The humanitarian tragedy in Syria overshadows all other considerations. But it is also clear that besides losing moral standing in the world, the US is losing strategic ground there as well. The forces backed by the Western powers are steadily losing territory to the more radical groups fighting against Assad. Groups from Iraq are prevalent in the fighting and al Qaeda groups are steadily becoming more powerful. If these forces succeed in seizing control, Western efforts to support liberal movements in the Middle East will suffer a severe setback.
The National Front in France has won a by-election in southeast France by a wide margin. The National Front is a far-right group that has made anti-immigrant sentiment a central objective, and discontent with the current Socialist government has broadened its appeal. The by-election suggests that anti-Euro feelings in France are increasing, and the European Parliament elections are scheduled for next May. The trend does not augur well.
China’s official news agency published a very long article arguing that the world needs to free itself from the influence of the United States since it does not seem as if the US is capable of behaving responsibly. The current stalemate in Washington has shaken the confidence of many countries in the world, but the Chinese opinion is quite dramatic: “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated. . .A new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.” Unfortunately, the world is far from being able to choose a successor to the US, and the Chinese offer no real alternative.
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What would it do to our economy if the US dollar was replaced as the international reserve currency?
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I don’t think anyone knows. The flow of capital would slow considerably since there isn’t a replacement currency available. Without some currency that all nations would trust, I imagine interest rates would go up to cover the risk associated with greater uncertainty. Investment would therefore slow down, and the global economy would slow considerably.
The crisis of confidence, however, would rattle everything in the short term. It would make the Lehman collapse look like a minor blip. The morons in Congress should know much better, but that’s a lost cause.
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