Major American Allies Ignore U.S. Pleas and Join China’s Development Bank

Yves here. The lead story at the Financial Times, Europeans defy US to join China-led bank, updates this post. Key sections:

France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution…

The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank…

The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades…

Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant. One suggested that the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”

By George Washington. Cross-posted from Washington’s Blog.

UK, Australia, New Zealand, Singapore and India All Sign On … South Korea Next?

This week, 2 major U.S. allies – 2 of the “Five Eyes” – have disregarded American please and joined China’s development bank … a new alternative to the US-dominated IMF and World Bank lending order. (A third member of the Five Eyes – New Zealand – previously signed onto the Chinese bank.)

Specifically, the UK and Australia signed on this week.

The Financial Times reports, quoting a senior US Official:

[The decision of the UK to join the Chinese development bank was made with] virtually no consultation with the US.

We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.

The New York Times reported last week:

Fundamentally, Washington views the Chinese venture as a deliberate challenge to those postwar institutions, which are led by the United States and, to a lesser extent, Japan, and the Obama administration has put pressure on allies not to participate…


South Korea and Australia, both of which count China as their largest trading partner, have seriously considered membership but have held back, largely because of forceful warnings from Washington, including a specific appeal to Australia by President Obama.

Zero Hedge predicted last week:

In short order Australia and South Korea will likely be on board and at that point, the stigma the US has created around membership will have completely disappeared (if it hasn’t already), opening the door for other US “allies” to join ….

An Op-Ed in The Australian argues:

The decision by the Abbott government to sign on for negotiations to join China’s regional bank … represents another defeat for Barack Obama’s diplomacy in Asia.


Canberra’s move follows similar decisions by Britain, Singapore, India and New Zealand.

Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia.


Since then, the Abbott government has felt absolutely zero subjective good will for Obama.

This is an outlook shared by many American allies.


The Obama administration has neither the continuous presence, nor the tactical wherewithal nor the store of goodwill or personal relationships to carry Canberra, or other allies, on non-essential matters.


Such prestige as the US enjoys in Asia these days rests disproportionately on the shoulders of the US military.

Obama has neglected and mistreated allies and as a result Washington has much less influence than previously.

The saga of the China Bank is almost a textbook case of the failure of Obama’s foreign policy.


Obama treats allies shabbily and as a result he loses influence with them and then seems perpetually surprised at this outcome.


The consensus is that the Obama White House is insular, isolated, inward-looking, focused on the President’s personal image and ineffective in foreign policy.

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  1. sd

    The consensus is that the Obama White House is insular, isolated, inward-looking, focused on the President’s personal image and ineffective in foreign policy.
    Seems to me that this generally describes every White House tenant since Reagan took office. Vain and self serving with little thought of anyone, including the nations own citizens. L’etat c’est moi leadership. God knows we don’t send the best and brightest to Washington. Rather, the place is littered with sociopaths.

    1. Nelson Wight

      I heartily agree sd but this also may involve the fact that W>H> advisors, for the most part, are neo(brainless)cons whose raison d’etre is empire. Did you read John Brennan(CIA) told that
      when Obama came to the White House he was horribly ignorant and we (he and Rahm) gave him
      extensive tutelage to bring him up to snuff. My thought is he’d be much better off to clear all the caca out of PA Ave
      house and start over with some good advisors.

      1. MyLessThanPrimeBeef

        Actually, in California, some people might be happy to see that.

        Apres moi, radiation or toxic waste…that’s a different story.

    2. participant-observer-observed

      Notice how focusing the spotlight onto Obama here deflects attention away from the POTUS puppet-masters.

      This state of affairs is more a reflection on the international standing on the leadership bankruptcy of the real US financial power nexus:

      Blankfein-Dimon-Summers-Goldman/Citi/Morgan/BoA et al. /bin Saud/perpetual-Wall St-scamming
      Cheney/Bush/Blackwater/Halliburton/bin Saud/perpetual-war-machine

      Leadership here means long-term, 5-25+ years. Nobody wants their cowboy operation of crony dereliction, and everyone can see the naked emperor.

      They would never listen to the screaming voices and persistent mirrors-in-the-face from within the USA, so now they have to be told the hard way: everybody knows they have pimped all of the domestic capital, mfg. etc. abroad and put all the winnings in their offshore havens.

      Maybe American NGOs could apply to the new development bank for loans! Maybe they could give us the low-interest student loan rates that the USGov pays for borrowing its own money from the Fed!

  2. John Glover

    I second sd’s opinion. The fact is its been US policy to use any and all means to maintain our hegemonic status. It’s also a fact that sooner or later that status is going to end. Whoever is president is going to increasingly look he’s running out of fingers to stick into the leaking dike.

    And really, half of this post is an editorial rant from Rupert Murdoch’s rag on how bad Obama has been? You can do far better than that….

    1. Pepsi

      It was so fucking reckless and unnecessary too. Owning the global reserve currency is a massive advantage and everything necessary should have been done to safeguard that status. Our neoliberal masters are working on squandering this for essentially nothing.

      It seems to be a requirement to totally lack imagination and foresight to be a neoliberal in power.

      1. susan the other

        Being the reserve currency killed us slowly… with love – because of being the reserve currency we were able to deficit spend ourselves to death while we spent other countries into prosperity – which is OK except now we alone are stuck with the bill and nobody has even said “thanks for a good time”… So good riddance to our status as the reserve currency – it is the trojan horse we give to China. And if we get smart soon we can do to China what the British Empire did to us (not just the British, but also the French, Belgians, and other shrewd European mercantilists after WW2).

      2. jgordon

        Seeing the reserve currency as an advantage is like viewing an obese diabetic having unlimited access to donuts as a good thing. It’s a poison we’ll be far better off without.

        1. MyLessThanPrimeBeef

          From above: ‘…defining economic and trade rules.”

          Those and owning the global reserve currency are akin to controlling space and time dimensions in which we play our parts on this stage we call existence.

          The price of current account deficits, losing manufacturing and the middle class is really a pittance to pay in that Faustian bargain.

          I mean, the lords can just print more dollars (thank God for that). As for the middle class, as long as they keep breeding and reproducing, the game continues.

  3. wbgonne

    When a nation is the world hegemonic power it can maintain that status simply by exploiting its superior position in the existing order, unless the existing order is unravelling, in which case its power can only be maintained by using its superior position to revise the existing order. The 2007 economic crash was a global historical inflection point that demanded a revamp of the existing order. The course correction required a turn away from financialization, consumerism and vicious capitalism. In other words, neoliberalism was spent. It was time for a new order based on ecology and community. The United States might have maintained its world leadership role had it initiated this new order. Obama indeed ran on a platform of vague but fundamental change and the American people responded. But Obama is an ultra-conservative who lacks the imagination and the will to initiate the requisite fundamental change. Instead, Obama doubled-down on the crumbling order and demanded that the lesser nations submit to American will, even though America’s hegemonic power was dissipating. The result is that, under Obama, America’s power is draining at an accelerating rate.

    1. NotTimothyGeithner

      Basically America has become the Roman Empire without the medicine, sanitation, wine, public order, irrigation, roads, the fresh water system, public health, and peace.

    2. Praedor

      Hah! What you think about a new non-neoliberal order being needed is NOT this new Chinese investment bank. Quite the opposite. It is neoliberalism without any ecological concern at all. The only way you get Germany and Britain (in particular) interested in joining is if it means austerity loans and looting. China also doesn’t give a flying crap about human rights or the environment and will loan to anyone for any purpose: deforestation loans, strip-mining loans, water polluting loans, coal-burning loans…ANYTHING so long as it will bring back a short-term return on “investment”. It’s austerity and ecological devastation from here until we’ve wiped ourselves (and, unfortunately, most other innocent creatures) off the earth due to self-immolation.

      1. wbgonne

        I agree with you. My point is that this is the result of the United States’ failure to revise the world order when it had the power to do so. Instead, the U.S. attempted to exploit the existing but collapsing system. Other nations have recognized this and concluded that the U.S. has neither the power nor the moral authority to prevent them from picking the bones of the corrupt system, just as the U.S. is doing. If neoliberalism — money above all — is the paradigm, so be it. Others can play that game too. We are hoist on our own petard.

        1. Praedor

          How could it be otherwise? The US CREATED neoliberalism. Every single coup the US has ever promulgated has had neoliberalism serving as the skeleton to prop up what followed (usually a rightwing dictatorship). Neoliberalism is a bit more than money above all (though that lay at the ultimate base). It is about the entire social order: serving the do-nothing rich investors at the cost of labor and the environment. It is winner-take-all, take-no-prisoners looting. It is redistribution of wealth upwards from those with none to those with more than they could ever need or use.

          1. susan the other

            I hope you are wrong about China’s vision. I think they are very serious people who do not disregard the environment at all. They have critical environmental concerns (the air in Beijing) as well as long term concerns – the general and chronic destruction of the environment. China is a thinking nation. (From tribal pillage to organized pillage, to feudalism, to the beginnings of economic thought, to etc, and soforth and so on…)

            1. MyLessThanPrimeBeef

              Lots of thinking Chinese with any vision to see how to get out are getting out.

              I’d feel much better if any Chinese global leadership comes from the proletariat Chinese, instead of Red princelings.

            2. NotTimothyGeithner

              The polity in China is changing. The capitalist types haven’t been joining the party for 20+ years. Communists have been joining, but they don’t have a cult of personality right now. Wealthy Chinese are fleeing for fear of this reality. Corruption trials are all the rage, and for the first time in an age, there is no successor because the Party membership has changed.

            3. Carlos Fandango

              At the end of the day, Chinese in power will act the same as anyone else in power. The lure of neoliberalism is that elites can transfer ownership of public assets to themselves. For Communist elites the thought of owning the institution they are currently just managing (on behalf of the people) is very exciting …… less work, for more pay.

              The hope for the common person is that there is a good balance of world power where elites in competing powers are obliged to make some concessions to their minions. They will do so to maintain internal order or gain international prestige. A global hegemony is the worst possible outcome for the proletariat.

              Putting aside dreams of an anarchic revolution. It’s sad, but this is my brightest hope for our future.

            4. MG

              This is assuming you get past the basic notion that the Han Chinese respect the life of individuals including their own citizens. They don’t. It is certainly better than in India due to several reasons (castes, religions, ethnic). Never been to a place in the entire globe where an individual’s life means so little despite such pockets of wealth and commerce.

  4. Plutoniumkun

    I find this really odd about Obama’s administration. I was always at least sceptical about what he would do, but I did think that at the very least foreign affairs would be handled in a grown-up, competent manner. But to allow a humiliation like this is bizarre, and should surely be a firing offence for whoever came up with the idea of trying to bully States into not joining the new bank, and then allowing even the usual poodles like the UK and Australia to ignore the US. Surely the first rule of diplomacy is to never threaten an ally into doing something unless you are 100% certain that they will fall into line.

    That said, I do think the new organisation has quite an ominous selection of member organisations. Bad and all as the World Bank and IMF and ADB might be, at least they are to some extent responsive to external pressures on environmental and human rights issues. This new bank will certainly be the first call for anyone wanting funding for the worst type of fossil fuel or hydro or forest destroying schemes.

    1. cwaltz

      I tend to agree. During the primaries of 2008 I had an inkling of hope that we might do things differently. He promptly removed them though by then placing his hawkish opponent in charge of State. It was the first of many signs that things weren’t going to be that different.

    2. low integer

      allowing even the usual poodles like the UK and Australia to ignore the US

      While there is certainly some truth to this statement of yours, it is nice to see that you, presumably a US citizen, hold Australia in such high regard. It is this sort of assumption of compliance, without any pretense of mutual respect coming from the larger entity, that eventually drives a smaller entity to begin loosening a previously established alliance. Of course, with regard to the US, along with what (as you mentioned) amounts to the bullying of allies, there’s also the endless warmongering, spying, human rights abuses, and corrupt politicians with crazy economic policies and lack of respect for their own citizenry to help other countries contextualize these types of decisions. Moving forward, I am not sure how the Australian goverment will act with regard to the US, and I note that Australia is currently involved (in a small capacity) in some military campaigns with the US, however in my opinion edging away from the influence of the US is the first decent decision made by the current Australian government since they have taken office.
      Best wishes to all. Peace!

    3. ian

      I think the problem with the Obama administration is more one of not doing things that require sustained attention well. My impression (admittedly subjective) is that they seem to lose interest in situations, then parachute in for a short time, then lose interest again. Very often, it’s the day-by-day boring stuff that matters.

      1. participant-observer-observed

        tail wagging the dog “leadership”

        But what to expect from a novice player?

    4. Carlos Fandango

      I think a good portion of the funds might go towards meeting Chinese geopolitical aspirations, for example the Silk Road route. Some of these schemes might be less environment unfriendly.

      Of course it would be nicer if the money was spent on education, healthcare, sustainable energy and sustainable transport.

      1. hunkerdown

        Unfortunately, uneducated captive labor without effective tools to comprehend or resist their captivity seems a core feature of civilization itself. I’m at a loss for counterexamples but would gladly entertain some.

  5. ex-PFC Chuck

    Per G.W.:

    Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia.

    Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia throughout the world.

    Fixed it for ya.

    1. PIGL

      Just wondering, how charming and focussed do you think President Obama would be in order to convince a number of moderately powerful, distant and independent states to act in the interests of the United States of American and contrary to the interests of their own citizens, or even of their local elites? The American cupboard is pretty bare, I’d say, except for vastly expensive weapons systems of dubious practical value. And the catastrophic clown show that is your political system is creating a pretty bad atmosphere. I mean, if you’re going to pin this development on Obama, presumably all y’all are of the view that Bush and Cheney and Co., or the Romneybot, would be doing a better job? I wonder what grounds you could possibly have for this?

      1. hunkerdown

        Do you not understand just how offensive it is for oligarchs to shove their pure-bred poodles in our faces and tell us to pick one?

        Do you not understand how doubly offensive it is for our supposedly fellow rank-and-file to expose themselves as authoritarian sycophants and argue the oligarchs’ cause for them instead of marching them into the ocean?

        1. PIGL

          well, gee whiz, I’m sorry as fuck I offended you by, you know, asking a question.

          I’m not arguing any goddamned cause. I’m questioning the reflexive Obama hatred around here, at least in respect to his foreign policy, where he is painted as some of sort of uniquely bad (either evil or inept) when as far as I can see, he’s acting like an American. It is so over the top that it reminds me (in the sense of being exactly the same as) the vituperative hatred directed at the Clintons in the early 90s by another group of finance types, much more powerful, I expect, than the commentariat here. There’s something non-rational about it, as if personal interests are somehow being threatened.

          What respect to the case in question, concerning the new Chinese bank, what was Mr. Obama supposed to do precisely, go all “Mr. Gorbachev, tear down this wall”? Because that is not how diplomacy works in real life. It’s about persuasion or coercion, not personal relationships.

  6. Praedor

    That’s that then. The Chinese bank will be as nasty and looter-filled as the IMF/WB. If Germany, France, and Britain are into it then that means it will be austerity loans all the way. We’ll give you this “development” loan so long as you privatize EVERYTHING, sell off your natural resources, cut worker pay (or just prevent it from EVER getting into the livable range), and feed the investor/bankster class.

    I had higher hopes for China’s alternative. Turns out not to be an alternative at all. Just another front for robbing the 99% for the 1%.

      1. MyLessThanPrimeBeef

        Don’t give up on the Chinese people.

        The Chinese ruling class is not saying the same. They are giving up as we speak…look at green-card-for-buying-a-house, maternity motels here and other countries chateaus and mansions in France, etc..

        The leaders are giving up over there.

    1. MRW

      The Chinese bank will be as nasty and looter-filled as the IMF/WB.

      You don’t know that. China has made real inroads in African countries by offering infrastructure loans at 2-3% and not demanding the entire country’s resources as collateral. The World Bank has usurious interest and draconian collateral requirements; the Economic Hitman model. Furthermore, the Chinese are tough businessmen, but it would a tremendous loss of face to the nation to become plunderers now. Name one country where they’ve done it. You can’t.

      1. Yves Smith Post author

        China has had a terrible time in Africa with its agricultural investments. Lots of friction with the locals. Citing China’s relations with Africa as some sort of success story is not (generally) accurate.

        And infrastructure loans are not comparable to IMF loans. The IMF lends to bankrupt countries. Bankruptcy lenders in the private sector ARE senior and do take pretty much everything as collateral. But you can steal on a smaller scale just as well with infrastructure, see US privatizations as an example.

  7. Ed

    I’m waiting and seeing on this story. This is strange in geostrategic power politics terms.

    A US-China alliance (or an alliance between the US and Chines elites) could take on the rest of the world and win. That seemed to be on the cards. If its fallen apart, this is a big an event as the collapse of the Nazi-Soviet Pact, or of Bismark’s web of alliances.

    Failing this, you would think the US would be able to keep its closes medium power allies on its side. And if they are losing them, then why the aggressive moves in Latin America, Eastern Europe, and the Middle East? This all makes no sense. My initial take is that this bank is probably not a big deal.

  8. ella

    Consider, the effect of the FED QE infinity and the lending rules of the IMF / World bank. What effect, if any, has their policies had on the move to create and join the new China bank? Consider, what effect of western Geo-politics, Russia, American military expansion in the middle east / Afghanistan?

    How will the new bank lend the assets? The terms of the loans and to who? What happens to the national contributions to the bank if they are not repaid?

    Curious, yes, answers no.

  9. timbers

    By splitting Europe and Russia, Obama has committed the long term strategic blunder equivalent of GWB’s military blunder of invading Iraq. As time passes is looks more and more like Europe (not just Russia) drifting away from U.S. and towards the East instead of Western Europe moving towards USA. If this continues, Western European sanctions on Russia will be looked at like “WTF?” and melt away.

    Great analysis at The Saker of Ukraine’s future. Says U.S. has already lost, Western Ukraine will fragment into many parts, and longer it drags on the costlier it will be for U.S. and Europe:

    1. MRW

      I agree, timbers. I think that history will show–and I wrote this at the time on several blogs–the Russian sanctions were the beginning of the loss of US status as the reserve currency. Might take until 2030 for China to build the financial infrastructure, but Obama did it, or allowed Victoria Nuland and her neocon husband and friends to run foreign policy. (Because these self-serving tribalists want to scarf up Ukrainian resources.)

      China lost no time, opened the first Chinese bond market in the City of London. The British either understood they were ending the American dollar hegemony and wanted to assist it, or they are too dumb to understand what China was doing.

      It is the same blind, ignorant thinking that caused Americans to think that if they opened China, gave it most favored nation status (1999) that the Chinese would go wild to buy US products. I remember Charlie Rose and Laura Tyson making that point in November 1994 with Sir James Goldsmith. ‘Look at the market we’re creating! We’ll prosper! American companies will sell to the largest market in the world!’

      Dumb shits.

      1. Carlos Fandango

        The British want to retain their European lead in financial services and currency trading. They will forever be a poodle humping the leg of the biggest power in town.

  10. C

    It remains to be seen what this bank will do or who will really run it. To my mind the bigger threat is that it means decoupling major portions of the world economy from the dollar and FED currency controls. It is also a bad sign that so many of our allies who looked to us as the source of financing are so mistrustful of our economy, our institutions, and perhaps our currency that they can’t rely on us. They may also be doing the math on the labor and capital flows to China and be planning ahead.

    In many ways however this failure predates Obama. Our last 3-4 administrations love financial sanctions. We have deployed them anywhwere and everywhere. And Bush’s very public decision to mismanage the IMF made plain how much control we really have over other economies. Consequently everyone, even our allies, know we have this power and are sensitive to it. As with Drones this has led the rest of the world to look for alternatives.

    1. GlassHammer

      “It is also a bad sign that so many of our allies who looked to us as the source of financing are so mistrustful of our economy, our institutions, and perhaps our currency that they can’t rely on us.”

      To be fair, the 2008 Financial Crisis shook the belief that the U.S. was/is a stable source of financing.
      The crisis did extensive damage to our long term economic hegemony (which was already weakened by decades of punitive trade/financial arrangements with developing countries).

      1. susan the other

        Punitive finance to everyone actually. Which is probably why (after taking control of oil) the Bush administration said, “Enough.”

      2. MRW

        To be fair, the 2008 Financial Crisis shook the belief that the U.S. was/is a stable source of financing.

        Ha. That’s not accurate. The Federal Reserve supplied $29 trillion to shore them all up. We do a $600+ billion trade business daily in treasury securities. The safest assets in the world today are treasury securities. Aka, the USD.

        But the Chinese are smarter than the crew in the WH. We let the neocons gut the 30-year career Arabists in the State Department. We let the neocons turn Congress into an Israeli legislative body, when their first duty is the “general welfare” of its citizens here especially after 2008. We are letting the neocons revive the Cold War, and ignoring the considered intelligence of advisors like Stephen Cohen.

        Pogo was right. And the Chinese know it. It’s what the British did to them.

        1. participant-observer-observed

          That is fine for monopoly players, but if you look to see who is holding the USD cash, it is mostly Chinese:
          1. PRC w 3,945,932 (USD millions in reserve)
          5. ROC w 420,788
          9. HK w 324,821
          10. Singapore w 251,464
          (Korea, Japan, Brasil, Russia, and India are also all in the top 10)

          {the Saudis and Swiss are the only non-Asians in the top 10}

          USA#19, UK#17, Aus#35, and NZ#64 are not even in the top 10

          (see wikipedia “list of countries by foreign exchange reserves,” list updated 17 March 2015 – the link won’t let me post my comment here)

          1. Carlos Fandango

            These countries all have a fetish for a USD currency peg to boost exports. Seems to be a particular feature of Chinese psychology, they feel more secure in the trade arrangement if they have a stash in your country.

            1. participant-observer-observed

              But if they are reserves, aren’t they holding the stash in their own countries?

            2. Yves Smith Post author

              Holding the foreign currency is the inevitable result of the currency manipulation. They want the jobs and the growth. Holding the currency is an unfortunate by-product.

  11. doug champion

    I really doubt the chinese can surpass the world bank in evil doing….All these comments about the environment. Hogwash. WB equally involved in enviro destruction with token $ in place to placate the ignorant….

    1. Praedor

      But there was at least a VENEER of concern. The Chinese version is unlikely to even give a miniscule bow to environmental issues.

      1. susan the other

        I think China is really gonna clean our clock. Environmentally. They will produce the science and the scientists and the money and the vision. I hope.

        1. MyLessThanPrimeBeef

          We need only one sign from the Chinese to give you hope.

          One sign – maybe they can stop playing games with their rare-earth wealth with the rest of the world, even if they recently dropped their export quotas.

          1. susan the other

            The reason China represents hope is numbers. 1.5 billion people are probably all relatively smart and capable and only .01% of them are dicks. I’m just thinkin’.

            1. MyLessThanPrimeBeef

              I think it’s discouraging to look at that 1.5 billion number.

              A smaller population, in China or any country, would, actually, give one hope.

              The world’s population is at 7 billion people. And we are all relatively smart and capable. That’s like 5 China’s…almost.

            2. participant-observer-observed

              Another big reason is dearth of science deniers combined with strong Confucianism values re social civilization investment.

              Public education is a cherished value, as are libraries and sports/recreation centers. I never heard of political de-funding of any thing like that in all my years in Chinese countries. I simply cannot imagine such a thing.

              Also racial memory of the Maoist economic disasters and famines may help immunize against recklessness …. or not …

              But as an internal political machine, PRC and ROC too for that matter still have a lot of repressed neuroticism, which can be easily seen by reading party players public comments on any kind of issue that challenges status quo thinking. That is the real danger, when that neuroticism gets acted out, just as US national psychopathic tendencies do harm in USA and abroad.

        2. MRW

          They will produce the science and the scientists and the money and the vision.

          They are already producing the scientists. Since no one in this country ever reads the source documents in climate science and takes their cue from business and political writers masquerading as science know-it-alls or advocates like Justin Gillis (NYT) or Joe Romm, since no one does the people in this country have no idea what the science is showing. You don’t hear it.

          Show me one climate journalist who has read the 573-page American Physics Society January 2014 transcript of their Climate Change Statement Review and the Framing Document, and I will eat my clichéd shoe. To call this science ‘settled’ is the height of ptolemaic ignorance. But the Chinese scientists don’t have the intense societal pressure to conform on this topic and their work shows it. We’re like the Europeans in 900 AD struggling to grasp Euclid’s Fourth Principle while the Islamic scientists in Cordoba were using trigonometry and what later became known as calculus (because the Cordoba documents were translated and disseminated throughout Europe via Christian monks and Jewish scribes).

          1. MRW

            Our young adults, according to latest OECD test results (2015) now rank last or second to last in reading, numeracy, and problem-solving skills among the top 22 countries they follow. In Chinese, on the other hand, there is one province (I forget the name) that produces mathematical geniuses. It’s an anomaly even in China. How’s your Chinese? We can’t speak it. They learn English. Who do you think is going to be further ahead?

          2. PIGL

            I don’t know if many journalists have, but I just read the first third of it. Your characterisation of the report is somewhat misleading. For one thing, yes,it’s 500+ pages, but it’s mostly transcripts in typescript at about 100 words a page. The framing document contains enough pointed questions to gladden the heart of the usual suspects like “Friends of Science”, but when you actually read the responses, the degree of doubt and uncertainty is much less than you suggest. The science is settled enough.

  12. Mel

    “Britain hopes to establish itself as the number one destination for Chinese investment”

    A fascinating and beautiful thing about investments is how easily they can be lost. Sony In Hollywood comes to mind. And the City of London probably dreads doing without the news they might hear in the new bank. Britain’s plan is probably bad news to people in the actual developing world who might have been looking for some seed money.

    1. cnchal

      “Britain hopes to establish itself as the number one destination for Chinese investment”

      Perhaps British leaders can beg China to set up sweatshops, so the British have jawbs, other that just financial looting. The race to the bottom has come around for another lap.

      1. MyLessThanPrimeBeef

        It’s worse to be on the outside and not have agents on the ground.

        (They wish they had people inside the Hermit Kingdom).

    2. MRW

      “Britain hopes to establish itself as the number one destination for Chinese investment”

      The same dumb mistake we made in the 90s, thinking that the Chinese will race to their/our shores. No. The Chinese are going to demand payment in Yuan for their imports, which means the Brits have to sell their products to China to get them.

      1. Carlos Fandango

        Don’t forget most Chinese goods delivered to the West are actually produced in China by Western companies and Chinese contractors. The raw materials are often shipped to China from the West. In many cases, the only payments made in yuan are for manufacturing services which are a small fraction of the product sales cost.

    1. financial matters

      I like this analysis also. I think this statement:

      “Europe has not wanted to bail out Greece, not because they couldn’t, but out of fear that it would lead to the other indebted nations with far larger economies and debts, Spain and Italy, who Europe could not afford to bail out, following Greece’s lead.”

      is more political than based on what could happen monetarily. Similar to Greece being able to support a job guarantee program using TANS, Europe could do the same thing using Euros. Not to support the banks but to support the population. The US is similarly getting into budget cuts which will have similar ill effects on its population.

      It’s hard to imagine the Chinese led Asia Infrastructure Investment Bank (AIIB) being worse than the World Bank and IMF. The IMFs position in the Ukraine is a case in point. Supporting a repressive govt while privatizing the gas and agriculture for US corporations. I think it’s good to have several strong currencies anyway which is what Keynes had in mind with the bancor.

      If the US wants to use its military and security prowess for a worthwhile purpose it needs to support ecologically sustainable growth that is well distributed. It can’t win with 99% of income gains going to the top 1% as has been happening in recent years.

      The various countries will find other ways to escape poverty.


    Both BRICs and Bretton Wood’s system break fundamental economic rules.

    1) Debt instruments should not vector away from their mirror. That mirror is credit as money that issued forth at moment of hypothecation. If debt and its private credit cannot get back together for cancelation, it is usurious.

    2) National money should not exchange for another nation’s money. All hyperinflations save Zimbabwe, have been foreign exchange collapses. It is too easy to do full spectrum warfare when one owns a reserve currency, where this warfare is currency collapses via mechanisms well described by Perkin’s in his book, “economic hitman.”

    3) All international trade is really Barter, and that barter can be marked with something like a Bancor. This would prevent FX manipulations, and would re-locate international trade firmly into a legal and moral sphere. National economies would become balanced.

    4) The Western Banking system money supply is now virtually 100% “private credit.” Western Central Banks are agents of TBTF banks. Private credit returns to ledger for destruction, but the usury passes through and is then held by those Bankers who created said credit. This creates a two loop economy where the upper loop (finance) looks for gains amongst those who had to go into debt (labor and those who use money for transactions). Upper loop may withhold, or then shower their held usury money downward onto lower loop of laboring debtors, who are desperate to sell their perishable goods and services cheap. This is a very high cost, high friction money type that takes rents for its right to exist. Permanent low friction floating money needs to be in money supply as a large component (maybe 60%) to allow low cost exchange. This low friction money should not by definition, have a debt instrument as a mirror.

    a. Brics do not change private “credit” banking dynamic appreciably, other than the fact that they have State Banks in their mix, and State Banks often forgive loans. This means that former credit as money no longer is required to vector to ledger for destruction. This mechanism can put needed purchasing power into an economy, and that released credit may then drain into banker ledgers, decrementing the numbers, thus offsetting predatory usury function private bankers depend on.

    b. Brics seem to have some sovereign control of their system, and hence their credit may vector onto beneficial paths such as improving public commons. Western bankster systems by contrast seem intent on harvesting countries real assets such as industry, land, and natural resources. Harvesting is done using magick exchanges for releasing debts. Real assets can then be used as permanent tolls on an economy, thus creating a financial feudal oligarchy. QE, for example, is a magick exchange where newly created central bank keyboard money trades for debt instruments, when those debts should have instead been haircut, or jubileed. Witness Greece and neo-liberal austerity means being thrust upon the Western world. Exchange real assets for what were intially predatory debts, and hence lose your nation’s sovereignty.

    It’s a wonder why more sovereigns aren’t clamoring to escape parasitical Neo-liberal psychopathology. Expect a stampede to de-dollarize and escape slavery system.
    BRICs and their alternate money universe are exactly what PUTIN has promised, a multipolar world. Too bad BRIC’s they are not going for more advanced monetary science, and instead are creating a system very similar to Bretton Woods. Will they use their system for parasitical control, or will they use it to benefit their population? The control levers are nearly the same.

  14. ToivoS

    This has to be a huge story. Maybe not something that will capture headlines in the 24/7 news cycles. But certainly to those of us who track history in increments of decades. When Hillary and Obama announced their pivot to Asia, the strong message was that this was a new policy to isolate China economically from rest of Asia — especially from the island nations in the Western Pacific as well as the SE and Southern Asian nations.

    So what does the US do next but to attack Russia through Ukraine. Russia responded by moving closer to China. The US responds by increasing sanctions against Russia. Russia responds by sending the South Stream oil pipeline through Turkey. And what does China do? Something I would have never predicted but to set up a bank in competition with the IMF and succeed in attracting England, Australia, France and Germany and for sure in coming weeks South Korea. Obviously Russia and Taiwan will join but for obvious political reasons will delay their involvement.

    This is the outcome of Hillary Clinton’s foreign policy vision. Of course we can blame Obama since he gave her that position to pursue these utterly insane policies. The net result is that US foreign policy is in complete taters. In 1950 the Republicans ran on the question of ‘who lost China’. In the coming election, if the Republicans have any sense they will be running on ‘who lost Europe’ [of course the Republicans were the primary advocates for the policies that have resulted in this fiasco].

    In any case, Obama will have to answer for this even if the Republicans egged him on.

    1. participant-observer-observed

      This is the outcome of Hillary Clinton’s foreign policy vision. Of course we can blame Obama since he gave her that position to pursue these utterly insane policies.

      You attribute to the powerless agents too much power…..look to who is pulling the puppet strings, not at the puppets!

      If you do that, you will see they have their players in both parties, Supreme Court, etc.

  15. nohomehere

    Just think a new and fresh opportunity , as many countries will want to see if the new aiib will be as EXTRACTIVE as the world bank and their onerous policies! “Such prestige as the US enjoys in Asia these days rests disproportionately on the shoulders of the US military.” America has shot itself in the foot by allowing the rule of law to lapse, Placating banks gone wild!

  16. RBHoughton

    What are the Leviathan capitalists who own America going to do now? Its not much use having all the money if you can’t make it work.

    They have devalued the middle class and reduced consumption as a contributor to their accumulation in expectation of accelerating wealth-growth with the resources of weak countries like Iraq, Libya, Ukraine and the profits from their reconstruction.

    They must be wondering who to hit next. Its tough being a zillionaire.

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