Contributed by Joe Montero

At a time of worsening international tensions, it would make a great deal of sense for Australia to be playing a constructive role towards reducing these tensions. Sadly, with Scott Morrison and his gang in Canberra, Australia has been dragged into moves that do the opposite.

The shift in Australia’s dealing with other nations has nothing to do with national defence and everything to do with the power of Washington over Australian political decisions. Enough to use Canberra to punch others on the nose, when it will not do for Washington to do so itself.

Behind this is a declining empire that can no longer dominate the global scene without challenge, and increasingly relying on threat and war to cling to the dream of everlasting American power. The decline is about economics. The United States has a huge debt problem with the rest of the world, which came from the under performance of its economy. Much of the manufacturing base has gone.

Doing business relies on financing the world, trading in shares, property, commodity and currency bubbles, and online services. Without these, the American economy would be in real trouble. But the trouble with an economy relying on the creation of debt is that this is not sustainable for ever. The means to pay the debt must be found

The probem ies in that the rate of return on investment has been falling for a long time. The graph be;ow provides a visual representation of what had been happening over the last 30 years.

Source: Fidelity Investments, Asset Allocation Research Team (AART).

Short-term and even medium turn fluctuations tend to cover the longer term fall. Although the illustration above is not an accurate description of what has been happening in the real world, it still gives a good idea of the trend. A further pointer is the bar graph below. It shows a fall in the absolute return on investment.

Source: Fidelity Investments proprietary analysis of historical asset class performance, which is not indicative of future performance.

Stocks delivered their highest performance during the early 1960’s, returning an average of more than 20 percent. Then the return began to shrink to around 5 percent, and into negative territory under recession condition – up to around -8 percent.

Bonds, which are in the main certificates sold to the private sector by government, were used as a means to counter the falling rate of investment, by providing a higher return when redeemed. Some increase on the money supply has also tended to hide what has been happening to the rate of return. Neither government support or more money could ever stem the fall in the return across the whole economy.

We can see from the graph below that the level of global direct foreign Investment has been falling significantly since the stimulus package response to the Global Financial Crisis

The falling away of investment is further revealed by the trend in foreign direct investment (FDI) across the planet. The findings below reveal that since the stimulus era that began with the response to the Global Financial Crisis of 2008 and ended with Donald Trump’s entry into the White House, FDI has been going downwards for developed and developing economies.

FDI inflows: global and by group of economies, 2007–2020 (billions of US dollars)

Source: UNCTAD (preliminary estimates)

For developed economies the FDI flow fell by 69 percent to $229 billion. The United States recorded a 49 percent drop. 31 percent or $107 billion went to China. Most of this flow is financed through the global financial system dominated by American owned banks. The overall decline of 42 percent has its origin in the weakness of the United States Economy.

These are some of the indicators that underline how serious the situation has become. The overall problem of the weakness of the American economy is more complex than this. But these facts alone show that it is in trouble and that the is connected to a change in the pattern of investment.

United States Foreign Debt is ballooning out. The graph below shows the rise in the debt owed by the United States to the world.

This year, $US1.31 trillion is owed to Japan, $US1.071 Trillion to China, and a similar amount is owed to Europe. A more than $3 Trillion debt with no ready means to pay it back provides Washington with an incentive to to compel its creditors to absorb as much a s possible. The way to do this is to open these nations to economic penetration. This is where China fits in. This is the new emerging economic powerhouse, and on track to become the worlds biggest economy. . American economic dominance depends on putting aside this challenge.

Part of the political expression of this is a more aggressive foreign policy.

Pressure is being put on Europe for the continent to deliver itself as a better destination for United States investment. But it is China  that the principal focus is on, simply because of its spectacular growth over the period where most of the world has been slowing down.

Furthermore, China holds 3.4 trillion worth of US dollar reserves. Far more than any other country. This is roughly a third of the total. It gives china a lot of leverage. A sudden release of these reserves would cause an economic tsunami.

Vulnerability lies behind the growing aggressiveness of Washington. Hence the political and trade disputes. All is designed to force concessions and penetrate the Chinese economy. China won’t comply and this increases the tension.

What has this got to do with Australia? A great deal. Major shareholders in the United States have a major stake in the Australian economy and wield political influence through this, their connections, and political funding.

Australia is drawn into a geopolitical game, contrary to Australia’s interests, and serving to champion Washington and the big money behind it.

This means getting drawn into global trade arrangement do not suit Australia. It means getting involved in wars that bring death, misery, and destruction to other nations.

Washington’s economic and military policies include the goal of shifting the cost of its geopolitics to other nations. Some of this is being passe on to Australia, and is part of what got us locked into the AUKUS submarine deal.

Australia is made a leading cheer leader for Washington, at the cost of international reputation. Almost every country in Asia and the Pacific region is against AUKUS as an echo of English speaking Western colonial arrogance, racism, and gunboat diplomacy. Australia is seen to play the local puppet for old colonial masters.

AUKUS is incredibly clumsy and stupid. No wonder most of the 200 nations on this planet don’t like it. There is no support from the United Nations or from any major group of nations.

Cartoon by John Shakespeare

The idea that the United States is giving Australia 200 nuclear submarines is laughable. Billions of dollars will have to be handed over for the privilege of paying a portion of another nation’s military cost. The United States will still be effectively in command of the submarines. Australia will expand as a military base for the American war machine. The cost to the taxpayer will continue to rise as more hardware and personnel are stationed here.

Australia gets to be a more dangerous place or the privilage.

Scott Morrison’s government  is embarrassingly the loudest promoter of the anti-China hysteria. Australia’s trading position is damaged. Meanwhile, Washington comes in through the back door, to replace – from barley to beef – Australia’s trade with China. Some friend.

Even worse is that engagement in a trade war against China, joining AUKUS, and other measures, fans tensions, risks the proliferation of nuclear weapons, and edges us closer to a potential war.

Australia is too insignificant to be part of the Quad group, another of Washington’s initiatives, involving the United Kingdom, Japan, and India. Quad aims to counter China’s growing diplomatic and trading relationship with the world. Like AUKUS, it lacks international support and has little prospect of succeeding

Washington is targeting China’s Belt and Road Initiative with a package of its own. Belt and Road currently involves 130 countries building trading relationships and transport infrastructure. A massive $US26 trillion has been committed to finance this till 2030. The worst part of this, from Washington’s point of view, is that Belt and Road bypasses the need to rely international financial institutions dominated by American banks. a

A large part of the global economy could free itself from a global financial system that had functions to create debt, cover the the loss of the rate of return on American investment.

Rising aggression and efforts to impose the costs of its economic problems on others is causing a growing isolation of the United States. The world is moving in a different direction. Those few nations most closely tying themselves to its coattails. as Australia is doing for now, are on the wrong side of history, isolating and damaging themselves

Is ostracism from the world community in Australia’s interests? Is the possibility of being dragged into a war in the service of an empire the way to go?