As the post-Cold War world’s sole superpower, the U.S. has been taking its place on the historical stage for more than two decades. During this short period in which time flies, we witnessed more than once events that are usually seen perhaps one time in a generation. When change is inevitable, keeping pace with the change becomes mandatory. The consequences of stagnation need to be taken into account as much as taking action.
The developments in the recent period caused great damage to the U.S.’s hegemonic presence and reputation. If you remember, we shared earlier in this column an article penned by Nobel laureate, U.S. economist Joseph Stiglitz. He stated that because the U.S. was preoccupied with its own problems during the pandemic period, and allocated the vaccines to itself disregarding the world, is against the values advocated by the U.S. He added that as a result, U.S. discourses are no longer as impactful as soft power. Vaccines and their patents should have been shared accordingly, as President Recep Tayyip Erdogan suggested.
Of course, it’s not only this. Its recent history is filled with such contradictions. It did not escape Stiglitz that they supported the putschists in Egypt despite their fervent advocacy of democracy.
The list goes on. Their departure from Afghanistan opened a completely different window to pro-U.S. collaborators. U.S. forces that left without even looking back, fled the country without any care for neither the public nor their collaborators there.
As the cause of the 2008 economic crisis, the U.S. tried once again to get the whole world to pay the price of its selfishness and the measures it failed to take. The balloon it formed while trying to save its own economy, its banks afflicted the world once again. They are now busy calculating how the balloon that is now fully blown up and about to burst will return to its previous state.
The fact that U.S. institutions were the cause of the crisis is why they switched from the, “Let them do it, let them go” theory to, the “it’s too big to sink” philosophy. This situation, which was completely contrary to IMF’s prescriptions, was specific to the U.S.
The reason I remind these is that the Federal Reserve’s contemplation of whether the decisions it is going to take about this time will be based on itself or the world presents another critical proof of whether the U.S. can sustain its presence as a global power.
Fed interest hikes will serve as a litmus.
As Fed, positioned at the center of the global finance mechanism as a driving force, continues to increase the interest rate, the central banks in other countries that are following it increase the interest rate as well. The interest hike practice is spreading to countries at the speed the bacteria spread during the pandemic period.
What did the last Fed interest hike move cause last time?
Fed’s last harsh consolidation period started in the late 1970s, during Paul Volcker’s FED presidency. Higher U.S. interest rates helped trigger further stagnation in the global south. Africa and Latin America suffered a decade-long growing loss, which heightened further through the IMF’s retributive rescue conditions. Structural coherence was a worse treatment than the ailment itself. The stagnation that emerged in a smaller region, as globalization and financialization were still new back then, may be due to present outcomes, which the impact is multiplied today as a result of high global coherence.
The fear is that Fed may create a payments crisis with these steps.
Every rising interest rate is presenting high costs to countries in borrowing. Don’t pay attention to Türkiye’s low public debt/gross national product rate, the whole world’s average, in other words, countries are not in a state to pay an interest double this rate! Every single increasing interest rate signifies less ability to pay it off. If a payments crisis does start, the chaos in the world will make the demand for a new order essential.
In other words, if the Fed places itself alone in the center with the steps it decides to take, this could be the end of their superpower sovereignty. In fact, Fed would be driving the last nails in its coffin.
The U.S. started to pay the price of the initiatives it took or not after the 2008 crisis.
