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pic-geab-108 US Isolation: When global finance turns away from the dollar system, it means the cliff is near

The United States has been voluntarily isolating itself from the rest of the world, and not just from a geopolitical point of view. This terrible isolation can only get worse, whatever the result of the presidential election: if Trump wins, it will be due to a lack of foreign policy; in the case of Clinton, her iron-fist will have a word. Another domain, namely finance, which has so far been spared, is being added to this political dimension; something which has always been at the centre of America’s power in the world. No wonder this happens at the very moment the US can no longer hold itself.

The Deutsche Bank case: a very useful scarecrow 

When in trouble, the US always uses the same method, which consists of hiding its own problems by bringing out into the open the problems of others. Europe is regularly the fall guy. So when the world, in total awe, learns about the record fine of $14 billion that the United States imposed on Deutsche Bank[1], one could certainly look horrified at the violations committed by this bank[2], but one must also see the interest which this sanction serves. Many commentators saw this as a little revenge after the Apple fine in Europe[3], a credible explanation, but there is more to this. By creating problems for the largest European bank, the United States has managed to bring about debates on the problems of European banks in general. Despite the surprising financial stability in Europe after all those years of turmoil (in part thanks to the ECB’s capital injections, even though they probably serve global finance more than European interests), we do not claim that the European banking industry is in perfect shape, far from it[4]. But we think this is a quite convenient bogeyman to forget about the current US difficulties. The titles of articles about Deutsche Bank are definitely alarmist: imminent bankruptcy, bailout necessary, a contagion to other European banks, or even a possible next crisis in sight[5].

And indeed, not to mention the so called economic growth of the United States, which is worse and worse as seen on the following chart[6], the Fed’s failure to raise interest rates is indicative of the weakness of the US economy.

fig1Figure 1 – Quaterly Official Growth of the US economy (annualised rhythm) since January 2015. Source: Trading Economics.

The job market is still struggling, despite the announcement of an unemployment level of around only 5%, which does not reflect reality at all when we look at the lowest employment rate since 1970 (to sum up, the decline in the unemployment rate is only the fruit of the decline in the participation rate).

fig2Figure 2 – Labour participation rate (blue, left scale) and unemployment rate (red, right scale) in the US since 2007. Source: FRED.

Another example: despite an always higher dollar, Bayer affords to buy back Monsanto[7] and Danone bought back WhiteWave[8]: as if Old Europe could have afforded the luxury to buy the US (contrary ... Read