Desertification

Desertification is the degradation of land in arid, semi-arid, and dry subhumid areas, leading to a reduction in biological productivity. It’s not the expansion of existing deserts, but rather the process by which fertile land becomes increasingly dry and unproductive. This process is often caused by a combination of natural factors like climate change and human activities like deforestation and unsustainable agriculture.

Key aspects of desertification:

Global issue:

Desertification affects large areas worldwide, impacting communities and ecosystems.

Reversible in some cases:

While some desertification is permanent, others are reversible with proper land management practices.

Consequences of desertification:

Reduced agricultural productivity:

Desertification can make it harder to grow crops, leading to food insecurity and economic hardship.

Loss of biodiversity:

As vegetation declines, animal habitats are destroyed, and species can become endangered.

Increased vulnerability to drought:

Desertified areas are more susceptible to prolonged droughts, which can exacerbate existing problems.

Social and economic consequences:

Desertification can lead to conflict over resources, migration, and poverty.

Addressing desertification:

Practices like crop rotation, terracing, and contour plowing can help to conserve soil and water.

Afforestation and reforestation:

Planting trees can help to restore vegetation cover and improve soil health.

Sustainable agriculture:

Using water-efficient irrigation techniques and avoiding overgrazing can reduce the risk of desertification.

Climate change mitigation: Reducing greenhouse gas emissions can help to mitigate the effects of climate change, which is a major driver of desertification.

Similarities and Differences Between China and the U.S.

Water

The U.S. has 45% of all the freshwater in the world and approximately 4.22% of the world’s population. In the U.S., approximately 35% of the land in the lower 48 states is classified as arid or semi-arid. This includes regions like the Great Basin (most of Nevada, half of Utah, and sections of Idaho, Wyoming, Oregon, and California), parts of the Southwest, and the Great Plains. The hydrographic Great Basin is a 200,000 square mile area that drains internally. All precipitation in the region evaporates, sinks underground or flows into lakes (mostly saline). Creeks, streams, or rivers have no outlet to either the Gulf of Mexico or the Pacific Ocean. Specifically, the region is bounded by the Wasatch Mountains to the east, the Sierra Nevada to the west, and the Snake River plain to the north. The south rim is less distinct. The Great Salt Lake, Pyramid Lake, and the Humboldt Sink are in this area. Humboldt Sink is located in northwestern Nevada, on the border between Pershing and Churchill counties, approximately 50 miles (80 km) northeast of Reno and between the West Humboldt Range (to the southeast) and the Trinity Range (to the northwest). It should be noted that the Great Plains region, considered semi-arid but heavily agricultural, relies almost entirely on fossil water from the Ogallala Aquifer, currently experiencing depletion. It is estimated that significant parts may be unable to support irrigation possibly within 50 years. The Texas State Water Plan predicts that water levels in the Ogallala will decline by 52% before 2060. Parts of western Kansas are already dry. If fully drained, the aquifer could take thousands of years to refill naturally. According to studies from Stanford University and others, up to 40% of Ogallala will be unable to support irrigated crop production within the next 80 years. To put this in perspective, the Ogallala Aquifer region is responsible for approximately 30% of all US. Crop and livestock production. Therefore, in 80 years, barring mitigating action, the U.S. will have to import that much. That will exacerbate the trade deficit.

China has 6% of the world’s freshwater resources and approximately 20% of the global population; in addition, its per capita water availability is significantly lower than the global average. Approximately 52.2% of China is classified as arid or semi-arid. Of that, approximately of 83% is concentrated in Northwest China, a region that includes Shaanxi, Gansu, Ningxia, Qinghai, Xinjian, and central and western parts of Inner Mongolia. These regions are particularly vulnerable to global climate change. The northern rim of the Himalayas, often referred to as the “Himalayan Rim”, is largely situated within the Tibet Autonomous Region of China. The Trans-Himalaya (also known as the Gagdise-Nyenchen Tanglha), is a mountain range located north of the main Himalayas, primarily within China, India, and Nepal. This region is characterized by the Tibetan Plateau and various other mountain ranges.

The distribution of water and population density in both countries is strikingly similar; roughly their eastern halves are much wetter with a corresponding higher population density. The difference is that China does not have a western ocean (the U.S. does, the Pacific) which severely reduces options to reduce the water shortage.   

Religion

China is a country with diverse religious practices. However, Buddhism is considered the largest officially recognized religion. In addition, a blend of Buddhism, Taoism, and Confucianism, collectively termed Chinese folk religion, exists. A substantial portion of the population identifies as non-religious or atheist. Christianity, Islam, and other religions are minority faiths. Buddhism is a non-theistic religion, meaning it doesn’t believe in a creator God. Similarly, in Taoism there is no single, monotheistic God.

In the U.S., 62% of U.S. adults identify as Christian; of those, approximately 40% identify as Protestant, and 19% identify as Catholic. Judaism accounts for 2%, Islam, Buddhism and Hinduism account for 1% each. However, fully 29% of the population identifies as religiously unaffiliated. Thus, a majority of the population identifies as monotheistic. In the U.S., while the exact phrase “separation of church and state” does not appear in the Constitution, the First Amendment’s Establishment Clause prohibits Congress from making laws respecting an establishment of religion. The Supreme Court has referred to this as creating a “wall of separation” between church and state. In practical terms, this means the government cannot require religions to promote, support, or oppose political points of view, i.e., praising or swearing allegiance to ruling political leaders in lieu of God. More to the point, the government has no role in appointing religious leaders such as bishops, rabbis and imams, who all play a role in guiding their respective communities in matters of faith and practice.

Similarities

Both:

  • Are determined to make their nation great again.
  • View each other as the principal competitor and adversary.
  • Are proud of their potential and achievements.
  • Are pursuing sweeping, domestic changes.
  • Their population density is much higher on the eastern portion of their respective territories.
  • Rely on nationalist propaganda to frustrate each other’s efforts and uproot domestic corruption.

Charitable Remainder Unitrust (CRUT)

A CRUT is a type of charitable remainder trust that allows a person to donate assets to charity while receiving income for life or a specified term. The CRUT pays a fixed percentage of its assets each year to the beneficiary, with the remainder going to the charity after the term.

  • Asset Donation: Eligible types of assets that can be transferred to the CRUT include stocks, bonds, or real estate.
  • Income for Beneficiary: The CRUT pays a fixed percentage of its fair market value each year to the donor or beneficiary. This payout percentage is typically at least 5%.
  • Remainder to Charity: Once the income period ends, the remaining assets in the trust are distributed to the designated charitable organization(s).
  • Annual Revaluation: The trust assets are revalued annually to determine the amount of the payout.
  • Flexibility: Additional contributions can be made to the CRUT.

Key Benefits

Income Stream:

The donor or the designated beneficiary receives income from the trust assets during the term.

Tax Benefits:

The donor may be able to claim a charitable deduction for the value of the assets transferred to the CRUT.

Estate Planning:

The CRUT can help reduce the donor’s estate tax burden by removing assets from his/her estate during his/her lifetime.

Support for Charity:

The remainder interest in the trust provides ongoing support for your chosen charitable cause.

Important Considerations

CRUTs are irrevocable, meaning its terms cannot be changed after they are established.

Specialized professionals such as a knowledgeable estate planning attorney should be consulted to determine if a CRUT is the right choice for any individual.

Determining Individual Wealth

Question #1

What methods exist to measure wealth inequality?

Answer #1

Several methods are used to measure and determine wealth inequality. The most common method is the Gini coefficient, which measures the distribution of income or wealth across a population. Other methods include the Theil index, the Hoover index, percentile ratios, and the Lorenz curve.

The Gini coefficient is a widely used measure that ranges from 0 to 1, where 0 represents perfect equality (everyone has the same wealth) and 1 represents perfect inequality (one person has all the wealth). A higher Gini coefficient indicates greater inequality.

The Lorenz curve is a graphical representation that plots the cumulative share of income or wealth against the cumulative share of the population, visually showing the distribution. A more unequal distribution is represented by a greater gap between the Lorenz curve and the line of perfect equality.

Percentile ratios compare the incomes or wealth of different groups, such as the top 10% to the bottom 10%.

The Theil and Hoover indexes are other statistical measures that quantify inequality, often used in conjunction with the Gini coefficient.

Question #2

Do any methods exist to trace the actual wealth of a specific individual?

Answer #2

Individuals are not obligated to disclose their financial information. That makes it difficult to directly track their wealth. Also, assets can be held in various forms, including stocks, bonds, real estate, businesses, and other intangible assets, making it difficult to track and value them accurately. In addition, data from different sources may not always be accurate or consistent, requiring careful analysis and interpretation.

Various methods do exist that can provide insights into a person’s financial standing. These include tax returns, financial statements, surveys, estate tax returns, wealth screening data, and publicly available information.

Question #3

What methods exist to launder money?

Answer #3

Money laundering is a complex process that involves disguising the origins of illegally obtained money to make it appear legitimate.

This process typically involves three stages:

  1. Placement: Introducing the illegal funds into the legitimate financial system.
  2. Layering: Conducting complex transactions to disguise the origin of the funds.
  3. Integration: Returning the money to the criminals as legitimate funds.

Various methods can be used within these stages to obscure the source of the money.

Money laundering is a massive global problem. The United Nations Office on Drugs and Crime (UNODC) estimates between 2% and 5% of the global GDP is laundered each year, and those funds allow criminal enterprises to continue financing their illicit operations.

While techniques vary – and frequently evolve – there are several common schemes used to launder dirty money. These include smurfing, trade-based laundering, the use of shell companies, and gambling. 

Thomas Jefferson Deficit Spending

Thomas Jefferson on deficit spending, banks, taxes, interest

Letter to John Wayles Eppes

Eppes was a nephew of Thomas Jefferson.

Monticello, June 24, 1813

Dear Sir,  

This letter will be on politics only. For although I do not often permit myself to think on that subject, it sometimes obtrudes itself, and suggests ideas which I am tempted to pursue. Some of these relating to the business of finance, I will hazard to you, as being at the head of that committee, but intended for yourself individually, or such as you trust, but certainly not for a mixed committee.

It is a wise rule and should be fundamental in a government disposed to cherish its credit, and at the same time to restrain the use of it within the limits of its faculties, “never to borrow a dollar without laying a tax in the same instant for paying the interest annually, and the principal within a given term; and to consider that tax as pledged to the creditors on the public faith.” On such a pledge as this, sacredly observed, a government may always command, on a reasonable interest, all the lendable money of their citizens, while the necessity of an equivalent tax is a salutary warning to them and their constituents against oppressions, bankruptcy, and its inevitable consequence, revolution. But the term of redemption must be moderate, and at any rate within the limits of their rightful powers. But what limits, it will be asked, does this prescribe to their powers? What is to hinder them from creating a perpetual debt? The laws of nature, I answer. The earth belongs to the living, not to the dead. The will and power of a man expire with his life, by nature’s law. Some societies give it an artificial continuance, for the encouragement of industry; some refuse it, as our aboriginal neighbors whom we call barbarians. The generations of men may be considered as bodies or corporations. Each generation has the usufruct of the earth during the period of its continuance. When it ceases to exist, the usufruct passes on to the succeeding generation, free and unincumbered, and so on. We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country. Or the case may be likened to the ordinary one of a tenant for life, who may hypothecate the land for his debts, during the continuance of his usufruct; but at his death, the reversioner (who is also for life only) receives it exonerated form all burthen. The period of a generation, or the term of its life, is determined by the laws of mortality, which, varying a little only in different climates, offer a general average, to be found by observation. I turn, for instance, to Buffon’s tables, of 23,994 deaths, and the ages at which they happened, and I find that of the numbers of all ages living at one moment, half will be dead in 24 years and 8 months. But (leaving out minors), who have not the power of self-government) of the adults (of 21 years of age) living at one moment, a majority of whom act for the society, one half will be dead in 18 years and 8 months. At 19 years then from the date of a contract the majority of the contractors are dead, and their contract with them. Let this general theory be applied to a particular case. Suppose the annual births of the State of New York to be 23,994; the whole number of its inhabitants, according to Buffon, will be 617,703 of all ages. Of these there would constantly be 269,286 minors and 348,417 adults, of which last, 174,209 will be a majority. Suppose that majority, on the first day of the year 1794, had borrowed a sum of money equal to the fee-simple value of the State, and to have consumed it in eating, drinking and making merry in their day; or, if your please, in quarrelling and fighting with their unoffending neighbors. Within 18 years and 8 months, one half of the adult citizens were dead. Till then, being the majority, they might rightfully levy the interest of their debt annually on themselves and their fellow-travelers, or fellow-champions. But at that period, say at this moment, a new majority have come into place, in their own right, and not under the rights, the conditions, or laws of their predecessors. Are they bound to acknowledge the debt, to consider the preceding generation as having had right to eat up the whole soil of their country, in the course of a life, to alienate it from them (for it would be an alienation to the creditors,) and would they think themselves either legally of morally bound to give up their country and emigrate to another for subsistence? Every one will say no; that the soil is the gift of God to the living, as much as it had been to the deceased generation; and that the laws of nature impose no obligation on them to pay this debt. And although, like some other natural rights, this has not yet entered into any declaration of rights, it is no less a law, and ought to be acted on by honest governments. It is, at the same time, a salutary curb on the spirit of war and indebtment, which, since the modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burthens ever accumulating. Had this principle been declared in the British bill of rights, England would have been placed under the happy disability of waging eternal war, and of contracting her thousand millions of public debt. In seeking, then, for an ultimate term for the redemption of our debts, let us rally to this principle, and provide for their payment within the term of nineteen years at the farthest. Our government has not, as yet, begun to act on the rule of loans and taxation going hand in hand. Had any loan taken place in my time, I should have strongly urged a redeeming tax. For the loan which has been made since the last session of Congress, we should now set the example of appropriating some particular tax, sufficient to pay the interest annually, and the principal within a fixed term, less than nineteen years. And I hope yourself and your committee will render the immortal service of introducing this practice. Not that it is expected that Congress should formally declare such a principle. They wisely enough avoid deciding on abstract questions. But they may be induced to keep themselves within its limits.

I am sorry to see our loans begin at so exorbitant an interest. And yet, even at that you will soon be at the bottom of the loan-bag. We are an agricultural nation. Such an one employs its sparings in the purchase or improvements of land or stocks. The lendable money among them is chiefly that of orphans and wards in the hands of executors and guardians, and that which a farmer lays by till he has enough for the purchase in view. In such a nation there is one and only one resource for loans, sufficient to carry them through the expense of war; and that will always be sufficient, and in the power of an honest government, punctual in the preservation of its faith. The fund I mean, is the mass of circulating coin. Every one knows, that although not literally, it is nearly true, that every paper dollar emitted banishes a silver one from the circulation. A nation, therefore, making its purchases and payments with bills fitted for circulation, thrusts an equal sum of coin out of circulation. This is equivalent to borrowing that sum, and yet the vendor receiving payment in a medium as effectual as coin for its purchases or payments, has no claim to interest. And so, the nation may continue to issue its bills as far as its wants require, and in the limits of the circulation will admit. Those limits are understood to extend with us at present, to 200 millions of dollars, a greater sum than would be necessary for any war. But this, the only resource which the government could command with certainty, the States have unfortunately fooled away, nay corruptly alienated to swindlers and shavers, under the cover of private banks. Say, too, as an additional evil, that the disposal funds of individuals, to this great amount, have thus been withdrawn from improvement and useful enterprise, and employed in the useless, usurious and demoralizing practices of bank directors and their accomplices. In the war of 1755, our State availed itself of this fund by issuing a paper money, bottomed on a specific tax for its redemption, and, to insure its credit, bearing an interest of 5 per cent. Within a very short time, not a bill of this emission was to be found in circulation. It was locked up in the chests of executors, guardians, widows, farmers, etc. We then issued bills bottomed on a redeeming tax, but bearing no interest. These were readily received, and never depreciated a single farthing. In the revolutionary war, the old Congress and the States issued bills without interest, and without tax. They occupied the channels of circulation very freely, till those channels were overflowed by an excess beyond all the calls of circulation. But although we have so improvidently suffered the field of circulating medium to be filched from us by private individuals, yet I think we may recover it in part, and even in the whole, if the States will co-operate with us. If treasury bills are emitted on a tax appropriated for their redemption in fifteen years, and (to insure preference in the first moments of competition) bearing an interest of six percent there is no one who would not take them in preference to the bank paper now afloat, on a principle of patriotism as well as interest; and would be withdrawn from circulation into private hoards to a considerable amount. Their credit once established, others might be emitted, bottomed also on a tax, but not bearing interest; and if ever their credit faltered, open public loans, on which these bills alone should be received as specie. These, operating as a sinking fund, would reduce the quantity in circulation, so as to maintain that in an equilibrium with specie. It is not easy to estimate the obstacles which, in the beginning, we should encounter in ousting the banks from their possession of the circulation; but a steady and judicious alternation of emissions and loans, would reduce them in time. But while this is going on, another measure should be pressed, to recover ultimately our right to the circulation. The States should be applied to, to transfer the right of issuing circulating paper to Congress exclusively, in perpetuum, if possible, but during the war at least, with a saving of charter rights, I believe that every State west and south of Connecticut river, except Delaware, would immediately do it; and the others would follow in time. Congress would, of course, begin by obliging uncharted banks to wind up their affairs with a short time and the others as their expired, forbidding the subsequent circulation of their paper. This they would supply with their own, bottomed, every emission, on an adequate tax, and bearing or not bearing interest, as the state of the public pulse should indicate. Even in the non-complying States, these bills would make their way, and supplant the unfunded paper of their banks, by their solidity, by the universality of their currency, and by their receivability for customs and taxes. It would be in their power, too, to curtail those banks to the amount of their actual specie, by gathering up their paper, and running it constantly on them. The national paper might thus take place even in the non-complying States. In this way, I am not without a hope, that this great, this sole resource for loans in an agricultural country, might yet be recovered for the use of the nation during war; and, if obtained in perpetuum, it would always be sufficient to carry us through any war; provided, that in the interval between war and war, all the outstanding paper should be called in, coin be permitted to flow in again, and to hold the field of circulation until another should require its yielding place again to the national medium.

But it will be asked, are we to have no banks? Are merchants and others to be deprived of the resource of short accommodations, found so convenient? I answer, let us have banks; but let them be such as are alone to be found in any country on earth, except Great Britain. There is not a bank of discount on the continent of Europe, (at least there was not one when I was there) which offers anything but cash in exchange for discounted bills. No one has a natural right to trade the money of a lender, but he who has the money to lend. Let those then among us, who have a monied capital, and who prefer employing it in loans rather than otherwise, set up banks, and give cash on nations bills for the notes they discount. Perhaps, to encourage them, a larger interest than is legal in the other cases might be allowed them, on the condition of their lending for short periods only. It is from Great Britain we copy the idea of giving paper in exchange for discounted bills; and while we have derived from that country some good principles of government and legislation, we unfortunately run in the most servile imitation of all her practices, ruinous as they prove to her, and with the gulph yawning before us into which these very practices are precipitating her. The unlimited emission of bank paper has banished all her specie, and is now, by a depreciation acknowledged by her own statesmen, carrying her rapidly to bankruptcy, as it did France, as it did us, and will do to us again, and every country permitting paper to be circulated, other than by public authority, rigorously limited to the just measure for circulation. Private fortunes, in the present state of circulation, are at the mercy of those self-created money lenders, and are prostrated by the floods of nominal money with which their avarice deluges use. He who lent his money to the public or to an individual, before the United States Bank, twenty years ago, when wheat was well sold a dollar the bushel, and receives now his nominal sum when it sells at two dollars, is cheated of half his fortune; and by whom? By the banks, which, since that, have thrown into circulation ten dollars of their nominal money where was one at that time.

Reflect, if you please, on these ideas, and use them or not as they appear to merit. They comfort me in the belief, that they point out a resource ample enough, without overwhelming war taxes, for the expense of the war, and possibly still recoverable; and that they hold up to all future time a resource within ourselves, ever at the command of government, and competent to any wars into which we may be forced. Nor is it a slight object to equalize taxes through peace and war.

I was in Bedford a fortnight in the month of May, and did not know that Francis and his cousin Baker were within 10 miles of me at Lynchburg. I learnt it by letters from themselves after I had returned home. I shall go there early in August and hope their master will permit them to pass their Saturdays & Sundays with me.

Ever affectionately yours.

The Wealth Pyramids

Comparison between current and ancient depiction of pyramids of wealth. The red portion of the bottom pyramid, inspired by Mesoamerican models, represents the blood, sweat and tears of the poor. The rectangular gold reflects the wealth of the elite.

It is true that the current trade deficit of the U.S. is unsustainable. No country can spend more than it produces indefinitely without eventually having to face catastrophic consequences. The markets, the elite and the government understand that. It is also true that the history of deficits predates Mr. Trump’s two administrations, and that no one other than he since Ross Perot has been more vocal about the topic. So, credit where credit is due. President Trump is the only one that has had the courage to do something about it, particularly in the context of the rise of China, and right behind it, India.

But nothing in this world lasts forever, or more concretely, all things must pass. Therefore, tariffs are at best an interim step. In fact, U.S. Treasury Secretary Scott Bessent confirmed the concept when he said that the tariffs showdown with China is unsustainable. But, like Hernán Cortés, Mr. Trump’s decision to impose them on friend and foe alike, and to threaten Canada and Greenland, among others, means that he’s burned the ships that carried the precious, irreplaceable cargo of goodwill that had been so painstakingly amassed during, and in the wake of, World War II. Having staked so much on tariffs, the question is, what is Plan B in the event they don’t deliver the much needed result -balanced trade? What’s more, tariffs are a regressive tax, paid for by the people who buy everyday items such as food, clothing, and sundry supplies. Accordingly, taxpayers of modest (and lower) means, who are compelled to divert a much higher percentage of their income to such items, will be disproportionately impacted. It is high time that the well-being of the nation be measured by the plight of the middle class (and below), not the net worth of the top 10 percent of the population. Otherwise the aggrieved voters, who are the majority of the electorate, might do so themselves.

Bank of International Settlements (BIS)

Origin

On January 20, 1930, at a Hague Convention, the governments of Germany, Belgium, France, the United Kingdom, Italy, Japan, and Switzerland created the BIS. The latter agreed to grant the Bank legal charter under Swiss law. Currently it is based in Basel, Switzerland and has representative offices in Hong Kong and Mexico City. The original founders included the central banks of the six signatory states plus three American private banks, J.P. Morgan and Company, the First National Bank of New York, and the First National Bank of Chicago.

Purpose

The Bank’s original purpose was to facilitate reparation payments imposed on Germany by the victorious powers at the 1919 Peace Treaty at the end of World War I. However, after the 1931 Hoover Moratorium on reparation payments and their subsequent suspension at the Lausanne Conference of 1932 in the midst of the Great Depression, it eventually shifted its focus to international financial stability and banking services for central banks. Attempts were made to abolish the Bank during the 1944 Bretton Woods Conference; the Roosevelt administration as well as the British, Norwegian, and Dutch delegations disliked the possibility that control of international finance might be outside the grasp of national policy-makers. However, European central banks valued the Bank’s non-governmental character and resisted its liquidation.

Structure

The Bank’s capital is held by central banks only; sixty-three central banks and monetary authorities are currently members of the BIS and have rights of voting and representation at General Meetings.

The Bank has three main decision-making organs: the Board of Directors, General Management, and General Meetings of Member State banks.

The Board of Directors, which meets at least six times a year, determines the strategic and policy direction of the BIS, supervises BIS Management, and fulfills the specific tasks given to it by the Bank’s Statutes. The Board may have up to 18 members, including six ex officio Directors comprising the central bank Governors of Belgium, France, Germany, Italy, the United Kingdom and the United States. Ex-officio Directors have a reserved seat simply because they’re representatives of the central banks of the aforementioned countries. They may jointly appoint one other member of the nationality of one of their central banks. Eleven Governors of other member central banks may be elected to the Board. Notably, no Governors from Asia, Latin America, Africa, or the Muslim world are ex officio Directors.

BIS Management is under the overall direction of the General Manager, who is responsible to the Board of Directors for the conduct of the Bank.

The Annual General Meeting (AGM) is held no later than four months after 31 March, the end of the BIS financial year. The AGM decides the distribution of the dividend and profit of the BIS, approves the annual report and the accounts of the Bank, makes adjustments in the allowances paid to Board members and selects the Bank’s independent auditor.

Extraordinary General Meetings must be called in order to amend the Statutes of the Bank, change its authorized capital or liquidate the Bank.

Financial Statements

The financial statements are prepared in accordance with the Statutes and accounting policies of the Bank. The BIS publishes audited annual financial statements as of 31 March each year in its Annual Report. The BIS balance sheet total was SDR 379 billion SDR as at 31 March 2024.

De Facto Sovereignty

The Bank has certain privileges and immunities that, in the aggregate, give it de facto sovereignty – beyond the reach of local and international law. Senior management of the BIS enjoys diplomatic status, and enjoys specific privileges that include: immunity from legal process (e.g., suits, arrests, imprisonment) in respect to acts performed in their official capacity, even after their service with BIS has ended; inviolability of premises and archives (the BIS’s premises and archives, including official papers, documents and data, are inviolable; and tax exemptions for their salaries and official goods (salaries and emoluments paid by the BIS are exempt from taxation and may also be exempt from taxes on capital payments and certain income from other sources). In addition, they have exemptions from customs duties, taxes on goods imported for official uses, and immigration restrictions, along with repatriation facilities in times of international crises. The BIS and its staff are exempt from social security and welfare legislation and contributions in the host countries.

The BIS has the freedom to act independently and to make its own rules and regulations within its premises. It has the freedom to hold meetings in France and other host countries, with no restrictions on discussion or decision-making. Its property and assets, and those entrusted to it, are immune from search, seizure, or expropriation.

Internal Power

At BIS, voting power is directly proportional to the number of shares subscribed by each member. Each member central bank or its designee has voting rights at the General Meetings equivalent to the number of shares they subscribed in their respective country. While the shares have identical property rights, the right to vote and be represented is reserved for the central bank of the country that subscribed the shares. This means that a member with more shares will have a proportionally larger say in the decisions made at the BIS. The BIS Statutes explicitly state that voting rights are “in proportion to the number of shares subscribed” by each member. This means that if one member has twice as many shares as another, they will have twice as many votes. While a precise individual breakdown of BIS shareholdings for each member bank isn’t publicly available, it’s known that 559,125 of the 600,000 shares were held by member central banks as of March 2019. These shares are not fungible, meaning they are linked to specific national issues (American, Belgian, and French). Two American banks own BIS shares: the Federal Reserve System and the Federal Reserve Bank of New York.

Evaluation

Although the Bank is Eurocentric (34 jurisdictions in Europe, 16 in Asia, 5 in South America, 3 in North America, 3 in Africa, and 2 in Oceania), its influence on the international monetary and financial system with policy-making and large cross-border banking is undeniable. However, the opacity of its motives came to the forefront in the context of facilitating multi-billion-dollar IMF bailouts in the 1990s, the true beneficiaries of which were alleged to have been US-based commercial bank creditors. In addition, major economies have the greatest clout within the Bank. The Bank also represents the apex of international standard formulation through practices that are shared or agreed upon informally by the network’s members. The insulation of the Bank and its hosted mechanisms from governments places them outside international law. This infers a distinctive preference for favoring the elite over what democratic majorities might choose. In turn, that raises questions on how to regulate and limit such informal authority.

Conclusion

The efficiency and proficiency of the BIS in executing the policies and procedures set forth by its decision-making organs are beyond criticism. It is not what it does but what it does not do that needs to be explored. A relic of the age of colonial empires and an enduring catalyst to all Industrial Revolutions, the Bank was created long before today’s defining terms such as climate change, semiconductors, computers, fiber optics, internet, jets, drones, space exploration, weapons of mass destruction, robotics, artificial intelligence, and their promising yet potentially nightmarish ramifications existed. Thus, evolving circumstances such as the need to abolish the use of fossil fuels – the main cause of anthropomorphic climate change – are not included among the Bank’s specific purposes. Furthermore, its system of allocating voting rights effectively insulates and preserves the interests of the global elite. In addition, having determined that the BIS is undeniably Euro-centric, that the six original ex-officio members cannot be replaced, and that its role in augmenting and preserving the world’s ruling financial system is of crucial importance, it can be reasonably concluded that its oligarchical design is not responsive to the needs, hopes and expectations of the vast majority of people in today’s emerging multi-polar world: to drastically reduce pervasive poverty and to disperse the dangerous concentration of wealth and power.

China’s Shipbuilding Capacity

China’s shipbuilding capacity is believed to be over 230 times greater than that of the United States. Chinese shipyards produce roughly 23.2 million tons, accounting for over 50% of the world’s mechant tonnage produced. In contrast, capacity of the U.S. is less than 100,000 tons, or 0.1% of global production.

China’s Jiangnan Shipyard alone has more capacity than all U.S. shipyards combined. The unclassified U.S. Navy briefing slide (above) dramatically illustrates the disparity.

By way of comparison, in 1942 the U.S. economy was 5.6 times larger than Japan’s and built 49,000 airplanes while Japan built only 9,000. In the three years following the Battle of Midway, Japan built six aircraft carriers and the U.S. built 17. In four years, American industrial production, already the world’s largest, doubled in size.

That is no longer so.

Opinion: Preventing a Terminal War

The line it is drawn

The curse it is cast

The slow one now

Will later be fast

As the present now

Will later be past

The order is rapidly fadin’

And the first one now

Will later be last

For the times they are a-changin’

– Bob Dylan, 1964

Background

The rate at which today’s technology is advancing – particularly artificial intelligence, robotics and renewable energy – is unprecedented in recorded history. And recorded history is the correct way of saying this because no one really knows what may lurk in unrecorded antiquity. The same is true regarding international politics, where seismic changes are taking place. Yet, in terms of spiritual growth, humanity is still infected with the same age-old irresistible lust for dominance, as if we could take it with us when we draw our last breath. And so, the risk of extinction that it casts on us and all other species on this planet we think we own, keeps growing unabated. No wonder the Bulletin of the Atomic Scientists has set the Doomsday Clock to 89 seconds to midnight, an ominous metaphor of the growing probability of terminal apocalypse. It is through the prism of this regrettable truism that we look at today’s unfolding events.

The Conundrum

While the scope and magnitude of problems confronting the U.S. today are indeed unprecedented, except for nuclear war none are more urgent than the need to preserve the dollar’s role as reserve currency of the world. This privilege, not a right, has allowed the federal government to incur perennial trade and fiscal deficits, amass the largest public debt in history, and export a substantial portion of its inflation. More importantly, the privilege has kept us from facing sovereign insolvency, when a government is unable to meet its obligations and investors either demand usurious interest rates or simply refuse to buy sovereign bonds.

The U.S. has been heading in that direction for close to 50 years. As a result, its accumulated debt is higher than it’s ever been, to the point that the Congressional Budget Office projects that by the end of 2025, 100% of the debt will be held by the public, the federal budget deficit will reach $1.9 trillion, and that by 2035 the federal debt will rise to 118% of GDP.

The root cause of this predicament is the government’s propensity to overspend, outsource manufacturing, and underinvest in nation-building. This has created steep inequality, a chronic and persistent housing crisis, a skyrocketing cost of medical care, a prohibitive cost of raising children, and a plummeting birth rate. In fact, the number of births in the U.S. has declined 17% since 2007, when it was at its most recent peak, and 3% in 2023.

As of February 12, 2025, it’s encouraging and uplifting to perceive that President Trump appears to be fully cognizant of, and has taken spot-on steps to address, the aforementioned all-important issues. Certainly, the interim step he has taken to deal with the trade deficit, specifically to impose tariffs on friends and competitors, is necessary. The $37 trillion plus debt makes it unsustainable, for example, to keep borrowing just to essentially give the money away.     

Accordingly, as it pertains to these specific decisions, the president deserves the highest praise. Truth be told, tariffs are politically expedient because (a) they can be imposed at the president’s discretion without legislative action, and (b) not being responsible for them, members of Congress are held harmless at election time from the wrath of their constituents. However, they’re a regressive tax; and as solutions go, they’re only a palliative, not a cure. The root cause of the trade deficit, which will at some point have to be publicly acknowledged and addressed, is that the country’s non-outsourced manufacturing sector still must successfully compete globally, not just within the cocoon of the U.S. market, and to do so two essential conditions are necessary: (1) a comprehensive and honest global free trade agreement devoid of subsidies and tariffs, and (2) the U.S. must mass produce and sell quality items that the rest of the world may be willing and able to buy. That includes, for example, quality small, low-priced electric vehicles comparable to Chinese brands.  

Regarding the dollar’s privileged role, nothing in this world lasts forever. Indeed, since 1450 AD several nations have had that privilege, and they all eventually lost it. Accordingly, any attempt to forcibly or artificially extend the dollar’s reign should include the caveat that, even if successful, it’s still going to be temporary. Loss of that privilege is usually, but not always, gradual, unrelenting and irreversible, like flowing magma. In fact, in some ways, it’s already started. Accordingly, Mr. Trump’s threat to impose 100% tariffs on BRICS countries should they attempt to create a common currency akin to the euro may at best only postpone the inevitable. On that vein, though the president’s interim actions are indeed cause for celebration, it’s equally alarming that no one in his administration is known to have announced a comprehensive plan to mitigate the catastrophe that will surely befall us the day the dollar is finally dethroned. Perhaps one that lifts the GDP by 16 or 17% in twenty years? 

Dynamics

Nobody knows how the incipient trade, technological, political and military rivalry with China will evolve, particularly in Latin America, Taiwan, and more broadly, in the Pacific. What is certain is that in terms of naval power, the importance of which will become more apparent as the confrontation progresses, China already has the largest and fastest-growing navy in the world, and its capability is growing. In addition, the U.S. presently lacks the shipbuilding capacity to keep up with it. By that measure, disagreements with Russia are secondary, fixable and preferable. However, Russia’s “cooperation” with China, Iran and North Korea raises questions about how they will affect everyone’s core interests. Might Russia backtrack on its commitment to provide sophisticated weaponry to Iran such as advanced warplanes and air defense systems? In the event, how would Iran react to that? How does Russia’s alliance with North Korea compare with the U.S. and Taiwan? Are these relationships bound to continue and intensify, or will Russia effectively degrade them in order to reassure the U.S., Israel, Taiwan and Japan? How will the rivalry between India and Pakistan, nuclear-armed rivals supported respectively by Russia and China, affect the overall dynamic? More importantly, can they all trust one another?

Expansion and Intervention

It is not unthinkable to assume that in view of their common national security and economic interests, both Canada and Greenland might eventually join the United States. However, since their combined population is roughly equal to California’s, essentially what the U.S. would be getting is a vast, sparsely populated, very cold territory with lots of natural resources. That said, this proposed peaceful latter-day Anschluss is possible, provided Canadians and Greenlanders agree to it. As of this writing that does not appear to be the case.

With respect to the Panama Canal, its strategic importance to the U.S. is growing by leaps and bounds. Specifically, the U.S. must preempt even the smallest possibility of China closing the canal to American combatant and supply ships sailing from the Atlantic to the Pacific. It goes without saying that for the U.S. that is a vital national security issue. Obviously, Panama’s president understood this well given that in the wake of Secretary Rubio’s February 1, 2025 visit, the former announced that Panama will not renew its relationship with China’s Belt and Road Initiative.

That is not to say the incident might not have long-term repercussions. While from an American perspective it is necessary and therefore perfectly acceptable to invoke and apply the Monroe Doctrine, that assumes that Latin America as a whole will remain the divided, poor and powerless vassal of the U.S. it’s been since its independence from Spain and Portugal, themselves now irrelevant ex-global powers. But things can and have changed quickly and unexpectedly. For example, no one in the late 1980s predicted the Soviet Union’s demise or the meteoric – and ongoing – rise of China and India. In 1950 all three were extremely poor, particularly the European portion of the Soviet Union which was literally in ruins after World War II. Today, Russia has a surprisingly resilient economy, China and India are growing faster than anyone else, and all three are nuclear armed. By the same token, it’s impossible to accurately extrapolate how Africa and Latin America will evolve during the rest of the century and beyond. For that reason, it might be prudent to consider a strategy based on something other than a strong-arm approach reminiscent of Emperor Caligula’s maxim “oderint dum metuant – let them hate me, as long as they fear me.” Perhaps a policy based on goodwill and respect might be preferable.

Demographics

Demographics cannot be ignored. As of October 2024, the combined population of the entire Western Hemisphere was 1.03 billion, China’s was 1.41 billion and India’s 1.45 billion. This will become a weightier issue should poverty and inequality decline in the latter two. If and when that happens, at some point their economies will likely rely more on internal consumption than on exports. From then on American and European consumers will find it increasingly difficult to generate as much tax revenue as their Chinese and Indian peers. In turn, that will inevitably redefine their defense capabilities.

Fossil Fuels and the Dollar

Regarding energy, Mr. Trump appears to subscribe to the belief that fossil fuels are the wave of the future, not a relic of the First Industrial Revolution. In fact, he withdrew from the Paris Agreement and wants the Keystone XL pipeline completed as soon as possible.

A critical supporting element of the dollar’s prowess is its relationship to oil. On August 15, 1971 President Richard Nixon discarded the Bretton Woods system of fixed exchange rates and converted the dollar to a fiat currency, just like all other currencies. In 1974 Saudi Arabia and the United States reached an agreement whereby the former would recycle its windfall oil revenue by investing into the U.S. economy. Later that same year the Saudis stopped accepting the British pound as payment for oil. Thus, all countries that were not oil self-sufficient were required to earn dollars to pay for their oil. The only country that did not have to do so was the U.S. All it has had to do is print money at is pleasure. It is for that reason that no issue save nuclear war is more important to the U.S economy.

In view of these facts, it’s unsurprising that President Trump’s first phone call to a foreign leader in his second term was to the Crown Prince of Saudi Arabia, who promptly announced that the Kingdom wants to invest $600 billion into the U.S. over the next four years. Not quite satisfied, the day after their phone call Trump said during virtual remarks to business and foreign leaders at the World Economic Forum in Davos, Switzerland, that he would ask the Prince to “round out” their investment to around $1 trillion”. If so, that would average $250 billion per year. To put it in perspective, that would amount to 28% of the $892 billion in interest that the U.S. government paid in 2024. If it holds, this agreement all but guarantees that Saudi oil will continue to be priced in dollars. More importantly, it would for all intents and purposes indefinitely extend the 1974 pact and likely dissuade Saudi Arabia from joining BRICS. That is particularly important because Iran is already part of BRICS and has a bilateral relationship with Russia. Were Saudi Arabia to join BRICS, both shores of the Persian Gulf would operate under the auspices of an organization that specifically excludes the U.S.

However, the proposition to perpetually rely on oil to support the dollar evokes images of rowing against the current on a category 4 whitewater river. Not only is the president rejecting an opportunity to compete with China on renewable energy among countries that intend to walk away from fossil fuels, which are many, he appears to have discarded the possibility of gradually replacing oil with green and white hydrogen to prepare for the day when the demand for petrodollars starts to recede. A prudent alternative might be to chart a hybrid course: oil and fossil fuels in the short term paired with a simultaneous massive investment in white and green hydrogen over the next twenty or thirty years.

Inequality and Education

There are two additional particularly thorny issues: rising inequality in the U.S and abroad, and lack of a concerted effort to fully overhaul America’s education system.

Inequality, a taboo subject, is enshrined in the altar of capitalism as a necessary evil. Yet, for the working classes, who daily face the daunting challenge of finding affordable housing and making ends meet, it is a preeminent issue. And this is true not just in the U.S. but in Canada, Spain, and virtually everywhere else. For that reason, China’s proven track record of lifting 800 million people from poverty in 40 years speaks volumes and attracts adherents worldwide, particularly in the Global South. Accordingly, the President and Congress should freely and publicly discuss inequality at least as much as UFOs and the Kennedy and MLK assassinations. In fact, a good place to start might be to create a bipartisan task force empowered to hold public hearings and recommend ways to reduce and minimize it.

China is far ahead in the number of STEM graduates and leads the world in critical renewable energy technologies, including solar panels and batteries. Clearly, the U.S. should invest more by orders of magnitude on education, renewable energy, domestic infrastructure, public transportation, and all those things on which China is now the undisputed leader. In particular, no one in the current administration is known to have proposed a specific plan to make higher education free, or nearly so, to talented and meritorious youths whose parents simply lack the means to pay for it. Mantras like democracy or individual financial responsibility simply won’t cut it. If our esteemed elected leaders truly aspire to create the necessary conditions for the U.S. to successfully compete with China and India in the 21st Century and beyond, it will have to encourage, inspire and steer a very large percentage of our qualified indigenous youth into choosing STEM careers and simultaneously, create life-long reliable jobs for them in those fields. And even then, there are no guarantees.

Medical Care

Medical care, the proper term as opposed to medical insurance, should also be high on the agenda. Whatever Mr. Trump decides to do, if anything, to the Affordable Care Act, it simply will have to offer subsidized coverage to today’s 20.8 million enrollees. Otherwise, they won’t be able to pay the premiums and other related costs.

Lastly, the most pressing issue: the growing confrontation with China. Here, the crux of the matter is whether there is anything that might satisfy their obviously conflicting core interests without stepping on each other’s toes. It makes no sense to avoid nuclear war with Russia only to wage one with China.  

A Possible Alternative: A Global Mechanism to Calculate, Allocate and Enforce the Exchange Rates of all Currencies Based on Per Capita Production of White and Green Hydrogen

Since time immemorial gold, silver or their equivalent have been the fuel that allowed the rich and powerful, whether clan potentates or emperors, to amass armies and enslave others. This was attested to by Cicero in his Fifth Philippic, Nervos belli, pecuniam infinitam: “The sinews of war [are] unlimited money. The concept has been seconded by others worldwide, including the ancient Maya, whose city-states lived in a continuous state of war as their kings strove to control trade between the coast and the highlands, and Cardinal Richelieu many centuries later: “Gold and money are among the chief and most necessary sources of the state’s power… a poor prince would not be able to undertake glorious action.”

That truism, combined with the universal lust for dominance, has historically been, and remains, at the heart of wars. It’s not inedible philosophical, economic or political mantras. It’s about having others do that which the powerful don’t like or want to do – menial chores, raising their own children, personally caring for their aging parents. Enter slaves, surfs, the destitute and the homeless – powerless human beings without a decisive voice with which to reform the pecking order. By the same token, given the state of today’s technology, those at the top have the means to divvy the world’s resources and to keep everyone else from having a “place in the sun”, as Kaiser Wilhelm might say.

Today’s weapons of mass destruction combined with the ease with which sensitive information can be obtained means that the genie is out of the bottle. Case in point, North Korea, India, Pakistan and Israel, which did not exist as independent nations betwen 1900 and 1945, are now nuclear-armed. And Iran, now involved with a special written relationship with Russia, certainly has the knowhow and raw materials to follow suit without anyone’s consent. That is the first powder keg.

The second powder keg is a sudden acute and uncontrollable confrontation between the U.S. and China, one where neither backs down from their attempt to become –and remain – “primus inter pares”, first among equals. And Taiwan is ground zero at the end of a short fuse, just waiting for a flame to ignite it.

Enter climate change, impervious to human machinations, aspirations, suffering and quarrels. It may in fact be our way out, but only if we grasp the lifeline it’s throwing to us.

A Suggested Solution

These observations revolve around the premise that a nation with a dominant currency effectively rules the world. Indeed, as noted earlier, that is a historical fact.

Since ancient times monetary systems were backed either by silver or gold. In fact, silver was much more widespread, from the Sumerians (3000 BC) until 1873. In the 16th century vast deposits of silver were discovered at the Cerro Rico in Potosí, Bolivia. That spawned an international silver standard in conjunction with Spanish pieces of eight. These coins played the role of international trading currency for nearly four hundred years. In 1821, following the independence of the Spanish colonies, and with it, the permanent interruption of the silver stream from Bolivia to Spain, Great Britain formalized the gold standard and introduced it to its colonies. Over the next 35 years, with the exception of China, most of the world followed suit. By 1935 China and the rest of the world abandoned the silver and gold standards, respectively, and introduced fiat currencies pegged to the pound sterling or the U.S. dollar. In the U.S., from 1792 to 1834 silver served as the primary backing. That year it began transitioning to a gold standard following the demonetization of silver in 1873. Note that these events took place as a result of the loss of the silver stream from Bolivia to Spain, and from there to the rest of Europe and the U.S. In 1933 Franklin Delano Roosevelt confiscated all privately held gold. From 1933 to 1971 the dollar remained on a quasi-gold standard, meaning that each unit of currency was convertible into a specific amount of gold. As a result, the government had to hold enough gold reserves to back this currency. In 1971 Richard Nixon abandoned the dollar’s convertibility to gold and made it fiat currency, where it remains.

Today all currencies, including the dollar, are still fiat. However, the dollar has managed to retain its position as reserve currency of the world, as outlined above. There was a time when American industrial prowess was unmatched. This was particularly acute following World War II, when much of Europe and Japan were in ruins. As a result, the dollar was backed by America’s economic prosperity. But that has declined. In 1960 U.S. GDP represented 40% of global GDP. By 2014 it had been cut in half. The dollar’s dominance is not based on the percentage of America’s GDP relative to the rest of the world. Rather, it’s based on its relationship to oil. As long as oil is priced in dollars, nations who buy it in the international market need dollars to pay for it. That creates quasi-infinite demand. This peripheral mechanism has attracted capital to the U.S. stock market, contributed to the U.S. trade deficit by allowing it to pay with its own currency practically everywhere for anything regardless of point of origin, and encouraged the federal government to overspend. As a result, unsurprisingly, the accumulated debt exceeds $36 trillion.

This against a backdrop of the rise of China, whose GDP measured in terms of PPP (purchasing power parity) has overtaken the U.S. In his book The Thucydides Trap: Are the U.S. and China Headed for War? Graham Allison shows that in 12 of 16 past cases in which a rising power confronted a ruling power, they resulted in bloodshed. The similarity between the naval rivalry between Great Britain and Germany just prior to World War I, when the latter’s GDP surpassed the former, and between the U.S. and China today, when the latter’s GDP, as measured by purchasing parity, has overtaken the U.S., is uncanny. World War I resulted in the death of 8.5 million soldiers from wounds or disease. It also laid the foundation for World War II, the end of European global domination, the disintegration of the British and French empires, and ushered in a new world order characterized by America’s overwhelming economic domination. That is now in the process of ending. The one question remaining is whether a terminal war involving China, the U.S., and Russia can be permanently avoided.

One way to do it might be to negotiate an irrevocable universal agreement (not communism) to create a neutral, unbiased mechanism to distribute wealth fairly and equitably among nations and individuals. Only that would preclude any one nation to reach, by artificial means, Cicero’s critical threshold of ‘pecuniam infinitam’ with which to attempt to dominate the world. This does not mean that the wealth of richer nations and individuals would be confiscated and transferred to the poor. Rather, it would create a pathway whereby the poor would gradually achieve purchasing power parity.

One way to do so (there are undoubtedly others) is to design and adopt a formula that would use per capita production of green and/or white hydrogen to determine the exchange rate of all national currencies. Thus, regardless of population or territorial size, all countries would the means to eventually achieve economic and financial independence. One variation of this criterion is explained here. As a bonus, this scheme would eliminate the perceived need for weapons of mass destruction and massive defense budgets, an express wish of presidents Trump, Reagan, Kennedy, and Eisenhower.

U.S.-China GDP by PPP 2017 & British-German GDP 1913

In just over 100 years the pattern is eerily similar; and so is the possibility of a similar confrontation and for the same reasons: the Thucydides Trap. We all know the tragic loss of lives and treasure in World War I and its follow-up, World War II. But all-out war between the U.S. and China, waged with modern weapons, which no rational person wants, would imperil the very existence of life on our planet.

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