U.S. Takes A Backseat in International Diplomacy. China Now Leads the Way.

The list of distinguished secretaries of state includes many giants of diplomacy who were not president, including Daniel Webster, Henry Clay, William Seward (who completed the Alaska Purchase), George Shultz, John Foster Dulles, Dean Rusk, Dean Acheson, and Henry Kissinger. In short, America has a long history of strong leadership in foreign policy.

Significant accomplishments in that field include the Monroe Doctrine, the Louisiana Purchase, the Petrodollar accord, and the resolution of the Cuban Missile Crisis. Since World War II, the U.S. has been the undisputed leader in global diplomacy – until now.

Over the past twenty years, the U.S. has suffered under weak or disastrously incompetent secretaries of state, including Madeline Albright, Colin Powell, Hillary Clinton, John Kerry, Rex Tillerson, and Antony Blinken. These weak secretaries have presided over a long list of failures, including the Serbian War, 9/11, the Iraq War, the Libyan fiasco (that resulted in the deaths of a U.S. Ambassador and four CIA operatives), the withdrawal from Afghanistan (13 military killed in a terror attack), and now the losing War in Ukraine.

This decline in diplomatic prowess has gone hand in glove with the overuse of economic sanctions by the U.S. and an international loss of confidence in the U.S. dollar as a preferred means of payment.

Aristotle said that “nature abhors a vacuum” and politics is no different. When a weak U.S. creates a vacuum in the conduct of great power diplomacy through its failure and incompetence, a rising great power such as China is always waiting to fill the void.

This article is the latest evidence of the displacement of the U.S. by China as the leader in global affairs. Iran and Saudi Arabia have been bitter enemies for centuries for reasons having to do with religion, culture, geographical claims, and disputes over global oil production and the price of oil.

Yet, China has brokered a rapprochement between the two to the point that they are reopening their respective embassies and moving toward normal diplomatic relations. This comes on top of recent efforts by China to negotiate the purchase of oil from Saudi Arabia in yuan rather than U.S. dollars and other efforts to broker a peace deal between Russia and Ukraine (with likely cooperation from Europe).

Matters of war and peace, international commodities deals and the role of currencies in international transactions used to be the bread and butter of U.S. diplomacy. Now, because of U.S. incompetence, that field is being ceded to China.

Along with diplomatic influence comes military and financial predominance. Investors should see in this U.S. failure the ultimate failure of the U.S. dollar as the leading payment currency. That means inflation down the road as the dollar is abandoned and sinks in relation to gold and other currencies.

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