It feels like morning in America once again. The sun is rising on America and hope is in the air. The U.S. Economy grew at 5% in the third quarter, a rate as high as that of emerging economy darlings like India & China. The economy is adding jobs and wages are slowly beginning to rise. American households are getting real money put in their pockets by falling gas prices. Driving is less expensive and heating the home should be less expensive this winter. Consumer confidence is sky-high, the stock market is at an all-time high, the world can’t get enough of American social innovation. Things look just as rosy on the geopolitical front – Russia is in trouble, Putin is being called a paper tiger, ISIS is being put in its place and even Ebola is nowhere to be found.
We love the “awesome” feeling and believe in it. The seventh-year of a two-term presidential cycle has indeed been great. Remember how great end of 1986 felt under President Reagan and how much fun 1987 was until the final quarter. Remember how 1998 led to the boom in 1999 under President Clinton. And the end of 2006 led to a prosperous 2007. The seventh year has been great fun at least till the last quarter. But the fun hid the changes that were happening underneath the surface until they burst into our consciousness a couple of years later.
Today, we take a look at what might happening underneath the surface as we enjoy today’s awesome feeling. One negative lining in this silver cloud is that the mainstream media sees it and has begun proclaiming it. Witness the Everything Is Awesome article by Michael Grunwald in Politico on the day before Christmas.
(src – Everything is Awesome – Politico.com)
Our main concern is that the problem of overreach that springs from “everything is awesome” conviction. Think back to 2003 in the euphoric aftermath of a triumphant Iraq war and the end of the vicious bear market of 2001-2002. What America did in Iraq in 2004 was a classic case of imperial overreach which snatched a defeat from the grasp of victory. The major result of the Iraq venture was to make Iran the dominant force in Iraq & then in Syria. Iran then overreached and overplayed its own hand. Then it was Saudi Arabia’s turn to overreach and launch a semi-existential conflict with Iran. The Sunni-Shia civil war we wrote about in December 2012 is in full swing and the aftereffects of that are now buffeting Saudi Arabia. Things are getting so bad that Saudis had to launch an oil price war to weaken its antagonists.
Russia is a classic example of overreach. Instead of using its revenues from an artificially high oil price to diversify its economy, Russia doubled down and simultaneously expanded its geopolitical objectives. It is hard to imagine that Putin was a global success story just a few months ago. Then you have China. They totally misread the financial crisis of 2008 and concluded that their economic system was superior to that of America. So they overreached financially and then geopolitically. They poured an unimaginable amount of stimulus into an imbalanced economy & created a bubble, a bubble that could end up dwarfing Japan’s buble of the 1980s. Their arrogance in Africa & Asia has soured their relations with just about every country they work with. Today, China is facing a major restructuring of its economy while it is preparing for a conflict with America.
Coming back to America, we have been concerned about the imperial overreach of the “values” crowd in America, the crowd that, in the words of Nicolas Kristof, wants to go to war not in pursuit of America’s strategic interests but to spread America’s values. This crowd & their European allies coerced President Obama into getting rid off Libya’s Muammar Gaddafi and threatening war against Bashar al-Assad in Syria. That Libya is now a humanitarian & economic disaster, that Syria is now the worst human catastrophe of the 21st century is insignificant to this “values” crowd. These are not isolated voices of a fringe. This is now a big movement with supporters & adherents in Academia, Think Tanks & Human Values NGOs. They are emboldened by the fact that their views are in consonance with President Obama’s own passions even though he does tend to recoil from their extreme positions.
The overreach of this “values” doctrine in US policy is what troubles us the most in this morning in America. The balance that has guided American policy since George Washington is now scorned by this crowd. Now it is their morality or bust. And bust is what we fear in the really critical areas.
The most basic goal of policy is to prevent two of your adversaries from uniting against you. The only reason World War II began is that Hitler made a deal with Stalin. Hitler’s defeat began when he broke that deal and invaded Russia. President Roosevelt did not use a “values” standard to say good riddance to Stalin. He understood the enormous benefit in making an ally of Stalin against Hitler’s Germany. Fast forward to 1971. President Nixon understood the necessity of splitting off Mao’s China from their relationship with USSR. That China was not a friend, would not be a friend and their values were diametrically opposed to America’s values. But splitting off China from USSR was an overwhelming strategic objective of USA and President Nixon achieved it.
That brings us to central mistake in President Obama’s policy, a mistake that seems to be driven by both his “values” doctrine and his personal feelings. His policy has been diametrically opposed to those of President Roosevelt & President Nixon. The results demonstrate it. Russia and China, the two main adversaries of America, are being virtually forced into an alliance against America by America. How dumb is that?
Read what Ambassador Blackwill said in his speech in Beijing on December 11, 2014:
- “Because of profound differences in history, ideology, strategic culture, and domestic politics, the United States and China have diametrically opposed and mutually incompatible perceptions regarding the future balance of power in Asia – in short, the two countries have conflicting grand strategies.”
- “Although both sides will deny it publicly, the main thrust of U.S.policy is to maintain its strategic primacy in Asia, and the main thrust of China’s policy is to replace the United States as Asia’s leading power.”
- “I agree with former Australian Prime Minister and distinguished Sinologist Kevin Rudd who believes that China has come to the same conclusion, “There is emerging evidence to suggest that President Xi, now two years into his term, has begun to conclude that the long term strategic divergences between U.S. and Chinese interests make it impossible to bring about any fundamental change in the relationship.”
Russia is the one country in the world that can substantially strengthen China against America. Russia is the only country that can destroy America, Russia is the only country that comes close to America in very high grade military technology. Russia can, if it wants or if it forced to, make China a far stronger military rival to America. So it is easy to see why China is delighted by American actions against Russia. As Bloomberg reported this week, China is ready to help Russia in its current problems:
- “Russia is an irreplaceable strategic partner on the international stage,” according to an editorial today in the Global Times, a Beijing-based daily affiliated with the Communist Party. “China must take a proactive attitude in helping Russia walk out of the current crisis.”
- “Many Chinese people still view Russia as the big brother, and the two countries are strategically important to each other,” said Jin Canrong, Associate Dean of the School of International Studies at Renmin University in Beijing, referring to the Soviet Union’s backing of Communist China in its first years. “For the sake of national interests, China should deepen cooperation with Russia when such cooperation is in need.”
(src Bloomberg,com )
An overriding strategic objective of China is to make its currency Yuan into a global currency. To do that, it needs to persuade other countries to accept & hold the yuan as a reserve currency. The energy deal between Russia & China goes a long way towards making yuan a major international currency besides guaranteeing China a steady source of oil & gas. This in turn puts pressure on other commodity exporters to deal with China in yuan.
None of this positive for America. After all, American prosperity depends to a large extent on the U.S. Dollar being the global reserve currency. A yuan-based trading system will take share away from the dollar-based financial system and tie countries to China. This is not imminent but as the old adage goes, change happens slowly at first and then all of a sudden.
As Ambassador Blackwill said in his speech, “no country in this vast region wants to have to choose between China and the United States“. Yet the Obama Administration is virtually forcing Russia to choose China over the United States. Presidents Roosevelt & Nixon must be turning over in their graves.
Russia is but the most visible example of what we see as a massive overreach by the “values” crowd in America. Go anywhere in the world and you will hear of the intense pressure from the Obama Administration to fit their societies & their countries into America’s “values” system. It seems similar to the pressure President Obama put on Republicans to behave his way after his election victories in 2009 & 2012. We know how that turned out in America. We pray it doesn’t turn out that way in other areas of the world.
America is most successful in the world when America is friendly & open to diversity of thought, policies and values. That is when America becomes the beacon on the hill. Otherwise it runs the risk of becoming a Pak-Values-i-Stan.
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