Thursday, August 22, 2013

The Price of doing business

                                                  By Neil Harris

As the world’s leading imperialist power, America has a dominant role in every field – diplomatically, militarily and, of course, its economy dominates the whole world. It survives by exporting capital and sucking in cheap labour, natural resources and profits. However, the highly successful world of American finance capital also has a dark side, normally glossed over; the American government is the greatest debtor in the world and that debt is still growing.
This US Federal debt, which reached $9909 billion at the end of 2012, is often discussed, but not in much detail. The complex flows of capital around the world, ending up at the US Treasury department highlight some interesting realities about the world economy and America’s relationship with it.
Out of the total debt of $9 trillion, 56.2 per cent was held by foreign investors in December 2012 and of that 72.3 per cent was held by ‘official investors’ such as governments and national reserves. The list makes interesting reading, the top ten lenders are 70.9 per cent of the total.
As is well known, the greatest lender to America is People’s China, a socialist country propping up the world’s greatest imperialist power by lending it $1.2 trillion or nearly 22 per cent of all its foreign debt. Except that this lending is essentially enforced, as is lending by the other countries on the list. In China’s case its ‘market economy’ is dominated by its export led consumer goods industries and this has always relied on American (or America’s allies) technology and investment as well as access to American markets. Re-investing that balance of payments surplus into the US Federal debt is the price of doing business with America.
Interestingly, at sixth place lending $195 billion (3.5 per cent) is Taiwan, just as reliant on American markets and technology as People’s China. At tenth place is the autonomous region of Hong Kong which lends $142 billion (2.5 per cent), paying just the same entry fee for access to American markets. Overall, ‘greater China’ takes up three places in the top ten, lending 27.9 per cent of the total foreign held debt.
In an honourable second place is Japan which lends just short of 20 per cent ($1,111 Billion). This is just the same fee for access to American markets but is also a mechanism by which Japan uses the investment to reduce the value of the yen against the dollar.
A country like Brazil (sixth 4.5 per cent) with an unstable, developing economy but with lucrative foreign currency earnings from farming and raw materials is always looking for a safe haven for its money. More surprising is to find a similar economy like Russia represented in eighth place with 2.9 per cent or $161.5 billion. America’s condemnation of the Putin regime has never extended to refusing to take its money – and Putin’s criticism of US imperialism will always be muted while Russia remains so reliant on the American economy.
‘Oil Exporters’ (not including Russia) make up $262 billion or 4.7 per cent of foreign holdings and this puts them in fourth place. With the exception of the Norwegian State North Sea oil fund which has been well run, the history of oil producers ‘sovereign funds’ has been an investment history of vast sums of money lost through bad advice, corruption and incompetence. It’s not surprising to see so much of their money invested in the relatively safe haven of US federal debt. Except that just like the bloated and unnecessary arms purchases forced on Middle Eastern oil sheikdoms, this investment is a price that they have to pay to ensure that their autocracies will continue to be propped up by the American military – which in turn is paid for by US government debt.
At the end of the month when you are a bit short of cash, you have to borrow the money from wherever you can which is partly why Russian and Chinese money plays such a big role in this list. However, these figures have to be treated with a degree of caution – they represent the location of the holdings not necessarily the nationality of the holder or even the true nature of the ownership in some cases. Therefore in the case of Hong Kong, the figure may well be bloated by the desire of individuals and organisations to export funds from China, to hide them from the state. Similarly, the ‘New Russians’ and their corporations are just as keen to find a safe foreign home for their money.
There’s an awful lot of American money being hidden in the US Treasury too and this isn’t referring to conventional private investors. Given America’s ‘War on Drugs’ and condemnation of ‘tax havens’, there are some surprises on the list.
In ninth place is tiny Luxembourg lending a massive $155 billion (2.8 per cent) far more than Britain, Germany or France whose economies tower above it. Lacking any real industry or raw materials, these are funds derived from its shadowy and secretive world of ‘offshore’ banking. Luxembourg is manipulating, laundering and generally hiding the ill-gotten gains of assorted European capitalists and criminals – then depositing the capital with the US Treasury department.
For the better class of European tax avoider you can’t go wrong with Switzerland, the refuge of choice for White Russians, Nazis, dictators, politicians and celebrities. It comes in at seventh place with $195.4 Billion (3.5 per cent) of dirty money dumped in America.
The Drugs Enforcement Agency may have a fearsome reputation in the Caribbean and Latin America for mercilessly hunting down drug dealers and extraditing them back to the states for trial but they haven’t had it all their own way. The coyly named ‘Caribbean banking centres’ come in at third place amongst the list of largest foreign lenders to the US Government.
A scattering of tiny island paradises are lending the US a staggering $266.2 billion (4.7 per cent of the total) and these billions are made up of the life savings of assorted American small businessmen, dentists and doctors who have hidden their savings pot in offshore banks – as do giant corporations. The tiny banks taking such big deposits are propping up the economies of an archipelago of offshore banking islands, where questions are rarely asked. This is because they are also the financial home of choice for fraudsters, the directors of Ponzi schemes, the mafia, the drugs cartels of Mexico and Latin America, as well as all the generals and dictators – their extended families and hangers-on - that kept this part of the world safe for US capitalism for the last 100 years. That money, like all the rest, ends up back home in America, which is why this whole process is allowed to continue.
You might imagine that the countries that lend America the money that keeps its state running would have some power over it; ‘he who pays the piper calls the tune’.  In fact the opposite is true, each is lending money as a tribute, part of a worldwide protection racket run by America. It’s the price of doing business with the greatest imperialist power.

No comments: