National Interests

“It is a truism (and truisms are often overlooked by busy people) that British interests are not confined to British territory. They do not end, that is to say, where foreign territory begins. If this were only so, the world would be an infinitely simpler place, where we should have no problems beyond our shores and there would be nothing more for us to worry over than the prosperity and happiness of British lands. But that prosperity depends in time of peace on the free flow of trade along the sea-ways of the world; and in time of war the whole existence of Great Britain hangs by the slender chain of those communications. It follows that the circle of her most vital national concerns includes certain regions of the earth which she has not the slightest claim or wish to govern but cannot afford to see controlled by unsympathetic hands… “

Philip Guedalla – English barrister, biographer, historian and writer. Introduction to The Lost British Policy, Britain and Spain since 1700 by Barbara Wertheim (later Tuchman), 1938.

In the United States, the National Security Strategies (NSS) of the Bill Clinton, George W. Bush, Barack Obama, and Donald Trump administrations pledged to defend the nation’s security and interests. However, none of these documents itemize the latter. As for President Biden, he has reportedly recently approved a highly classified nuclear strategy that deals squarely with China’s rising economic and military prowess.

In 1996, the year after Bill Clinton’s NSS was published, the Commission on America’s National Interests (part of the Office of Justice Programs, itself under the U.S. Department of Justice) determined that four levels of US national interests exist: vital, extremely important, just important, and less important. In addition, it concluded that there are only five vital national interests:

  1. To prevent the threat of an attack of weapons of mass destruction on U.S. soil or its military abroad;
  2. To ensure U.S. allies’ survival and cooperation to shape an international system in which we can thrive;
  3. To prevent the emergence of hostile powers on U.S. borders;
  4. To ensure the viability of major global systems;
  5. And to establish productive relations with nations that could become adversaries.

ONE AND TWO. But given the number of intercontinental ballistic missiles, nuclear-powered, nuclear-armed submarines, and strategic bombers presently deployed by the U.S. and its adversaries, mirror launch on warning policies, the fact that launched ballistic missiles cannot be recalled, redirected or shot down (Russia and the U.S. have in excess of 1600 warheads, the U.S. has 44 interceptors with a 50% kill ratio), the threat of a surprise attack with weapons of mass destruction is ensconced in daily life and cannot be prevented. Instead, the U.S. and Russia, who collectively have the lion’s share of these weapons, rely on deterrence to do so. Should that fail, the subsequent all-out nuclear exchange would annihilate upwards of 600 million people in as little as ninety-two (92) minutes, unleash nuclear winter, and starve to death a further 5 billion around the world in a matter of weeks.

THREE. The emergence of hostile powers on U.S. borders is, for the foreseeable future, not a factor. Indeed, neither Canada, Mexico, nor Latin America as a whole have the means to threaten the U.S.

FOUR. The viability of major global systems presumes that the U.S. will continue to retain its economic and military hegemony. However, the “no limits cooperation” between China and Russia, the refusal of the Global South to sanction Russia on account of the Ukrainian war, and the concerted effort by BRICS countries to collectively avoid the dollar in international transactions suggest that America’s influence and authority is eroding.

FIVE. While it is possible to establish productive relations with Russia, China, Iran, North Korea and others, that would require dialogue and cooperation without preconditions, not confrontation. However, given that as of this writing (August 23, 2024) it’s been over two years since the presidents of the U.S. and Russia have talked to each other, that does not presently appear to be on the table. As for the specific “national interests” that the U.S. is committed to defend, survival should be at the very top. Based on that simple criterion, everything else must necessarily be negotiable, including the status of Israel/Palestine, Russia/Ukraine, China/Taiwan, NATO, the dollar, and control of the world’s oil and natural gas reserves. If we’re unable to reach an agreement, we may not make it to the next century.

Historical U.S. Debt as Percentage of GDP

On August 7, 2024 the national debt reached $35,094,756,345,920.31 ($35 trillion). As the graph shows, it is now on a level not seen since the end of World War II. However, in 1940, just before the U.S. entered the war, the debt stood at about 45% of GDP. In contrast, should the U.S. enter into a war with another major power, it would be doing so already burdened by a debt of 120% of GDP.

Historical Defense Budgets

Note: On March 11, 2024, the Biden-Harris Administration submitted to Congress a proposed Fiscal Year (FY) 2025 budget request of $849.8 billion for the Department of Defense (DoD), consistent with the caps approved by Congress under the Financial Responsibility Act (FRA) of 2023. On August 1, 2024 the Senate Appropriations Committee approved its fiscal 2025 defense spending bill, funding the Defense Department at $852.2 billion. Though approved unanimously, the bill still has to be reconciled with the House’s version of the Pentagon funding legislation, which authorized $833 billion in total funding. The proposed 3.3% increase in defense spending suggests that the bipartisan agreement on spending caps might be falling apart.

Hydrogen as a Peacemaker

The idea of using solar (or geothermal) energy and seawater to mass-produce green hydrogen by electrolysis, burn it and add gravity to generate a surplus of electricity and freshwater, even far from shore (which desalination cannot do), is feasible, practical and necessary. Indeed, it is a seismic proposal, in more ways than one. For starters, the pertinent raw materials –solar energy, seawater and gravity- are in the public domain, easily accessible and, except for landlocked nations, which have no direct access to the ocean, universally available. As a result, it would be extraordinarily difficult for anyone to organize a global cartel with the power to allocate production quotas of hydrogen and to set its price. Gradually the scheme would make nuclear fission and fossil fuels obsolete, dramatically increase the supply of hydrogen needed to build a widespread, reliable network of hydrogen automobile pumping stations, modernize the electric power industry, stop the wholesale dumping of greenhouse gases into the atmosphere, end the real estate crisis for the working class, and create millions of non-temporary, well-paying construction and energy jobs that cannot be outsourced.

Since oil is the main support pillar of the value of the dollar and the demand for oil will at some point collapse, it follows that the dollar needs to replace the oil mainstay. Accordingly, today’s essay looks at the dollar in light of the enormous burden of chronic current account and trade deficits and the necrotic inability of our elected leaders to come to its rescue.

BRICS countries don’t have to promote one of their national currencies to global reserve status. All they have to do, when they’re good and ready, is to stop accepting dollars as payment for their goods and services. If China did this by itself in the 19th Century, collectively they might do it too.

To say that this would usher in wholesale chaos would be a gross understatement. For the U.S., it would be an ominous event. And the European Union, which is closely linked to the American market and the dollar, would be dragged into the vortex. In other words, countermeasures must be taken to preclude the global economy from falling into the abyss.

It makes no sense to peg any currency to gold; the supply is finite, there are 8 billion people (and counting) in the world, and it just doesn’t work. Green hydrogen, which is renewable, fits the bill. it’s high time to let it determine the value of all currencies.

Status of the Dollar

According to the International Monetary Fund (IMF), the U.S. dollar share of global foreign exchange reserves declined from roughly 73% in 2000 to about 56% in 2020 despite the dollar’s continued appreciation during that period. Particularly noteworthy is the slope of the decline beginning in 2014, the year of the Ukrainian Revolution but prior to the Russian invasion and the subsequent sanctions from the U.S. and its allies. Importantly, the figures do not quantify the recent and projected expansion of BRICS, their shared goal to drop the dollar in international transactions, and the growing tensions between the U.S. and China over Taiwan and the South China Sea.

The reason for the apparent paradox of the dollar’s appreciation and its declining FX reserve status is that since 1974 the dollar has in effect been backed by oil. No other currency has enjoyed that privilege.

That status is under siege. In 2009 the head of the People’s Bank of China issued a white paper calling for a neutral reserve asset to replace the dollar-centric system. In addition, China, the world’s largest importer of oil, has also bought vast quantities of gold and begun to sell its hoard of U.S. Treasuries, hitherto one of the largest in the world. Then, in January 2023, Saudi Arabia openly declared that it was willing to sell oil in currencies other than the dollar, and in November of that year it sealed a currency swap deal with China. Time will tell how this saga will evolve. What is certain is that a new trend has emerged.

Beginning with the 15th Century countries whose currencies were the de facto FX global reserves also dominated the world. Three facts stand out: all unsuccessfully attempted to preserve that privilege, all were either Europeans or their progeny, and none have been able to reach the summit again.

The last time this happened, from the British pound to the U.S. dollar, was a peaceful succession. Today China, Russia, India, Brazil and Iran, among many others, are directly challenging the dollar’s dominance. And this is happening while Taiwan, Ukraine, and Israel/Palestine could at any time escalate into all-out war between the U.S. and Russia, or China, or both.

To put this in context, no one can win a nuclear war because life as we know it would cease to exist in less than one hour. The initial death toll would be in the many millions, followed by at least 5 billion due to nuclear winter. And yet, our leaders publicly specify the circumstances under which they would use these weapons. Their overt warnings imply that dominance is more important than survival, a contradiction in terms since their primary mission is to look after the well-being of their respective populations.

While nothing could undo the devastation of nuclear war, there is a way to prevent it: disarmament. However, that has prerequisites. One is to address the primeval feeling of helpless impotence, whether economic or military, or both, that occurs when a hostile power becomes dominant. Another, particularly as it pertains to the U.S., is to prevent the hyperinflation that would overwhelm its economy if and when foreign demand for dollars nosedives and they are repatriated. This of course would imply that paper dollars would no longer be accepted globally to settle international transactions. Before dismissing this thought as a chimera, recall the obvious antecedent. In the 19th Century Chinese goods, particularly tea, porcelain and silk were very popular in Great Britain. However, true to the Confucian ways, particularly their philosophy of self-sufficiency, China did not want to buy British goods. Furthermore, they demanded to be paid in silver, not paper money, for their exports. Earlier that century Spain had lost its American colonies. When that happened the river of silver it had been enjoying dried up, and since Spain had been spending upwards of 90% of its revenue in imported goods, many of them British, the latter lost one of its main sources of silver. As a result, Britain faced a shortage of it to pay the Chinese merchants. Its solution was to force China to legalize and import opium from Britain’s Indian colonies to redress the trade imbalance. Never before, or since, has one country forced another, at gunpoint, to have its population become addicted to a narcotic.

BRICS doesn’t have to use one of their national currencies to replace the dollar. All they have to do, when they’re good and ready and not before, is to stop accepting dollars as payment for their goods and services. If China did this by itself in the 19th Century, collectively they might do it too.

To say that this would usher in wholesale chaos would be a gross understatement. For the U.S., which is already saddled with immense and chronic current account and trade deficits, it would be an unprecedented catastrophe. And the European Union, which is closely linked to the American market and the dollar, would likely also be dragged into the swirl.

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