Thursday, January 6, 2022

The United States: A Push Toward Moral Decline, Political Extremism, Political Divisions and Violence?

By Dr. Rodrigue Tremblay

(Author of the book about morals "The Code for Global Ethics" and his book about geopolitics "The New American Empire")

"Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people. The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of a private power to a point where it becomes stronger than the democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group, or by any other controlling private power.
Franklin D. Roosevelt (1882-1945), 32nd American President (1933-1945). (in 'Message to Congress on Curbing Monopolies', April 29, 1938)

"The flood of money that gushes into politics today is a pollution of democracy."
Theodore H. White (1915-1984), American political journalist, historian and novelist, (in Time magazine, Nov. 19, 1984)

"Well, Doctor, what have we got—a Republic or a Monarchy?" A Republic, if you can keep it".
Benjamin Franklin (1706-1790), American inventor and U.S. Founding Father. (An answer to a lady's question at the close of the Constitutional Convention of 1787)

Poll after poll indicates very deep political divisions among Americans, with indications that such divisions are deepening, and even widening as a consequence of the the pandemic. Indeed, according to the most recent NPR/Ipsos poll, seven in ten Americans believe the country is in crisis and is at risk of failing.

Why so much pessimism and such disintegration?

· Major shifts in domestic policies over the last 40 years

Over the last four decades, there have been two important structural shifts in the U.S. that have profoundly changed the functioning of its political and social systems in a most negative way.

The first was the decision by the Reagan administration (1981-1989) to open American airwaves to extremist political groups. Indeed, in 1986, the Reagan administration and the Federal Communications Commission (FFC) abolished the 1949 Fairness Doctrine rule in licensing the airwaves to radio and television operators. That policy required the  holders of broadcast licenses both to "present controversial issues of public importance and to do so in a manner that was honest, equitable, and balanced." The policy was formerly repealed in 1987.

Secondly, on January 21, 2010, the U.S. Supreme Court made a controversial decision regarding the role of money in politics. Indeed, the court issued a 5-4 decision in favor of a plaintiff, Citizens United, which struck down restrictions on the amounts of money spent in the political arena by corporations, including nonprofit corporations, labor unions, and other associations, by declaring that "money is speech", which could not be regulated under the First Amendment.

That 2010 Supreme Court decision was an important break with the past, because it reversed century-old campaign finance restrictions, and it has enabled corporations and other special interest groups to spend unlimited amounts of money in American elections.

To the traditional rule of "one person, one vote", expressing the principle that citizens should have equal representation in voting, the U.S. Supreme Court has, in fact, added the rule of "one dollar-one voice" for corporations, nonprofit organizations and labor unions. The more dollars an outfit has, the stronger is its political voice and its political influence. As a consequence, this has moved the American electoral system closer to a de facto plutocracy and power politics for the super-rich and special interests. As former president Jimmy Carter (1924- ) said in 2015, the United States is now "an oligarchy with unlimited political bribery". 

These two influential decisions, in 1986 and in 2010—coupled with friendly fiscal measures by the U.S. government and an ultra-loose monetary policy pursued by the Fed in the aftermath of the 2007-08 financial crisis and during the 2020-22 pandemic—have been instrumental in entrenching the money oligarchy and the special interests of the ultra-rich in the United States. Their increased wealth has given them a dominant control over the political propaganda machine (print and electronic media), over the electoral process and the overall functioning of public institutions.

· Income and wealth inequalities are high and increasing in the U.S.

Income and wealth inequalities in the United States are presently more severely skewed in favor of upper-income Americans than over the last 50 years, while the U.S. middle class, where a clear majority of Americans used to belong, is shrinking. For instance, according to the Pew Research Center analysis, the relative share of U.S. aggregate income of American adults in the middle class fell from 62 percent in 1970 to 43 percent in 2018—a significant drop. During the same period, the share of upper-income Americans rose from 29 percent in 1970 to 48 percent in 2018. Even the share of lower income Americans has fallen from 10 percent to 9 percent.

The shifts in U.S. aggregate wealth among upper-income families and middle- and lower-income families have been even more pronounced than income inequality and are growing since the early '80s. 

For example, also from Pew Research, the share of American wealth held by upper-income families was 75 percent in 1983, but surged to 87 percent in 2016. Middle-income families and lower-income families saw their share of U.S. wealth decline. The former's share fell from 22.3 percent in 1983 to 11.8 percent in 2016, while the latter saw their share of wealth fall from 2.7 percent in 1983 to 1.2 percent in 2016.

Many factors can explain such a significant shift in the relative shares of income and wealth over the last half-century, in the United States, but also in the most advanced economies in Europe, in Canada and in Australia, in a less profound way.

The most relevant are: 

The process of rapid technological changes, deregulation and the rise of new industries have produced a profound transformation in the way communications and information in general are being transmitted almost instantaneously, through a proliferation of television and radio networks and computer networks.

In this new context, unscrupulous media won't hesitate to suppress information and offer superficial or biased analyses, going as far as to generate disinformation and fake news, where facts are denied and lies glorified. For this purpose, they can resort to psychological manipulation through the propaganda technique of the 'Big Lie'. In so doing, they can profoundly influence the masses in a chosen direction. This has opened the gates to demagoguery.

The advent of social media, for instance, was made possible by the Internet, with the support of ever more powerful microprocessors, and by interconnected computer networks. This is the technology that has allowed for the creation of numerous social communication platforms (Facebook, Twitter, LinkedIn, etc.) and which have generated enormous personal wealth for some individuals.

The development of a more globalized economy has also transferred political power in favor of multinational corporations and banks, at the expense of national governments. Indeed, in the mid-1990s, there was an acceleration of economic and financial globalization, when low cost communication networks intensified the international movements not only of goods and services through cross-border trade, but also of financial capital and direct investment, work and technology, from high wage countries to lower wage economies.

Also, in many advanced economies, there was a relative institutional decline of labor unions, and this played a role in widening the gap between more skilled and less skilled workers and in enlarging the gap between the rich and poor.

Governments have also played an important role in exacerbating income and wealth disparities through fiscal policies, which lowered taxes on high incomes and transferred subsidies and grants to the wealthy. This has also been the case with monetary policies, which have created financial bubbles in the real estate markets and in the stock market, thus favoring the wealthiest among owners.

One must also add the policies of mass immigration pursued by certain governments, which have had a disproportionate negative impact on low-wage earners, especially when such policies increase the competition between less skilled workers.

It is not surprising that all these important technological and economic transformations, and the concomitant shifts in income and wealth disparities, have created political and social resentment among many low-income earners. They strongly resent being pitted against low-wage earners in less developed countries through free trade and more imports of labor-intensive goods, and, at home, through mass immigration. For these workers, it's a double whammy.

A substantial part of the current divisiveness and the refusal to compromise observed in the U.S. can be traced back to this increasing trend toward income and wealth inequalities between high income earners and low income earners.

· Violence and civil tensions are on the rise in the U.S.

Money and guns seem to be the modern gods of America. [N.B.: In June 2018, a Small Arms Survey estimated that there were 393.3 million guns, some military guns, in civilian hands in the United States, i.e. 120.5 guns per 100 inhabitants.]

This could explain why violence of Americans against other Americans seems to be so deadly, and while this is increasing and even encouraged in some quarters. In only one year, in 2020, there were some 43,000 people killed by firearms in the United States, an average of over 100 deaths per day.

Politically, the violent storming of the U.S. Capitol by a pro-Trump mob, on January 6, 2021, failed in its objective of reversing the democratic results of the November 3rd 2020 election. However, evidence mounts that such a full-fledged and seditions attempted coup d'état had been well organized and planned in advance.

If so, this is likely to be a harbinger of unsavory things to come for the United States. About one third of Americans now think that violence against the government can be justified. Some observers are not even excluding a possible new civil war. They are troubled by the fact that the Pentagon pays to broadcast the conspiracy-prone Fox News network to its 800 bases around the world. 

Domestically, some instances of economic anarchy have occurred in the San Francisco Bay area, where organized mobs have been charging and looting stores. It would not be a surprise to see such a phenomenon spreading to other large American cities, especially if a serious economic recession were to follow the current financial excesses.


In matters of politics and social affairs, wisdom calls for ruling at the center in order to unite rather than divide. Governing for extremist interests, either left or right, only encourages the fragmentation of a nation.

Currently, several indicators show that the United States has entered a phase of internal self-destruction, due to a series of political, economic and technological factors, and because of all the disruptions that ensue, some of which have been exacerbated by the on-going pandemic.

If the United States were to continue on the same path of extreme political divisiveness, social disintegration, hatred between groups and dangerous economic inequalities, this could have profound consequences for itself and for its democracy, of course, but also for the entire world.

The end result of it all could be more moral decline, more political extremism and gridlock, more costly conflicts abroad and more violence at home. This does not bode well for the future.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book , in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

NOTE: Professor Tremblay's articles may be reproduced without charge by non-profit sites, provided they are complete and the source and author's name are clearly indicated. For commercial reproduction in a magazine or book or on line, it is necessary to obtain the express permission of the author ( or his assistant (

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Posted Thursday, January 6, 2022.

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Tuesday, December 21, 2021

Is Today's Canada a True Democracy?


Merry Christmas and a Happy New Year 2022!

Tuesday, December 21, 2021

Year-end thoughts: Is Today's Canada a True Democracy?

Some people allege that Canada is a democracy. Let us look more closely.

• Canada has an unelected Head of State who is a foreign Monarch, named for life. That sounds very much like the Middle ages, doesn't it?

• Just as in the U.K., Canada also has an unelected 'Chamber of Lords', called the 'Senate' in Canada, where the oligarchy that rules Canada from Toronto and Ottawa places the servants of the system to oversee the elected House of Commons and amend or reject laws it doesn't approve of.

• The Canadian government can function after only receiving some 20 percent of support from the electorate, as is the case with the current minority liberal government, and still contend that it has a 'mandate' to change Canada profoundly. 

• The Canadian confederation has been substantially centralized since the fundamental changes made to the Canadian Constitution by politicians—without a referendum—in 1982. Canadian provincial governments, which previously had exclusive rights in the 1867 Constitution, such as the Quebec government regarding language, culture and education, have been forcefully placed under the tutelage of unelected judges named and paid solely by the federal government.

• Indeed, to complete this pyramid of power, Canada has a Supreme Court and other federal courts, filled with lawyers, among whom some have donated or rendered services to the party in power. These courts can not only revise the form of laws, but also change them substantially, or annul laws that have been democratically voted by governments, especially by provincial governments.

• And to top it all off, the Canadian federal government owns and operates its own radio and TV networks, in French and in English, which can spew out government propaganda at will.

A democracy? Canada's system of government is, at best, closer to being an oligarchic form of government, in which ordinary citizens do not have much to say, because the pyramid of power is inverted with the ultimate political power at the top, and not at the level of the sovereign people. We are far from a system of government "of the people, by the people, and for the people", in which the supreme political power in society rests with the citizens.


P.S. We could add that the Canadian federal government has access to its own central bank, which can print money at will and impose a stealth inflation tax on the people.


Professor Rodrigue Tremblay, 
emeritus professor of economics, 
Université de Montréal

Monday, November 1, 2021

The 'Night of the Long Knives' of November 4-5, 1981, and the Canadian Federal Constitutional 'coup de force' of 1981-1982 Against Quebec*

By Rodrigue Tremblay, professor emeritus of the University of Montreal and former minister

"One of the saddest constancies in the conduct of those in power is the utter inability that they all seem to acquire to admit the slightest mistake. They prefer to stumble of "run away" rather than simply admitting that they were wrong, that is to say that they are human. René Lévesque, Le Journal de Montréal, Dec. 1970.

"There were indications and polls that the government had for several months, and in most cases, they raised fears of a defeat of the sovereignist option. Nevertheless, the Parti Québécois had decided without possibility of repeal, and whatever the circumstances, that the consultation would take place during its first term. Wanting to give itself an obligation of result, the party created a calendar obligation!" Claude Morin, Les prophètes désarmés, Boréal, 2001, p. 209-210.

"In the assault on Québec by Ottawa in early November 1981, the aggressor was Pierre Elliott Trudeau... The gravedigger of Quebec's veto power was ultimately the current Prime Minister of Canada. — The justifications that Mr. Trudeau multiplies on this subject are pure intellectual boasting, a lying demagoguery." Claude Ryan, Le Devoir, Dec. 1982.

November 4-5 marks the 40th anniversary of events that have profoundly impacted the history of Quebec and its place in the Canadian Confederation.

It was, indeed, during the night of November 4-5, 1981, that secret negotiations—which took place at the Château Laurier in Ottawa, between the Canadian federal government of Pierre Elliott Trudeau (1919-2000) and the premiers of the nine English-speaking provinces, but in the absence and without the knowledge of the government of Quebec—led to the acceptance by the former of the constitutional project of the sitting Canadian Prime Minister. 

The entire constitutional process was a failure of democracy. The Canadian government did not hold any pan-Canadian referendum, or even a special election, to obtain the approval of the sovereign people for its 1981 constitutional project, which was subsequently incorporated into the Constitution Act of 1982, and which was never signed by the Quebec government.

In addition, Mr. Trudeau's project did not include, as had been promised during the 1980 Quebec referendum campaign, that the insertion of a Charter of Rights and Freedoms in the Canadian Constitution would take into account the "distinct French character of the Quebec society" and that the government of Quebec had the responsibility to protect and promote this distinctiveness, while respecting fundamental freedoms.

• The thread of events that led to the exclusion of Quebec from the 1981 constitutional agreement and the Constitution Act of 1982

What triggered the Canadian constitutional negotiations process was the decision of the Government of Quebec to hold a constitutional referendum on May 20, 1980, in the hope of obtaining a 'mandate to negotiate, on an equal footing, a new constitutional agreement between Quebec and the rest of Canada', according to the principle of the right of peoples to self-determination.

However, a number of important political events occurred in Quebec in the winter and spring of 1980, after the referendum question was adopted, on December 20, 1979.

First, federal elections were held on February 18, 1980. The results gave strong electoral support to Pierre Elliott Trudeau, who regained the post of Prime Minister. The Liberal Party of Canada (PLC) obtained 68.2% of the votes in Quebec and elected members in 74 of the 75 Quebec ridings.

Second, the federal government decided to get directly and massively involved in the Quebec referendum campaign by holding debates in the House of Commons on the Quebec government's proposals, beginning on April 15, 1980.

The debates in Ottawa spanned two weeks, and they allowed Prime Minister Pierre Elliott Trudeau to partially eclipse Claude Ryan, the leader of the "No" campaign. Trudeau personally intervened also on April 25, 1980, when he wrote an 'open letter to Quebecers', in which he promised that he would do everything in his power "to reform the Canadian Constitution" in the event of a victory of the "No", but without specifying the content and direction of such a reform.

Indeed, Mr. Trudeau did not explicitly state whether such a reform would go in the direction of the nine autonomist recommendations for a 'renewed federalism' proposed by Claude Ryan, even if many Quebecers believed that this was going to be the case. The proposals of the "No" camp had been made explicit in a constitutional policy document called the Beige Book, which the PLQ published on January 9, 1980. These proposals were presented as an alternative to the manifesto of the "Yes" campaign entitled 'Equal to Equal'.

Canadian Prime Minister Pierre Elliott Trudeau was not registered with the "No" committee, as made mandatory by the provisions of the Quebec Referendum Act that tightly restricted all campaigning to the designated "Yes" and "No" committees with set budgets. Nevertheless, Trudeau intervened during an important rally for the "No" camp on May 14, just days before the vote, and made commitments that strongly contributed to the defeat of the "Yes" option.

Trudeau announced:

"If the answer to the referendum question is NO, we have all said that this NO will be interpreted as a mandate to change the Constitution, to renew federalism. I make a most solemn commitment that following a NO vote, we will immediately take action to renew the Constitution and we will not stop until we have done it. I make a solemn declaration to all Canadians in the other provinces. We, the Québec MPs, are laying ourselves on the line, because we are telling Quebecers to vote NO; [...] and we will not agree to your interpreting a NO vote as an indication that everything is fine and can remain as it was before."

In the end, on May 20, 1980, the constitutional mandate sought by the Lévesque government was rejected with a "No" vote of 59.56% against a "Yes" vote of 40.44%.

• The consequences of the 1980 referendum defeat for the Lévesque government and for Quebec

After its defeat, the Lévesque government made a number of strategic mistakes vis-à-vis the Canadian federal government, which had emerged as the big winner in the referendum fight, and which wanted to go ahead with constitutional changes as soon as possible.

The Lévesque government did not offer its resignation. Indeed, a government that loses a plebiscite must normally resign, because a plebiscite defeat is, in some ways, more important than an electoral defeat. To everyone's surprise, the Lévesque government did nothing. It acted as if such a defeat was a minor setback and that it could remain—even without a mandate—Quebec's negotiator vis-à-vis the Canadian government.

Even after Pierre Elliott Trudeau published his "open letter to Quebecers", on July 15, 1980, in which he admitted, not without a certain arrogance, that the "constitutional changes"  to come would go int the direction of a centralized and unitary Canadian federalism, the Lévesque government stayed pat. It made no protest against what appeared to be a clear betrayal of the promises made implicitly and explicitly during the referendum campaign.

When the Prime Minister of Quebec attended the first federal-provincial conference, held in Ottawa on September 15, 1980, to officially begin major negotiations on upcoming constitutional changes, he could not claim to have a mandate to propose constitutional changes in the name of the people of Quebec, since such a mandate had been refused.

Similarly, when the Supreme Court of Canada, chaired by Bora Laskin (1912-1984), a personal friend of the Canadian Prime Minister, ruled on September 28, 1981, that the Trudeau government only needed the support of a "sufficient number" of provincial governments to proceed with its constitutional reformand not their unanimous acceptance, as had been the case before—the government of Quebec found itself quite helpless and in a position of great vulnerability.

Indeed, the Lévesque government's strategy to oppose the federal government's unilateral constitutional goals consisted in joining with seven other English provincial governments to form the so-called Group of Eight.

However, this interprovincial opposition front was very fragile and in serious danger of collapsing, as a result of the complacent interpretation by the Supreme Court of Canada. Indeed, it was obvious that the Trudeau government had only to agree to the few requests from the English-speaking provinces to secure their support.

This was made all the easier since, without having previously consulted his colleagues in the Group of Eight, Prime Minister Lévesque had openly accepted Pierre Elliott Trudeau's trap proposal to hold a double pan-Canadian referendum on the Charter of Rights and Freedoms and on an amendment process, an idea that profoundly displeased the English-speaking premiers and which they would want to avoid at all costs.

The breakup of the Group of Eight occurred on the night of November 4-5, 1981... and we know the rest.

• The consequences of the federal constitutional coup de force of 1981-1982 for the people of Quebec and for the French-Canadian nation

Three major consequences for the people of Quebec and for the French-Canadian nation as a whole followed the federal constitutional coup of 1981-1982.

1- Quebec's elected Parliament has since been placed under the arbitrary tutelage of a "government of judges", unelected and appointed by the sole Canadian government. [N.B.: In the German federal system, for example, the members of the German Constitutional Court are appointed equally by the Bundestag (the German parliament) and by the Bundesrat (a council of ministers of the Länders, or provinces)].

In such a context, it has become problematic for the Quebec government to legislate in the areas of language, culture, secularism and education, all domains that in the past fell under its exclusive jurisdiction. The most obvious example is the Charter of the French language, better know as "Bill 101", which was amputated of large provisions at the hands of federal courts.

2- Insertion of the political ideology of multiculturalism in the constitutional Act of 1982, (N.B.: Canada is the only country in the world which has put such a political ideology in its constitution), coupled with the adoption of a federal policy of super massive immigration and of population replacement overwhelmingly biased towards English Canada. Ultimately, the latter policy poses a threat to the relative political power and the the very survival of the French-Canadian nation.

3- A move toward increased political centralization at the federal level tends to de facto make Quebec—the only state where francophones form a majority in North America—a domestic colony, subject to the political diktats of English Canada. The result is a major breach of history and democracy.


The constitutional changes leading to an agreement during the 'Night of the Long Knives' on November 4-5, 1981, in spite of the formal opposition of the Quebec government, and which were subsequently introduced into the constitutional Act of 1982, have considerably reduced the sovereignty of the Parliament of Quebec in its areas of its competence.

Because of the new Canadian constitutional context imposed upon Quebec in the post-1982 period, the Quebec government is facing many obstacles in its primary mission to preserve Quebec's future as the only majority French-speaking society in North America.


* This text is partly drawn from the author's book in French: « La régression tranquille du Québec 1980-2018 », Montréal, Fides, 2018, 344 p.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book , in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr Tremblay's site or email to a friend here.

Posted Monday, November 1, 2021.

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Monday, September 6, 2021

Disorderly Retreat from Afghanistan: The U.S. has become an Overextended Military Empire posing a Serious Threat to its long-term Security

 Disorderly Retreat from Afghanistan: The U.S. has become an Overextended Military Empire posing a Serious Threat to its long-term Security

By Dr. Rodrigue Tremblay

(Author of the book about morals "The Code for Global Ethics" and his book about geopolitics "The New American Empire")

"If a state overextends itself strategically—by, say, the conquest of extensive territories or the waging of costly wars—it runs the risk that the potential benefits from external expansion may be outweighed by the great expense of it all." Paul Kennedy (1945- ), British historian, (in 'The Rise and Fall  of the Great Powers', 1987)

"As distinct from other peoples, most Americans do not recognize—or do not want to recognize—that the United States dominates the world through its military power. Due to government secrecy, our citizens are often ignorant of the fact that our garrisons encircle the planet. This vast network of American bases on every continent except Antarctica actually constitutes a new form of empire—an empire of bases with its own geography not likely to be taught in any high school geography class." Chalmers Johnson (1931-2010), American author and professor of political science, (in an article in TomDispatch, 'America's Empire of Bases', Jan. 15, 2004).

"The task facing American statesmen over the next decades, therefore, is to recognize that broad trends are under way, and that there is a need to "manage" affairs so that the relative erosion of the United States' position takes place slowly and smoothly, and is not accelerated by policies which bring merely short-term advantage but longer-term disadvantage." Paul Kennedy (1945- ) British historian, (in 'The Rise and Fall of the Great Powers', 1987).

In 1987, British historian Paul Kennedy (1945- ) wrote a geopolitical book about how great powers rise and fall, in which he studied how economic and military factors can accompany or cause previously dominant  nations to lose their great power status. His main conclusion is that sooner or later a great hegemonic power will become overextended and its economy will struggle to keep its big military machine going. Indeed, an empire can increase its resources by launching wars abroad, at least for a while. However, sooner or later, a situation of permanent war and the military occupation of foreign lands result in more costs than benefits.

There are 193 countries that are members of the United Nations. But one country, the United States, operates an extended network of hundreds of military bases around the world, by far more than all the other countries taken together. Professor David Vine, in his 2020 book "The United States of War" established the total number of American military bases overseas to be close to 800 bases in more than 70 countries. This is enough to place the United States as the first truly global military empire in the history of the world.

Such a widespread collection of foreign military bases has two main consequences. First, it makes sure that the United States is likely to get involved in many foreign conflicts. And, second, it requires an important chunk of the U.S. public budget to be allocated to maintaining such a large military apparatus.

As a matter of fact, in the proposed total 2021-2022 U.S. budget ($6.8 trillion, of which $3.0 trillion or 44% is a deficit), $740 billion is allocated to the U.S. Department of Defense (DOD). However, U.S. military expenditures are much higher than those allocated to the Pentagon. For instance, the 2021 proposed budget for the U.S. Department of Veterans Affairs (VA) amounts to $243 billion. One must also add the nearly $100 billion that the U.S. Department of the Treasury spends on pensions for retired military personnel. Then there is the C.I.A. budget, which was $85.8 billion in 2020 and might possibly be higher in 2021. This amounts to $1,168.8 billion of military-related expenditures, or more than 17% of the total U.S. budget for 2021-2022.

· The overload of the office of American president

For many people, the American debacle in Afghanistan would seem to be proof that President Joe Biden is inept and incompetent, and that his advisers are clueless when it comes to making good decisions and to properly assessing a situation. This is a somewhat unfair appreciation of the circumstances. They are neither imbecile nor incompetent, but they could be overworked and distracted.

In fact, a case can be made that the function of American president has increasingly become way too complex and demanding for a single individual to handle, especially since the United States has assumed a global military role. The U.S. president has only twenty-four hours in his day like anybody else.

Indeed, the American head of state is obliged to manage a huge bureaucracy; he must tackle important domestic issues (pandemic, budget, Congress, etc.); and, as if this were not enough, he must also play the role of an emperor on the international scene and deal with Iran, China, Taiwan, Russia, Iraq, Syria, Yemen, Israel, when not with North Korea, Somalia or Ukraine, etc. At the same time, the few trusted advisers who assist him are called upon to tackle many issues simultaneously. The president and his advisers can easily get distracted by the multitude of international problems that confront their administration.

· The United States and the fall of Saigon in 1975 and of Kabul in 2021

It may be informative to compare two important American military failures, in 1975 and in 2021

· The fall of Saigon on April 30, 1975

The first instance when a major military expedition turned into a genuine fiasco for the United States occurred in 1975, with the fall of Saigon, capital of South Vietnam. The city could no longer benefit from the protection offered by the US Air Force, since an agreement to withdraw American forces had been concluded two years earlier. The date of April 30, 1975, marks the hasty and chaotic withdrawal of the last 6,000 Americans to leave SouthVietnam along with 50,000 Vietnamese, after Saigon fell to the North Vietnamese army.

Indeed, it's very important to underline that in Paris, on January 27, 1973, the American Secretary of State Henry Kissinger signed an armistice treaty, called the Paris Peace Agreement. This agreement was concluded between the United States and South Vietnam, on the one hand, and the northern Democratic Republic of Vietnam (DRV) and the Viet Cong, on the other hand. The agreement called for "an immediate cease-fire, the withdrawal of American military personnel within two months, the release of American prisoners, the end of the bombardments and the reunification of Vietnam by peaceful means."

The goal was to allow the United States to extricate itself "with honor" from the Vietnamese quagmire. However, it was nothing more than a soft surrender on the part of the United States. The "peaceful reunification" clause between the North and South Vietnams was untenable. It was, in fact, not respected by the DRV and its allies, even if it was paramount to the Nixon administration.

· The fall of Kabul on August 15, 2021

The parallel between the fall of Saigon on April 30, 1975, and the fall of Kabul on August 15, 2021, is troubling. In both cases, the U.S. government had previously entered into an agreement with the enemy to withdraw its armed forces from the country, leaving the government in place without military air protection. Similarly, in both cases, the withdrawal of American civilians and local allies took place in an atmosphere of haste and chaos.

The difference between the two is that in the case of Afghanistan, Donald Trump's administration left the Afghan governmentand even NATO alliesoutside of the negotiation process. The Trump administration signed an Accord of armistice with the Taliban, on February 29, 2020, in Doha, Qatar. The so-called "deal" was signed between American Special peace envoy Zalmay Khalilzad (under the supervision of U.S. Secretary of State Mike Pompeo) and the Taliban leader Mullah Abdul Ghani Baradar.

The glaring absence of the Afghan government at the negotiating table greatly undermined its credibility. The fateful date of February 29, 2020, also marks the beginning of the demoralization and disintegration of the Afghan army, which felt abandoned and which could henceforth anticipate losing US military air cover and assistance in their fight against the Taliban.

The Feb. 2020 Trump-Taliban agreement called for the United States to reduce its forces from 13,000 to 8,600 over the next three to four months, with the remaining U.S. forces to be withdrawn in the following 14 months, or by May 1, 2021.

For their part, the Taliban pledged to put an end to attacks against American and coalition forces ❲but not against the Afghan army❳, prevent terrorism, including the obligation to renounce al-Qaida and "prevent this group or others from using Afghan soil to prepare attacks against the United States or its allies."

Trump's former Security adviser, Gen. H.R. McMaster, has since called Trump's "deal" with the Taliban a "capitulation deal", because it was clearly paving the way for the Taliban to regain power in Kabul. As McMaster put it, "The Taliban didn't defeat us. We defeated ourselves!"

· A joint responsibility Trump-Biden for the 2020-2021 Afghan disaster

Initiated in October 2001, by Republican George W. Bush, both incumbent Joe Biden and former President Donald Trump wanted to end the U.S. military involvement in Afghanistan, without paying too much attention to the consequences. They believed that a military withdrawal without conditions could be done smoothly, and they counted on the collaboration of the Taliban to do so. —This was largely wishful thinking.

President Joe Biden was anxious to focus more on the current frictions that the United States has with Iran, China and Russia, and he endorsed the agreement reached by Donald Trump's government in February 2020, for a complete and definitive withdrawal of the American military forces from Afghanistan, no later than May 1, 2021.

He announced his decision on April 14, 2021. i.e. that the U.S. and NATO troops were going "to be out of Afghanistan before we mark the 20th anniversary of that heinous attack on September 11th", and that he was pushing back the final date for a complete withdrawal to August 31, 2021.

The option of extending the presence of a reduced U.S. military mission in Afghanistan until the country was truly stabilized and that there would be no possibility for a resurgence of al-Qaeda and the Islamic State (ISIS)—and above all the Islamic State group in Khorasan (ISIS-K), as suggested by former American officials—was not retained.

Let's add that the Biden administration left behind billions of dollars of military equipment recuperated by the Taliban!

Neither Trump nor Biden figured out that this would betray twenty years of a direct American commitment in Afghanistan, and that a complete and precipitous military exit would leave many thousands of Afghans who had worked for the U.S. government in clear danger for their lives. Similarly, they didn't seem to have considered the worst-case scenario: that the Taliban would rapidly overthrow the pro-American government in Kabul and that total chaos would ensue. (N.B.: The C.I.A., for one, had predicted the collapse of the Afghan government and a quick Taliban victory if all American troops were to withdraw from the country.)

Nevertheless, even though both Trump and Biden were involved in planning the U.S. military exit from Afghanistan, it was the Democratic president who made the final decisions that led to the—preventable—August 2021 fiasco. This is why despite Biden's denial, it's likely that it will be the Democrats who will suffer an electoral backlash for his crisis mismanagement, in the 2022 and 2024 elections. It remains to be seen how important such setbacks will be.

· Conclusion

The experience of the last fifty years has shown that the idea that prevailed after World War II, that the United States could count on its military supremacy to impose democracy and capitalism on other countries, is past due. No country, whatever its military might, can impose its will on other countries forever. This was an imperial idea that American neocon thinkers resurrected after the fall of the Soviet Empire (USSR) in December 1991, but nothing good came of it.

Since Bill Clinton's administration (1993-2001), successive U.S. governments  have abandoned the United Nations and its peacekeeping mechanisms. They replaced U.N. operations with those of NATO, which are more flexible, for sure, but also much less legitimate. — This was a mistake.  A return to the legitimacy of a reformed United Nations Organization would seem to be the road to follow in the coming years, if the world is going to avoid falling back into destructive conflicts.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book , in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr Tremblay's site or email to a friend here.

Posted Monday, September 6, 2021.

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Monday, August 16, 2021

A Chaotic US Exit from Afghanistan: American Emperors have no clothes



by Dr. Rodrigue Tremblay

A Chaotic US Exit from Afghanistan: American Emperors have no clothes

Monday, August 16 2021

The Afghanistan war was a botched operation from day one, when George W. Bush invaded that country, in October 2001, "because something had to be done after the 9/11 attack on the United States". Then, George W. Bush sealed the issue for the future when he withdrew a large number of U.S. troops from Afghanistan to invade the country of Iraq, in March 2003, with his big lie about "weapons of mass destruction" in that country.

After terrorist Osama Bin Laden was assassinated in Pakistan, on May 2, 2011, President Barack Obama could have called for the end of the Afghanistan military adventure and declare victory. He did not, because he knew full well that without U.S. military support, the puppet Afghan government would collapse, and he would have to take full responsibility for the disaster.

And in February 2020, then President Donald Trump made an ominous 'deal' with the Islamic taliban, in Doha, Qatar, fixing the date of May 2021 for a complete withdrawal of American troops from Afghanistan. Even though President Joe Biden extended that date to late summer 2021, he more or less followed Trump's plan of withdrawal, no matter what.  N.B. : The Trump-taliban agreement was to be implemented after the November 2020 election, which Mr. Trump expected to win.

Now, President Joe Biden is likely to be the only one bearing the full political cost of twenty years of a bad American foreign policy by previous administrations.

Granted, the Biden administration should have better anticipated the chaos to follow a precipitous American withdrawal from Afghanistan and better planned in consequence. The images of sheer chaos seen around the world will follow the United States for years to come.

That will make it easier for Donald Trump and Republicans in the U.S. Congress to dump the entire responsibility for the disaster on the sitting president, on his Security advisor Jake Sullivan and on his Secretary of State Anthony Blinken. 

Who says that politics is a fair and honest game?


Wednesday, July 7, 2021

The Economic Aftermath of the War Against the Pandemic: Inflation, Recession, deflation, Stagflation or Secular Stagnation?


by Dr. Rodrigue Tremblay

(Author of the book about morals "The Code for Global Ethics" and his book about geopolitics "The New American Empire")

"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." John Maynard Keynes (1883-1946), British economist, 1936.

"All crises have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment." John K. Galbraith (1908-2006), in 1994.

"Sooner or later a crash is coming and it may be terrific. The vicious circle will get in full swing and the result will be a serious business depression. There may be a stampede for selling which will exceed anything that the Stock Exchange has ever witnessed. Wise are those investors who now get out of debt." Roger Babson (1875-1967), American entrepreneur, economist and business theorist, on September 5, 1929.

After forty some years of disinflation and declining interest rates, there is some confusion about whether or not this long disinflationary decline is about to end, to be replaced with a creeping up of real wages, prices and interest rates.

This could certainly be the case in the wake of the current post-pandemic economic recovery. In the longer term, we can foresee a context of significant demographic changes, while economic and financial globalization will continue to show signs of abating, and could even be reversed in the years to come.

These changes will produce negative shocks on labor supply and be accompanied by upward price pressures. All of this, of course, in the context of significant climate change and rising adjustment costs.

Similarly, it is also possible that major economies will experience creeping inflation, at least in the coming few years, as this has happened after the economic dislocations of a war.

After World War II, for instance, the six-year period of reconstruction, from 1946 to 1951, was characterized by an average inflation rate of 6.4% in the U.S. This was the result of a combination of both demand-pulled inflation and cost-pushed inflation. Many governments and central banks had injected a lot of money in the economy during the war, but because of rationing, people were allowed to spend only part of their incomes and were forced to save a higher proportion of their incomes than they otherwise would. Inevitably, saving rates were very high. Consequently, after the war, there was a lot of pent-up demand, and increased spending pushed prices up.

Also, industrial plants had to be refitted to produce private goods, and those costs also pushed up prices. Moreover, the real estate market was especially propelled by the demographic factor of the post-war baby-boom surge and by more accessible mortgages.

Today, in the wake of the war against the 2020-2021 global pandemic, the real estate market is also very hot, again propelled by a demographic phenomenon, this time by record immigration levels, accompanied by generous public emergency income support programs and by super low mortgage rates.

· Larger public deficits and growing public debts, and ultra-lax monetary policies by central banks

In order to fight the economic damage brought about by the 2020-2021 pandemic and the subsequent economic lockdowns, governments and central banks in major economies embarked upon aggressive income support programs, larger deficits and higher public debts, combined with important measures of money printing by central banks.

In the U.S., for example, the national debt (excluding total unfunded Social Security and Medicare promises) of the federal government ballooned from $22.7 trillion in 2019, to $28.2 trillion in May 2021, a 24% increase and a level that has pushed the U.S. national debt above 100% of yearly GDP.

Also in the U.S., the Fed purchased massive amounts of Treasury and mortgage-backed securities with newly printed money, as it did during the Great recession of 2008-2009. Indeed, on March 15, 2020, the Fed announced that it would be buying at least $500 billion in Treasury securities and $200 billion in government-guaranteed mortgage-backed securities over "the coming months".

And, in December 2020, the Fed reiterated its policy of buying monthly 'at least' $120 billion of Treasury bonds and mortgage-backed securities ($80 billion of government debt and $40 billion of mortgage-backed securities), and this "until the economy recovers to 'full employment'".

However, there could be a problem in defining 'full employment', because millions of workers have decided to exit the labor force or to retire for good during the pandemic and the economic downturn.

Thus, the labor force could be smaller today than before the pandemic, resulting in a tight labor market and labor shortages in some trades, because, according to employers, some workers simply 'do not want to work', unless it is from home. Therefore, no matter how long the Fed keeps interest rates to the floor, it's dubious that all jobs lost during the pandemic recession will come back.

· The risk of financial bubbles

However, the massive purchases of securities by the Fed have pushed short-term interest rates to close to zero, while keeping longer-term interest rates artificially low. In so doing, the Fed (and other central banks) has created bubbles in bond prices, in stock prices and in real estate prices. And when such bubbles burst, a severe recession could logically follow.

The Fed's ultra loose monetary policy of excess liquidity has also resulted in the unusual situation of banks being awash with excess cash that they couldn't lend profitably, leaving them no other choice but to deposit most of it at the Fed, in the form of excess reserves. As of June 2, 2021, American banks' deposits totaled $15,802.6 billion (not seasonally adjusted), as compared to only $13,912.2 billion in March 2020, a 12% increase.

As an indication of such an ultra loose monetary policy, the Fed's balance sheet ballooned during the pandemic, going from $4.17 trillion in late December 2019, to $7.95 trillion in early June 2021, a huge 90% jump.

An extended ultra loose monetary policy can possibly feed inflation, or, if an economy is already in a recession or into an economic downturn, it can produce so much liquidity that the economy becomes mired in a liquidity trap.

· A liquidity trap and a debt trap

In my intermediate macroeconomics textbook, here is how I define John Maynard Keynes' liquidity trap

The monetary situation that prevails when short-term interest rates are way down and everyone anticipates a fall in the price of bonds and an increase in interest rates, so that any further increase in money supply by the central bank is not spent but is hoarded.

To extricate an economy from a liquidity trap, a central bank can gradually end its purchases of securities and let interest rates slowly rise. On the other hand, fiscal policy can become more aggressive in stimulating investments and aggregate demand.

Currently, central banks in the largest economies are at an impasse, as their persistent policy of artificially keeping interest rates close to zero—with even negative interest rates in Europe—has not only created a liquidity trap, it has also encouraged a general increase in debt levels, possibly creating a debt trap when rates are one day allowed to rise.

· Debt trap for monetary policy

Indeed, central banks are not immune from a situation of moral hazard or from a debt trap.

When a central bank pursues an easy money policy and keeps interest rates artificially low (and even pushes them into negative territory) over a long period, it creates an environment that incites not only governments, but also businesses and consumers, to take on heavy or excessive debt loads. This is the well-known case of Japan, where the economy has been bogged down by deflation and economic stagnation for more than a quarter of a century.

Both in Europe and in North America, central banks have been pursuing—since 2008, and even more since March 2020—very aggressive quantitative easing (QE) monetary policies. They have kept interest rates artificially low, a replica of Japanese monetary policy.

For example, in the United States, as in most developed countries such as Canada, total mortgage debt is presently very high, even as some other categories of debt, such as credit card debt, have slightly declined.

In so doing, central banks may have built for themselves a policy debt trap, because they may have reasons to fear that letting interest rates return to their normal level could trigger a wave of bankruptcies, and this would damage the economy. Central banks may have become prisoners of their own ultra loose monetary policy.

· Cycle analysis for the real estate market: The Kuznets' cycle

In the U.S., and especially in Florida and California for obvious demographic reasons, the 18-year Kuznets' cycle is well and alive. Previous tops in this cycle were in 1987 and 2005, while bottoms occurred in 1993 and 2011. If the cycle is as reliable nowadays as in the past, (with 12-year price upswings and 6-year price contractions), the year 2023 could see another major top unfolding in real estate prices in the U.S.

Considering that Fed chairman Jerome Powell has indicated that it is the Fed's intention to keep interest rates at rock-bottom levels for months to come, possibly until 2023, this would seem to coincide perfectly with the Kuznets' cycle rationale.

· What does this entail for future inflation, recession, deflation, stagflation and even 'secular stagnation'?

Let us keep in mind that the 2005 top in real estate prices was followed by the 2007-2008 subprime mortgage crises and the 2008-2009 Great recession, two crises in which the Fed played a major role.

Now, sixteen years later, it would seem that the Fed is going to keep the bubbles alive until 2023, through its purchases of securities and its ultra loose monetary policy. Therefore, inflation should keep creeping up for some months to come.

When the Fed stops its purchasing program, letting interest rates adjust upwards, this will be the sign that the bond market bubble and the real estate bubble are about to end. The stock market bubble could linger, but not much longer. However, when this happens, a severe economic recession could follow.

· Conclusion

The coming years should see major reversals in some important economic trends, especially in demographics and in globalization. The 2023-2025 period, in particular, should be watched closely. It could herald a period of stagflation, that is a period of slower economic growth, rising taxes and creeping cost-push inflation.

Indeed, after that period, the demographic shift could intensify. The 2023-2029 years will see the last baby-boomers retiring, while governments could be facing a looming post-pandemic budgetary crisis arising from the ballooned public debt and the increased costs of caring for an aging population.

Because of the demographic shock to be experienced in most advanced economies in the coming years, labor shortages are likely to linger on, pushing real wages and prices up. Businesses will have a growing incentive to accelerate the use of computer-assisted automation, robotization and artificial intelligence. Such a move will reduce the demand for some categories of labor and may keep some wages in check.

A wholesale reliance on mass immigration cannot solve a labor shortage, except in some well-identified sectors or industries requiring specific skills. The generous refugee and family reunification programs in place in many countries add more to the demand for labor than newly imported workers can do to alleviate the labor supply shortage, besides creating social problems.

Finally, let us also keep in mind that 2029 will mark the 100th anniversary of the beginning of the Great Depression (1929-1939). This could revive talks among economists about a potential era of 'secular stagnation', under the influence of negative structural demographic factors and a slowdown in economic and financial globalization.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "
The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book , in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr Tremblay's site or email to a friend here.

Posted Wednesday, July 7, 2021.

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Monday, May 10, 2021

Unregulated Digital Cryptocurrencies VS Regulated National Currencies: Is There a Danger?


Unregulated Digital Cryptocurrencies VS Regulated National Currencies: Is There a Danger?

by Dr. Rodrigue Tremblay

(Author of the book about morals "The Code for Global Ethics" and his book about geopolitics "The New American Empire")

"I have arrived at the conviction that the neglect by economists to discuss seriously what is really the crucial problem of our time is due to a certain timidity about soiling their hands by going from purely scientific questions into value questions." Friedrich Hayek (1899-1992), (in a conversation, on Feb. 9, 1978).

"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." Milton Friedman (1912-2006), (in 'The Counter-Revolution in Monetary Theory', 1970).

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner, which not one man in a million is able to diagnose." John Maynard Keynes (1883-1946), (in 'The Economic Consequences of the Peace'. 1919, Ch. VI, pp. 235-236).

A few years ago, after the 2007-2008 financial crisis, some clever people, whose identity is hidden behind the appellation of 'Satoshi Nakamoto', devised a decentralized electronic system of payments, which is independent of the existing traditional banking system. It is based on a new form of digital 'currencies' or 'electronic currencies', the 'cryptocurrencies'. Some observers have called the cryptocurrency innovation a sort of a new 21st Century digital gold rush.

The supply of a given electronic cryptocurrency is backed by a mathematically constrained scarcity and by a ledger technology that prevents counterfeiting. The demand is supported by a speculative faith of some buyers that other buyers are going to push the price of that cryptocurrency higher and higher. Cryptocurrencies can only be transacted and used as a means of payment within the narrow framework of an electronic network of decentralized registers, which are supported by powerful computers and the Internet.

There are presently as many as 7,000 such digital or virtual cryptocurrencies on the Web, and they serve as a playground for big and small speculators, besides being used as a convenient conduit to make international money transactions, in total anonymity. Even private companies, such as Facebook, are considering launching their own commercial cryptocurrency.

· The Bitcoin was the first cryptocurrency using the blockchain technology

The first cryptocurrency surfaced in 2009 with the Bitcoin, a decentralized and international private digital 'currency'. It is the product of the application of a relatively new computerized technology, the blockchain. In order to limit the supply, the maximum stock of Bitcoins in existence was mathematically and electronically set at 21 million units, so that any increase in demand, once that threshold has been reached, must involve the exchange of existing Bitcoin units or coins. This tends to push prices higher and higher.

· The complicated process of creating cryptocurrencies

The blockchain technology is a  computerized technology using chains of blocks containing data that allow information to be stored and transmitted through a large number of computers spread around the world.

Because of the speculative nature of each cryptocurrency market, its price, such as the price of one Bitcoin in dollars or other traditional currencies, is very volatile. It can fluctuate widely within a short span of time. This conveys the risk that big speculators, with access to large amounts of money and sophisticated trading techniques, could game the system and impose big losses on smaller or inexperienced speculators.

To a certain extent, the world of cryptocurrencies can be assimilated to an unregulated online casino for speculators, and this could lead to the creation of a speculative mania. The cryptocurrency craze is somewhat reminiscent of the Tulip mania in Holland in the 17th Century. At one time, for example, a single rare tulip bulb could be worth more than the price of a house!

· A serious problem: the process of creating cryptocurrency units requires huge amounts of energy

There is an important technical drawback to the process of creating cryptocurrency units: It requires enormous amounts of energy. As more and more cryptocurrency transactions need to be computerized, the network of computers required to solve the complex blockchain calculations must increase, along with the energy it takes to run them.

For example, a study done at the University of Cambridge, in the U.K., concluded that the network of computers used by operators or 'miners' in the process of generating units of the first cryptocurrency, the Bitcoin, consumes more electrical power, in one year, than that used by the entire country of the Netherlands, a country of over 17 million inhabitants.

As the cryptocurrency phenomenon continues to grow, it will require more and more computers to complete one cryptocurrency transaction, and each transaction will end up consuming more and more energy. For instance, a few years ago, a single Bitcoin transaction required as much electricity as 80,000 Visa card transactions. Nowadays, according to the Digiconomist website, a single Bitcoin transaction uses as much electricity to complete as 735,121 Visa transactions, (or 55,280 hours of viewing time on YouTube). And this is increasing on a daily basis. Such a heavy reliance on energy could severely threaten the long-run economic sustainability of the current process of cryptocurrency production.

· Economist Friedrich Hayek's libertarian principle of privately issued fiat currencies

Beyond the technical jargon, it is worthwhile to  know that the idea of having an international system of private money or monies, free of government interference, is an old libertarian dream, It is based on the belief that the private self-interest of competing private entrepreneurs can lead to a general welfare superior to that of government intervention, even when this involves the creation of money.

Indeed, in 1976, economist Friedrich Hayek (1899-1992), of the Austrian school of economics, published a pamphlet entitled The Denationalisation of Money, (with a refined version, published in 1978). Hayek advanced the radical idea that sovereign governments should forgo their central bank's legal monopoly to issue national currencies and leave the issuance of money to private entrepreneurs.

However, at the time, the idea of having competing private currencies was not well received.

Some saw in it the transfer, to private operators, of the public revenues that governments and their central banks receive in the money creation process, called seigniorage. Others feared that the idea of having multiple private currencies used as means of payments would create confusion and chaos in the economy.

It was also thought that private issuers of money would have an incentive to issue too much of it, and thus create inflation and a loss of purchasing power for the users. Many also anticipated that in times of financial crises, governments could not adequately intervene to stimulate production and employment, through an aggressive monetary policy, etc.

Some of these criticisms were the same arguments invoked in the 1930s to abandon the gold standard, a rigid commodity-based monetary standard, which tied national currencies to gold. It was thought that such a system had contributed in causing the Great Depression (1929-1939).

For some thirty years, after the Bretton Woods agreement of 1944, the world was placed under a gold-exchange standard, with the U.S. dollar remaining tied to gold, and most of the other national currencies tied to the U.S. dollar, with fixed exchange rates. However, after the first oil shock of 1973, the gold-exchange standard was itself replaced by the current monetary system of fiat money, i.e. a system of flexible government-regulated currencies, issued by a central bank that oversees the banking system. It is usually connected to other national currencies through flexible exchange rates, so as to maintain equilibrium in the external balance of payments.

· Governments of major countries could begin competing between themselves in adopting official digital currencies and possibly ban private cryptocurrencies altogether

Some ten countries have already banned trading in private cryptocurrencies. This includes: China, Iran, India, Bangladesh, Morocco, Thailand, Uganda, Zambia and Nigeria. The last country to do so is Turkey. Turkey's central bank recently announced that it is outlawing the use of private cryptocurrencies, such as the Bitcoin, in payments for goods and services, a ban that took effect last April 30. It warns speculators that cryptocurrencies present "irrevocable risks", as the market is volatile and there is a lack of oversight. It also cited their use in "illegal actions due to their anonymous structures". No doubt that other countries will follow their example.

Conversely, the governments of major nations have either announced that they intend to set up their own official digital currency or are studying the possibility to do so. For one, the Chinese government has announced its intention to launch an international digital Yuanpossibly to be in full operation for the Beijing Winter Olympic Games of Feb. 2022. Obviously, the new Chinese digital currency for international use could eventually represent a challenge to the U.S. dollar as the preferred reserve currency, and to counteract the practice of various American administrations to impose economic and financial sanctions on other countries for political purposes.

More generally, the advent of a digital Yuan could force other governments to get involved in creating their own international digital currencies. Already, the U.S. Fed has announced that it is studying the potential costs and benefits of developing a digital dollar. No doubt that other governments in the U.K., Europe and Japan would likely follow suit with digital versions of their own currencies, such as a "Britcoin", a "Eurocoin", a "Yencoin", etc.

A world of legal public digital currencies, traded internationally, could be just around the corner, even if money and capital markets are far from being able to operate with digital currencies. Nevertheless, such a purely monetary development could have profound effects on the existing private digital cryptocurrencies. Over time, it could also upend the international and domestic payment systems.

· Conclusion

The future may have in store a growing reliance on digital money, possible public digital currencies issued by a few major central banks. It should be obvious that if governments begin to compete in creating their own digital currencies, this could pose a serious challenge to the current cryptocurrencies in existence, the latter facing a real regulatory threat.

Similarly, in such a futuristic digital context, if it were to materialize, this would raise the issue of how to preserve individual economic freedom, when all financial transactions can be recorded and made available to governments, allowing them to track people's incomes, spending and investment in real time.

It would be ironic if the libertarian monetary innovation of private cryptocurrencies, designed to free users from government interference, were to lead to a world of public digital currencies. Governments would then have even more power over people than today. A resurgence of barter could ensue.1


1. A book of fiction that foretells such a political plot is The Patriot Conspiracy, 2012,  (also found here).


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book , in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr Tremblay's site or email to a friend here.
Posted Monday, May 10, 2021.

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