Based in part on a recent article by Chris Hedges. See link to his article at the end.
This week marks the end of the dollar's reign as the world's reserve currency. It also, therefore, marks the start of a terrible period of economic and political decline in the United States, and signals the last gasp of the American imperium.
Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news (while we endure the greatest economic crisis in our history) may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to lay out any more money to continue to prop up an inflated dollar and sustain massive US federal budget deficits, already swollen to over $2 trillion, which fund both our imperial expansion into Eurasia and our system of casino capitalism. They have us by the throat and they are about to tighten their grip.
Crucially important meetings were recently held in Yekaterinburg, Russia, which presaged America's soon-to-be greatly reduced status. Attending the meetings were Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance, even as a silent observer.
This high level gathering was, in the words of economist Michael Hudson, "the most important meeting of the 21st century so far." Why? Because it was the first formal step by our major trading partners to replace the dollar as the world's reserve currency. And if they eventually succeed in negotiating such a transition, the dollar will dramatically plummet in value, the cost of our imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered middle class, who will in all likelihood demand vengeance, radical change, order and moral renewal -- which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will impose.
In his recent Financial Times article called "The Yekaterinburg Turning Point: De-Dollarization and the Ending of America's Financial-Military Hegemony." "Yekaterinburg," economist Michael Hudson writes, Yekaterinburg, Russia "may become known not only as the death place of the czars but of the American empire as well." http://www.ft.com/cms/s/0/16e9f3e8-5944-11de-80b3-00144feabdc0.html?nclick_check=1
Perhaps most significantly, China, Russia, India, Pakistan, and Iran are forming a financial and military arrangement that could very well enable them to force America out of Eurasia.
To understand exactly how all this could be done, first realize that the US balance-of-payments deficit is mainly military in origin -- half of America's discretionary spending is military. And since our deficit spending ends up in the hands of central banks around the world, those countries don't have many choices other than to recycle the money by buying US government debt (i.e. loaning our government money), thereby supplying our government (primarily the Pentagon) with hundreds of billions of dollars the US would otherwise have to try and collect from American taxpayers, greatly reducing their purchasing power - at least to whatever extent the IRS succeeded in collecting. And so it is with these huge and continuing loans, that the Eurasian countries have been financing their own military encirclement by the U.S. Plus, they have been providing us with these billions in loans that have no chance of ever being repaid! at least not in full, and perhaps nowhere near in full. Thus, Eurasian countries are literally paying for America's military encirclement and potential aggression against them! Not surprisingly they want to stop doing this.
China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in Chinese currency rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China's central bank has openly called for the abandonment of the dollar as reserve currency. What the new system will be remains unclear, but the flight from the dollar has clearly begun. The goal, in the words of the Russian president, is to build a "multipolar world order" which will break the economic (and, by extension, military) domination by the United States. China is frantically spending its dollar reserves to buy factories, minerals and property around the world (including in the US) so it can unload its US currency. This is why Aluminum Corp. of China made so many major concessions in the attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia it desperately needs to shed its dollars. China knows that these American dollars are going to be worthless in the not-very-distant future.
The architects of this new global arrangement realize that if they 'break' the dollar they also break America's worldwide military domination, for our military spending cannot be sustained without this cycle of heavy US borrowing. The official US defense budget for fiscal year 2008 is $623 billion, and this is before one adds on things like nuclear research and the massively wasteful Strategic Defense Initiative (SDI) "star wars" boondoggle.