[A-List] Michael Hudson's Super-imperialism (euro)

["James Daly" <james.irldaly@xxxxxxxxxxxx>]

sorry -- another of the sources I mentioned -- I hope it is not too
far off the subject of the seminar -- James D.

----- Original Message ----- From: "James Daly"
<james.irldaly@xxxxxxxxxxxx> To: <a-list@xxxxxxxxxxxxxxxxxxx> Sent:
Thursday, April 24, 2003 1:15 PM Subject: Euro/dollar motive


This account of the Euro/dollar rivalry seems helpful to an economics
illiterate like me. I hope I'm not duplicating.

Geoffrey Heard is a Melbourne, Australia, writer on the environment,
sustainability and human rights. . .

Iraq War: It is between Dollar & Euro

Summary: Why is George Bush so hell bent on war with Iraq? Why does
his  administration reject every positive Iraqi move? It all makes
sense when you consider the economic implications for the USA of not
going to war with Iraq. The  war in Iraq is actually the US and Europe
going head to head on economic leadership of the world.

America's Bush administration has been caught in outright lies, gross
exaggerations  and incredible inaccuracies as it trotted out its
litany of paper thin excuses for making war on Iraq. Along with its
two supporters, Britain and Australia, it has  shifted its ground and
reversed its position with a barefaced contempt for its audience. It
has manipulated information, deceived by commission and omission and
frantically  "bought" UN votes with billion dollar bribes.

Faced with the failure of gaining UN Security Council support for
invading Iraq, the USA has threatened to invade without authorisation.
It would act in breach of the UN's very constitution to allegedly
enforced UN resolutions.

It is plain bizarre. Where does this desperation for war come from?

There are many things driving President Bush and his administration to
invade Iraq, unseat Saddam Hussein and take over the country. But the
biggest one is hidden and very, very simple. It is about the currency
used to trade oil and consequently, who will dominate the world
economically, in the foreseeable future -- the USA or the European
Union.

Iraq is a European Union beachhead in that confrontation. America had
a monopoly on the oil trade, with the US dollar being the fiat
currency, but Iraq broke ranks in late 1999, started to trade oil in
the EU's  euros, and profited. If America invades Iraq and takes over,
it will hurl the EU and its euro back into the sea and make America's
position as the dominant economic power in the world all but
impregnable.

It is the biggest grab for world power in modern times.

America's allies in the invasion, Britain and Australia, are betting
America   will win and that they will get some trickle-down benefits
for jumping on to the  US bandwagon.

France and Germany are the spearhead of the European force -- Russia
would like to  go European but possibly can still be bought off.

Presumably, China would like to see the Europeans build a share of
international trade currency ownership at this point while it
continues to grow its international trading presence to the point
where it, too, can share the leadership rewards.

DEBATE BUILDING ON THE INTERNET

Oddly, little or nothing is appearing in the general media about this
issue, although key people are becoming aware of  it -- note the
recent slide in the value of the US dollar. Are traders afraid of war?
They are more likely to be afraid there will not be war.

But despite the silence in the general media, a major world discussion
is developing around this issue, particularly on the Internet. Among
the  many articles: Henry Liu, in the 'Asia Times' last June, it has
been a hot topic on the Feasta forum, an Irish-based group exploring
sustainable economics, and W. Clark's "The Real Reasons for the
Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of
the Unspoken Truth" has been published by the 'Sierra
Times','Indymedia.org', and  'ratical.org'.

This debate is not about whether America would suffer fromlosing the
US dollar monopoly on oil trading -- that is a given -- rather it is
about exactly how hard the USA would be hit. The smart money seems to
be saying the impact would  be in the range from severe to
catastrophic. The USA  could collapse economically.

OIL DOLLARS

The key to it all is the fiat currency for trading oil.

Under an OPEC agreement, all oil has been traded in US dollars since
1971 (after the dropping of the gold standard) which makes the US
dollar the de facto major international trading currency. If other
nations have to hoard  dollars to buy oil, then they want to use that
hoard for other trading too. This fact gives America a huge trading
advantage and helps make it the dominant economy in the world.

As an economic bloc, the European Union is the only challenger to the
USA's economic position, and it created the euro to challenge the
dollar in international markets. However, the EU is not yet united
behind the euro -- there is a lot of jingoistic national politics
involved, not  least in Britain -- and in any case, so long as nations
throughout the world must hoard dollars to buy oil, the euro can make
only very limited inroads into the dollar's dominance.

In 1999, Iraq, with the world's second largest oil reserves, switched
to trading its oil in euros. American analysts fell about laughing;
Iraq had just made a mistake that was going to beggar the nation. But
two years on, alarm bells were sounding; the euro was rising against
the dollar, Iraq had given itself a huge economic free kick by
switching.

Iran started thinking about switching too; Venezuela, the 4th largest
oil producer, began looking at it and has been cutting out the dollar
by bartering oil with several nations including America's bete noir,
Cuba. Russia is seeking to ramp up oil production with Europe (trading
in  euros) an obvious market.

The greenback's grip on oil trading and consequently on world trade in
general, was under serious threat. If America did not stamp on this
immediately, this economic brushfire could rapidly be fanned into a
wildfire capable of consuming the US's economy and its dominance of
world trade.

HOW DOES THE US GET ITS DOLLAR ADVANTAGE?

Imagine this: you are deep in debt but every day you write cheques for
millions of dollars you don't have -- another luxury car, a holiday
home at the beach, the world trip of a lifetime.

Your cheques should be worthless but they keep buying stuff because
those  cheques you write never reach the bank! You have an agreement
with the owners of one thing everyone wants, call it petrol/gas, that
they will accept only your  cheques as payment. This means everyone
must hoard your cheques so they can buy petrol/gas. Since they have to
keep a stock of your cheques, they use them to  buy other stuff too.
You write a cheque to buy a TV, the TV shop owner swaps your cheque
for petrol/gas, that seller buys some vegetables at the fruit shop,
the fruiterer passes it on to buy bread, the baker buys some flour
with it, and on it goes, round and round -- but never back to the
bank.

You have a debt on your books, but so long as your cheque never
reaches  the bank, you don't have to pay. In effect, you have received
your TV free.

This is the position the USA has enjoyed for 30 years -- it has been
getting a free world trade ride for all that time. It has been
receiving a huge subsidy from everyone else in the world. As it debt
has been growing, it has printed more money (written more cheques) to
keep  trading. No wonder it is an economic powerhouse!

Then one day, one petrol seller says he is going to accept another
person's cheques, a couple of others think that might be a good idea.
If this spreads, people are going to stop hoarding your cheques and
they will come flying home to the bank. Since you don't have enough in
the  bank to cover all the cheques, very nasty stuff is going to hit
the fan!

But you are big, tough and very aggressive. You don't scare the other
guy who  can write cheques, he's pretty big too, but given a
'legitimate'  excuse, you can beat the tripes out of the lone gas
seller and scare him and his mates into submission.

And that, in a nutshell, is what the USA is doing right now with Iraq.

AMERICA'S PRECARIOUS ECONOMIC POSITION

America is so eager to attack Iraq now because of the speed with which
the euro fire could spread. If Iran, Venezuela and Russia join Iraq
and sell large quantities of oil for euros, the euro would have the
leverage it needs to become a powerful force in general international
trade. Other nations would have to start swapping some of their
dollars for  euros.

The dollars the USA has printed, the 'cheques' it has written, would
start to fly home, stripping away the illusion of value behind them.
The USA's real economic condition is about as bad as it could be; it
is the most debt-ridden nation on earth, owing about US$12,000 for
every single one of it's 280 million men, women and children. It is
worse than the position of Indonesia when it imploded economically a
few years ago, or more recently, that of Argentina.

Even if OPEC did not switch to euros wholesale (and that would make a
very nice non-oil profit for the OPEC countries, including minimising
the various contrived debts America has forced on some of them), the
US's difficulties would build. Even if only a small part of the oil
trade went euro, that would do two things immediately

* Increase the attractiveness to EU members of joining the 'eurozone',
which in turn would make the euro stronger and make it more attractive
to oil nations as a trading currency and to other nations as a general
trading currency.

* Start the US dollars flying home demanding value when there isn't
enough in  the bank to cover them.

* The markets would over-react as usual and in no time, the US
dollar's value would be spiralling down.

THE US SOLUTION

America's response to the euro threat was predictable. It has come out
fighting.

It aims to achieve four primary things by going to war with Iraq

* Safeguard the American economy by returning Iraq to trading oil in
US dollars, so the greenback is once again the exclusive oil currency.

* Send a very clear message to any other oil producers just what will
happen to them if they do not stay in the dollar circle. Iran has
already received one message -- remember how puzzled you were that in
the midst of moderation and secularization, Iran was named as a member
of the axis of evil?

* Place the second largest reserves of oil in the world under direct
American control.

* Provide a secular, subject state where the US can maintain a huge
force perhaps with nominal elements from allies such as Britain and
Australia) to dominate the Middle East and its vital oil. This would
enable the US to avoid using what it sees as the unreliable Turkey,
the politically impossible Israel and surely the next state in its
sights, Saudi Arabia, the birthplace of al Qaeda and a hotbed of
anti-American sentiment.

* Severe setback the European Union and its euro, the only trading
bloc and currency strong enough to attack the USA's dominance of world
trade through the dollar.

* Provide cover for the US to run a covert operation to overturn the
democratically elected government of Venezuela and replace it with an
America-friendly military supported junta -- and put Venezuala's oil
into American hands.

Locking the world back into dollar oil trading would consolidate
America's current position and make it all but impregnable as the
dominant world power -- economically and militarily. A splintered
Europe (the US is working hard to split Europe; Britain was easy,but
other Europeans have offered support in terms of UN votes) and its
euro would suffer a serious setback and might take decades to recover.

It is the boldest grab for absolute power the world has seen in modern
times. America is hardly likely to allow the possible slaughter of a
few hundred thousand Iraqis stand between it and world domination.

President Bush did promise to protect the American way of life. This
is what he meant.

JUSTIFYING WAR

Obviously, the US could not simply invade Iraq, so it began casting
around for a 'legitimate' reason to attack. That search has been one
of increasing desperation as each rationalization has crumbled. First
Iraq was a threat because of alleged links to al Qaeda; then it was
proposed Iraq might supply al Qaeda with weapons; then Iraq's military
threat to its neighbours was raised;  then the need to deliver Iraqis
from Saddam Hussein's horrendously inhumane rule; finally there is the
question of compliance with UN weapons inspection.

The USA's justifications for invading Iraq are looking less impressive
by the day. The US's statements that it would invade Iraq unilaterally
without UN support and in defiance of the UN make a total nonsense of
any American claim that it is concerned about the world body's
strength and standing.

The UN weapons inspectors have come up with minimal infringements of
the UN weapons limitations -- the final one being low tech rockets
which exceed the range allowed by about 20 percent. But there is no
sign of the so-called weapons of mass destruction
(WMD) the US has so confidently asserted are to be found. Colin Powell
named a certain north Iraqi village as a threat. It was not. He later
admitted it was the wrong village.

'Newsweek' (24/2) has reported that while Bush officials have been
trumpeting the fact that key Iraqi defector, Lt.  Gen. Hussein Kamel,
told the US in 1995 that Iraq had manufactured tonnes of nerve gas and
anthrax (Colin Powell's 5 February presentation to the UN was just one
example)they neglected to mention that Kamel had also told the US that
these  weapons  had been destroyed.

Parts of the US and particularly the British secret 'evidence' have
been shown to come from a student's masters thesis.

America's expressed concern about the Iraqi people's human rights and
the country's lack of democracy are simply not supported by the USA's
history of intervention in other states nor by its current actions.
Think Guatemala, the Congo, Chile and Nicaragua as examples of a much
larger  pool of US actions to tear down legitimate, democratically
elected governments and replace them with war, disruption, starvation,
poverty, corruption, dictatorships, torture, rape and murder for its
own economic ends. The most recent, Afghanistan, is not looking good;
in fact that reinstalled a murderous group of warlords which America
had earlier installed, then deposed, in favour of the now hated
Taliban.

Saddam Hussein was just as repressive, corrupt and murderous 15 years
ago when he used chemical weapons, supplied by the US, against the
Kurds. The current US Secretary for Defence, Donald Rumsfeld, so
vehement against Iraq now, was on hand personally to turn aside
condemnation of Iraq and blame Iran. At that time, of course, the US
thought Saddam Hussein was their man -- they were using him against
the perceived threat of Iran's Islamic fundamentalism.

Right now, as 'The Independent' writer, Robert Fisk, has noted, the
US's efforts to buy Algeria's UN vote includes promises of re-arming
the military which has a decade long history of repression, torture,
rape and murder Saddam Hussein himself would envy. It is estimated
200,000 people have  died, and countless others been left maimed by
the activities of  these monsters. What price the  US's humanitarian
concerns for Iraqis?  (Of course, the French are also wooing Algeria,
their former north African territory, for all they are worth, but at
least they are not pretending to be driven by humanitarian concerns.)

Indonesia is another nation with a vote and influence as the largest
Muslim  nation in the world. Its repressive, murderous military is
regaining strength on the back of the US's so-called anti-terror
campaign and is receiving promises of open and covert support --
including intelligence sharing.

AND VENEZUELA

While the world's attention is focused on Iraq, America is both openly
and covertly supporting the "coup of the rich" in Venezuela, which
grabbed power briefly in April last year before being intimidated by
massive public displays of support by the poor for
democratically-elected President Chavez Frias. The coup leaders
continue to use their control of the private media, much of  industry
and the ear of the American  Government and its oily intimates to
cause disruption and disturbance.

Venezuela's state-owned oil resources would make rich pickings for
American oil companies and provide the US with an important oil source
in its own backyard.

Many writers have noted the contradiction between America's alleged
desire to establish democracy in Iraq while at the same time, actively
undermining the democratically-elected government in Venezuela. Above
the line, America rushed to recognise the coup last April; more
recently, President Bush has called for "early elections", ignoring
the fact that President Chavez Frias has won three elections and two
referendums and, in any case, early elections would be
unconstitutional.

One element of the USA's covert action against Venezuela is the
behaviour of American trans-national businesses, which have locked out
employees in support of "national strike" action. Imagine them doing
that in the USA!  There is no question that a covert operation is in
process to overturn the legitimate Venezuelan government. Uruguayan
congressman, Jose Nayardi, made it public when he revealed that the
Bush administration had asked for Uruguay's support for Venezuelan
white collar executives and trade union activists "to break down
levels of intransigence within the Chavez Frias administration". The
process, he noted, was a shocking reminder of the CIA's 1973
intervention in Chile which saw General Pinochet lead his military
coup to take over President Allende's democratically elected
government in a bloodbath.

President Chavez Frias is desperately clinging to government, but with
the might of the USA aligned with his opponents, how long can he last?

THE COST OF WAR

Some have claimed that an American invasion of Iraq would cost so many
billions of dollars that oil returns would never justify such an
action.

But when the invasion is placed in the context of the protection of
the entire US economy for now and into the future, the balance of the
argument changes. Further, there are three other vital factors First,
America will be asking others to help pay for the war because it is
protecting their interests.  Japan and Saudi Arabia made serious
contributions to the cost of the 1991 Gulf war.

Second -- in reality, war will cost the USA very little -- or at
least, very little over and above normal expenditure. This war is
already paid for! All the munitions and equipment have been bought and
paid for. The USA would have to spend hardly a cent on new hardware to
prosecute this war -- the expenditure will come later when munitions
and equipment have to be replaced after the war. But munitions,
hardware and so on are being replaced all the time -- contracts are
out. Some contracts will simply be brought forward and some others
will be ramped up a bit, but spread over a few years, the cost will
not be great. And what is the real extra cost of an army at war
compared with maintaining the standing army around the world, running
exercises and so on? It is there, but it is a relatively small sum.

Third -- lots of the extra costs involved in the war are dollars spent
outside America, not least in the purchase of fuel. Guess how America
will pay for these? By printing dollars it is going to war to protect.
The same happens when production begins to replace hardware.
components, minerals, etc. are bought in with dollars that go overseas
and exploit America's trading advantage.

The cost of war is not nearly as big as it is made out to be. The cost
of not going to war would be horrendous for the USA -- unless there
were another way of protecting the greenback's world trade dominance.

AMERICA'S TWO ACTIVE ALLIES

Why are Australia and Britain supporting America in its transparent
Iraqi war ploy?

Australia, of course, has significant US dollar reserves and trades
widely in dollars and extensively with America. A fall in the US
dollar would reduce Australia's debt, perhaps, but would do nothing
for the Australian dollar's value against other currencies. John
Howard, the  Prime Minister, has long cherished the dream of a free
trade agreement with the USA in the hope that Australia can jump on
the back of the free ride America gets in trade through the dollar's
position as the major  trading medium. That would look much less
attractive if the euro took  over a significant part of the oil trade.

Britain has yet to adopt the euro. If the US takes over Iraq and
blocks the euro's incursion into oil trading, Tony Blair will have
given his French and German counterparts a bloody nose, and gained
more room to manoeuvre on the issue -- perhaps years more room.
Britain would be in a position to demand a better deal from its EU
partners for entering the "eurozone" if the new currency could not
make the huge value gains guaranteed by a significant role in world
oil trading. It might even be in a position to withdraw from Europe
and link with America against continental Europe.

On the other hand, if the US cannot maintain the oil trade dollar
monopoly, the euro will rapidly go from strength to strength, and
Britain could be left begging to be allowed into the club.

THE OPPOSITION

Some of the reasons for opposition to the American plan are obvious --
America is already the strongest nation on earth and dominates world
trade through its dollar. If it had control of the Iraqi oil and a
base for its forces in the Middle East, it would not add to, but would
multiply its power.

The oil-producing nations, particularly the Arab ones, can see the
writing on the wall and are quaking in their boots.

France and Germany are the EU leaders with the vision of a resurgent,
united Europe taking its rightful place in the world and using its
euro currency as a world trading reserve currency and thus gaining
some of the free ride the United States enjoys now. They are the ones
who initiated the euro oil trade with Iraq.

Russia is in deep economic trouble and knows it will get worse the day
America starts exploiting its take-over of Afghanistan by running a
pipeline southwards via Afghanistan from the giant southern Caspian
oil fields. Currently, that oil is piped northwards -- where Russia
has control.

Russia is in the process of ramping up oil production with the
possibility of trading some of it for euros and selling some to the US
itself. Russia already has enough problems with the fact that oil is
traded in US dollars; if the  US has control of Iraqi oil, it could
distort the market to Russia's enormous disadvantage. In addition,
Russia has interests in Iraqi oil; an American take over could see
them lost.  Already on its knees, Russia could be beggared before a
mile of the Afghanistan pipeline is laid.

ANOTHER SOLUTION?

The scenario clarifies the seriousness of America's position and
explains its frantic drive for war. It also suggests that solutions
other than war are possible.

Could America agree to share the trading goodies by allowing Europe to
have a negotiated part of it? Not very likely, but it is just possible
Europe can stare down the USA and force such an outcome. Time will
tell.  What about Europe taking the statesmanlike, humanitarian and
long view, and withdrawing, leaving the oil to the US, with
appropriate safeguards for ordinary Iraqis and democracy in Venezuela?

Europe might then be forced to adopt a smarter approach -- perhaps
accelerating the development of alternative energy technologies which
would reduce the EU's reliance on oil for energy and produce goods it
could trade for euros -- shifting the world trade balance.

Now that would be a very positive outcome for everyone.

. . . .

By Geoffrey Heard is a Melbourne, Australia, writer on the
environment, sustainability and human rights. . .
. .

P.S. Anyone is free to circulate this document provided it is complete
and in its current form with attribution and no payment is asked.  It
is prohibited to reproduce this document or any part of it for
commercial gain without the prior permission of the author. For such
permission, contact the author at gheard@xxxxxxxxxxxx

SOME REFERENCES AND FURTHER INFORMATION

http://www.ratical.org/ratville/CAH/RRiraqWar.html 'The Real Reasons
for the Upcoming War With Iraq:

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