Top Ten Economies, Real Gross Domestic Product (GDP)
Real GDP Manufacturing Manufacturing
Trillions $ Percent Trillions $
United States 20.94 11 2.30
China 14.72 27 3.97
Japan 5.05 20 1.01
Germany 3.84 18 0.64
United Kingdom 2.08 9 0.19
India 2.66 14 0.37
France 2.63 9 0.24
Italy 1.88 15 0.28
Canada 1.64 10 0.16
South Korea 1.63 25 0.41
Currencies
The United States
The outstanding debt of the United States is $31 trillion, or 1.43 times the real GDP. Nevertheless, despite the pressing need for extensive domestic investment, America’s assistance to Ukraine, which is not an official ally, now tops that given to any other nation in the last century. Clearly that simple fact cannot be explained by altruistic or moral reasons. It makes sense only if strategic interests of exceptional importance are at stake such as the dismemberment of the Russian Federation. Having concluded that the combined Russia/China challenge is an existential threat, someone in power has concluded that, under present circumstances, the U.S. simply cannot back down from sustaining Ukraine. Several high-ranking American officials have repeatedly stated that the U.S. will do “whatever it takes” to enable Ukraine to defeat Russia. In truth America’s reputation is at stake, and with it, the dollar’s cherished status as reserve currency of the world. Losing it would be nothing short of nightmarish for the U.S. economy: runaway hyperinflation, depression, government default, inability to maintain military expenditures anywhere near today’s level, social chaos, martial law, even a high likelihood of a failed state. The devastation would be magnified several orders of magnitude relative to China because America’s manufacturing sector accounts for only 11% of the economy whereas China’s manufacturing stands at 27% of its economy. No, under those circumstances the U.S. would not be able to keep up, much less surpass, China’s military output. In short, this primeval fear is nothing less than an archetypical reenactment of Thucydides’ trap where, ironically, Sparta is the U.S. and Athens is China.
Europe
The euro is a fiat currency (all modern currencies are) issued by the national central banks of the Eurosystem or the European Central Bank. As the Eurozone does not have a unified standing army raised from its member nations, global military weight is limited.
China
China’s economic, political, and (growing) military clout stems from its growing technological prowess, large manufacturing capacity, huge consumer base, perennial trade surpluses, the unparalleled feat of having lifted at least 800 million people from extreme poverty over 40 years , and a peaceful Belt and Road Initiative that insidiously erode, in the aggregate, America’s economic influence. More importantly, the yuan has emerged as a budding exchange medium for a small but growing percentage of oil transactions that may, in time, topple the dollar from its perch as RCW. At that point it is not inconceivable that China might someday successfully sanction the U.S. rather than the other way around. These and other considerations may have contributed to the Department of Defense’s conclusion that China is America’s top security threat.
China’s Risk
Were Russia to be dismembered into a myriad of inconsequential states, enormous mineral reserves throughout Asia, including oil and gas, would literally come up for grabs. In that situation the collective West, backed by NATO, could attempt to choke off China’s two main sources of oil –Asia, and the Persian Gulf. If successful, that would automatically give the U.S. dollar a new lease on life as RCW (reserve currency of the world) and indefinitely postpone the day of reckoning stemming from the perennial twin (trade and fiscal) deficits and the (growing) $31 trillion accumulated debt. So, Ukraine and Taiwan are not really unrelated; they’re actually essential cogs in the strategy to neuter Russia and China: the former because it is an irreplaceable destabilizer of Russia, and Taiwan because it is the lid of a Pandora’s Box that prevents the ever growing Chinese Navy, already the largest in the world numerically, from controlling the Strait of Malacca, the choke point through which oil from the Persian Gulf transits, after passing India, to the South China Sea on its way to China itself and American stalwart allies Japan, Korea and Taiwan. Thus, not only is China sure to face stiff competition from fast-growing India for the same oil and gas reserves currently nurturing the Chinese economy, it faces the daunting prospect of ensuring that energy supplies headed for China will actually get through.
Russia’s Conundrum
Russia’s economy, far smaller and not nearly as intertwined with the U.S. as China, is theoretically more vulnerable to U.S and European sanctions. But that does not alter the geographic reality. The distance from Shostka in northeast Ukraine to Moscow is roughly 300 miles, a few minutes flight time for modern missiles. To put this in perspective, during the 1962 Cuban crisis Kennedy was ready to go to war over Soviet missiles 1,200 miles from Washington, D.C. , four times the distance from Shostka to Moscow. NATO in Ukraine would give the former the capability to threaten near instant decapitation of the Russian government at any time and for any reason. From Russia’s perspective this possibility is amply supported by the historical record. Unclassified American/British plans (Operations Unthinkable (1945) and Dropshot 1957), among others, that sought to bomb and/or dismember the Soviet Union, are well documented. As a result, it is highly unlikely that Russia will back down from its core demand of an ironclad written guarantee that Ukraine will not be admitted to NATO. Accordingly, barring a total military defeat, it is difficult to imagine what would cause Russia to negotiate for peace from a position other than strength if the result fails to render Ukraine militarily inert. Any other result would all but collapse any remnant of rear and/or respect for Russia from other ex-Soviet states. Equally importantly, nations such as China, India and Iran, among others, which have not supported American-led sanctions, might re-evaluate their Russian connection.
The Global South
Latin America, Africa and the Middle East have several things in common. They’re all ex-colonies or “protectorates” of European powers, they’re governed by elite classes that became ensconced in power since independence, the income and wealth gap between to ruling class and the rest of the population is immense, and they never seem to graduate from “developing” to “developed” economies despite enormous natural wealth. In addition, the degree of poverty of their lower tiers of society is nothing short of scandalous, to the point that millions lack running water, food, and safe shelter. Not surprisingly, in recent years many governments in these regions have elected, when allowed to do so, left-leaning governments in the hope that laws will finally be passed to redress these issues. From their point of view, there has been a concerted effort by the ex-colonial masters to keep things as they are: the role of the global south its limited to supplying raw materials and cheap labor to the industrialized nations. This all but guarantees a continued class struggle for a more equitable distribution of wealth which, if achieved, might threaten the continued supply of raw materials to the developed nations. For many, China’s rise is proof that there now exists an alternate path to climb out of poverty. Its Belt and Road Initiative is source of hope for the southern masses, to the point the China is now either the largest or second largest trading partner with most of the world. This of course directly impacts the interests of the United States. Its manufacturing sector is much smaller than China’s and its comparable manufactured goods are invariably more expensive. In addition, its perennial trade deficit, particularly as it relates to manufacturing, means that it cannot export to poor countries. Case in point, the percentage of American-made automobiles in India, Africa, and Latin America is very small. This situation cannot be redressed with sanctions or coups. Instead, gradually and imperceptibly, the SDR (Special Drawing Rights) should be issued to all nations as a common currency. It would no longer be defined by a basket of privileged countries –the US dollar, Euro, Chinese Yuan, Japanese Yen, and British Pound. Instead, each country would be issued SDRs based in proportion to their production, or contribution as an investment to the production of, green hydrogen relative to their population. This would level the purchasing power for all nations and incentivize the production of green hydrogen. As a result, heretofore poor countries would be able to buy more industrial goods from other countries and in so doing, create jobs worldwide. The technology to do this already exists. What’s lacking is the political will to do so.