Global leadership vacuum
By: Fred Johnson
Nature abhors a vacuum and right now the world senses a leadership vacuum and numerous countries are all too happy to fill it. North Korea has been very busy this year. They first kicked out the UN nuclear inspectors and the US response was that we were “concerned.”
Then they fired a long range ballistic missile and the U.S. was “very concerned.”
Over Memorial Day weekend, North Korea exploded an atomic bomb, fired off several medium range missiles and announced that they will no longer abide by the 1953 armistice that ended the Korean War. Our military intelligence reports that the atomic bombs are becoming increasingly more powerful and the missiles more accurate.
Our response has been to ask the U.N. to “pass a resolution.”
Iran kicked out their U.N. inspectors ages ago and have recently test fired a long range missile capable of striking Israel. They make no bones that their goal is to wipe Israel off the face of the earth. This Memorial Day weekend, Iran sent six naval warships to the Gulf of Aden where they threaten to block the Strait of Hormuz (through which about 40 percent of the world's traded oil is shipped) if Iran is attacked over their nuclear program. The Taliban is emboldened to move across the border into Pakistan and threaten that country as well as Afghanistan.
Even tiny Ecuador is flexing its muscles and is ordering the U.S. out of their military base there and inviting Iran to come in; which will give Iran a foothold in South America. China is racing to fill a vacuum in the business world. Their business plan has shifted from the old strategy of manufacturing cheap goods to sell to the US.
In the last four months, China has signed trade agreements with a number of countries including Argentina, Brazil, South Korea, Indonesia, Malaysia and Hong Kong using the yuan as currency instead of the U.S. dollar. Instead of investing in U.S. Treasuries, China is purchasing mining companies, oil refineries and farmland around the world. China and Brazil recently signed a trade agreement where Chinese and Brazilian petroleum companies will cooperate in the exploration and refining of petroleum from Brazil’s huge off-shore oil fields. Brazil will ship 200,000 barrels of petroleum a day to China as part of the deal.
We now have the ironical situation where the communist government of China is embracing capitalism while the U.S. administration is blaming capitalism for our economic woes and seems determined to rein it in. China recently admonished the U.S. about our huge deficits and deficit spending. The U.S. must sell $2 trillion dollars of Treasury bonds this year to finance the deficit and if China does not buy; we are in big trouble and we will see our interest rates soar and the dollar weaken even more. The recent rise in the price of gasoline is caused, not by a shortage of petroleum, but by our weakening U.S. dollar.
Investors’ response to the perceived global vacuum has been to pull money out of U.S. markets and send it to China and other emerging markets-- those countries that have not borrowed trillions to “stimulate” their economy.
Fred Johnson is a member of the Morgan County Republican Party.