A lot of Caribbean people seem to be concerned about President Donald Trump being president of the most powerful country in the world, the United States of America (US). He is perceived as a racist and an anti-immigrant president. Millions of Caribbean nationals reside in the United States and the concerns are reasonable. I am not concerned about that because that was a decision that could only have been made by US citizens. I see a more serious threat; that is, an unstable US economy.
After the 1944 Bretton Woods Conference, the US dollar became the global reserve currency and it was reinforced in 1975, when OPEC decided that oil must be purchased in US dollars. Every Central Bank in the region has US dollars as their reserve currency. The US is the Caribbean’s number one trading partner and usually the biggest contributor to our tourism industry, so their economy directly affects us.
In 2008, there was a global financial crisis, mainly caused by the United States. They mitigated it by quantitative easing (QE). Quantitative easing is when Central Banks create money by buying securities, such as government bonds from banks, with electronic cash that did not exist. This aims to put more cash in the economy — create liquidity. The Federal Reserve also took interest rates in the US to zero. This has encouraged borrowing and credit that are unrealistic and unsustainable. This will eventually lead to another financial crisis when the parties or people cannot pay back the creditors. At the end of 2016, in the car industry alone, 40% of debtors in the US are either in default or have missed payments. Most economists expect another financial crisis.
The table below shows the US consumer debt at the end of 2016. So far, the US has spent about $6 trillion to stabilize their economy but it is still tenuous. There is no way their economy can sustain a national debt of $19 trillion (104% of GDP), consumer debt of $12.6 trillion and entitlement debts of many trillions for Social Security, Medicare etc., and their debt is growing steadily. It is a recipe for disaster. The credit card was invented in the US in 1950 by Frank X. McNamara and it has transformed the US economy tremendously. The world is noticing: 23 countries (60% of the world’s GDP) have bypassed the US dollar and SWIFT (which is the dollar-based worldwide transaction system), through the use of swap lines.
|Total owed by US household carrying this type of debt
|Total debt owed by US consumers
|Any type of debts
The other aspect is global military instability. The US dropped its biggest non-nuclear bomb in Afghanistan on April 13, 2017. This bomb costs approximately US$314 million and only killed 36 ISIS fighters. Quite inefficient! The US is still fighting ISIS in Iraq and Syria. The US has also deployed war ships to the Korean Peninsula. They hope to contain North Korea leader Kim Jong-un. I suspect he is behaving like that after what happened to Gaddafi in Libya after he abandoned his nuclear ambition and got destroyed by US-led forces. China is North Korea’s greatest ally, so the US will have to deal with China to contain North Korea. The US is the hegemon in global security because it has the best weapons, quantitatively and qualitatively, but China is the world’s hegemon when it comes to economic security.
The US is the leader of NATO, the strongest military alliance in the world. The US owes China US $1.12 trillion (It used to be more). China has been transferring US government debt, and China has over US $3 trillion in foreign reserves. China helped to stabilized Europe during their financial crisis. The two countries are interdependent, because the US buys billions of cheap Chinese exports, which keeps consumer prices low. They are also competitors for global hegemony. It is comparable to the relationship between the US and the United Kingdom around the 1930’s. The uneasy configuration in the US, both politically and socially, will induce her to act more combatively in the international arena. China has to project dominance in the South China Sea or her legitimacy as a global leader is nullified. Don’t forget the uncertain military conflict in Ukraine, which involves both the US and Russia. It is quite incredible and indeterminate.
It is now April 2017 and a lot has changed, both locally and globally. Belize has many challenges. We see that regardless of who is in government, the struggle continues. We still have to face crime, unemployment and a huge foreign debt. Let’s focus on nation building.
Belize has to become more self-reliant and prepare for turbulent times ahead. From a mathematical perspective, the more ways that exist for something to happen, the more likely it is to occur. It’s not if a new world order will be created, it is when. All preliminary indicators, both globally and locally, manifest that change is coming soon. Will the future belong to us because we are prepared, or will we be reactionary?