adopted after the IMF’s disastrous 2001 loan to that country). (2) Not to lend to a country that repudiates its debt to official creditors (the rule originally intended to enforce payment to U.S.-based institutions). (3) Not to lend to a country at war – and indeed, destroying its export capacity and hence its balance-of-payments ability to pay back the loan. Finally (4), not to lend to a country unlikely to impose the IMF’s austerity “conditionalities.” Ukraine did agree to override democratic opposition and cut back pensions, but its junta proved too unstable to impose the austerity terms on which the IMF insisted.

U.S. Neoliberalism Promotes Privatization Carve-Ups of Debtor Countries

Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China’s mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia.

At stake is much more than just which nations will get the contracting and banking business. At issue is whether the philosophy of development will follow the classical path based on public infrastructure investment, or whether public sectors will be privatized and planning turned over to rent-seeking corporations.

What made the United States and Germany the leading industrial nations of the 20^th century – and more recently, China – has been public investment in economic infrastructure. The aim was to lower the price of living and doing business by providing basic services on a subsidized basis or freely. By contrast, U.S. privatizers have brought debt leverage to bear on Third World countries, post-Soviet economies and most recently on southern Europe to force selloffs. Current plans to cap neoliberal policy with the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Transatlantic Free Trade Agreement (TAFTA) go so far as to disable government planning power to the financial and corporate sector.

American strategists evidently hoped that the threat of isolating Russia, China and other countries would bring them to heel if they tried to denominate trade and investment in their own national currencies. Their choice would be either to suffer sanctions like those imposed on Cuba and Iran, or to avoid exclusion by acquiescing in the dollarized financial and trade system and its drives to financialize their economies under U.S. control.

The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today’s U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. “Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company’s ‘expected future profits.’”

This policy threat is splitting the world into pro-U.S. satellites and economies maintaining public infrastructure investment and what used to be viewed as progressive capitalism. U.S.-sponsored neoliberalism supporting its own financial and corporate interests has driven Russia, China and other members of the Shanghai Cooperation Organization into an alliance to protect their economic self-sufficiency rather than becoming dependent on dollarized credit enmeshing them in foreign-currency debt.

At the center of today’s global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity.

The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran’s secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and ‘70s was highlighted by the overthrow of Allende in Chile and Operation Condor’s assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America’s status as the world’s “indispensible nation” entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees.

Germany’s Choice

This is not how the Enlightenment was supposed to evolve. The industrial takeoff of Germany and other European nations involved a long fight to free markets from the land rents and financial charges siphoned off by their landed aristocracies and bankers. That was the essence of classical 19^th-century political economy and 20^th-century social democracy. Most economists a century ago expected industrial capitalism to produce an economy of abundance, and democratic reforms to endorse public infrastructure investment and regulation to hold down the cost of living and doing business. But U.S. economic diplomacy now threatens to radically reverse this economic ideology by aiming to dismantle public regulatory power and impose a radical privatization agenda under the TTIP and TAFTA.

Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies. Instead, the world is polarizing, not converging. The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain.

The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization?

Today’s global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

The past century’s global fracture between creditor and debtor economies has interrupted what seemed to be Europe’s democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21^st century.

Gold Has Been On A Tear All Year

Posted with permission and written by Rory Hall, The Daily Coin

 

 

 

 

The way gold has been moving the past few weeks, it’s easy to overlook the 11% growth it is enjoying during 2017. As we move towards year end, we see gold has been flat while suffering attack after attack from the banking cabal. The charts over the past ten trading day have these massive waterfalls that are intended to frighten traders. A few years ago this worked like a charm - today, not so much.

 

While these waterfalls make the chart look horrific, if you look just past where the attack ends, you will see a reversal. Not just a reversal, but over the past ten days, close to a 100% reversal. This shows just how the “strong hands” are not letting go and not being shaken at all from their stance. The word is out – gold is where it’s at and physical gold is really where it’s at.

 

We have one more Federal Reserve meeting scheduled for the second week of December. We can only hope Fed Chairman Janet Yellen aka Mother Felon does her thing and raises the Fed Rate by another 0.25% – 0.50%. If this happens we expect a similar reaction as has happened in January 2016 and January 2017.

 

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  On December 15, 2015, gold bottomed out at $1,049 (on the London pm gold price fix) the day after the Federal Reserve raised rates for the first time in almost 10 years. Gold immediately took off and rose by almost $200 per ounce to $1,241 in less than two months (by February 11, 2016).
  

  
  


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  On December 20, 2016, gold bottomed out at $1,125 on December 20, shortly after the Fed raised rates again. Gold then rose gradually to $1,257 in February and $1,346 by the next September.
  

  
  

It could happen again this year. Even if gold fell to the low $1,200s range, it could take off again in late December. That’s the theory of the Commodities Corner column in last week’s Barron’s. First, the article points out that gold rose 8.6% in 2016 and is on track to gain over 10% in 2017, so each year’s low gold price is higher than the previous year’s low. Then, Barron’s explained that speculative gold traders tend to ‘short’ gold in advance of the FOMC meeting and then cover those shorts when the Fed meets. Source

 

We are hoping Mother Felon signals that 2018 is going to another great year for gold. Keep your eyes and ears open for the Fed Chair to, hopefully, announce an early Christmas present on December 12-13. The only question that remains is whether she will or she won’t do as she has done the past two years.

 

Starting last Sept. 20, immediately after the Fed’s “pause” on rate hikes, the market began to price in a Fed rate hike for December. Asset classes adjusted in line with those expectations.

Treasuries, gold, euros and yen all fell. Bond yields and the dollar both rose. Tight money was on the way.

The problem is that the markets have now priced in a 100% chance of a Fed rate hike in December. You can’t get any more sure of yourself than that. This means that Treasuries, euros, gold and yen have all found a bottom.

They’re just waiting for confirmation from the Fed in a few weeks. As I said, markets are waiting for Godot.

This sets up one of my favorite trading situations. I call it the “asymmetric trade.”

When something is fully priced, the happening of the event does not move prices. But if the event does not happen, prices move violently to reprice for the unexpected outcome.

This means you have a “Heads I win, tails I don’t lose” situation. Source

I agree people that are holding physical gold, and not an illusion of gold like GLD, it’s a “Heads I win, tails I don’t lose” scenario. While gold is still under the control of the West, gold is nothing more than a hostage and does what it is told by its capture. Gold, in our opinion, is going higher: not just higher, but much higher from where it is currently. Will the next “gold master” allow it to roam free? We doubt it - we just hope gold has some breathing room and the leash is slightly longer than it is today.

 

The global monetary system is beginning to change. Gold is going to be part of the change and a major player in the future global trade system. If one simply reviews gold through the lens that is the countries in Mackinder’s Heartland, you will see nations scooping up gold with both hands. These nations are members of the BRI, EAEU, SCO, AIIB and the endless list of economic and military alliances that are currently developing and solidifying their future economic growth. The picture is very clear – gold, probably on the blockchain or some form of new fintech, is going to be included in the future of global trade. The major players, Russia and China, are making this crystal clear. How we get to the new system is the question of our life time that could have a very ugly answer.

 

We will continue holding physical gold and encouraging people to research reasons to hold physical gold. As we see it, our financial insurance policy increased by more than 8% in 2016 and another 11% in 2017 and is poised to continue to post gains over the next few years. Either way, gains or losses, insurance is insurance and only works if you hold it. We choose to hold it.

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

Gold Has Been On A Tear All Year

Posted with permission and written by Rory Hall, The Daily Coin

 

 

 

Check out these other articles by our contributors:

Steve Rocco - Global Silver Investment Demand Maybe Down, But Still Double Pre-2008 Market Crash Level

Dave Kranzler - The Debt Bubble Is Beginning To Leak Air

Craig Hemke - Does The CoT Structure Prohibit A Rally?

Sprott Money"s Ask The Expert - Danielle DiMartino Booth

Xi"s Roadmap To The Chinese Dream

Authored by Pepe Escobar via The Asia Times,

China"s Belt and Road Initiative - the New Silk Road - will spark the country"s development and turn the dream into reality...

It all starts with Hong Kong as a major BRI financing hub.

Now that President Xi Jinping has been duly elevated to the Chinese Communist Party pantheon in the rarified company of Mao Zedong Thought and Deng Xiaoping Theory, the world will have plenty of time to digest the meaning of “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

Xi himself, in his 3½-hour speech at the start of the 19th Party Congress, pointed to a rather simplified “socialist democracy” – extolling its virtues as the only counter-model to Western liberal democracy. Economically, the debate remains open on whether this walks and talks more like “neoliberalism with Chinese characteristics”.

All the milestones for China in the immediate future have been set.

• “Moderately prosperous society” by 2020.


• Basically modernized nation by 2035.


• Rich and powerful socialist nation by 2050.

Xi himself, since 2013, has encapsulated the process in one mantra; the “Chinese dream”. The dream must become reality in a little over three decades. The inexorable modernization drive unleashed by Deng’s reforms has lasted a little less than four decades. Recent history tell us there’s no reason to believe phase 2 of this seismic Sino-Renaissance won’t be fulfilled.

Xi emphasized, “the dreams of the Chinese people and those of other peoples around the world are closely linked. The realization of the Chinese dream will not be possible without a peaceful international environment and a stable international order.”

He mentioned only briefly the New Silk Roads, a.k.a. Belt and Road Initiative (BRI) as having “created a favorable environment for the country’s overall development”. He didn’t dwell on BRI’s ambition and extraordinary scope, as he does in every major international summit as well as in Davos earlier this year.

But still it was implicit that to arrive at what Xi defines as a “community of common destiny for mankind”, BRI is China’s ultimate tool. BRI, a geopolitical/geoeconomic game-changer, is in fact Xi’s – and China’s – organizing foreign policy concept and driver up to 2050.

Xi has clearly understood that global leadership implies being a top provider, mostly to the global South, of connectivity, infrastructure financing, comprehensive technical assistance, construction hardware and myriad other trappings of “modernization”.

It does not hurt that this trade/commerce/investment onslaught helps to internationalize the yuan.

It’s easy to forget that BRI, an unparalleled multinational connectivity drive set to economically link all points Asia to Europe and Africa, was announced only three years ago, in Astana (Central Asia) and Jakarta (Southeast Asia).

What was originally known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road were endorsed by the Third Plenum of the 18th CCP Central Committee in November 2013. Only after the release of an official document, “Visions and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Roads”, in March 2015, the whole project was finally named BRI.

According to the official Chinese timeline, we’re only at the start of phase 2. Phase 1, from 2013 to 2016, was “mobilization”. “Planning”, from 2016 to 2021, is barely on (and that explains why few major projects are online). “Implementation” is supposed to start in 2021, one year before Xi’s new term expires, and go all the way to 2049.

The horizon thus is 2050, coinciding with Xi’s “rich and powerful socialist nation” dream. There’s simply no other comprehensive, inclusive, far-reaching, financially solid development program on the global market. Certainly not India’s Asia-Africa Growth Corridor (AAGC).

Have BRI, will travel

It starts with Hong Kong. When Xi said, “We will continue to support Hong Kong and Macau in integrating their own development into the overall development of the country”, he meant Hong Kong configured as a major BRI financing hub – its new role after a recent past of business facilitator between China and the West.

Hong Kong’s got what it takes; convertible currency; total capital mobility; rule of law; no tax on interest, dividends and capital gains; total access to China’s capital market/savings; and last but not least, Beijing’s support.

Enter the dream of myriad financing packages (public-private; equity-debt; short-long term bonds). Hong Kong’s BRI role will be of the Total Package international financial center (venture capital; private equity; flotation of stocks and bonds; investment banking; mergers and acquisitions; reinsurance) interlinked with the Greater Bay Area – the 11 cities (including Guangzhou and Shenzhen) of the Pearl River Delta (light/heavy manufacturing; hi-tech venture capitalists, start-ups, investors; top research universities).

That ties up with Xi’s emphasis on innovation; “We will strengthen basic research in applied sciences, launch major national science and technology projects, and prioritize innovation in key generic technologies, cutting-edge frontier technologies, modern engineering technologies, and disruptive technologies.”

The integration of the Greater Bay Area is bound to inspire, fuel, and in some cases even mould some of BRI’s key projects. The Eurasian Land Bridge from Xinjiang to Western Russia (China and Kazakhstan are actively turbo-charging their joint free trade zone at Khorgos). The China-Mongolia-Russia economic corridor. The connection of the Central Asian “stans” to West Asia – Iran and Turkey. The China-Pakistan Economic Corridor (CPEC) from Xinjiang all the way to Gwadar in the Arabian Sea – capable of sparking an “economic revolution” according to Islamabad. The China-Indochina corridor from Kunming to Singapore. The Bangladesh-China-India-Myanmar (BCIM) corridor (assuming India does not boycott it). The Maritime Silk Road from coastal southeast China all the way to the Mediterranean, from Piraeus to Venice.

Yiwu-London freight trains, Shanghai-Tehran freight trains, the Turkmenistan to Xinjiang gas pipeline – these are all facts on the ground. Along the way, the technologies and tools of infrastructure connectivity – applied to high-speed rail networks, power plants, solar farms, motorways, bridges, ports, pipelines – will be closely linked with financing by the Asia Infrastructure Investment Bank (AIIB) and the security-economic cooperation imperatives of the Shanghai Cooperation Organization (SCO) to build the new Eurasia from Shanghai to Rotterdam. Or, to evoke Vladimir Putin’s original vision, even before BRI was launched, “from Lisbon to Vladivostok”.

Xi did not spell it out, but Beijing will do everything to stay as independent as possible from the Western Central Bank system, with the Bank of International Settlements (BIS) to be avoided in as many trade deals as possible to the benefit of yuan-based transactions or outright barter. The petrodollar will be increasingly bypassed (it’s already happening between China and Iran, and Beijing sooner rather than later will demand it from Saudi Arabia.)

The end result, by 2050, will be, barring inevitable, complex glitches, an integrated market of 4.5 billion people mostly using local currencies for bilateral and multilateral trade, or a basket of currencies (yuan-ruble-rial-yen-rupee).

Xi has laid China’s cards – as well as the road map – on the table. As far as the Chinese Dream is concerned, it’s now clear; Have BRI, Will Travel.

A Failing Empire, Part 3: China & Russia Are Transforming Enemies Into Friends

Authored by Federico Pieraccini via The Strategic Culture Foundation,

In the previous articles, the military and economic means by which the United States initially aimed for global hegemony were addressed, detailing how the US became the (declining) superpower it is today. In both analyses I highlighted how the threat of US military power is no longer credible, and how sanctions and the strong-arming behavior of corporate giants and international bodies (IMF, World Bank, BIS, etc) have ceased their effectiveness. This has made the United States increasingly irrelevant, leaving in the process a vacuum to be filled by emerging powers like China and Russia, which effectively ushers in a new world order based on multipolarity. In this third and final part of the series, I will dive into the specific events that show how the military, economic and diplomatic combination of Iran, Russia and China have forged, by known as well as less-known means, an alternative world order to the unipolar American one.

Russia, China and Iran have in recent years drawn enormous benefit from the declining military and economic power of the United States, further propelled by a general mistrust of Washington"s diplomatic and political abilities, both with Obama and now with Trump. The two previous articles showed that Moscow, Beijing and Tehran, even as they addressed different situations, shared similar interests and came to coordinate their military, economic and diplomatic strategy.

The success of the Euro-Asian triptych is based on the essential principle of transforming enemies into neutral players, neutral players into allies, and further improving relations with allied nations. In order for this project to be realized, economic, military and diplomatic efforts are variously employed, depending on the country and the general regional context. The flexibility shown by Moscow and Beijing in negotiations has delivered historic deals, not only in the energy sector but also in the military sphere and also in education and poverty reduction, as seen in Africa.

Saudi Arabia, Turkey and Syria are three countries that, when analysed individually, reveal this precise strategy of Russia, China and Iran. Particular attention is focused on the Middle East for several reasons. It is the region where America’s declining military power, unable to achieve its geopolitical objectives in Syria, meets with the progressive loss of Washington"s economic influence, highlighted by the increasingly precarious position of the petrodollar that is about to be challenged by petroyuan deals between Saudi Arabia and China.

From Enemies to Neutrals

The military defeat of Syria"s enemies was mainly due to the Syrian Arab Army (SAA) together with Iran (plus Hezbollah) and Russia"s military cooperation, together with Beijing’s diplomatic and economic support. Thanks to the strategy adopted by Putin in Syria, Russia was able to stop the advanced project of the United States, Saudi Arabia, Turkey, Qatar, France, the United Kingdom, Jordan and Israel to dismantle Syria. The Russian Federation gradually entered into the Syrian conflict, and the military results immediately favored the axis of resistance, the US military unable to intervene directly to change the course of events.

The consequences of this choice have led historic allies in the region to doubt Washington’s real commitment to the region and America’s military ability to intervene in a conflict in the Middle East and North Africa (MENA) and change its course in favour of Riyadh, Doha, Ankara or Tel Aviv. The new Trump administration has showed itself not to live up to the expectations of Saudi regional hegemonic plans, even though the Kingdom agreed to buy up to $110 billion worth of US weapons and commit to further investments in the US.

Riyadh is in an even tighter position than one would ordinarily think. It has to individually support the weight of the petrodollar, which is increasingly shaky thanks to the Chinese desire to eliminate forms of payment in US dollars by switching to the petroyuan. Moreover, Riyadh sees little tangible benefits to the US militarily backing its aggressive anti-Iran policies, even though Trump has shown to different ideas than Obama on the Iran deal. Saudi Arabia shares a common interest with Israel in the region with regard to their shared anger concerning Washington’s diminishing effectiveness in the region.

From the Saudi point of view, everything went downhill within a relatively short period. The defeat in Syria that coincided with the agreement on the nuclear deal (Joint Comprehensive Plan of Action - JCPOA) between Iran and the 5+1 countries. In both these scenarios, Riyadh feels the profound betrayal of its old North American ally. The Chinese economic pressure on Riyadh to accept yuan payments for oil, coupled with the growing ability of Moscow to effectively intervene in the region, and the renewed diplomatic and political role of Iran thanks to the JCPOA agreement, has left Riyadh on a certain path to destruction. The only solution is a strategic change that could affect the region in a significant manner.

The visit of Saudi King Salman to Moscow to sign trade agreements (an investment fund of over 1 billion dollars has been created) was of symbolic importance. The King’s actions, conducted in person, reflected recognition of Russia’s new dominant role in the Middle East as a result of American intentions to withdraw influence in the region. The need for the Saudi king to appear in person in Moscow also directly concerns the succession to the throne, with Mohammed bin Salman to inherit the keys to the kingdom, in spite of the disasters in Yemen and the Gulf Cooperation Council (GCC) crisis caused by the clash with Qatar. In a situation of extreme weakness, especially with oil prices so low, the Saudi monarchy is left with few cards to play and has to initiate a dialogue with Moscow and possibly start some kind of cooperation in various fields related to energy and investment. Initially, the main excuse for the Moscow meeting between Putin and the Saudi king was to coordinate the production and sale of petroleum and gas, a necessity for both countries given falling oil prices over the last 24 months.

The first goal achieved by Putin and the Saudi king appears to be a spike in oil prices to acceptable levels, following Washington and Riyadh’s failed strategy to bankrupt Moscow by plunging oil prices.

Secondly, the meeting focused on the acceptance of Riyadh’s defeat in Syria, recognizing Assad as the only legitimate leader of the Syrian Arab Republic.

A lot is developing behind the scenes, and this is evident with Riyadh now recognizing a political solution as the only way to end the conflict, something never mentioned by Saudi state representatives. It will be very difficult for Riyadh to give up the regime-change project, even if the political, diplomatic, military and economic pressure from China and Russia increases. A common faith accompanies Riyadh and Tel Aviv, as shown with both repeatedly trying to persuade Putin to abandon his friendship with Iran and Assad, but without success. The loyalty demonstrated by Moscow to Tehran and Damascus has also had a positive effect on the Saudis, who must recognize that while Putin may have different views on certain issues, he is a man of his word; unlike the United States, where new administrations may sometimes throw friends under the bus, Putin maintains his promises, even under extreme pressure. In this sense, Trump"s decision to decertify the Iran deal is a demonstration of good will to Israel and Saudi Arabia by the new administration.

Saudi Arabia finds itself with very low monetary reserves as a result of the lowered price of oil and involvement in several wars. To add to this is a military defeat in Syria and an even bigger debacle in Yemen. To cap it all off, the United States, its most valuable ally, is increasingly disinterested in the fate of the Saudi monarchy and the kingdom, thanks to increasing energy independence as a result of fracking. Adding to this, the Gulf Cooperation Council (GCC) has split as a result of the economic warfare against Qatar, representing another example of Washington not supporting Riyadh to the full extent the monarchy in Saudi Arabia would have been expecting. The reasoning for Riyadh is as simple as it gets. If Washington is not able to support Saudi Arabia militarily, but Riyadh has to bear the burden economically, then the Kingdom is in enormous trouble and needs alternatives like Russia and China. It is unthinkable for Saudi Arabia to continue supporting petrodollar hegemony while Iran becomes a regional leader in the Middle East.

The best way is by negotiating with the main players, and Russia looks like the perfect mediator, as recently announced. China is just waiting for all these disputes to settle down to bring to bear its  economic power to definitively relegate to the past the last forty years of chaos in the region stemming from Saudi-Iranian rivalry.

For Riyadh, even if the attempt to separate Russia and Iran were to fail, it would nevertheless bring about relations that send a clear signal to the West. The purchase of S-400s is a clear demonstration of expanding Russian influence in the Middle East, and Riyadh perhaps has an understandable fear of American retaliation in the event that it starts to change course regarding the sale of oil in currencies other than the dollar.

Moscow has achieved a diplomatic miracle with Saudi Arabia, thanks to the military efforts in Syria, Chinese economic pressure through the issuing of petroyuan, and Iranian diplomatic success, stemming especially from the nuclear energy agreement, which has served to rehabilitate Tehran on the international political scene.

The purchase of advanced Russian weapons systems sends a clear signal and indicates that the Saudi kingdom is ready to assume a more neutral position and has started to knock on the door of the multipolar world, an acknowledgement of Chinese economic power and the military-technological predominance of the Russian Federation.

From Neutral to Friends

In transforming itself into a more neutral country, Riyadh may be attempting to balance American economic and military influence with Russian and Chinese support. The importance for Russia and China in having a neutral country with great spending capacity in the region should also be noted. In the case of Turkey, Russian intervention in Syria, coupled with Turkish aspirations to become a Euro-Asian energy centre, progressively pushed Moscow and Ankara together. As a result of effective diplomatic work following Turkey’s downing of a Russian jet, relations have gradually improved, occurring in parallel to the operational success achieved by the Syrian army and Russian Air Force against Turkish-backed terrorists. The military defeat of Turkey was already clear twelve months ago. In the last three to four months, Erdogan seems to have changed priorities, focusing on the Kurdish issue and on growing relations with Qatar (the political movement of the Muslim Brotherhood is key in both countries and essential to their relationship). In the meantime, Turkey is distancing herself from her NATO allies, gravitating more and more towards the orbit of the “axis of resistance” that consists of Iran, Iraq and Syria.

The Syria peace talks held in Astana laid the foundation for diplomatic efforts by Tehran and Moscow to persuade Ankara to abandon the military option (even though this was already clear once Russia decided to intervene). Instead, Ankara would be encouraged to open up important energy deals between Ankara and Moscow. It seems that Ankara has now decided to become an energy hub, carrying Turkish Stream gas from Russia to Europe as well as gas from Qatar and Iran. It even seems that China has every intention of connecting with the Turkish facilities for the supply of gas and oil, thus increasing Ankara’s role as a central energy-transit hub for the region.

The other aspect that has firmly convinced Erdogan to yield on Syria concerns the Kurdish issue. The Syrian Democratic Forces (SDF), consisting mainly of Kurdish fighters, operate in Syria under the command and on behalf of the US-led international coalition. Ankara has nominated the Kurds of the SDF as an armed extension of the Kurdistan Workers’ Party (PKK), considered a terrorist group in Turkey. This divergence between Washington and Ankara has continued to grow, even during the Trump administration, contrary to forecasts during the US election period.

With the progressive use of the SDF in Syria by the international coalition headed by the US, Trump and Erdogan’s strategies have ended up clashing. Trump needs to give his domestic audience the impression that the US is devoted to fighting ISIS, even if this means relying on Kurdish soldiers that entails severing relations with Turkey. Erdogan sees this as a matter of national security. The situation has escalated to a point where a few days ago, a diplomatic dispute led to the suspension of the issuing of visas from the respective embassies in Ankara and Washington. Erdogan considers American aid to the Kurds as a betrayal of the worst kind from a NATO ally. A natural reaction to these actions by the US, therefore, was the the agreement between Iraq, Iran, Syria and Turkey to preserve territorial integrity vis-a-vis the Kurdish issue.

The blessing of the Chinese and Russians is evident in this situation. In order to pacify the region, rebuild it and incorporate it into the One Belt One Road project, the Maritime Silk Road, and the North-South Transport Corridor, wars have to stop and diplomacy must prevail. For Ankara, it is a unique opportunity to exit the war in Syria without appearing as one of the defeated factions (hence the Turkish participation in the Astana talks with Russia and Iran). At the same time, Turkey emphasizes the importance of its geographical position as a centre for energy distribution on the Eurasian supercontinent. This is all at the expense of the US, with Turkey breaking free from Washington’s pressure.

Moscow has already removed all sanctions against Turkey, and vice versa, greatly increasing trade with considerable prospects for growth in the coming years. As for weapons sales to Saudi Arabia, Russian influence is expanding, thanks to the S-400 systems in the process of being sold to Ankara over the vehement protests of many NATO countries. The S-400 system is a further effort to deter US aggression, but is also the first indication of Ankara’s will to diversify, this time militarily, constituting a pillar of the new multipolar world order.

Ankara, after numerous diplomatic and military failures, has rebuilt its role in the region alongside Iran and Qatar, in a context where its partnership with Moscow and Beijing will guarantee Erdogan a margin of maneuver to progressively disengage from the NATO system that has brought so many problems to the country. A future entry into the Shanghai Cooperation Organization (SCO) could seal Ankara’s passage into the multipolar world, becoming in the process a fully fledged ally of Moscow and Beijing. In the meantime, it is already possible to say that Moscow and its allies have succeeded in the unlikely task of turning a nation that was on the brink of a direct involvement in Syria in the effort to remove Assad into one of the most important guarantors of Syria’s territorial integrity. Erdogan has agreed to Assad staying in power into the near future, and has even agreed to help fight terrorists in Syria, as evidenced with the recent Turkish military operations in Idlib.

How deep these new friendships between Moscow, Riyadh and Ankara are yet to be tested. Erdogan and the Saudi monarchs have been known not to keep their word. At it stands, this appears to be an economic, political and military masterpiece of the Iranian, Russian and Chinese triad. The war in Syria has almost been won; the terrorist groups supported by the Saudis and Turks have been neutralized; and the conditions for a full Eurasian economic and military integration of Riyadh and Ankara have been set.

Supporting Friends in need.

Ultimately, it is worth pointing out the contribution of Russia, China and Iran to the Syrian government and people. Over the six years of aggression against the Syrian Arab Republic, Iran has never failed to contribute in terms of manpower, equipment and logistical support in the battle against terrorism. Moscow, in the early stages of the conflict, even before intervening directly, took steps to settle the Syrian foreign debt to Russia, and in fact lent money by providing armaments, energy and logistics as a way of actively contributing to the defeat of terrorists in Syria.

The People"s Republic of China has already paved the way for the future of Syria in economic terms, declaring the country an important transit route and a final destination of a part of the Belt and Road Initiative (BRI). Chinese economic power will allow Damascus to rebuild a nation devastated by six years of terrorism and foreign aggression. With Russian military capabilities, Damascus will have all the necessary means to end the conflict and stabilize the country, laying the foundation to prevent any future Western aggression. From a political and diplomatic point of view, the joint actions of Tehran, Beijing and Moscow, together with Damascus, are an integral part of the axis that stretches from Iran to Iraq and Syria and arrives at the Mediterranean, or could even go to Turkey. With the combination of economic, military and political elements, Syria has survived almost unprecedented aggression, emerging as the winner, thus ensuring its ability to determine its future autonomously without external impositions.

*  *  *

Series Conclusions

The path traced by Moscow, Beijing and Tehran is expected to stabilize the Middle East, thanks to the resolution of the Syrian conflict. Some key elements of this global change we are witnessing are: Chinese economic pressure on the Saudis to accept payment for oil in yuan; the eradication of terrorism in Iraq and neighbouring countries, thereby circumventing sanctions imposed on Iran by the US and its allies; and transforming Turkey into a regional energy-distribution centre.

The RPC intervenes economically in a number of regions, particularly in the Middle East, to support Russian military power through money, diplomacy, economic investment (OBOR) and by providing liquidity to allies, as seen with Moscow when it was hit with Western sanctions. For Beijing, the decline in terrorism is a key factor in fostering China"s development of the Silk Road 2.0 infrastructure, allowing Beijing to enter into areas destroyed in the Middle East to offer easy reconstruction plans. At the moment, Syria, Egypt, Libya and Pakistan seem to hold great importance for China"s future strategies.

Russia and China lead organizations such as the BRICS, the UEE, the SCO, and the AIIB. The grand strategy is to support the creation of an alternative to the US dollar-based neoliberal world order and to contain the effects of declining US empire. Nations will increasingly have to choose between two systems: whether the multipolar world order, based on friendship and win-win cooperation, or the unipolar one, based on the America’s declining military and economic power.

Strong Chinese economic support, together with Russian military might as well as Iran’s importance in the Middle Eastern region, are successfully shielding countries like Syria from American military interventions, driving a wedge between old US allies and paving the way for Washington’s planned economic and military isolation in the region. Thus, countries similarly facing US pressure, such as South Korea, Mexico and Venezuela, will increasingly gravitate toward the multipolar world led by Russia and China, accelerating the decline and influence of the United States beyond the Middle East.

The multipolar world order is here to stay. The US is no longer the lone superpower but rather one among two other nuclear-armed powers. The sooner the US realizes this, the better it will be for humanity and for peace around the world.

Escobar Exposes Real BRICS Bombshell: Putin's "Fair Multipolar World" Where Oil Trade Bypasses The Dollar

Authored by Pepe Escobar via The Asia Times,

Putin reveals "fair multipolar world" concept in which oil contracts could bypass the US dollar and be traded with oil, yuan and gold...

The annual BRICS summit in Xiamen – where President Xi Jinping was once mayor – could not intervene in a more incandescent geopolitical context.

Once again, it’s essential to keep in mind that the current core of BRICS is “RC”; the Russia-China strategic partnership. So in the Korean peninsula chessboard, RC context – with both nations sharing borders with the DPRK – is primordial.

Beijing has imposed a definitive veto on war – of which the Pentagon is very much aware.

Pyongyang’s sixth nuclear test, although planned way in advance, happened only three days after two nuclear-capable US B-1B strategic bombers conducted their own “test” alongside four F-35Bs and a few Japanese F-15s.

Everyone familiar with the Korean peninsula chessboard knew there would be a DPRK response to these barely disguised “decapitation” tests.

So it’s back to the only sound proposition on the table: the RC “double freeze”. Freeze on US/Japan/South Korea military drills; freeze on North Korea’s nuclear program; diplomacy takes over.

The White House, instead, has evoked ominous “nuclear capabilities” as a conflict resolution mechanism.

Gold mining in the Amazon, anyone?

On the Doklam plateau front, at least New Delhi and Beijing decided, after two tense months, on “expeditious disengagement” of their border troops. This decision was directly linked to the approaching BRICS summit – where both India and China were set to lose face big time.

Indian Prime Minister Narendra Modi had already tried a similar disruption gambit prior to the BRICS Goa summit last year. Then, he was adamant that Pakistan should be declared a “terrorist state”. The RC duly vetoed it.

Modi also ostensively boycotted the Belt and Road Initiative (BRI) summit in Hangzhou last May, essentially because of the China-Pakistan Economic Corridor (CPEC).

India and Japan are dreaming of countering BRI with a semblance of connectivity project; the Asia-Africa Growth Corridor (AAGC). To believe that the AAGC – with a fraction of the reach, breath, scope and funds available to BRI – may steal its thunder, is to enter prime wishful-thinking territory.

Still, Modi emitted some positive signs in Xiamen; “We are in mission-mode to eradicate poverty; to ensure health, sanitation, skills, food security, gender equality, energy, education.” Without this mammoth effort, India’s lofty geopolitical dreams are D.O.A.

Brazil, for its part, is immersed in a larger-than-life socio-political tragedy, “led” by a Dracula-esque, corrupt non-entity; Temer The Usurper. Brazil’s President, Michel Temer, hit Xiamen eager to peddle “his” 57 major, ongoing privatizations to Chinese investors – complete with corporate gold mining in an Amazon nature reserve the size of Denmark. Add to it massive social spending austerity and hardcore anti-labor legislation, and one’s got the picture of Brazil currently being run by Wall Street. The name of the game is to profit from the loot, fast.

The BRICS’ New Development Bank (NDB) – a counterpart to the World Bank – is predictably derided all across the Beltway. Xiamen showed how the NDB is only starting to finance BRICS projects. It’s misguided to compare it with the Asian Infrastructure Investment Bank (AIIB). They will be investing in different types of projects – with the AIIB more focused on BRI. Their aim is complementary.

‘BRICS Plus’ or bust

On the global stage, the BRICS are already a major nuisance to the unipolar order. Xi politely put it in Xiamen as “we five countries [should] play a more active part in global governance”.

And right on cue Xiamen introduced “dialogues” with Mexico, Egypt, Thailand, Guinea and Tajikistan; that’s part of the road map for  “BRICS Plus” – Beijing’s conceptualization, proposed last March by Foreign Minister Wang Yi, for expanding partnership/cooperation.

A further instance of “BRICS Plus” can be detected in the possible launch, before the end of 2017, of the Regional Comprehensive Economic Partnership (RCEP) – in the wake of the death of TPP.

Contrary to a torrent of Western spin, RCEP is not “led” by China.

Japan is part of it – and so is India and Australia alongside the 10 ASEAN members. The burning question is what kind of games New Delhi may be playing to stall RCEP in parallel to boycotting BRI.

Patrick Bond in Johannesburg has developed an important critique, arguing that “centrifugal economic forces” are breaking up the BRICS, thanks to over-production, excessive debt and de-globalization. He interprets the process as “the failure of Xi’s desired centripetal capitalism.”

It doesn’t have to be this way. Never underestimate the power of Chinese centripetal capitalism – especially when BRI hits a higher gear.

Meet the oil/yuan/gold triad

It’s when President Putin starts talking that the BRICS reveal their true bombshell. Geopolitically and geo-economically, Putin’s emphasis is on a “fair multipolar world”, and “against protectionism and new barriers in global trade.” The message is straight to the point.

The Syria game-changer – where Beijing silently but firmly supported Moscow – had to be evoked; “It was largely thanks to the efforts of Russia and other concerned countries that conditions have been created to improve the situation in Syria.”

On the Korean peninsula, it’s clear how RC think in unison; “The situation is balancing on the brink of a large-scale conflict.”

Putin’s judgment is as scathing as the – RC-proposed – possible solution is sound; “Putting pressure on Pyongyang to stop its nuclear missile program is misguided and futile. The region’s problems should only be settled through a direct dialogue of all the parties concerned without any preconditions.”

Putin’s – and Xi’s – concept of multilateral order is clearly visible in the wide-ranging Xiamen Declaration, which proposes an “Afghan-led and Afghan-owned” peace and national reconciliation process, “including the Moscow Format of consultations” and the “Heart of Asia-Istanbul process”.

That’s code for an all-Asian (and not Western) Afghan solution brokered by the Shanghai Cooperation Organization (SCO), led by RC, and of which Afghanistan is an observer and future full member.

And then, Putin delivers the clincher;

“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”

“To overcome the excessive domination of the limited number of reserve currencies” is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar.

Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan and convertible into gold.

This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan.

Inbuilt in the move is a true Chinese win-win; the yuan will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.

The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers prefer to be paid in physical gold instead of yuan. The key message is the US dollar being bypassed.

RC – via the Russian Central Bank and the People’s Bank of China – have been developing ruble-yuan swaps for quite a while now.

Once that moves beyond the BRICS to aspiring “BRICS Plus” members and then all across the Global South, Washington’s reaction is bound to be nuclear (hopefully, not literally).

Washington’s strategic doctrine rules RC should not be allowed by any means to be preponderant along the Eurasian landmass. Yet what the BRICS have in store geo-economically does not concern only Eurasia – but the whole Global South.

Sections of the War Party in Washington bent on instrumentalizing  India against China – or against RC – may be in for a rude awakening. As much as the BRICS may be currently facing varied waves of economic turmoil, the daring long-term road map, way beyond the Xiamen Declaration, is very much in place.

Endless Regional Chaos: American Presence In Afghanistan Explained

Authored by Federico Pieraccini via The Strategic Culture Foundation,

The geographic location of Afghanistan has always occupied a central role in many geopolitical studies. Donald Trump’s reasons for reinforcing US troops in the region are driven by the continuing US need to prevent a complete Eurasian integration among regional powers.

The April peace talks between Afghanistan, India, Pakistan, Russia and China seemed to have put an end to the persistent and dominant American presence in the country. In Washington, following fifteen years of war and a series of failures, many had come to the conclusion that the time had come for the United States to return home.

Trump had throughout his electoral campaign criticized the foreign policy of his predecessors, giving the indication that he would be looking to leave Afghanistan once he assumed the presidency.

The road plan for Afghanistan laid out by the April peace talks seemed to offer the prospect of national reconciliation between the Taliban and the central authority in Kabul, assisted by parties with great interest in the country like India and Pakistan, given their geographic proximity, as well as Russia, China and Turkey.

The first talks in April 2017 capitalized on America"s absence at the conference as well as on the will of the protagonists to reach an agreement after fifteen years of war and terror. Afghanistan is a key crossroad in the eastward expansion strategy that illustrates the special partnership between Russia and China, as seen with the steady progress of the Silk Road 2.0 initiative and the Eurasian Economic Union. Given Afghanistan’s geographic position, sharing boundaries with Pakistan, Turkmenistan, Iran, Tajikistan, Uzbekistan, it is useful to emphasize the role the country could play as a commercial and energy hub in the not too distant future.

Due to incompetence or perhaps due to facing insurmountable pressures, Donald Trump is undergoing a gradual and inexorable diminution with the elimination of all the most representative members of his administration. At the same time, the appointment of military personnel to civilian roles has pushed the administration into unexplored directions not foreshadowed in the electoral campaign. Trump spoke of less US military presence in the internal affairs of other nations. But as we shall see, nothing could be further from the truth.

The appointment of Generals McMaster, Kelly and Mattis (Mattis perhaps being the most powerful US defense secretary since the end of World War II) is Trump"s attempt to withstand and bargain with the most significant elements of America’s deep state. A strong military component in the White House helps ensure continuity in US foreign policy. Contrary to what was professed during the elections, Donald Trump immediately traded American foreign policy in exchange for explicit GOP backing for key legislation that will help secure a 2020 re-election. Without bills on health, tax and immigration reform being passed, there will be no arguments in favor of the GOP and Trump during the midterm and presidential elections in 2018 and 2020 respectively.

The deep state in Washington has slowly but inexorably taken over Trump"s presidency, a task made all the simpler by Trump’s character, which dismisses his lack of experience with an overweening self-confidence. The military component of the deep state, in concert with GOP leaders, took less than six months to quash Trump"s electoral promises and turn the president’s foreign policy into a dangerous reprise of the Obama and Bush years.

More and more frequently, American intervention in foreign lands lead to situations of uncontrollable chaos, with no real central authority able to govern and obey Washington’s orders. The current state of the Middle East is reflective of this. In Afghanistan, Washington, especially Mattis, is cognizant of the country"s rebirth under Sino-Russian leadership after fifteen years of America’s presence. This is a scenario that the US deep state is not willing to tolerate.

Leaving aside Afghanistan’s huge amounts of natural resources (about one trillion in precious metals), as well as its strategic location linking east and west, a peaceful Afghanistan led by a single central authority would hardly cohere with US objectives in the country. The US loves to consider itself the indispensable nation for peace in Afghanistan, when actually it is the main obstacle to peace.

For American foreign policy continuity, Afghanistan needs to remain in a chaotic situation. Above all, the US military industrial complex is not willing to surrender its political and military power in the country, only to be substituted by Moscow or Beijing. With these unofficial motives, General Mattis announced a surge of several thousand American troops to the country. It is immediately clear that numerically and tactically, four or five thousand soldiers will make no difference. The intent is purely demonstrative, as seen in Syria with a few missiles lobbed at an empty airbase. The purpose is to send a clear and unambiguous message to Russia, China, Pakistan and even India, to the effect that without American consensus, no strategic reorganization is permissible in Afghanistan.

General Mattis and all those who for decades have been constantly thinking of MacKinder"s geopolitical theory (Heartland Theory) are aware of the strategic importance of keeping Afghanistan hostile towards regional powers like China and Russia. The USSR"s war in defense of the country, and the socialist superpower’s subsequent collapse, offers a historical warning.

In April, Moscow and Beijing, with the tacit approval of New Delhi and Islamabad, launched a peace process in Kabul that should have facilitated talks between the central authority and the Taliban to bring about a truce that would bring to an end the violence and destruction that had over fifteen years left the country bleeding in endless poverty and suffering.

The American surge will not advance American interests in the country. It will not change the delicate balance negotiated between the parties back in April. It will not affect the efforts of Moscow and Beijing to stabilize the country. It will only buy Washington more time by bombing and killing civilians, always viewed by American generals as an acceptable and privileged option available to them.

Like in other parts of the world, the presence of American troops does not fully explain the long-term goals of military planners. Afghanistan in some respects resembles a similar situation to Southeast Asia. In South Korea, the American presence has persisted since 1950, and with it the destabilization of the Korean peninsula. As in Asia, the central purpose of the American presence in Afghanistan is to occupy geo-strategic zones in order to prevent Eurasian integration between powers like India, China and Russia. Secondly, it is the constant presence of troops and military bases in locations close to or around the two major powers of China and Russia that aims to overburden and thereby diminish the defensive capabilities of these two strategic threats. In 1962, when the USSR did something similar in response to the US deployment of patriot missiles in Turkey, it started building up its offensive capability in the Western Hemisphere using Cuba as a military base. The US was willing to go to war to halt this domestic threat and for weeks the world was on the verge of a nuclear conflict. Only dialogue between American and Soviet leaders averted this threat to human existence.

Conclusions

Washington cares for nothing other than its own interests. But twenty-five years after the end of the Cold War, the world is changing, and more and more fruitful efforts to replace the chaos wrought by US policies can be seen with peaceful, mutually beneficial cooperation increasingly being the order of the day. The road to economic prosperity and a re-established unity among the Afghan people is still a work in progress, but once the country manages to establish its independence, Washington will have a hard time dictating conditions. Countries like Russia, China and India have every intention of using diplomacy and peacekeeping to prevent a dangerous escalation in Afghanistan.

India and China have some divergence over the future of the region, but by the start of the 2017 BRICS conference, they had already resolved a border dispute that lasted over two months. The ability to create diverse organizations like BRICS, AIIB and SCO provides the opportunity to begin any kind of negotiation with a legal and economic foundation. This represents a commendable example of overcoming differences through diplomacy and economic benefits.

While the United States exhales the last breaths as a declining global power, no longer able to impose its will, it lashes out in pointless acts like lobbing 60 cruise missiles at Syria or sending 4000 troops to Afghanistan. Such acts do not change anything on the ground or modify the balance of forces in Washington’s favor. They do, however, have a strong impact on further reducing whatever confidence remains in the US, closing the door to opportunities for dialogue and cooperation that may otherwise have offered themselves.

Trump promised isolationism. His generals, behind the scenes, have managed to make this electoral promise come true, leaving Washington alone in the international arena in the near term.

The New Silk Road Will Go Through Syria

Authored by Pepe Escobar via Asia Times,

China and Syria have already begun discussing post-war infrastructure investment; with a "Matchmaking Fair for Syria Reconstruction" held in Beijing

Amid the proverbial doom and gloom pervading all things Syria, the slings and arrows of outrageous fortune sometimes yield, well, good fortune.

Take what happened this past Sunday in Beijing. The China-Arab Exchange Association and the Syrian Embassy organized a Syria Day Expo crammed with hundreds of Chinese specialists in infrastructure investment. It was a sort of mini-gathering of the Asia Infrastructure Investment Bank (AIIB), billed as “The First Project Matchmaking Fair for Syria Reconstruction”.

And there will be serious follow-ups: a Syria Reconstruction Expo; the 59^th Damascus International Fair next month, where around 30 Arab and foreign nations will be represented; and the China-Arab States Expo in Yinchuan, Ningxia Hui province, in September.

Qin Yong, deputy chairman of the China-Arab Exchange Association, announced that Beijing plans to invest $2 billion in an industrial park in Syria for 150 Chinese companies.

Nothing would make more sense. Before the tragic Syrian proxy war, Syrian merchants were already incredibly active in the small-goods Silk Road between Yiwu and the Levant. The Chinese don’t forget that Syria controlled overland access to both Europe and Africa in ancient Silk Road times when, after the desert crossing via Palmyra, goods reached the Mediterranean on their way to Rome. After the demise of Palmyra, a secondary road followed the Euphrates upstream and then through Aleppo and Antioch.

Beijing always plans years ahead. And the government in Damascus is implicated at the highest levels. So, it’s not an accident that Syrian Ambassador to China Imad Moustapha had to come up with the clincher: China, Russia and Iran will have priority over anyone else for all infrastructure investment and reconstruction projects when the war is over.

The New Silk Roads, or One Belt, One Road Initiative (Obor), will inevitably feature a Syrian hub – complete with the requisite legal support for Chinese companies involved in investment, construction and banking via a special commission created by the Syrian embassy, the China-Arab Exchange Association and the Beijing-based Shijing law firm.

Get me on that Shanghai-Latakia cargo

Few remember that before the war China had already invested tens of billions of US dollars in Syria’s oil and gas industry. Naturally the priority for Damascus, once the war is over, will be massive reconstruction of widely destroyed infrastructure. China could be part of that via the AIIB. Then comes investment in agriculture, industry and connectivity – transportation corridors in the Levant and connecting Syria to Iraq and Iran (other two Obor hubs).

What matters most of all is that Beijing has already taken the crucial step of being directly involved in the final settlement of the Syrian war – geopolitically and geo-economically. Beijing has had a special representative for Syria since last year – and has already been providing humanitarian aid.

Needless to add, all those elaborate plans depend on no more war. And there’s the rub.

With the demise of Daesh (ISIS), or at least its imminent loss of any significant urban center, no one knows in what manner a fragmented, phony Caliphate “Sunnistan” might be manipulated into cutting Syria from its New Silk Road future.

Qatar has already provided a game-changer; Doha has gotten closer to Tehran (common interests in South Pars/North Dome gas-field oblige), as well as Damascus – much to the despair of the House of Saud. So, unlike the recent past, Qatar is not engaged in regime change anymore. But still there are the diverging interests of Saudi Arabia, Turkey, Israel and, of course, Washington, to accommodate.

A possible scenario out of what Putin and Trump negotiated in Hamburg – that was not relayed by either Lavrov or Tillerson – is that the ceasefire in southwestern Syria, assuming it holds, could mean US peacekeeping forces in effect sanctioning the creation of a demilitarized zone (DMZ) between the Syrian Golan and the rest of the country.

Translation: the Golan de facto annexed by Israel. And the “carrot” for Moscow would be Washington accepting Crimea de facto re-incorporated into the Russian Federation.

That may sound less far-fetched than it seems. The next few months will tell if this is indeed a plausible scenario.

The other big sticking point is Ankara against the YPG Kurds. Contrary to the ominous and quite possible Balkanization scenario, Washington and Moscow might well decide, in tandem, to let them sort things out by themselves. Then we will inevitably have the Turkish army occupying al-Bab for the foreseeable future.

The bottom line: that Saudi Arabia gets nothing. And Israel and Turkey get political/military “wins”. It’s hard to imagine how Moscow could possibly sell this arrangement to Iran as a victory. Still, Tehran may not have a free flow Iran-Iraq-Syria-Hezbollah route totally back in action, but it will maintain close relations with Damascus and be engaged in the expansion of the New Silk Roads.

The key question from now on seems to be whether Washington will follow the deep state “Syraq” policy – as in “Assad must go” mixed with support or weaponizing of non-existent “moderate rebels”; or whether Trump’s priority – to eliminate Daesh/ISIS for good – will prevail.

Beijing, anyway, has made up its mind. It will work non-stop for the Iran-Iraq-Syria triumvirate to become a key hub in Obor. Any bets against a future, booming Shanghai-Latakia container route?