Ariel Noyola Rodríguez
Economist graduated from the National Autonomous University of Mexico (UNAM). Involved in the Centre for Research on Globalization, Global Research, based in Canada. His reports on World Economy are published in the weekly magazine Contralínea and his opinion columns in the international news chain Russia Today. The Journalists Club of Mexico awarded him the National Journalism Prize in the category of Best Economic and Financial Analysis for his pieces issued in the Voltaire Network during 2015.
Following the parliamentary impeachment of Dilma Rousseff (Brazil) and Mauricio Macri’s arrival at the Pink House (Argentina), the United States is desperately trying to increase its military presence in Latin America, focussing particular attention on the South Cone. Peru, a member state of the Pacific Alliance, is the most recent victim of Washington’s imperial incursions. At the end of 2016, one of Peru’s regional governments, the Amazonas, approved the establishment of a new US military base that is being marketed to the public as a response centre for natural disasters.
During the first Annual Summit organized by the Asian Infrastructure Investment Bank (AIIB) in Beijing, China has shown her intention to take over the global leadership in infrastructure investment. By the end of this year, AIIB would have more than 100 members, making it the first lending institution in multilateral loans in history, under the control of the most important emerging countries. Yet, it is expected that she makes the decision of dropping off the Dollar, as it is the only way to break away from US hegemony in international finance.
The US labour market has begun to stumble. In the past month of May, non-agricultural labour added 38 thousand new jobs while the Wall Street investors hoped for an increase of 160 thousand, Janet Yellen, the President of the Federal Reserve System, had no alternative but to leave the reference interest rate intact after the June meeting of the Federal Open Market Committee. The risk of a new recession in the United States is more of a threat than ever, although the Western media insist on promoting the idea that the principal dangers are the deceleration of the Chinese economy and the possible abandonment of the United Kingdom from the European Union.
After the economic sanctions that the United States and the European Union imposed against Russia, Moscow and Beijing put together an imposing energetic team that has radically transformed the world oil market. In addition to increasing their interchange of hydrocarbons exponentially, both oriental powers have decided to put an end to the domination of the dollar in fixing the prices of the black gold. The petroyuan is the instrument of payment of strategic character that promises to facilitate the transition to a multipolar monetary system, a system that takes various currencies into account and reflects the correlation of forces in the current world order.
Many have insisted on promoting the idea that the recovery of the United States economy is gathering strength for some time. Even high level functionaries of international financial organisms have declared that the North American economy has managed to escape the tendency of low growth that prevails in the rest of industrialized countries. Nevertheless, this unlimited optimism contrasts with the reality: inflation has not increased in any significant way and unemployment has been chronic in more than 30 states of the American Union, with this, the dangers of deflation persist and with this a new recession.
The year 2016 has hardly begun and the losses in different stock markets around the world care colossal: nearly 8 trillion US dollars during the first three weeks of January according to the calculations of the Bank of America Merrill Lynch. The Government of the United States made addicts of investment banks of policies of cheap credit. And now that the System of the Federal Reserve ended their monetary stimuli the whole world is paying the consequences. In the most recent Davos summit it was noted that there is much uncertainty among big businesses: no one knows when the next crisis will explode.
The leaders of South America are in a point of divergence. The economies of the Latin American region regressed in 2015 and, according to diverse estimations will not grow in 2016. Nothing indicates that commodity prices will rally. The dilemma between adjustments, public spending and seeking loans from credit institutions subject to the US Treasury Department remains. Nevertheless Ariel Noyola believes that the leaders of the region can strengthen the bases of South American financial architecture through the operation of the Bank of the South, a project that has been stagnated for eight years, and that in the face of the current economic situation, could prevent the deepening of the debacle.
Apparently the year 2015 marks the beginning of the new IMF interior revolution. First the incorporation of the yuan into the SDR’s was approved, the reserve basket created in 1969 to serve as a supplement of member nations’ official reserves. And now, thanks to approval from the US Congress, the IMF will finally be able to implement the reform of the quotas representation system, China and other emerging countries will increase their power in decision-making, whilst European countries will lose relevance. However, it is still too early to conclude that this is a radical transformation of the correlation of forces inside the IMF: The United States will retain its powers of veto.
In spite of the fierce opposition of the US treasury Department, on November 30 the IMF finally approved the inclusion of the yuan in the Special Drawing Rights, the currency basket created in 1969 to complement the official reserves of the members of the multilateral organization. With this the Chinese currency will become, next October 1 (2016), part of the integrating fifth of the IMF basket. The financial influence of China on a world scale will continue to grow at high velocity: the weight of the yuan in the Special Drawing Rights will be greater in comparison with the Japanese yen and the pound sterling.
The Government of China promotes the internationalization of «the people’s currency» (‘renminbi’) through a policy of alliances that does not take ideological barriers into account. In a first moment the diplomatic forces of the yuan were concentrated in Pacific-Asia, but in a second moment, it became necessary to gain the support of the West. After the President Xi Jinping visited London, between the 19th and the 23rd of October, the bases of the «golden age» between China and the United Kingdom were established, with which both countries looked to push the yuan-ization of the world economy.
The economic perspectives that Japan brings in evidence that the «non-conventional» monetary policies implemented by some central banks of industrialized are an absolute failure. The Japanese economy not only fails to register sustained economic growth but has regressed to the fall of prices according to official data. The recovery plan of Prime Minister, Shinzo Abe, is dead: as already happened from the middle of the decade of 1990, Japan is sinking into economic stagnation and deflation, even as the public debt continues to grow.
The ego of Janet Yellen has broken into a thousand pieces. The new data published some days ago by the US Department of Labor confirms the hypothesis of the economist Ariel Noyola Rodríguez, who had maintained since last year that the United States’ labour market was much more fragile than was presumed by the head of the Federal Reserve. If the situation of the North American economy continues to get worse it is probable that in coming weeks new measures will be taken to mitigate structural unemployment.
After the reintegration of Crimea in Russian territory, the United States has pressured regulatory authorities of the European Union to restrict the access of Russia to SWIFT, the system of international payment founded by 200 Anglo-Saxon banks in the decade of the 1970s. In response, the government of Vladimir Putin has established an alternative system of payments that has already begun to extend its operations among Russian banks and, let it be said in passing, has served as an inspiration for China as well as the other countries that make up BRICS.
For several months the Federal Reserve has insisted that with the recovery of the North American economy they are in a tail wind. However, the multi-millions of monetary stimuli (“Quantitative Easing”) and maintaining the “federal funds rate” close to zero have not been sufficient to completely dissipate recessive tendencies. Seven years after the Lehman Brothers bankruptcy, the current President of the US central bank, Janet Yellen, faces a serious dilemma: detain the stock market rise under the risk of converting into reality the worst nightmare of the United States, deflation.
After the devaluation of the yuan, the international financial markets started trembling. Washington accused Peking of taking advantage of the market. As China wants to incorporate the yuan into the Special Drawing Rights, it is inconvenient to prolong the devaluation. Furthermore, if a currency war broke out, China would risk increasing the economic and geopolitical tensions between countries in the Asian-Pacific region. That way, the United States would have more possibilities to disrupt regional co-operation initiatives and thereby undermine China’s rise as a world power.
South America under threat
China’s defiance before the IMF
Asian Infrastructure Investment Bank’ First Annual Summit