World Economy: Vladimir Putin Sick of US Dollar Hegemony

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Vladimir Putin says he wants “a new architecture” for the world.

What?

Bauhaus? Arts and crafts? Frank Lloyd Wright?

He means he is sick of US hegemony. He would prefer that the world economy not be dominated by the dollar and that world politics not be under the thumb of the Pentagon.

He speaks for the Chinese, no doubt, and for the French, the Arabs…and many others.

And guess what. He will get his wish.

Wealth and power are migrating, as Dan Denning puts it, from the West to the East. Growth rates are faster in the East…taxes are lower…and ‘legacy costs’ – pensions to unionised workers, for example – barely exist. Cash piles up in the hands of the Chinese, for example, at the rate of billions per week. Meanwhile, in the USA, cash leaves the country on a one-way ticket. The trade deficit sucks out US$2 billion per day. The interest on the US federal debt totes to over US$8 trillion, with interest payments of over US$1 billion a day (much of it paid to foreigners). Just those two items alone add up to more than US$1 trillion per year.

But wait, you say; doesn’t the money come back to the United States – as the foreigners recycle it into US Treasury bonds and other US investments? Yes, much of it does. But it comes back wearing funny clothes and speaking a strange accent. It leaves as an asset – and comes back as a liability! For now, it is no longer something that makes Americans richer; instead the returned dollars are a measure of our poverty. It is as if got on the plane like an old friend – and came back a slave master. Now, we work to pay it interest and dividends.

What Mr. Putin wants, Mr. Putin will get. Eventually. But not yet. Yesterday, the Dow rose like it meant business. The dollar went up too. And over in China, born-yesterday investors still expect prices to rise today, tomorrow, and the day after tomorrow. The Shanghai index is on the rise, again.

In fact, as near as we can tell, the whole Global Bubble…the first one in world history…is still expanding. But watch out – it could explode at any minute.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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