By Justice Markandey Katju
It is often mind-boggling what is going on in the world today, so I am giving my own perspective.
1. A principle catalyst for the present turmoil in the world is the massive US debt of 38.5 trillion dollars, on which a staggering amount of interest has to be paid ( 1 trillion dollars in 2024 alone )
For the last 40 years or so the US government expenditure ( much of it on defence ) has far exceeded its revenue ( which comes mainly from taxes ).
Now if a person's income is say 50,000 dollars a year, but his expenses are 70,000 dollars, he has to borrow the balance of 20,000 dollars. This is exactly what the US government has been doing. This borrowing is in the form of selling US treasury bonds, which is akin to fixed deposit receipts or IOYs carrying interest liability, to many countries and institutions.
For instance, China, the main rival of USA today, has been selling a huge amount of goods to USA, and in return has been getting US dollars.The Chinese invested much of this money by buying US treasury bonds, and in this way China, at one time held about 1.33 trillion dollars treasury bonds. Other countries also bought huge amounts of US treasury bonds.
But this living beyond one's means cannot go on forever. If a man is continuously subsisting on bank loans, a day will surely come when the bank will refuse to grant any further loans, fearing it may never be able to recover the loan and the interest thereon.
The man will then have two options (1) cut his expenses ( which may be very difficult if he has become accustomed to a certain life style ) or (2) resort to theft.
Now if the USA is to reduce its expenditure, it has these options, none of which may be viable :
a. Cut its huge defence expenditure.
But this will involve winding up its military bases which it has all over the globe and reducing its military forces, leading to loss of its influence all over the world, which would not be acceptable to the US Establishment.
Moreover, the huge US arms manufacturers, who are very influential in US politics, would not permit this, fearing cuts in their profits
b. Increase in taxes
This again would very difficult, as most Americans are already overburdened with mortgage payments on their housings, and paying higher prices for their groceries etc ( due to the current inflation ).
An important crisis occurred in 2022 when Russia invaded Ukraine. As a reaction, the US govt froze the 300 billion dollars in US treasury bonds which Russia then held, and consequently this huge amount of money became worthless for the Russians. This sent a shock wave all over the world, with governments in all countries realizing that investment in buying US treasury bonds was no longer safe, and had instead become very precarious, since the US government could freeze the treasury bonds at any time if it felt offended.
Most countries in the world have now stopped buying US treasury bonds, and many have been selling them off and buying gold or investing the money in other assets
For instance, China has reduced its US treasury bonds holdings from its peak of 1.33 trillion dollars to about 680 billion dollars today, and it keeps reducing it systematically almost every month, converting most of it into gold and other assets
Similarly, India has dumped 50 billion dollars US treasury bonds
Saudi Arabia has ended the petro-dollar agreement with USA
So how will the US govt now pay for its massive debt ? One way is to make the US Federal Reserve Bank print more dollars to buy US Treasury bonds. But this will lead to inflation, and the American public, already facing 6% inflation presently, may not tolerate more.
So the only alternative left is some form of colonialism i.e. theft and loot from other countries. Venezuela has already been taken over by the US Govt ( as President Trump himself stated ), and its huge oil deposits will be used for partly covering the US debt. Greenland may be next in line. And then other countries e.g. Columbia, which have huge natural resources, and may be up for grabs.
European countries have united to thwart Trump's designs for Greenland, but time alone will tell what may happen.It may be that Trump, whose present popularity in America seems to be declining, may forcibly occupy Greenland just before the mid term US Congress elections, to achieve a victory for the Republicans in the polls. But that may give a pretext to China, and embolden it to seize Taiwan.
2. However, there is another historical event that has taken place, and that is the meteoric rise of China as an industrial superpower, and the manufacturing hub of the world. I have explained this in detail in my articles, in which I have pointed out that China only claims to be socialist, but in fact it is capitalist and imperialist, spreading its claws and fangs all over the world, hungrily seeking raw materials and markets in Asia, Africa and Latin America ( apart from Western countries ) to grab for its behemoth industry, like a vampire seeking human blood.
I have said in my article below that though the US govt has effectively conquered Venezuela recently, the Chinese, who have hugely invested in that oil rich country, will not take this lying low, and are bound to retaliate in some form
Chinese industrial growth is bound to continue, and with that its expansionism all over the world.
China and America are presently fighting each other only economically, not militarily. But no one can predict the future. A single spark can light up a blaze when the fuel has gathered e.g. the assassination of Archduke Franz Ferdinand of Austria in 1914, which resulted in the First World War, or the Cuban Crisis in 1962, which almost resulted in World War 3
Sooner or later these two super powers are bound to collide, and then the consequences may be catastrophic.
3 There are some other flashpoints in the world too, like the crises in Gaza, Bangladesh, etc but these are relatively minor as compared to the first two.
(Justice Markandey Katju is a former Judge of the Supreme Court of India, and former Chairman of the Press Council of India. The views expressed are his own.)
