Does USA Twin Deficit strategy lead to war?
This article asserts USA is in a forever war:
TRUTH-OUT.ORG: We have been in an active shooting war in one form or another for almost 30 years now, and have been on a wartime economic footing since President Truman signed the National Security Act more than 60 years ago
But fails to explain why (to my satisfaction). But I think Rasmus hints at it in Looting Greece when talking about the USA Twin Deficit strategy, quoted below. I dont come close to understanding this, and Rasmus doesn't outright say it, but it seems to me: the finanicial system is the cause of the wars, and the wars are the foundation of the financial system. The technical purpose of the wars is to get everyone dependent on USA capital and IV-drugged into the finanical system.
Looting Greece: A New Financial Imperialism Emerges
(pp. 24-28). Clarity Press, Inc. Kindle Edition.
(pp. 24-28). Clarity Press, Inc. Kindle Edition.
Critics of Neoliberalism often emphasize the above more obvious elements, especially the first three, but they overlook its other important defining elements. That focus is in part a consequence of defining Neoliberalism based just on its initial Reagan-Thatcher forms. Critics thus overlook how removing barriers to international trade and money capital flows is central to Neoliberal regimes. Or how financial system restructuring since the 1980s has constituted a further important element of evolving Neoliberal industry policy.
A significant factor in US Neoliberal trade policy, for example, has been the emergence of what is called the ‘Twin Deficits’. The twins are the US trade deficit (US imports more goods than it exports) and the budget deficit (US federal government spends more than it receives in tax revenues). Both began to accelerate during the Reagan period. Both are thus highly correlated. But more than that, it is the trade deficit that has enabled the escalating budget deficit in the US since Reagan.
Prior to Reagan, US trade policy tried to maximize exports over imports. That was necessary to maintain a balance of payments given that US policy has always been since 1945 to encourage US corporations’ investment offshore. But that created a negative money capital outflow that had to be somehow ‘offset’ by a positive export-import inflow to the US in order to maintain a balance of payments. The US failure to continue that postwar formula by the late 1960s led to the collapse of the US dollar by the early 1970s and the end of the Bretton Woods system which Nixon declared ‘dead’ in 1971. The US fumbled throughout the 1970s to try to re-establish a new balance of money capital inflows-outflows. The Twin Deficits was the new solution.
Now, under Reagan, US trade policy reversed: the US decided to run a trade deficit, allowing imports to exceed exports. US dollars consequently began to flood global markets even more than before. Arrangements with trading partner countries were negotiated in which the latter agreed to recycle their accumulating dollars back to the US in the form primarily of purchases of US Treasury bonds. The bond purchases in turn allowed the US government to run huge budget deficits, mostly to enable massive cuts in taxes for corporations and investors, offsetting the loss of revenue by the recycled dollars the government now borrowed to fill the ‘deficit’ gap.
The key here is the dual idea of trade deficits tolerated, so long as trading countries benefited from the increased US purchase of their goods, and recycled their dollars. US multinational corporations were allowed to increase their offshore foreign direct investment. Money flows, unions and workers’ wages were reduced by the offshoring so US corporate profits were subsidized both by lower wages in the US and lower wages abroad. Cheap imports offset the lack of wage increases to some extent, and recycled dollars allowed the reduction in US taxes, allowing the US to fund wars abroad for the first time in its history without raising taxes, and generally allowed the US to run continual and rising domestic budget deficits. Twin Deficits policy was thus foundational in various ways to US Neoliberalism. But the Eurozone, as will be explained below, would not prove as successful in establishing a ‘twin deficits’ arrangement to ensure the recycling of money capital flows from the periphery to its core.
Twin deficits and the recycling of money capital flows required the elimination of limits and controls on money capital flows between states. Thus a second major element integral to US Neoliberalism was the elimination of controls on international money capital flows. If Twin Deficits required allowing US multinational corporations, including banks, to move money capital in greater volume and rates offshore into emerging and other markets, restrictions and limits on those flows would have to be reduced or, better yet, eliminated. The ending of controls was necessary not only for recycling dollars back to the US by foreign central banks, private banks, and investors purchasing US Treasury bonds and other government securities, but also for uninhibited recycling of money capital as direct investment by foreign corporations back to US financial and other investment markets.
The US lead in eliminating global money capital controls was quickly adopted by Europe and Japan in a series of key negotiations in the mid-1980s held in the US and Europe, sometimes called the ‘Plaza Accords’ and the ‘Louvre Agreement’ between the US and Europe which quickly followed the ‘Accords’. European banks and investors were prompt in agreeing to lift controls. Finance capital benefited in those regions as well as in the US. It was not a question of US pressuring them to do so. Had they not, and insisted on retaining controls into and out of Europe, it would have meant an even more uncompetitive position for Euro economies vis-à-vis US and UK than they already faced.
In addition to eliminating controls on international capital flows and establishing a ‘twin deficit’ capital recycling system, a third element of generic, US-UK Neoliberalism that also emerged in the 1980s, which accelerated rapidly in the 1990s and after the restructuring and deregulation of the global financial sector. This included the rise of nontraditional bank ‘capital markets’, shadow banking, and the associated revolution in financial derivatives and financial securities proliferation. Here again the US, and to an extent the UK, were leading initiators.
As with establishing a twin deficit arrangement, Europe also lagged in this particular Neoliberal element of financial restructuring, and remains still to this day in ‘catchup’ mode, compared to the US-UK. For example, capital markets (i.e. non-traditional bank sources of credit) are generally acknowledged as undeveloped in the Eurozone. Shadow banks are barely established there, with US and UK ‘shadow banking’ mostly setting up the ‘shadow banking’ shop in the Eurozone. Homegrown Euro shadow banking remains undeveloped. And only recently has the Eurozone begun to develop and regulate derivatives markets.
Twin deficits, unrestricted money capital flows, and the rise of the capital markets-shadow banks-securities revolution were all elements of generic Neoliberalism. They all represent elements which the Eurozone has lagged at introducing into its particular form of Neoliberal regime. For all three elements to function in a Neoliberal regime, they require a global currency (or regional currency in the case of Europe), a true banking union to breakup logjams in money flows, and a fiscal union of sorts to smooth out imbalances in the accumulation of debt that periodically occur.