Countries rely on both on strong private and public sectors to create a prosperous economy. An unbalanced economy threatened the United States at the beginning of twentieth century. Only after aggressive trust-busting and progressive reforms did the nation become hospitable to rapid development of new businesses and industries. Imperial polices secured grand markets for American industry to exploit and proliferate. Government regulation and global imperialism empowered the American economy to become the largest and most influential in the world.

Solving domestic issues laid the groundwork for an expanding economy. During the late 1800’s political machines and trusts conspired together, forming indomitable alienated fair markets and new businesses. The economy was stagnant. Progressives across the nation’s state governments led initiatives the against conglomerates; they instated a fair tax structure, expanded public infrastructure, capped work hours, acquired government utilities, and passed the Seventeenth Amendment. President Roosevelt capitalized on these gains, trust busting the largest oligopolies, arbitrating strikes, and placing federal regulations on railroads, foods, drugs, and false-advertising. Later, President Wilson forged ahead against hostile business practices; the Clayton Antitrust Act of 1914 was designed to fragment the remaining monopolies, his Federal Trade Commission eliminated unethical businesses practices, and a revolutionary federal income tax funded an expansive American government. The waves of progressivism across the government allowed the nation’s leaders to break up bad trusts and allow a diverse American industry to prosper. Aggressive imperial policies abroad only encouraged this crucial development.

Invasive foreign policy secured markets that would fund the American economy for decades. Hawaii was annexed and made into a state to make agricultural trade viable. Old Spanish colonies across the globe were taken by American troops during the Spanish-American War. These captured markets bolstered the American economy; United States businesses were safe to proliferate behind a high tariff wall and favorable geopolitics in theses territories. The Roosevelt Corollary staved off European intervention in the Americas by declaring that any foreign interference in Latin America would be policed by the United States. These kept foreign competition from venturing too close to America, as business of the United States traded with their neighbors at excessive gains. Industry boomed as the world came to rely on the superpower status of the American economy.

The American government put the United States’ economy in an advantageous position whose gains were compounded by fortuitous international events. Strong economic policies domestically allowed numerous companies to spring up and become profitable in the isolated American markets. Two world wars leveled the competition and made America the bread basket and industrial superpower of the world. With these positions came unimaginable wealth. By the close of World War Two America had escaped the global carnage and emerged largely unopposed for economic dominance. America grew an indomitable economy based on strong regulations domestically and invasive imperial polices to exploit new markets. The nation would only suffer an economic collapse only ensued after corporatist politicians approved legislation stripping back these domestic reforms, accomplishing everything from consolidating oligopolies on Wall Street and banning basic human rights like collective bargaining in Wisconsin. In addition, modern America would become entrenched in endless and fruitless wars, fought on specters like drugs and terrorism, which alienated new markets and narrowed the possibility of new business opportunities. America is currently backtracking, and will continue to backtrack until the reforms of the last century are reinstated.

Today, crude oil prices fell by a pay jaw dropping four percent; the cascading effects through the international economy will reduce all costs and prices in a few short weeks. However, the damage by the four month oil bubble has already culminated and several destitute developments. Americans have been saddled with a devalued dollar and increasingly reckless investors. Inflation during the oil bubble drove up prices and despite energy costs decreasing all other prices will remain high. Wall Street traders first drove the price of oil up through over eager investments and now are backpedaling at record rates as the economy suffers a stinging blow that could result in a double dip recession. The Commodity Futures Trading Commission, who monitors this market, not only allowed this financial disaster to happen but openly encouraged it in defiance of Congress.

How Did the Oil Bubble Devalue the Dollar?

In the past couple of months wrenching transportation costs caused by the oil bubble drove up energy prices around the world. When transportation costs rise sellers of goods have to raise prices in order to stay profitable; this drives prices for goods across all markets. The rises in rapid inflation. Despite the costs now dropping the dollar has already been devalued; prices will remain higher than before the oil bubble. This distressing fact manifests in every developed nation, as the latest paychecks will be worth a little bit less and economic slump will sag a little bit more. The United States will be hit worst by this crisis because nearly all OPEC reserves are traded in American dollars.

What Do Wall Street Traders have to do with the Oil Bubble?

One of the largest markets that investors gamble in is futures. This financial system acts like a delayed contract. Businesses generally buy products with money in normal transactions; futures allows those same contracts to be used on goods produced in the future, sometimes before they are even produced. By speculating on the price investors beat the market rate and make small fortunes. The problem with this process is that these contracts can be bought multiple times and each time the price of the gas rises to balance out the cost to obtain the future. To further compound the issue third part investors can bet on the contracts as well, driving energy prices up over 40% of their real value. This drives up energy prices, along with every facet of the economy, at record rates with bounding inflation. Once these investors realize their futures are overvalued they rapidly sell off them, resulting in 4% dip in crude oil prices today.

China is on the verge of unleashing a cataclysmic recession in mid to late 2011 and they know it. Harsh economic policies have cut back private sector investments in the economy, ordering the largest banks in the country to keep record quantities of capital in reserve rather than lending it out to investors. This will only aggravate the thirty-four month high inflation in China, currently at 5.5%, and will further stagnate the marketplace. Industrial output has slowed, only rising by 13.3%, the smallest rate the Chinese economy has seen in twenty years. The Chinese economy is slowing down and the Chinese government fears this will kick off a recession; by acting on these fears they might do just that.

Why Are Investments Declining in China?

The Chinese government has decreed that the reserve ratio held by all of the large banks, the counterparts to Bank of America and Citigroup, must be above 21.5 percent. In comparison, America’s percentage is less than half of this rate. The reserve ratio is the percentage of all deposits in the bank that is held with absolute liquidity, meaning it can be spent at any time. The rest is generally invested. The more money that is invested the faster an economy grows. A high reserve ratio means lower investments. Lower investments correlates directly to decreasing economic growth; with less money being put into building homes and businesses the overall economy slows down. This will trigger a recession if left unattended.

Are the Chinese Purposefully Causing A Recession?

No, they are shielding their economy from the worst of the projected recession. By raising the reserve ratio to record levels banks means that Chinese banks will be much more stable for this financial cataclysm. It means they will have far fewer loans lent out, so when borrowers inevitably default less money will be lost overall. In addition, the higher reserves will give the banks much more stable financial basis. They will be able to pay off debts as they arise and will not be forced to look for bailout or fall into bankruptcy. The peculiarly high reserve ratio protects the financial sector of China during the recession. In the aftermath, private banks will be architects of financial reconstruction rather than panhandlers weighing down the economy. If the United States had implemented this strategy before the 2008 recession there would have been few if any bank failures, they would have reserves on hand to prevent bankruptcy.

What is the Reserve Ratio?

The reserve ratio the percentage of money that each bank has to keep on hand at all times out of all of the deposits they have been trusted with. The rest can be lent out, earning the banks a tidy profit while expanding the economy. The American reserve ration rests around ten percent; this lower ratio allows much more money to be lent out. While this does allow greater investments there has increased risk of too many people defaulting and driving the bank into bankruptcy. Lehman Brothers and Bear Stearns failed during the 2008 recession because bad investments torpedoed the companies and the low reserve ratios were inadequate to patch the damage and meet payments.

How Will This Higher Reserve Rate Affect America?

In the short-term it will buoy up the Western economy, once the recession hits it will trigger the second dip in what will be known as the worst recession since the Great Depression. International investors will flock to American and European banks as they are denied by Chinese limit their investments, especially risky ones. This influx of mortgages and loans will translate into healthy profits for the banks of America. Higher profits mean hiring more employees and expanding operations. That is if the Chinese markets do not implode, like the Chinese are predicting. Without high reserve ratios and with the risky investments taken from the Chinese markets western banks will be besieged by foreclosures and defaulted loans. More banks will fail in the United States and the Western economy will plummet. Only those who had the foresight to prepare for this disaster, the Chinese, will prosper. In the aftermath of the 2011 recession, with the elimination of competition and rising demands for investments, the East will hold great and unprecedented financial power.

War between the Sudans threatens to engulf Africa as border conflicts over valuable regions spark firefights and troop occupations. Abyei, a region with lush farmland and oil deposits, became the hotspot as fighting ignited over the last couple of days. Northern tanks and infantry occupied the region, driving out any Southern troops and sympathizers. Negotiations over this disputed region took place in the Ethiopian capital Addis Ababa. The resolution agreed upon was to declare the territory a demilitarized region for the moment and to have it policed by Ethiopian troops until a national vote can be taken to decide the fate of the region. It has yet to see if these negations will be observed or abandoned. This unstable situation could easily explode into an international conflict, as China defends its oil reserves in Northern Sudan as the humanitarians and Africans rally around Republic of Republic of South Sudan and its struggling call for freedom.

How Has This Incident Affected the Region?

Tensions in one of the most dangerous regions of the world have only been risen higher and sparked more battles. In recent days the conflict between the nations has manifested in aircraft raids on Republic of Republic of South Sudan and widespread famine. The surrounding Africans nations are concerned that this war could spill over into their territory or create a new militant state rather than a new democratic one. This could result in the country becoming a haven for criminals and terrorists, something that no region of the world wants. Military units are being deployed to all surrounding borders as the Ethiopians head an effort to negotiate a truce in the region. The outlook is dim, it is almost certain a full-scale war is on the horizon.

How Could This Blossom Into A Battleground of the Second Cold War?

Chinese conglomerates import large amounts of oil and gold from Northern Sudan. Republic of Republic of South Sudan, oppressed by its northern largely autocratic government, will look to other superpowers to fund its development. Geologists, once they are allowed into the region, expect to find large pockets of oil and rare minerals in the Republic of South Sudan. America, Russia, India, and the European Union will all be interested in reinforcing their decaying reserves of oil. While the North is largely Islamic the South still largely has traditional African cultures, which may result in African nations supporting the weaker southern nation rather than the alien northern one. Tense relations between the nations, based on a history or genocide, could easily spark off a conflict. The ensuing global incident would resemble the Korean War where over thirty thousand Americans were killed. Neither side would back down when oil, the life blood of the economy, is on the line; this was seen in the Persian Gulf War.

Why Was the Republic of South Sudan Founded in Such a Toxic Position?

Earlier this year, on January 21, 2011, a landslide vote severed Sudan into Northern and Southern countries based on cultural and religious differences. This landmark achievement, planned to officially separate the new nations on July 7, 2011. Widespread border conflicts have marred the stability of the region, refugees and insurgents throughout the region have complicated the issue to the point of violence. Republic of Republic of South Sudan lacks the infrastructure and coordinated military forces to police this and the Northern Sudanese could not care less about their castaway state. A situation like this was inevitable.

How Does This Relate To the Sociology of the Region?

Sudan was an autocratic state ruled by President Omar al-Bashir, an Islamic extremist, who took control of the state after a coup more than twenty years ago. Since then he has committed genocide in Darfur, skimmed hundreds of millions from taxpayers, and charged with five accounts of crimes against humanity. His totalitarianism state has been pushing towards Islamic law for the whole country. Religious and cultural differences with the Southern half of the country led to their expulsion in the January 21, 2011 election. His rational-legal authority has killed millions and oppressed the rest of the country; the increasingly evident region that he set free Republic of South Sudan was to cut off the center of resistance against him. In the future, he may move in with more armed troops to silence that voice of freedom for forever.

The Dow fell below the 12,000 as nervous investors continued to sell off their stocks. This is the six consecutive day of losses in the stock market, destroying tentative gains made since the recession. The only Fortune 500 companies who successfully made gains were AT&T and Proctor and Gamble. All the other blue chip companies suffered hard losses; the worst was Travelers losing falling 135 points and losing 1.1% of their stock value. Motor company Toyota announced a loss of 1.6 billion in profits, due to the earthquake-tsunami double punch that has crippled the Japanese economy. The S&P and the NASDAQ Composite both fell by roughly 1.1% throughout the course of the day, contributing to their sixth consecutive week of losses. Safer investments, such as US back bonds, surged; driving down the interest rate by 0.04%. The stock market is in the opening stages of a second massive sell off, which will damage the international economy even more than the latest recession.

Why is the Double Dip Recession Happening?

The United States economy needs to get its act together before investors lose their nerve completely and sell everything. The international socioeconomic relies on trust and confidence. As long as everyone can pay of their debts people will gladly invest in any number of derivatives and stocks because it is a profitable thing to do. However, when massive blows to the stock market hammer that confidence consumers quickly stop buying stock, driving down the price. This is bad for the economy because companies rely on selling stocks to the market and their employees to fund their operations. Without the core faith in the stock market investments in new companies grind to a halt. This prevents new companies from entering the market, which further inhibits the economy.

It is a dangerous spiral that quickly stagnates the economy. New businesses cannot form to enter the market and existing companies cannot get the necessary funds to meet market demands. The circular movement of money halts, starving consumers and producers alike. This is the fear of what will happen should this double dip recession ensue; the only issue is that faith in the stock market and investments will be even harder to retrieve because of the recent 2008 recession. The economy could stagnate near indefinitely. One major aspect of this relates to economics, fiat money. The world relies on fluctuating currencies that are valued only compared to each other, they have no value themselves. This is good because it allows for large amounts of money to be utilized.

How Could This Hurt the Economy?

This is potentially disastrous because the money is prone to rapidly inflate and deflate, making counties rich one day and comparatively broke the next. Currencies are traded throughout the international economy, if the American dollar falls do to the currency trading markets driving it down Americans will be hard pressed. They will not be able to pay the mortgage, send their kids to college, or even by grocers if inflation rises too high too quickly. The unstable stock market could toss America into a recession instantly should there be a massive selloff. There is also the threat of a slow transition to a recession; as the American economy is strangled by the reduced investments they produce even less and then there are even fewer investments. This vicious circle is compounded ten times over by the banks leverage working against them, for every dollar they lose in their reserves they lose nine dollars they could invest. The double dip recession would attack America on two fronts, bringing misery to all.