The World This Week: Debt, the Dragon and the Eagle


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May 15, 2015 23:30 EDT

As the Greek debt saga plays on, the US talks tough and China flirts with its neighbors.

Yanis Varoufakis, the Marxist finance minister of Greece, is under pressure. In his words, Greece’s liquidity situation is “terribly urgent … we are talking about the next couple of weeks.” Varoufakis has raided Greece’s holding account at the International Monetary Fund (IMF) to repay a €750 million loan installment owed to the IMF itself. Unsurprisingly, the Greek economy has slipped back into recession again. As the Bard of Avon pointed out, Shylocks tend to want the proverbial pound of flesh from debtors.

The crisis in Greece comes from a simple fact: The Greeks took on debt recklessly and the Germans lent them money carelessly. When the chickens came home to roost, lenders lent Greece more money on the assumption that it would miraculously grow enough and pay back its debt. This was fiction. Yet the prevailing dogma is that the rights of creditors are inviolable. Hence, creditors did not take a haircut and insisted that Greece pay back loans that it could not afford. Syriza, Varoufakis’ party, won because it promised to renegotiate debts and end the austerity blighting Greek lives.

After winning power, Syriza has had to backpedal on its promises. The reasons are simple. The US can always devalue the dollar and make its debt cheaper. For a tiny country, unilateral default is painful even when it is possible. Greece is not flush with capital and would be frozen out of bond markets if it defaulted. The cost of debt would rise steeply. Besides, many items that Greeks consume on a daily basis are imported from the rest of the world. Greece would no longer have the money to pay for them.

At the end of the day, Greeks perceive the benefits of staying in the European Union (EU) to be higher than striking out on their own. The return to drachma would add the scourge of inflation to mass unemployment that already plagues the Greek economy. An aging society such as Greece is generally averse to inflation because older people want their savings to last longer. Therefore, when push comes to shove, Varoufakis and his colleagues are likely to blink and make a deal. Already, the Greeks are caving in to creditor demands and privatizing their biggest port, Piraeus.

The IMF and the EU know fully well that all hell will break loose if Greece exits the euro. Portugal, Spain, Italy and any EU member that displays weakness will spook markets. The cost of borrowing will rise for all these weaker EU countries. What John Maynard Keynes once called “animal spirits” will be disturbed and contagion could follow crisis. Hence, even Shylockian creditors such as the hidebound IMF will make a deal, even if at the last minute. Yet creditors have not evolved enough to forgive any loans or take a haircut. The Greek saga will play on like a broken record, lurching from crisis to crisis for a while.

Speaking of crisis, the US has upped the ante in Asia. Defense Secretary Ash Carter has decided that the US might be flying aircraft and sending ships to within 12 nautical miles of the reefs that China claims as its own in the Spratly Islands. China has been building artificial islands in the energy-rich South China Sea and claims sovereignty over 90% of it. Over $5 trillion of trade passes through sea routes in this area, and Vietnam, Brunei, Malaysia, Taiwan and the Philippines also claim the South China Sea as their territory, in whole or in part.

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© Shutterstock

The US stance is provocative and unnecessary. China is a rising power that is still smarting from the humiliation it faced in the 19th century. It wants to exert more power in its near neighborhood just as the US once imposed the Monroe Doctrine in Latin America. Until not too long ago, the United States clandestinely conducted coups in Latin America and trained many of the military dictatorships in the dark arts of torture. China is flexing its muscles far more gently than the US in its near neighborhood.

For many in the little town on the Potomac named Washington DC, there are damsels in distress in Asia. China is a potential rapist. The US has to be the knight in shining armor and ride to the rescue. Washington pundits forget three cardinal facts.

First, the aggressive policy of the US in the Asia Pacific raises tensions and increases risks of conflict needlessly. How would the Americans feel if a Chinese ship or plane showed up 12 miles off Hawaii or California? The ghost of Pearl Harbor would certainly emerge from the grave.

Second, the US is now a declining power. Its share of the world’s gross domestic product (GDP) is no longer 50% as it was at the end of World War II. Most estimate this share to be 21-25%. Furthermore, the US is a debtor nation, owing a fair bit of money to China. It is Chinese cash that funds in part the very ships and planes that will set sail to keep the Middle Kingdom in check. The Chinese are no fools and will invariably start undermining the dollar, the world’s reserve currency. Already, they have started creating institutions such as the Asian Infrastructure Development Bank (AIDB), and this process would inevitably hasten.

Finally, the US has increasingly dysfunctional institutions. Washington pundits point out that the US might be in bad shape, but the others are worse and China’s institutions are brittle, opaque and even nonexistent. However, pundits forget one simple fact: The US is now a deeply divided, discordant society. Tom Cotton and his Gang of 47 senators wrote a ridiculous letter opposing President Barack Obama on the Iran deal, even though that is the only option for the US given the rise of the Islamic State. It is hard to imagine that various arms of the US government will be able to act in concert to come up with a coherent plan to back up Carter’s aggressive declaration. Besides, most Americans are weary of war. Afghanistan and Iraq are not exactly poster children for more intervention. A society that locks up one out of three black men in prison, struggles with costs of health care and groans under student debt is seeking more justice, social mobility and jobs. Perhaps a war economy might be the answer, but no one is jumping up and down with pom poms to usher in the draft.

Even as the US talks tough, the Chinese are flirting with their neighbors. President Xi Jinping showed up in Moscow on May 9 to attend a typically spectacular Russian parade celebrating victory in World War II. Leaders of its former allies such as the US and Britain failed to show up, snubbing invitations from the Kremlin. Currently, Indian Prime Minister Narendra Modi is in China and is receiving the red carpet treatment. Though he has called on China to “reconsider its approach” to issues that strain China-India relations, Modi is trying to attract Chinese investment into India and bolster trade ties. Xi, who rarely receives foreigners outside the capital, hosted Modi in the ancient city of Xian, home to the terracotta warriors, to imbue this trip historical significance.

Even as China, India and Russia flirt with each other, Pakistan and Bangladesh flirt with disaster. Close on the heels of the murder of Sabeen Mahmud, a bold human rights activist, comes the killing of 45 Ismailis, a minority Shiite Muslim sect. Pakistan, a country founded by a Shiite leader, is now in the throes of endemic violence and, in the words of Anwar Akhtar at Fair Observer, it is a tough place for minorities and everyone else. Bangladesh is keeping pace with Pakistan when it comes to fanaticism and violence. Ananta Bijoy Das, an atheist of Hindu origin, was hacked to death by four men using meat cleavers. This is the third time a writer has been murdered in Bangladesh for spouting atheist views. The Islamization and radicalization of Bangladesh is poisoning the soul of the country and threatening the future of this poor nation.

Finally, Burundi is in a major crisis as President Pierre Nkurunziza decides to stay on for a third term in violation of the constitution. Mass protests broke out in the capital, Bujumbura, and Gen. Godefroid Niyombare attempted a coup whilst the president was out of the country. Now, the general and his co-conspirators have been arrested and Nkurunziza has returned home. Yet 105,000 refugees have fled from Burundi. About 70,000 have gone to Tanzania and over 50,000 are living on the shores of Lake Tangyanika. Many fear that the crisis might reignite the 13-year civil war between Hutus and Tutsis, which ended in 2005. It is perilous times for both Central and East Africa.

*[You can receive “The World This Week” directly in your inbox by subscribing to our mailing list. Simply visit Fair Observer and enter your email address in the space provided. Meanwhile, please find below five of our finest articles for the week.]

[seperator style=”style1″]Implications of the Boston Bomber Death Sentence[/seperator]

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Convicted Boston Marathon bomber Dzhokhar Tsarnaev now faces the death penalty for his actions.

The jury has spoken. Dzhokhar Tsarnaev now faces execution for his role in the Boston Marathon bombings. The sentence was announced on May 15, in federal district court in Boston after a grueling months-long trial that alternatively depicted Tsarnaev as a coldly calculating killer and a malleable youth influenced by his older brother. The jurors came to their decision after deliberating for about 14 hours over the past three days. Tsarnaev’s case will be automatically appealed.

Four scholars were asked to examine the implications of the trial and the final sentence.

Jeffrey Kaplan, University of Wisconsin-Oshkosh

On April 8, Dzhokhar Tsarnaev was found guilty of numerous counts, including the use of a weapon of mass destruction — albeit a homemade and poorly deployed one — relating to the attack on the runners and spectators at the Boston Marathon. On May 15, he was sentenced to death. Read more

[seperator style=”style1″]Baltimore, the City of Lost Souls[/seperator]

© Landon Shroder

© Landon Shroder

What were the deep-rooted causes behind the uprising in Baltimore?

“Baltimore is a troubled city, a city of lost souls.” Naisha Smith is only 25 years old, but she has an awareness that would escape even the most experienced of social observers. “The problems come when the citizens feel threatened … had they not rioted, the way they did, they would not have been heard. This is a build up from generations of constant anger.”

Her aunt, Renée Washington, a woman of sharp intelligence and inescapable warmth, who was sitting next to me in their Baltimore home, interrupted: “I agree with what the young people did, because these kids got tired of being another black statistic.”

She continued: “But if you never do anything, guess what? The next generation will be fighting the same fight we are fighting now, and it is time for it to stop.”

The candor in which they spoke about police violence was deeply unsettling. Attempting to justify my naiveté… Read more

[seperator style=”style1″]Practice and Practitioners of Holocaust Denial[/seperator]

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Debating with Holocaust deniers may be pointless, but trying to understand their motives and arguments is not.

Each year, I take a vote in my “The Third Reich, 1933-1945” module at Teesside University as to whether the subject of Holocaust denial should replace an existing lecture on the development of Nazism’s Final Solution – say, on the history of Auschwitz-Birkenau, or the actions of the Einsatzgruppen – those mobile killing squads following behind the Wehrmacht’s invasion of the Soviet Union (USSR) in June 1941. Nearly every year, my students overwhelmingly vote to ignore the subject. There are certainly good reasons for doing so, in fact: A close colleague researching the Holocaust understandably refuses to give any attention to Holocaust denial, since “it’s just an insult to both victims and history.”

I want to call this the “round earth” rejection of “Holocaust denial.” This was most aptly characterized by James Najarian, a wise interpreter of the various methods involved in denying the Holocaust… Read more

[seperator style=”style1″]Celebrating Destruction Will Only Lead to History Repeating Itself[/seperator]

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Wartime commemorations are the functional equivalent of mounting the heads of victims on pikes.

Everyone on the Mall near the Washington Monument was looking up at the sky. I was there, too. But I wasn’t looking up — at least not that far up.

On May 8, I was playing Ultimate Frisbee during the noontime game on a stretch of level grass behind the Holocaust Museum. This time, we were joined by thousands of people eager to commemorate the 70th anniversary of the surrender of Nazi Germany and the end of World War II in Europe. They’d shown up in droves to watch an air show of vintage planes.

I find it strange that so many people like to look at bombers. These machines visited enormous death and destruction during World War II, particularly on civilian populations. The firebombing of German cities killed 600,000 German civilians, including 75,000 children. The fire bombings of Tokyo and other major Japanese cities killed upward of 300,000 people… Read more

[seperator style=”style1″]Violence Against Women Throughout History[/seperator]

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Has violence against women been a consistent problem throughout history?

Violence against women has a long history in human communities. Yet we live in a time when people across the planet are beginning to give greater attention to this problem and, at times, to stand against misogynistic violence in all its forms.

Recently, the United Nations created the “He for She” campaign, which highlights that violence against women remains a global problem that exists at “alarmingly high levels.”

This month, History Talk hosts Patrick Potyondy and Leticia Wiggins sit down to discuss the origins of gender violence, its existence throughout history, and issues affecting women globally with scholars Treva Lindsey, Cathy Rakowski and Peggy Solic. Read more

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Photo Credit: Ververidis Vasilis /

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1 comment

  1. Landon Shroder

    May 18, 2015

    Cracking commentary this week (anyone listening?!?)

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