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Foreign Correspondent
by international syndicated columnist & broadcaster Eric Margolis


Copyright: Eric S. Margolis, 2005

3 January 2005

LONDON - 2005 promises to be a very interesting year. So I’ve looked deep into my crystal ball to discern what major stories the new year will bring:

  • The biggest problem the world faces this new year is the continuing fall of the US dollar. The Bush Administration’s reckless spending, ruinously expensive wars in Iraq and Afghanistan (now costing as much as the Vietnam War), America’s galloping trade deficit and credit spending frenzy are creating a very dangerous economic storm.

    It’s difficult to see how a serious economic crisis can be averted unless the US government slashes spending and American consumers stop buying cheap imports, start supporting their own domestic industries, and start saving. History shows that spending booms fuelled by cheap credit always explode and produce recession.

    Japan and China’s central banks may give up trying to artificially shore up the US dollar, as they have been, by buying US currency and securities. A plunging dollar could cause foreign investors to start dumping US securities and assets. The result: a potential worldwide financial crisis that could collapse the housing bubble, cause interest rates to soar, send securities markets into freefall.

  • China’s banking system is a house of cards. Uncontrolled credit expansion has fueled China’s property boom and international buying spree. Banks are swamped by bad, non-performing loans made to huge, money-losing state-owned corporations. Collapse of China’s insolvent banking system would threaten world financial markets and trade.

  • The deadly tsunami that hit India, Sri Lanka, Burma, Thailand and Indonesia will have long-term negative effects on those nation’s economies and public health – in spite of huge amounts of foreign aid that are pouring in.

    Experience with past disasters shows widescale theft of donated food, medicines and money, a surge in corruption, and diversion of relief supplies long before they ever reach the most needy. The tsunami hit two civil war zones, Aceh in northern Sumatra and Sri Lanka. Aid distribution in both nations could become a dangerous bone of contention between warring factions.

    President George Bush, who remained mute about the disaster for 72 hours, and at first promised only $15 million in aid, lost a chance to help restore America’s battered reputation in the Islamic World by rushing help to Indonesia, the world’s most populous Muslim nation.

  • The US-led occupation of Iraq and Afghanistan is a disaster for all concerned. Both wars are slowly being lost. The big question in 2005 is if and how George Bush will extricate the US from this US $6.5 billion per month catastrophe. January elections in Iraq won’t resolve this huge mess, any more than rigged elections did this fall in Afghanistan.

  • `Terrorism’ – the insurgency against US domination of the Muslim World and its resources – will intensify even if Osama bin Laden is captured or killed. He has created a new, powerful ideological movement that will continue to shake the Muslim World and challenge its corrupt, autocratic rulers and their foreign sponsors.

  • As the Bush Administration gets sucked ever deeper into its disastrous crusade against the Muslim world, it may - possibly with Israel - attack Iran’s nuclear infrastructure, or invade Syria. An attack on Iran would leave the already over-stretched US garrison in Iraq trapped amid a sea of hostile Shia – as well as Sunnis.

  • A real, viable peace between Israel and the Palestinians seems unlikely. Israel’s PM Sharon already has everything he wants, and, according to US National Security Advisor Brent Scowcroft, has `wrapped George Bush around his little finger.’ So why make concessions? Palestinians will remain trapped in their giant, open-air prison while the Muslim World vents its fury on the United States.

  • Now that Vladimir Putin has crushed all domestic political and business opposition, his control over Russia is absolute. Only the courageous Chechen mujihadin have resisted Putin’s restoration of Kremlin autocracy. Putin is determined to rebuild the old Soviet Union, starting with Ukraine which, in spite of the recent victory of pro-western forces, will come under intense economic and political pressure from Moscow.

    The Bush-Putin anti-Islamic alliance will strengthen, with China an increasingly active member. By regaining state control of Russia’s oil industry, Putin is poised to become a kingpin of world oil, even an equal to the Saudi royals - if he can raise enough cash to tap his nation’s vast but remote deposits.

  • The European Union, for all its growing pains, economic doldrums, and bureaucratic obesity, has replaced the United States as the world’s champion of human rights and support for civilized world order.

    By contrast, under George Bush, the US has become a reactionary power devoted to protecting the status quo in league with Britain, Russia, China and India. In short, a re-run of the Holy Alliance of 1815 in which Europe’s autocrats sought to protect their power and privileges, and halt the rise of bourgeois democracy.

  • Look for an increasingly independent-minded Europe and China to draw closer strategically as a result of the Bush Administration’s aggressive, unilateralist policies. Russia will play both sides, backing the US in its anti-Islamic campaigns, and, more discreetly, China, in opposing US influence in East Asia. European arms may begin to flow to China in 2005.

  • Revolution seems already under way in Saudi Arabia. The US-backed royal family will be increasingly besieged in 2005. As for US claims it will promote democracy in the Muslim World, any honest votes there will produce pro-Islamic parties advocating opposition to Israel, higher oil prices, and eviction of US influence form the region.

    So no true democracy, just US-implemented `guided democracy’ in Iraq, meaning a Vichy-style regime that keeps US bases, sells oil cheap, makes nice to Israel, and allows US firms to exploit Iraq’s wealth.

    To read previous columns by Mr. Margolis: Click here

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      Eric Margolis
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      The Toronto Sun
      333 King St. East
      Toronto Ontario Canada
      M5A 3X5

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