The Special relationship is a phrase used to describe the exceptionally close relation between the United States and Great Britain. Winston Churchill first coined it in a speech in 1946, and the special relationship is said to cover political, economic, diplomatic, cultural, military and cultural spheres. The Special relationship came into being at the same time as the Bretton Woods agreement, which many believe, including myself, is no longer relevant in the 21st century economy. While we continue to hear that the United States and Great Britain still enjoy exceptionally close ties, much closer than with any other country, the evidence is mounting to suggest that the Special relationship is in fact not so special anymore.
The latest episode in the not-so-special relationship is the attack on the British banks by the Americans. The United States is accusing Britain’s Standard Chartered Bank of laundering some $250 billion of transactions over 10 years for the Iranian regime, and hiding some 60,000 transactions from U.S. regulators. This was done with the help of U.S. consultancies and accounting firms, but the most striking thing is that throughout this 10-year period the special relationship has continually been held up as the basis for everything that has gone on between the United States and Great Britain.
The Standard Chartered Bank affair comes hot on the heels of another British bank under immense pressure form the United States, which is HSBC. HSBC stands accused of laundering drug cartel money, specifically in Mexico. Rumors have long been abounded about banks laundering drug money, especially American banks. However, it is again another British bank that is getting all the limelight in the United States for all the wrong reasons, with no sign of the special relationship coming to the rescue!
Of course the other big British bank, which recently took the limelight, was Barclays that blew the whistle on themselves over the Libor scandal. This time it was Barclay’s American CEO Bob Diamond who fell on the British Sword when it came time for heads to roll in the Libor scandal. Federal Reserve Chairman Ben Bernanke came out and said that he believed that Libor is structurally floored, which is true, yet despite the special relationship he was unable to voice his concerns prior to the scandal erupting or to work together to create a better system.
If we go back to the invasion of Iraq in 2002, it was the special relationship, which was used to justify why Tony Blair was so economical with the truth to the British cabinet about the legality of going to war. Many would say in fact that he simply lied under the cover of the special relationship. His premiership never recovered from this, and nor it would seem has the special relationship.
In 2010, BP suffered a horrendous oil spill in the Gulf of Mexico on their Deep Water Horizon platform, which resulted in nearly 5 million barrels of oil flowing into the ocean. BP had partners on the horizon platform, one of which was the U.S. oil services company Halliburton, which was connected to former Vice President Dick Cheney. Far from stepping in to offer support to BP and taking some of the responsibility, the United States and Halliburton did the opposite, ensuring that BP took the blame publicly. One of the results of the Gulf oil spill was that the CEO of BP changed. It went from being led by a British national to being led by a U.S. national. Far from the special relationship offering economic support, it in fact did the opposite, and a prize British asset remains under the leadership of an American.
The latest rumor is that New York is trying to edge London out as a global financial capital. This could explain why British Banks are coming under attack from the United States. This is despite the fact that in 2008 the U.S. banking system gave us Bernie Madoff, AIG, “too big to fail,” subprime lending, a frozen derivatives market and a nation full of underwater mortgages. A defaulting European Union would be a disaster for the American banks that have underwritten all the credit default swaps on European debt of course. It would be like a biblical moment insofar as credit default swaps are like insuring against a flood in the desert, and right now the clouds over the desert are very, very dark.
Whatever the truth is, the shape of the financial system is changing, and the special relationship really is not so special anymore. Instead of all capital flows going via either London or New York, the 21st-century market model will see capital flows going directly between trading partners, on a peer-to-peer basis, and the United States and Great Britain will have to compete with each other for a piece of these flows, whether they are with Russian/Eurasian Union, China, the Middle East, Africa or South Asia.
It seems that the U.S.-Anglo banking cable already understands the changing world, and whatever the rules of the special relationship were in the past, they no longer hold in the world of the not so special relationship.
The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
Current markets are anything but global or integrated. What if we had a paradigm shift in the way we think and transact when doing business with each other? Balanced global trade can only occur if we have transparent, accessible and efficient markets. We are on the cusp of achieving this, although most people cannot see it. Sam’s Exchange aims to give its readers a clearer view and a platform for discussion. Markets, trade and economics are in fact nothing more than the result of our thoughts and actions expressed in numbers, not the reverse.
Sam Barden is founding Partner of SBI Markets DMCC, a Dubai-registered commodities trading and advisory company. Barden has worked in the global financial markets for more than 17 years in Europe, Russia and the Middle East. He has advised and executed strategic transactions for both the government and private sector, in particular in energy and commodity markets, advising various energy producing nations on their strategic market developments and interaction. He holds a degree in economics and finance from Victoria University, Melbourne, Australia.
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