Why is the US collapsing? The Problem isn’t just the Economy
The process that began with the collapse of US banks and was fueled by the fire of social media led to comments that the US dollar, and therefore the US itself, was about to lose its throne. Balaji even spent $1.5 million for this cause.
If you stay on the throne long enough, you eventually gather enough enmity with everyone. After all, everyone’s eyes are somehow fixed on that throne. Like past empires, both natural developments, the memorization of the tactics and mindset of the superpower, and the irrelevant agendas created within the superpower itself have caused the collapse of these empires, both internally and externally. We have witnessed this process in different parts of history in different ways, but always with the same structure. Because attempting to destroy superpowers only from within or from outside usually results in failure.
Today, banks are the visible part of this iceberg. In this article, I wanted to take a look at the rest of the iceberg. Let’s examine both global developments and the agenda in the US.
High Proxy Costs
I want to start with India because this region has its own dynamics in terms of developments. As India took the title of the world’s most populous country from China, it is trying to compete neck and neck by elevating its production power to the level of China. Cheap labor is crucial for this strategy, hence population growth provides an advantage for India. On the other hand, China has significantly reduced population growth due to its one-child policy. Now it is trying to increase it again, but whether it will succeed remains to be seen.
India is also one of the countries insisting on trading with its local currency. We mostly see discussions about China’s moves with the Yuan, but the Indian Rupee also has a strong infrastructure. China and India continue to be natural rivals in this field as well. These neighboring countries, who occasionally experience military tensions in border areas, actually create a positive environment for the US.
However, it is quite challenging for the US to establish a similar power in this region, despite successfully positioning Taiwan against China, Ukraine against Russia, and Saudi Arabia as an intermediary power against Iran. The extreme poverty of countries like Nepal and Myanmar in the region, their lack of military or cultural influence, and their high dependence on China and India make them costly candidates to be proxies. On the other hand, Afghanistan is already a lost case for the US. Only Pakistan remains. Pakistan is a country that uses its geography and conducts business with everyone through its balancing policy. The imprisonment of former Prime Minister Imran Khan has caused significant turmoil in the country. Therefore, although it may be the most suitable candidate to be a proxy, existing connections still make the proxy possibility difficult.
Nevertheless, this region is actually the heart of the bloc we call the Eastern Bloc. Despite their problems with each other, all of these countries have close relations with either China, India, or Russia. The agreement where Pakistan accepted to pay for Russian oil with Yuan is actually the best example of this.
Due to the low probability of creating proxies in the region, the US is trying to increase direct economic relations as much as possible. Creating competition between China and India and going to the one offering the best price currently seems like the most sensible policy. The trade war with China during the Trump era proved to be not very beneficial for the US. Biden quickly abandoned this policy and improved relations with China. For example, efforts are being made for at least 50% of vehicles sold in the US to be electric by 2030. While some of these vehicles are manufactured entirely in China, the chips and batteries for the vehicles also come from China.
Biden’s direct invitation to Modi and Apple CEO’s visit to India are the biggest examples indicating the formation of this competition equation. It’s also important not to forget that Gemini, facing regulatory pressure in the US, has also established a center in India.
In short, there is no country that the US can use as a stick in this context. Nevertheless, the competition between countries serves a similar purpose. However, in doing so, the US is supporting these production-based growing economies, and consequently, its money will flow into these countries. So what happens if India, like China, decides to block unwanted US brands and services in its country? The US is somewhat obligated to produce in these countries, but people in these countries are not obligated to use iPhones. In order to maintain the attractiveness of products, the US needs to preserve its cultural superiority. However, since we will address the cultural aspect in future topics, let’s skip it for now.
Finally, the infrastructure for trade based on local currencies such as the Yuan and Rupee is increasingly strengthening the possibility of BRICS creating its own currency. Backing such a currency with commodities and production could weaken the US dollar, which is printed out of thin air. Of course, this is not something that will happen in 1–2 years. However, we can see that the flow is progressing against the US. When selling US products, the US is very successful in branding these products and adding a story behind them. Placing this appeal behind the dollar may be its biggest risk. Trying to market money as a commodity-product indicates a process in which production-based economies are winning the game.
Soft Power
The Israel-Palestine problem, as everyone knows, is an unresolved issue and a human tragedy. This problem may have the potential to finally come to an end, perhaps for the first time, following China’s moves. It is clear that the US is siding with Israel in this conflict. Similarly, we know that the US utilizes its influence against Iran in the region to prevent any attack on Israel. So, as I mentioned in the previous section, we see a balance established through proxy countries. However, China shows us that this balance does not always have to be a good vs. evil structure.
China, taking a major step towards reconciling Saudis and Iranians, has now positioned itself as a mediator in the Israel-Palestine problem. China’s image in Arabia is quite different from that of the US. The US has shown that it is not reluctant to use its hard power alongside its soft power through years of ongoing wars and operations. On the other hand, China represents only soft power in this region. Its trade connections further support this role day by day.
China, being friends with both Iran and the Saudis, can offer a very different perspective on the Israel-Palestine issue. Because Iran’s relationship with China is a necessity. While being at odds with the US, no one wants to ruin their relations with China. The possibility of China brokering a Saudi-Iran agreement using its influence is very high. The blockade on Iran is causing the country to waste its golden days and not utilize its wealth. In fact, this situation has already started to lead to internal turmoil in Iran. In such a necessity, it is highly possible for China to lead the way for Israel-Iran peace in a similar manner. This would be the second significant event that leads to a shift from the US-centric paradigm to a China-centric paradigm in Arabia’s balance politics. Problems resolved through trade-based agreements will automatically have an impact on the Israel-Palestine problem as well. In the current paradigm, conflicts and unrest among the parties involved in any problem are quite normal in Arabia, which has witnessed various wars in a short period of time. However, if this paradigm changes, there is a possibility of excluding the party causing conflict and unrest. Therefore, due to the necessity of playing by the rules, this paradigm shift is of utmost importance.
Capital Flow
One factor that the China-US trade wars have shown us is the necessity of US borrowing. This necessity actually works both ways. The US has to borrow more each year, and the demand for these bonds from countries that buy them also increases. These bonds can be used as collateral in almost every field. However, it was highly illogical for the US to enter into competition with the country it owed the most to, China, as it would damage their relationship. Rich Arab countries, especially Saudis, play an important role in this field as well.
The US printing money like crazy to smoothly overcome crises has led to changes in this borrowing demand. Commodities like gold have become preferred by both countries and companies in case of a possible global crisis. However, this is not the sole reason.
Again, we see a complete change in image and strategy among Arabs, particularly Saudis. They have been working on establishing a region on the coastline where Sharia law does not apply and it is open to tourism. They are also pouring billions of dollars into gaming companies and start-up ventures, acquiring foreign football clubs, and bringing Cristiano Ronaldo to the country, among many other aspects of this strategy.
Islamophobia, which reached its peak with ISIS, has had a highly negative impact on the perception of Arabs. That’s why there is an effort to change this perception primarily. Regular sponsorships and direct investments are made in football matches and tournaments, which are watched by millions of people, for this reason. Arabs, by keeping themselves constantly in the spotlight, indirectly benefit from the successes of these clubs.
Saudi Arabia has recognized the economic and diplomatic importance of the image created by the cultural tools of the United States. By investing in fields considered to be the technology of the future and sectors favored by young people, alongside their image-building efforts, they aim to attract capital directly to Saudi Arabia instead of constantly spending their petroleum-derived wealth abroad. This means that Saudis are now investing not only for the purpose of making money but also in areas that have the potential to create value within their own country. Therefore, investments in the US may no longer yield the desired results for the US. It is important to note that China also plays a role in this context.
We also see that cryptocurrencies play a role in the outflow of capital from the US. The US, which has been unable to establish a proper regulatory infrastructure, risks losing its position to the EU and Hong Kong. The announcement by German company Unstoppable Finance that it will launch a DeFi-focused bank and a Euro-based stablecoin after MiCA is an example of this. Christine Lagarde had previously stated that stablecoins were a red line for them. If token-based economy becomes the economy of the future and USD-based stablecoins continue to dominate, then the EU will lag behind and the appeal of the Euro will diminish. Lagarde’s concerns are being addressed with MiCA. The private sector now has the opportunity to invest in compliance with regulations, and stablecoin initiatives are already shifting from USD-based to Euro-based.
China is also providing incentives and regulatory clarity through Hong Kong to bring the Digital Yuan to global markets. In addition, it should be noted that a special commercial channel for the Digital Yuan has been opened between the French BNP Bank and the Bank of China. This move, following Macron’s visit to China, indicates that CBDCs are an important topic discussed among heads of state.
Furthermore, while Russia is starting efforts to establish BTC mining facilities outside the country and intends to use BTC as insurance in sanctioned areas, there is a debate about applying an additional 30% tax on US miners.
In short, the likelihood of capital outflows from the US increasing is growing. Factors such as the uncertainty of whether the US can sell its products to production center countries, the loss of influence in the oil-rich Arabian region, the efforts of Saudis to keep their money in the country through image and R&D work, and regulatory clarity are the most concrete examples of this theory.
The Rise of Local Agendas, the Collapse of Global Perception
The most significant reason for the decline of US power is not just the excessive printing of dollars. As mentioned at the beginning of the article, the situation of “remaining on the throne for a long time” can result in the dominance of local agenda over the global agenda. This is because being the greatest superpower can eventually spread the perception that the US=World to the public. For example, the NBA champion team is also considered the world champion. However, teams from other countries are not competing here.
The concept of US=World actually stems from the perception of the US as a kind of superhero in every field, especially after the Cold War. Events such as landing on the moon and leading the computer and internet revolutions have always kept the US in a coveted position. Soft power areas such as film, music, and art that support this perception have ensured that no country can come close to US popularity.
The dream country, the USA, is currently discussing the ban on abortion in many states and talking about gender-neutral babies (theybies). Netflix tries to increase awareness by featuring a gay or black actor in every content they produce.
When we evaluate these agendas internally, Netflix’s efforts initially seemed very sympathetic, but now they are becoming increasingly forced. This naturally causes more harm than benefit to the LGBT and black communities.
Similarly, the theyby issue undermines the freedom and sympathy granted to individuals who identify themselves as non-binary. This community needs recognition, and their own freedoms and rights should be granted to them. However, when popular culture merges with capitalism, the peak of each trend is always pushed. I believe it should be a crime to involve children in such freedom trends. Imposing gender neutrality to avoid imposing gender on young children is no different from putting a veil or a turban on a young child. We need to let children be free and allow them to make their own choices as they mature.
As a result, the direction of the local agenda in the USA has caused individuals with traditional views that are already not favorable towards the LGBT issue to distance themselves from the perception of the “dream country, USA,” and it has led to the association of the entire image of the USA with topics like homosexuality. Consequently, it has become much easier for anti-American countries to propagate against the USA. This is because the USA is no longer an admired country but has become a country that people want to stay away from. At least propaganda can be easily carried out in this way.
Throughout the entire article, what I wanted to convey is that the foundation of the USD, which is supported by the USA’s hard power and the image of the “dream country, USA,” is starting to shake. The negative developments we observe in the economic field have provided significant political and economic opportunities for China, Russia, and India to gain power against the USA. I hope I have been able to clearly convey the main reasons for the decline trend of the USA.
