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Sunday, March 21, 2004

Michelle links to an article which presents the real reason for the war in Iraq--to keep the dollar as the global currency:

If the euro becomes a global currency to rival the dollar, central banks and other traders will sell down their dollar reserves, causing the value of the dollar to plummet (and devaluing the debts of poor countries at the expense of their creditors). The unwanted dollars will be withdrawn from the US asset market and will flood the market for US goods and services. The US property market will deflate (so that poor Americans can more easily afford homes, at the expense of current property owners). The US stock market, being more volatile than the property market, will fall faster. The real prices of property and shares will fall further than the dollar prices because the dollar itself will be devalued. The additional dollars chasing US goods and services will fuel domestic inflation. They will also increase exports, reducing the current account deficit to compensate for the slowdown of foreign investment, and reducing domestic living standards as measured by consumption of goods and services. Inevitably, the Federal Reserve will raise interest rates in order to reduce the inflation, support the dollar, attract more foreign investment, and delay the day of reckoning on which America will have to export real goods and services to pay for its imports, service its foreign debt, and accumulate reserves of euros. But that will not rescue the landowners and shareholders and bond holders, because their assets can be devalued not only by reduced foreign investment, but also by higher interest rates.

And of course the price of oil in US dollars will increase; but this time there will be no compensating increase in the global demand for dollars.

So what does this have to do with Iraq, the "axis of evil," and the Bushies' assault on democracy in Venezuela?

The first OPEC member to show serious disloyalty to the dollar was Iran, which has expressed interest in the euro since 1999. In January 2002, George W. Bush named Iran in his "axis of evil", provoking a wave of anti-American demonstrations reminiscent of the Khomeini era, and undoubtedly setting back the political and religious liberalization of that country. Undeterred, Iran converted most of its currency reserves to euros during 2002, and a proposal to price Iran's oil in euros has been submitted to the central bank and the parliament.

Let us see whether the Americans find an excuse to destabilize Iran's toddling democracy in favor of a dictatorship that just happens to prefer dollars to euros.

The second offender was Venezuela. In 2000, Venezuela's President Hugo Chavez convened a conference on the future of fossil fuels and renewable energy. The report of the conference, delivered by Chavez to the OPEC summit in September 2000, recommended that OPEC set up a computerized barter system so that members could trade oil for goods and services without the use of dollars or any other currency. The chief beneficiaries would be OPEC's poorer customers, who did not have large currency reserves. Chavez made 13 barter deals. In one of them, Cuba provided health services in Venezuelan villages.

In April 2002 there was a coup against the twice-elected President Chavez. The coup was welcomed by the Bush administration and by editorials in numerous American newspapers, but collapsed after two days, leaving evidence that the U.S. administration was behind it.

The third and most blatant offender was Iraq. In October 2000, Iraq persuaded the United Nations to allow Iraqi oil to be sold for euros instead of dollars, with effect from November 6. Iraq then converted its entire $10 billion "oil for food" reserve fund from dollars to euros. These events went unreported in the U.S. media.

In case you don't already know it, the American economy is one giant house of cards. Without cheap imported oil, cheap labor via "free trade," and the hegemony of the dollar, we're basically Russia--a failed economy and lots of weapons of mass destruction. And rather than attempt to face this reality and work our way out of it in a reasonable (and peaceful) manner, our politicians would prefer to keep the blinders on and continue rushing full-tilt towards oblivion, just so long as we don't get there before the next election.