The Decline of Western Hegemony –
What It Means for Your Wealth
Image credit to Grok by xAI
Guest post by Dr. Dietmar Peetz, Strategy Consultant for Individuals and their Families
For those of you with financial assets tied up in NATO countries, it's time to pay close attention. The geopolitical shifts could redefine the value and security of your investments.
The Power Behind the Curtains
In the grand chessboard of global politics, it's the networks that rule. If you control the key networks, you control civilization itself. Among these, the financial transaction network stands paramount.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) underpins trillions in cross-border payments, particularly for crucial commodities. Cutting off a country's access to SWIFT is like cutting off its economic lifeline, making international trade nearly impossible.
A New Challenger Emerges
After sanctioning Russia out of the SWIFT network, BRICS nations have crafted a SWIFT alternative. Comprising powerhouses like Brazil, China, India, and other countries, this group is lessening their dependency on the USD, sidestepping U.S. sanctions.
The BRICS payment network, built on decentralized blockchain technology, could render the concept of a global reserve currency such as the US-Dollar obsolete.
What This Shift Means for the US
The fading demand for the USD spells trouble for American financial dominance. The US has long leveraged its currency's status to support vast trade deficits and a mounting national debt. A shift away from the USD could spike interest rates, escalating debt burdens and potentially destabilizing the US economy.
But if the FED would be forced to raise interest rates, other countries must follow suit to avoid massive capital outflows. This could trigger a global recession.
The ripple effects might lead to falling asset prices,
mirroring Japan's asset bubble burst in the 1990s.
Europe's Precarious Position
Europe, once sheltered under US military might and economic influence, is now caught in a squeeze.
After the sanctions and the Nord Stream attack, Europe shifted from relying on Russian energy to more expensive US energy supplies. This switch to U.S.-sourced Liquified Natural Gas (LNG) has significantly increased inflation in Europe, making European goods less competitive, as seen in the downturn of the German economy.
However, European companies can't just cut wages to improve competitiveness without risking social unrest.
Since 2008, much of Europe, especially the so-called Club Med countries, has experienced a steady decline.
In Greece, real wages have fallen below pre-crisis levels,
family savings are exhausted, and the population is decreasing.
Many people struggle to sell their properties, such as grandma's old house in the countryside, and often find no buyers at all, which has led to a zero or even negative price for real estate. This ongoing structural decline over the past two generations has become increasingly evident in 2024.
The Western rule-based neoliberal order, which relied on US hegemony to dominate globally in economic, military, and cultural aspects, is failing. With the US as the previously unchallenged imperial power, this order is no longer sustainable.
The end of the neoliberal era of abundance calls for a significant restructuring of both the Western economy and its military infrastructure.
The Rise of a New Order?
Europe is now re-arming itself—a costly move that's driving up inflation further in Europe but benefiting the US defence industry. In case Trump gets reelected in November (which is not so certain) the role of NATO will be devalued drastically – even if the US stays in the organization.
The West can no longer rely on the old colonial model of projecting imperial power onto resource-rich BRICS countries, forcing them to privatize natural resources and selling them to Western companies.
This cycle of resource extraction effectively ended with the onset of war in 2022. Most recently, the German Armed Forces were affected, as they will give up their airbase in Niger on August 31 following an ultimatum from Niger.
Additionally, the loss of the Suez Canal to the Houthis is
a significant blow for Europe, further complicating matters.
Indeed, the traditional methods of imperialism used to stifle competition are becoming less effective. As more countries join the BRICS alliance, Western sanctions on foreign tech companies like Huawei are proving to be less impactful. It's widely recognized that without such competition, Western manufacturers would enjoy a significantly larger market share.
Next phase in the civilization cycle
These hegemonic power strategies, though often associated with the West, are actually a natural phenomenon that recurs across different cultures and historical periods, with few exceptions.
This pattern of asserting dominance to control resources and suppress competition reflects a recurring theme in the history of civilizations, underscoring the cyclical nature of power dynamics on a global scale.
As the Western neoliberal playbook
- characterized by socialism for the rich and austerity for the masses -
reaches its limits, the West may be heading toward a great reset reminiscent of the 1930s.
This shift could redefine the social and economic landscape, mirroring the drastic changes of that tumultuous era.
The rise of far-right and fascist movements has been fueled by neoliberal policies. These policies include austerity measures and, more recently, control of the media and the use of propaganda to suppress voter dissatisfaction.
The ruling neoliberal parties have consistently resisted tackling extreme wealth and income inequality, curbing tax evasion by multinational corporations or imposing high taxes on the billionaire class - until recently.
Instead, they focused on cutting taxes, further privatizing state assets and cutting basic social services such as healthcare and education. These policies have further fueled social discontent and contributed to a growing sense of inequality and frustration among the population.
As we enter 2024 into the next phase of economic decline, we are likely to witness the widespread implementation
of price controls, restrictions on free movement, capital controls, and significant wealth taxes.
More critically, a shift toward redistributing wealth from the wealthy back to the state is anticipated. This strategy is viewed as essential for ensuring the survival of the state amid escalating fiscal pressures, aiming to stabilize the economy and address growing financial imbalances.
What are the implications for your wealth?
Overall, the consequences of hegemonic disputes between the West and the East mark the demise of the European middle class and, simultaneously, the European upper class. The European continent is teetering on the edge of becoming economically, culturally, militarily, and demographically insignificant.
For those with assets tied up in NATO countries, it's time to prepare for higher taxes and less liquidity. The geopolitical shifts could redefine the value and safety of your investments as the geopolitical conflict enters its hot phase sometime around 2028. Normally, financial markets are closed in times of war.
This guest post was originally published by Dr. Dietmar Peetz on LinkedIn.
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