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

[Hudsonmi@xxxxxxx]

Dear William,
    Europe could follow the US path only by running a balance-of-payments deficit in which other countries would hold their international monetary reserves - without constraint.
    But right now, Europe is running a balance-of-payments SURPLUS. Thus, in addition to national financial accounting (the budget surplus or deficit), one needs to factor in balance-of-payments accounting. This usually is counter-intuitive for people who have not worked in the field and programmed their brain to process an inside-out kind of economic thinking.
    Few politicians understand this (or other economic matters, for that matter). They react ad hoc. The US has managed to do this by always ignoring what foreign countries want and just doing what politicians want to do in the short run. This is not how Europeans or Asians are schooled, and it is really a contrast in political cultures.

    I repeat that the oil war was NOT part of a currency war. There's no real opposition to the US dollar as yet. 
    As long as Venezuela's debts are dollarized, by the way, it doesn't matter much what it keeps its reserves in. the US would be much more worried if Venezuela enforced the clauses in its debt contracts and sued to repudiate its foreign debt by making use of New York's "fraudulent conveyance" act, wiping out its debts legally. 

    The US isn't an oil-backed currency (although as long as OPEC holds dollars, this creates a demand for dollars that offsets the US balance-of-payments deficit). It's a military-backed currency, and hence politically backed as an extension of America's military power. Regarding oil and the balance of payments, the entire "dollar area" must be viewed as a unit, and your comments that oil prices support the dollar's value are correct.
    Also, it's an ideologically backed currency, through its control of the British Labour Party which time and again has sold out to America on bad terms and then tried to drag continental Europe along.
    
    Your quote from Spiro is accurate. Herman Kahn brought me down to meet with the Sec. of the Treasury to discuss the balance of payments, and he told me he'd told Saudi Arabia that NOT to keep their reserves in the form of US Treasury bonds would be treated as an act of war. I'm sure he must have told at least selected Congressmen the same thing, as this was quite open at the time. I discuss all this in my sequel to Super-Imperialism, Global Fracture: The New International Economic Order (Harper & Row, 1978). It's been out of print for many years.

    Regarding your last paragraph, I agree with you. That's the fair way of doing things.
    But life isn't fair. 
    This isn't only America's fault. It simply pushes its self-interest to the limit. Often its diplomats expect Europe and Asia to push back, so as to arrive at the equitable arrangement between the dollar, the euro and the yen/yuan that you propose. But nobody's pushing back. And so we have today's arrangements.
    Perhaps we can raise their consciousness as to what a rip-off is occurring.

Michael Hudson