Much of the angst being generated by Australia’s worst foreign policy decision since joining the American invasion of Vietnam may well be misplaced. It is unquestionable that the former prime minister and two former foreign ministers have been correct in their assessments of the decision by the Albanese Government to proceed with the AUKUS deal, as being nothing short of disastrous for Australian sovereignty and for our economy, but the question arises, will it ever happen?
The United States is engaged in a global attempt to sustain its unquestioned dominance over the last 30 or more years since the collapse of the Soviet Union. What was that dominance based on? It was literally ordained ever since the Bretton-Woods Conference in 1944 decided that the world currency when World War II ended would be that of the only Western country left standing, the US.
That decision reshaped the international financial, economic and geopolitical architecture of the world. What it meant was that international trade, which began to flourish after the devastation of that war, would be exclusively undertaken using US dollars. It meant countries that needed to import needed to pay for those imports in US dollars. To do so they needed to either be able to export, and earn those dollars in payment for those exports, or to borrow from the international financial bodies, set up at Bretton Woods and controlled by the US.
Equally, when it came to the US dollar reserves being built up by those countries through their central banking authorities, they had to invest them in order to get a return. Washington placed many restrictions on how they could be invested in the US and so the go-to investment for most countries, particularly after Richard Nixon canceled the convertibility of dollars into gold, was US Treasuries.
Since the Vietnam War, when the US turned from the largest creditor nation on the planet into the largest debtor nation due to its financing of that war, it then had to get the rest of the world and its citizens to finance its continuous foreign trade deficits and its Government budget deficits by selling larger and larger quantities of those US Government Treasuries. That has seen the US national debt increase from under $1 trillion in 1980 to about $35 trillion today. The rate of growth of that debt will soon reach $1 trillion a month. The question is, can the US repay that debt? The answer is an unequivocal no! The US has continued to finance that huge debt growth by selling the rest of the world and their own rich vastly increasing amounts of Treasury bonds.
The problem for the US is, since it weaponized the US dollar against countries around the planet that it does not like, less and less countries are prepared to hold their accumulated foreign reserves in the US dollar. The startling growth in the BRICS Alliance demonstrates declining faith in the ability of the US to redeem all that debt. BRICS is now in the process of developing a new world currency that, unlike the dollar which is a purely fit currency backed by nothing tangible, will be backed by convertibility into gold. The rate at which BRICS is attracting new countries applying to join places the future of the dollar as the world’s reserve currency in doubt.
The US Treasury is finding it increasingly difficult to get buyers for bonds it is selling at an increasing rate to finance its ballooning debt. Many large holders of US Treasuries are selling them off and buying gold. That is why Janet Yellen recently went to China to plead with them to buy more US Treasuries. The response was an increase in China’s dumping of the same. The truth is that the rest of the world has been funding the drunken sailor spending of the US for at least the last 30 years and they are increasingly deciding not to do so anymore.
What is the relevance of all of this to AUKUS? The US right now outspends the next nine countries in its defense expenditure. All of that is financed by foreign debt. As it gets harder and harder to find buyers for that debt, US military expenditure, including what it spends on the more than 800 military bases it sustains around the world, will simply be impossible.
The paltry injection of the $368 billion Australian dollars for these white elephant submarines will be a drop in the ocean of the vast reduction the US will have to make in its defense expenditure if it is to avoid national bankruptcy. Given that the US marine industry cannot even deliver the ships and submarines that the US navy currently has on order (neither can Britain deliver theirs), its capacity to deliver the nuclear submarines that we have been locked into by politicians, obsessed with proving that they have a bigger stick than China, is non-existent.
What we really need to worry about is, if we have made very large down payments on these big boys’ toys with both the US and the UK, will we ever get it back when they fail to deliver?
Les MacDonald is the CEO of NSW Meals on Wheels. Prior to this, he held executive positions in both the Commonwealth and NSW governments. He was previously Executive Director Uniting Care Ageing. Les has an extensive leadership history including board positions in public hospitals, health insurance, the maritime industry, public transport, cancer medicine and the Council for the Arts amongst others.
The article first appeared in PEARLS & IRRITATIONS website at https://johnmenadue.com/aukus-could-be-the-biggest-ponzi-scheme-in-history/
The views do not necessarily reflect those of China Daily.