| Author | Message | | Alpha | | Posted: Wed Feb 25, 2004 8:51 pm Post subject: PNAC (Zionist) Memo: Regime Change for Iran |
| Forwarded:
Here we go again. These guys have no shame!
http://www.newamericancentury.org/iran-20040224.htm
February 24, 2004
MEMORANDUM TO: OPINION LEADERS
FROM: GARY SCHMITT
SUBJECT: Regime Change for Iran
We would like to draw your attention to the following op-ed by Michael McFaul and Abbas Milani in yesterday's Wall Street Journal ("Solidarity with Iran"). In the face of Iranian clerics' assault on the democratic process leading up to Iran's recent parliamentary elections, the authors argue that it is time for the Bush administration to demonstrate that its commitment to democracy in the Middle East extends to U. S. policy toward Iran.
Iran's leaders have begun to make gestures of cooperation with the United States - which is not at all surprising given the presence of American forces in the surrounding countries of Iraq and Afghanistan and the rapidly declining legitimacy of the regime with the Iranian people. Given the Bush administration's goals for stemming the WMD proliferation and reigning in terrorist groups, it may be tempting to pursue closer ties with the powerful clerics. However, as McFaul and Milani note, there is little reason to believe that a commitment made by the Iranian government on these issues would be anything but an expedient retreat or, indeed, that it would be honored at all. In the meantime, by engaging the regime, the administration would "send a demoralizing signal to Iran's democratic forces," who over the long-term could actually provide the U.S. with "more lasting gains."
Solidarity With Iran
Michael McFaul and Abbas Milani
Wall Street Journal
February 23, 2004
On Friday, there was a coup d'état in Iran. By preventing thousands of democratic candidates from participating in the parliamentary elections, the clerics eliminated yet another relatively independent institution of political power. Their next target is the presidency. If President Mohammad Khatami is replaced in 2005 through a similar faux electoral process, then the concentration of monopoly power in the hands of a clique of despotic clerics will be complete.
Contrary to common perception, Iranian society is today one of the most pluralist, and the Islamic regime one of the most fragile, in the region. Even after the election, the prospects for a democratic breakthrough are greater there than elsewhere in the Middle East. Iran occupies the same place in its neighborhood as Poland did in communist Europe in the 1980s. Like Poland then, Iranian society is organized, hostile to the regime, pro-democratic and pro-American, while Iran's rulers--like their Polish counterparts 20 years ago--have no legitimacy, are deeply corrupt, and seem ready to use any means necessary to survive. At the risk of stretching the analogy, last Friday's "coup" in Iran is the equivalent of Gen. Wojciech Jaruzelski's crackdown against Solidarity. Just as in Poland after December 1981, inside Iran the era of compromise and negotiation is now over.
However, the coup in Iran today and the one in Poland are different in one critical respect: the West's reaction. In contrast to the concerted efforts in the '80s to aid Solidarity, few in the West--including the Bush administration--have shown much solidarity with Iran's democrats. This policy, or the lack of one, needs to change.
The first step in executing a new strategy is to clarify whose side we are on. President Bush must make clear, ideally in a major speech devoted to Iran, that the U.S. has no intention of pursuing closer ties with the autocratic clerics as a reward for dismantling their nuclear weapons program; and that it is not a patron of any émigré candidate for leading a future democratic Iran. Many in Iran doubt President Bush's promises about democracy in the Middle East. Instead they see Washington focused on immediate goals--such as arresting terrorists and eliminating WMDs--that have led to cooperation with autocrats like Pakistan's Pervez Musharraf, Libya's Moammar Gadhafi and now, perhaps, the clerics in Iran.
For years, the "spiritual leader" Ayatollah Khamenei and his minions thwarted any effort to seek better relations with the U.S. In the wake of Saddam Hussein's ouster, however, the nervous mullahs changed their tactics, but not their goals. They were suddenly more willing to negotiate with Western states, particularly on international controls over their nuclear program. After saber-rattling against any new protocol with the International Atomic Energy Agency, the surprisingly timid mullahs suddenly agreed last October to allow vigorous inspections of all their facilities. The message to the world, and to the U.S. in particular, seemed clear: If agreements are to be made with Iran, it is the conservatives, and not the elected president, who must be partners to the deal. Buoyed by Col. Gadhafi's recent rapprochement with the U.S., they have pursued private talks with American counterparts, and have allegedly outlined in a secret letter the path to the resumption of full diplomatic relations. As a sweetener for the deal, conservatives hint that they can keep the Iraqi Shiites quiet. But their posture is a combination of bluff and deception.
The Bush administration and our European allies cannot be tempted into an agreement with Khamenei or his surrogates. If the past is any indication, the clerics will break any agreement they have signed out of expedience. Already there are signs of their bad faith on their promise to come clean on the extent of their nuclear program. There is even a theological concept--Tagiye--to justify such double-dealings with the "infidels." Nor can they help in Iraq, where Iran's mullahs have in fact little influence over clerics such as Ayatollah Sistani. The only way they can influence events in Iraq is through the thousands of agents they have sent over the borders.
Most importantly, signals of rapprochement would send a demoralizing signal to Iran's democratic forces. Negotiations over weapons inspectors are absolutely necessary, but the interlocutors in such discussions must be elected officials, not unelected clerics. Beyond this limited engagement, President Bush must initiate a more sophisticated strategy for engaging Iranian society--without appearing to legitimize the regime. He must make public statements to assure democratic forces inside Iran that the U.S. is still on their side. President Bush should meet publicly with Iran's genuine democratic leaders, while avoiding imposters claiming to represent the Iranian people. American NGOs must engage more directly with Iranian civil society. Iranian students, scholars and entrepreneurs must be allowed greater interaction with American counterparts. Iran's democratic movement would benefit from contact with the West--with Western societies, ideas and economies. The same strategy and organizations that helped support Polish society in the dark days after December 1981 must be deployed in Iran.
The future of Iran, and of its potential democracy, must be determined inside Iran. But the U.S. can play a crucial role by making clear that democracy is the paramount foreign policy goal in Iran. Arms control negotiations with the mullahs may serve American short-term interests, but at the expense of more lasting gains. If Iran becomes a liberal democracy, surely the Iranian nuclear threat to the U.S. will disappear definitively. After all, did not Poland's Solidarity ultimately do more to end the Cold War than any Soviet-American arms control agreement?
Messrs. McFaul and Milani, fellows at the Hoover Institution, teach political science at Stanford.
http://www.nowarforisrael.com
http://nogw.com/warforisrael.html | |  | | Alpha | | Posted: Wed Feb 25, 2004 9:03 pm Post subject: Zionists Trying to Dupe US into Fighting Wars for Israel |
| Don't allow the JINSA/PNAC Zionist Jews (like Richard Perle and company) dupe US into doing regime change in Iran for the benefit of Israel (read the following article to see how that 'democracy' line is cover for the Zionist agenda of doing further regime change for Israel) as Iran can deal with its problems on its own and doesn't need outside (Zionist-driven) intervention (as Zionist Jews like Perle are not so worried about democracy and equality for the Palestinians who are under racist Israeli Apartheid-like oppression):
http://www.vdare.com/misc/macdonald_neoconservatism.htm
Read about this Zionist Richard Perle (as he is a traitorous Israel firster who is trying to dupe the US into fighting more war for Israel):
http://www.fpp.co.uk/online/02/12/Counterpunch_1.html
Also, read in the following article how Zionists in Israel (and in the US like Perle) will try to trick us into fighting wars in the Middle East for Israel:
http://www.rense.com/general31/lifeof.htm | | | | Alpha | | Posted: Mon Mar 01, 2004 8:06 pm Post subject: Iraq and the hidden euro-dollar wars |
| Iraq and the hidden euro-dollar wars by F. William Engdahl
Date: Tue, 3 Feb 2004 01:44:57 +1000 From: "makichris"
<chrispaul@netpci.com>
Current Concerns Current Concerns - The monthly journal for independent
thought, ethical standards and moral responsibility.
No 4, 2003, P.O. Box 223, CH-8044 Zurich, Phone +41-1-350 65 50, Email:
editors@currentconcerns.ch
A New American Century? Iraq and the hidden euro-dollar wars by F.
William Engdahl, USA/Germany
http://williambowles.info/guests/dollar_euro.html
also at
http://www.currentconcerns.ch/config_03/print.php?source=../archive/2003/04/source/20030409.html&issue=No%204,%202003
Despite the apparent swift U.S. military success in Iraq, the U.S.
dollar has yet to benefit as safe haven currency. This is an unexpected
development, as many currency traders had expected the dollar to
strengthen on the news of a U.S. win. Capital is flowing out of the
dollar, largely into the Euro. Many are beginning to ask whether the
objective situation of the U.S. economy is far worse than the stock
market would suggest. The future of the dollar is far from a minor issue
of interest only to banks or currency traders. It stands at the heart of
Pax Americana, or as it is called, The American Century, the system of
arrangements on which America’s role in the world rests.
Yet, even as the dollar is steadily dropping against the Euro after the
end of fighting in Iraq, Washington appears to be deliberately worsening
the dollar fall in public comments. What is taking place is a power game
of the highest geopolitical significance, the most fateful perhaps,
since the emergence of the United States in 1945 as the world’s leading
economic power.
The coalition of interests which converged on war against Iraq as a
strategic necessity for the United States, included not only the vocal
and highly visible neo-conservative hawks around Defense Secretary
Rumsfeld and his deputy, Paul Wolfowitz. It also included powerful
permanent interests, on whose global role American economic influence
depends, such as the influential energy sector around Halliburton, Exxon
Mobil, ChevronTexaco and other giant multinationals. It also included
the huge American defense industry interests around Boeing,
Lockheed-Martin, Raytheon, Northrup-Grumman and others. The issue for
these giant defense and energy conglomerates is not a few fat contracts
from the Pentagon to rebuild Iraqi oil facilities and line the pockets
of Dick Cheney or others. It is a game for the very continuance of
American power in the coming decades of the new century. That is not to
say that profits are made in the process, but it is purely a bypro-duct
of the global strategic issue.
In this power game, least understood is the role of preserving the
dollar as the world reserve currency, as a major driving factor
contributing to Washington’s power calculus over Iraq in the past
months. American domination in the world ultimately rests on two
pillars - its overwhelming military superiority, especially on the
seas; and its control of world economic flows through the role of the
dollar as the world’s reserve currency. More and more it is clear that
the Iraq war was more about preserving the second pillar ? the dollar
role ? than the first, the military. In the dollar role, oil is a
strategic factor.
American Century: the three phases
If we look back over the period since the end of World War II, we can
identify several distinct phases of evolution of the American role in
the world. The first phase, which began in the immediate postwar period
1945-1948 and the onset of Cold War, could be called the Bretton Woods
Gold Exchange system.
Under the Bretton Woods system in the immediate aftermath of the World
War, the order was relatively tranquil. The United States had emerged
from the War clearly as the one sole superpower, with a strong
industrial base and the largest gold reserves of any nation. The initial
task was to rebuild Western Europe and to create a NATO Atlantic
alliance against the Soviet Union. The role of the dollar was directly
tied to that of gold. So long as America enjoyed the largest gold
reserves, and the U.S. economy was far the most productive and efficient
producer, the entire Bretton Woods currency structure from French Franc
to British Pound Sterling and German Mark was stable. Dollar cre-dits
were extended along with Marshall Plan assistance and credits to finance
the rebuil-ding of war-torn Europe. American companies, among them oil
multinationals, gained nicely from dominating the trade at the onset of
the 1950’s. Washington even encouraged creation of the Treaty of Rome in
1958 in order to boost European economic stability and create larger
U.S. export markets in the bargain. For the most part, this initial
phase of what Time magazine publisher Henry Luce called ‘The American
Century’, in terms of economic gains, was relatively ‘benign’ for both
the U.S. and Europe. The United States still had the economic
flexibility to move.
This was the era of American liberal foreign policy. The United States
was the hegemonic power in the Western community of nations. As it
commanded overwhelming gold and economic resources compared with Western
Europe or Japan and South Korea, the United States could well afford to
be open in its trade relations to European and Japanese exports. The
tradeoff was European and Japanese support for the role of the United
Sates during the Cold War. American leadership was based during the
1950’s and early 1960’s less on direct coercion and more on arriving at
consensus, whether in GATT trade rounds or other issues. Organizations
of elites, such as the Bilderberg meetings, were organized to share the
evolving consensus between Europe and the United States.
This first, more benign phase of the Ameri-can Century came to an end by
the early 1970’s.
The Bretton Woods Gold Exchange began to break down, as Europe got on
its feet economically and began to become a strong exporter by the
mid-1960’s. This growing economic strength in Western Europe coincided
with soaring U.S. public deficits as Johnson escalated the tragic war in
Vietnam. All during the 1960’s, France’s de Gaulle began to take its
dollar export earnings and demand gold from the U.S. Federal Reserve,
legal under Bretton Woods at that time. By November 1967 the drain of
gold from U.S. and Bank of England vaults had become critical. The weak
link in the Bretton Woods Gold Exchange arrangement was Britain, the
‘sick man of Europe’. The link broke as Sterling was devalued in 1967.
That merely accelerated the pressure on the U.S. dollar, as French and
other central banks increased their call for U.S. gold in exchange for
their dollar reserves. They calculated with the soaring war deficits
from Vietnam, it was only a matter of months before the United States
itself would be forced to devalue against gold, so better to get their
gold out at a high price.
By May 1971 the drain of U.S. Federal Reserve gold had become alarming,
and even the Bank of England joined the French in demanding U.S. gold
for their dollars. That was the point where rather than risk a collapse
of the gold reserves of the United States, the Nixon Administration
opted to abandon gold entirely, going to a system of floating currencies
in August 1971. The break with gold opened the door to an entirely new
phase of the American Century. In this new phase, control over monetary
policy was, in effect, privatized, with large international banks such
as Citibank, Chase Manhattan or Barclays Bank assuming the role that
central banks had in a gold system, but entirely without gold. ‘Market
forces’ now could determine the dollar. And they did with a vengeance.
The free floating of the dollar, combined with the 1973 rise in OPEC oil
prices by 400% after the Yom Kippur War, created the basis for a second
phase of the American Century, the Petrodollar phase.
Recycling petrodollars
Beginning the mid-1970’s the American Century system of global economic
dominance underwent a dramatic change. An Anglo-American oil shock
suddenly created enormous demand for the floating dollar. Oil importing
countries from Germany to Argentina to Japan, all were faced with how to
export in dollars to pay their expensive new oil import bills. OPEC oil
countries were flooded with new oil dollars. A major share of these oil
dollars came to London and New York banks where a new process was
instituted. Henry Kissinger termed it, ‘recycling petrodollars’. The
recycling strategy was discussed already in May 1971 at the Bilderberger
meeting in Saltsjoebaden, Sweden. It was presented by American members
of Bilderberg, as detailed in the book Mit der Ölwaffe zur Weltmacht.[1]
OPEC suddenly was choking on dollars it could not use. U.S. and UK banks
took the OPEC dollars and relent them as Eurodollar bonds or loans, to
countries of the Third World desperate to borrow dollars to finance oil
imports. The buildup of these petrodollar debts by the late 1970’s, laid
the basis for the Third World debt crisis in the 1980’s. Hundreds of
billions of dollars were recycled between OPEC, the London and New York
banks and back to Third World borrowing countries.
By August 1982 the chain finally broke and Mexico announced it would
likely default on repaying Eurodollar loans. The Third World debt crisis
began when Paul Volcker and the U.S. Federal Reserve had unilaterally
hiked U.S. interest rates in late 1979 to try to save the failing
dollar. After three years of record high U.S. interest rates, the dollar
was ‘saved’, but the entire developing sector was choking economically
under usurious U.S. interest rates on their petrodollar loans. To
enforce debt repayment to the London and New York banks, the banks
brought the IMF in to act as ‘debt policeman’. Public spending for
health, education, welfare was slashed on IMF orders to ensure the banks
got timely debt service on their petrodollars.
The Petrodollar hegemony phase was an attempt by the United States
establishment to slow down its geopolitical decline as the hegemonic
center of the postwar system. The IMF ‘Washington Consensus’ was
developed to enforce draconian debt collection on Third World countries,
to force them to repay dollar debts, prevent any economic independence
from the nations of the South, and keep the U.S. banks and the dollar
afloat. The Trilateral Commission was created by David Rockefeller and
others in 1973 in order to take account of the recent emergence of Japan
as an industrial giant and try to bring Japan into the system. Japan, as
a major industrial nation, was a major importer of oil. Japanese trade
surpluses from export of cars and other goods was used to buy oil in
dollars. The remaining surplus was invested in U.S. Treasury bonds to
earn interest. The G-7 was founded to keep Japan and Western Europe
inside the U.S. dollar system. From time to time into the 1980’s various
voices in Japan would call for three currencies - dollar, German mark
and yen - to share the world reserve role. It never happened. The
dollar remained dominant.
From a narrow standpoint, the Petrodollar phase of hegemony seemed to
work. Underneath, it was based on ever-worsening economic decline in
living standards across the world, as IMF policies destroyed national
economic growth and broke open markets for globalizing multinationals
seeking cheap production outsourcing in the 1980’s and especially into
the 1990’s. Yet, even in the Petrodollar phase, American foreign
economic policy and military policy was dominated by the voices of the
traditional liberal consensus. American power depended on negotiating
periodic new arrangements in trade or other issues with its allies in
Europe, Japan and East Asia.
A Petro-euro rival?
The end of the Cold War and the emergence of a new Single Europe and the
European Monetary Union in the early 1990’s, began to present an
entirely new challenge to the American Century. It took some years, more
than a decade after the 1991 Gulf War, for this new challenge to emerge
full-blown. The present Iraq war is only intelligible, as a major battle
in the new, third phase of securing American dominance. This phase has
already been called, ‘democratic imperialism’, a favorite term of Max
Boot and other neo-conservatives. As Iraq events suggest, it is not
likely to be very democratic, but definitely likely to be imperialist.
Unlike the earlier periods after 1945, in the new era, the U.S. freedom
to grant concessions to other members of the G-7 is gone. Now raw power
is the only vehicle to maintain American long-term dominance. The best
expression of this argument comes from the neo-conservative hawks around
Paul Wolfowitz, Richard Perle, William Kristol and others. The point to
stress, however, is that the neo-conservatives enjoy such influence
since September 11 because a majority in the U.S. power establishment
finds their views useful to advance a new aggressive U.S. role in the
world.
Rather than work out areas of agreement with European partners,
Washington increasingly sees Euroland as the major strategic threat to
American hegemony, especially ‘Old Europe’ of Germany and France. Just
as Britain in decline after 1870 resorted to increasingly desperate
imperial wars in South Africa and elsewhere, so the United States is
using its military might to try to advance what it no longer can by
economic means. Here the dollar is the achilles heel.
With creation of the Euro over the past five years, an entirely new
element has been added to the global system, one which defines what we
can call a third phase of the American Century. This phase, in which the
latest Iraq war plays a major role, threatens to bring a new, malignant
or imperial phase to replace the earlier phases of American hegemony.
The neo-conservatives are open about their imperial agenda, while more
traditional U.S. policy voices try to deny it. The economic reality
faced by the dollar at the start of the new Century, defines this new
phase in an ominous way.
There is a qualitative difference emerging between the two initial
phases of the American Century - that of 1945-1973, and of 1973-1999
- and the new emerging phase of continued domination in the wake of the
9.11 attacks and the Iraq War. Post-1945 American power before now, was
predominately that of a hegemon. While a hegemon is the dominant power,
in an unequal distribution of power, its power is not generated by
coercion alone, but also by consent among its allied powers. This is
because the hegemon is compelled to perform certain services to the
allies such as military security or regulating world markets for the
benefit of the larger group, itself included. An imperial power has no
such obligations to allies, and not the freedom for such, only the raw
dictates of how to hold on to its declining power - what some call
‘imperial overstretch’. This is the world which neo-conservative hawks
around Rumsfeld and Cheney are suggesting America has to dominate, with
a policy of pre-emptive war.
A hidden war between the dollar and the new Euro currency for global
hegemony is at the heart of this new phase.
To understand the importance of this unspoken battle for currency
hegemony, we first must understand that since the emergence of the
United States as the dominant global superpower after 1945, U.S.
hegemony has rested on two un-challengeable pillars. First, the
overwhelming U.S. military superiority over all other rivals. The United
States today spends on defense more than three times the total for the
entire European Union, some $ 396 billion versus $118 billion last year,
and more than the next 15 largest nations combined. Washington plans an
added $ 2.1 trillion over the coming five years on defense. No nation or
group of nations can come close in defense spending. China is at least
30 years away from becoming a serious military threat. No one is serious
about taking on U.S. military might.
The second pillar of American dominance in the world is the dominant
role of the U.S. dollar as reserve currency. Until the advent of the
Euro in late 1999, there was no potential challenge to this dollar
hegemony in world trade. The Petrodollar has been at the heart of the
dollar hegemony since the 1970’s. The dollar hegemony is strategic to
the future of American global pre-dominance, in many respects as
important if not more so, than the overwhelming military power.
Dollar fiat money
The crucial shift took place when Nixon took the dollar off a fixed gold
reserve to float against other currencies. This removed the restraints
on printing new dollars. The limit was only how many dollars the rest of
the world would take. By their firm agreement with Saudi Arabia, as the
largest OPEC oil producer, the ‘swing producer’ Washington guaranteed
that the world ’s largest commodity, oil, the essential for every
nation’s economy, the basis of all transport and much of the industrial
economy, that oil could only be purchased in world markets in dollars.
The deal had been fixed in June 1974 by Secretary of State Henry
Kissinger, establishing the U.S.-Saudi Arabian Joint Commission on
Economic Cooperation. The U.S. Treasury and the New York Federal Reserve
would ‘allow’ the Saudi central bank, SAMA, to buy U.S. Treasury bonds
with Saudi petrodollars. In 1975 OPEC officially agreed to sell its oil
only for dollars. A secret U.S. military agreement to arm Saudi Arabia
was the quid pro quo.
Until November 2000, no OPEC country dared violate the dollar price
rule. So long as the dollar was the strongest currency, there was little
reason to as well. But November was when French and other Euroland
members finally convinced Saddam Hussein to defy the United States by
selling Iraq’s oil-for-food not in dollars, ‘the enemy currency’ as Iraq
named it, but only in euros. The euros were on deposit in a special UN
account of the leading French bank, BNP Paribas. Radio Liberty of the
U.S. State Department ran a short wire on the news and the story was
quickly hushed.[2]
This little-noted Iraq move to defy the dollar in favor of the euro, in
itself, was insignificant. Yet, if it were to spread, especially at a
point the dollar was already weakening, it could create a panic selloff
of dollars by foreign central banks and OPEC oil producers. In the
months before the latest Iraq war, hints in this direction were heard
from Russia, Iran, Indonesia and even Venezuela. An Iranian OPEC
official, Javad Yarjani, delivered a detailed analysis of how OPEC at
some future point might sell its oil to the EU for euros not dollars. He
spoke in April, 2002 in Oviedo Spain at the invitation of the EU. All
indications are that the Iraq war was seized on as the easiest way to
deliver a deadly pre-emptive warning to OPEC and others, not to flirt
with abandoning the Petro-dollar system in favor of one based on the
euro.
Informed banking circles in the City of London and elsewhere in Europe
privately confirm the significance of that little-noted Iraq move from
petro-dollar to petro-euro. ‘The Iraq move was a declaration of war
against the dollar’, one senior London banker told me recently. ‘As soon
as it was clear that Britain and the U.S. had taken Iraq, a great sigh
of relief was heard in London City banks. They said privately, “now we
don’t have to worry about that damn euro threat”’.
Why would something so small be such a strategic threat to London and
New York, or to the United States that an American President would
apparently risk fifty years of alliance relations globally, and more to
make a military attack whose justification could not even be proved to
the world? The answer is the unique role of the petro-dollar to underpin
American economic hegemony.
How does it work? So long as almost 70% of world trade is done in
dollars, the dollar is the currency which central banks accumulate as
reserves. But central banks, whether China or Japan or Brazil or Russia,
do not simply stack dollars in their vaults. Currencies have one
advantage over gold. A central bank can use it to buy the state bonds of
the issuer, the United States. Most countries around the world are
forced to control trade deficits or face currency collapse. Not the
United States. This is because of the dollar reserve currency role. And
the underpinning of the reserve role is the petrodollar. Every nation
needs to get dollars to import oil, some more than others. This means
their trade targets dollar countries, above all the U.S.
Because oil is an essential commodity for every nation, the Petrodollar
system, which exists to the present, demands the buildup of huge trade
surpluses in order to accumulate dollar surpluses. This is the case for
every country but one - the United States which controls the dollar
and prints it at will or fiat. Because today the majority of all
international trade is done in dollars, countries must go abroad to get
the means of payment they cannot themselves issue. The entire global
trade structure today works around this dynamic, from Russia to China,
from Brazil to South Korea and Japan. Everyone aims to maximize dollar
surpluses from their export trade.
To keep this process going, the United States has agreed to be ‘importer
of last resort’ because its entire monetary hegemony depends on this
dollar recycling.
The central banks of Japan, China, South Korea, Russia and the rest all
buy U.S. Treasury securities with their dollars. That in turn allows the
United States to have a stable dollar, far lower interest rates, and run
a $ 500 billion annual balance of payments deficit with the rest of the
world. The Federal Reserve controls the dollar printing presses, and the
world needs its dollars. It is as simple as that.
The U.S. foreign debt threat
But, not so simple perhaps. This is a highly unstable system, as U.S.
trade deficits and net debt or liabilities to foreign accounts are now
well over 22% of GDP as of 2000, and climbing rapidly. The net foreign
indebtedness of the United States - public as well as private - is
beginning to explode ominously. In the past three years since the U.S.
stock collapse and the re-emergence of budget deficits in Washington,
the net debt position, according to a recent study by the Pestel
Institute in Hanover, has almost doubled. In 1999, the peak of the
dot.com bubble fury, U.S. net debt to foreigners was some $ 1.4
trillions. By the end of this year, it will exceed an estimated $ 3.7
trillion! Before 1989, the United States had been a net creditor,
gaining more from its foreign investments than it paid to them in
interest on Treasury bonds or other U.S. assets. Since the end of the
Cold War, the United States has become a net foreign debtor nation to
the tune of $3.7 trillion! This is not what Hilmar Kopper could call
‘peanuts’.
It does not require much foresight to see the strategic threat of these
deficits to the role of the United States. With an annual current
account (mainly trade) deficit of some $500 billion, some 5% of GDP, the
United States must import or attract at least $1.4 billion every day, to
avoid a dollar collapse and keep its interest rates low enough to
support the debt-burdened corporate economy. That net debt is getting
worse at a dramatic pace. Were France, Germany, Russia and a number of
OPEC oil countries to now shift even a small portion of their dollar
reserves into euro to buy bonds of Germany or France or the like, the
United States would face a strategic crisis beyond any of the postwar
period. To pre-empt this threat, was one of the most strategic hidden
reasons for the decision to go for ‘regime change’ as it is known, in
Iraq. It is as simple and as cold as this. The future of America’s sole
superpower status depended on pre-empting the threat emerging from
Eurasia and Euroland especially. Iraq was and is a chess piece in a far
larger strategic game, one for the highest stakes.
The euro threatens the hegemony
When the euro was launched at the end of the last decade, leading EU
government figures, bankers from Deutsche Bank’s Norbert Walter, and
French President Chirac went to major holders of dollar reserves -
China, Japan, Russia - and tried to convince them to shift out of
dollars at least a part of their reserves, and into euros. However, that
clashed with the need to devalue the too-high euro, so German exports
could stabilize Euroland growth. A falling euro was the case until 2002.
Then, with the debacle of the U.S. dot.com bubble bursting, the Enron
and Worldcom finance scandals, and the recession in the U.S., the dollar
began to lose its attraction for foreign investors. The euro gained
steadily until the end of 2002. Then, as France and Germany prepared
their secret diplomatic strategy to block war in the UN Security
Council, rumors surfaced that the central banks of Russia and China had
quietly began to dump dollars and buy euros. The result was a dollar
free-fall on the eve of war. The stage was set should Washington lose
the Iraq war, or it turn into a long, bloody debacle.
But Washington, leading New York banks and the higher echelons of the
U.S. establishment clearly knew what was at stake. Iraq was not about
ordinary chemical or even nuclear weapons of mass destruction. The
‘weapon of mass destruction’ was the threat that others would follow
Iraq and shift to euros out of dollars, creating mass destruction of the
United States’ hegemonic economic role in the world. As one economist
termed it, an end to the dollar reserve role would be a ‘catastrophe’
for the United States. Interest rates of the Federal Reserve would have
to be pushed higher than in 1979 when Paul Volcker raised rates above
17% to try to stop the collapse of the dollar then. Few realize that
1979 dollar crisis was also a direct result of moves by Germany, and
France, under Schmidt and Giscard, to defend Europe together with Saudi
Arabia and others who began selling U.S. Treasury bonds to protest
Carter Administration policy. It is also worth recalling that after the
Volcker dollar rescue, the Reagan Administration, backed by many of
today’s neo-conservative hawks, began a huge U.S. military defense
spending to challenge the Soviet Union.
Eurasia versus the Anglo-American Island Power
This fight over petro-dollars versus petro-euros, which started in Iraq,
is by no means over, despite the apparent victory of the United States
in Iraq. The euro was created by French geopolitical strategists for
establishing a multipolar world after the collapse of the Soviet Union.
The aim was to balance the overwhelming dominance of the U.S. in world
affairs. Significantly, French strategists rely on a British
geopolitical strategist to develop their rival power alternative to the
U.S., namely Sir Halford Mackinder.
This past February, a French intelligence-connected newsletter,
Intelligence Online, wrote a piece, ‘The Strategy Behind
Paris-Berlin-Moscow Tie’. Referring to the UN Security Council bloc of
France-Germany-Russia to try to prevent the U.S.-British war moves in
Iraq, the Paris report notes the recent efforts of European and other
powers to create a counterpower to that of the United States. Referring
to the new ties of France with Germany and more recently with Putin,
they note, ‘a new logic, and even dynamic seems to have emerged. An
alliance between Paris, Moscow and Berlin running from the Atlantic to
Asia could foreshadow a limit to U.S. power. For the first time since
the beginning of the 20th Century, the notion of a world heartland - the
nightmare of British strategists - has crept back into international
relations.’[3]
Mackinder, father of British geopolitics, wrote in his remarkable paper,
‘The Geographical Pivot of History’ that the control of the Eurasian
heartland, from Normandy France to Vladivostock, was the only possible
threat to oppose the naval supremacy of Britain. British diplomacy until
1914 was based on preventing any such Eurasian threat, that time around
the expansion policy of the German Kaiser eastwards with the Baghdad
Railway and the Tirpitz German Navy buildup. World War I was the result.
Referring to the ongoing efforts of the British and later Americans to
prevent a Eurasian combination as rival, the Paris intelligence report
stressed, ‘That strategic approach (i.e. to create Eurasian heartland
unity) lies at the origin of all clashes between Continental powers and
maritime powers (UK, U.S. and Japan) ... It is Washington’s supremacy
over the seas that, even now, dictates London’s unshakeable support for
the U.S. and the alliance between Tony Blair and Bush.’
Another well-connected French journal, Reseau Voltaire.net, wrote on the
eve of the Iraq war that the dollar was ‘The achilles heel of the
USA’.[4] That is an understatement to put it mildly.
Iraq was planned long before
This emerging threat from a French-led Euro policy with Iraq and other
countries, led some leading circles in the U.S. policy establishment to
begin thinking of pre-empting threats to the Petro-dollar system well
before Bush was even President. While Perle, Wolfowitz and other leading
neo-conservatives played a leading role in developing a strategy to
preserve the faltering system, a new consensus was shaping which
included major elements of traditional Cold War establishment around
figures like Rumsfeld and Cheney.
In September 2000, during the campaign, a small Washington think-tank,
the Project for a New American Century, released a major policy study:
‘Rebuilding America’s Defenses: Strategies, Forces and Resources for a
New Century’. The report is useful in many areas to better understand
present Administration policy. On Iraq, it states, ‘The United States
has sought for decades to play a more permanent role in Gulf regional
security. While the unresolved conflict with Iraq provides the immediate
justification, the need for a substantial American force presence in the
Gulf transcends the issue of the regime of Saddam Hussein.’
This PNAC paper is the essential basis for the September 2002
Presidential White Paper, ‘The National Security Strategy of the United
States of America ’. The PNAC’s paper supportes a, ‘blueprint for
maintaining global U.S. pre-eminence, precluding the rise of a great
power rival, and shaping the international security order in line with
American principles and interests The American Grand Strategy must be
pursued as far into the future as possible.’ Further, the U.S. must,
‘discourage advanced industrial nations from challenging our leadership
or even aspiring to a larger regional or global role.’ (emphasis added).
The PNAC membership in 2000 reads like a roster of the Bush
Administration today. It included Cheney, his wife Lynne Cheney,
neo-conservative Cheney aide, Lewis Libby; Donald Rumsfeld; Rumsfeld
Deputy Secretary Paul Wolfowitz. It also included NSC Middle East head,
Elliott Abrams; John Bolton of the State Department; Richard Perle, and
William Kristol. As well, former Lockheed-Martin vice president, Bruce
Jackson, and ex-CIA head James Woolsey were on board, along with Norman
Podhoretz, another founding neo-con. Woolsey and Podhoretz speak openly
of being in ‘World War IV’. It is becoming increasingly clear to many
that the war in Iraq is about preserving a bankrupt American Century
model of global dominance. It is also clear that Iraq is not the end.
What is not yet clear and must be openly debated around the world, is
how to replace the failed Petro-dollar order with a just new system for
global economic prosperity and security. Now, as Iraq threatens to
explode in internal chaos, it is important to rethink the entire postwar
monetary order anew. The present French-German-Russian alliance to
create a counterweight to the United States requires not merely a
French-led version of the Petro-dollar system, some Petro-euro system,
that continues the bankrupt American Century, only with a French accent,
and euros replacing dollars. That would only continue to destroy living
standards across the world, adding to human waste and soaring
unemployment in industrial as well as developing nations. We must
entirely rethink what began briefly with some economists during the 1998
Asia crisis, the basis of a new monetary system which supports human
development, and does not destroy it.
1 Engdahl, F. William, Mit der Ölwaffe zur Weltmacht, edition steinherz,
Wiesbaden, 2002. Chapter 9-10 detail the creation and impact of the
Petrodollar recycling and the secret 1973 Saltsjoebaden meeting in
preparing the oil shock.
2 Radio Liberty/RFE press release, Charles Recknagel, ‘Iraq: Baghdad
moves to Euro’, November 1, 2000. The wire was picked up for about 48
hours by CNN and other media and promptly vanished from the headlines.
Since William Clark’s article, ‘The real but unspoken reasons for the
upcoming Iraq war’ appeared in the Internet on February 2, 2003, a
lively online discussion of the oil-euro factor has taken place, but
outside occasional references in the London Guardian press, little in
mainstream media has been said of this strategic background factor in
the Washington decision to go against Iraq.
3 Intelligence Online, no.447: 20/02/2003. ‘The Strategy Behind
Paris-Berlin-Moscow Tie’. Intelligence Online Editor, Guillaume Dasquie,
is a French specialist on strategic intelligence and has worked for
French intelligence services on the bin Laden case and other
investigations. His reference to French Eurasian geopolitics clearly
reflects high-level French thinking.
4 Reseau voltaire.net, ‘Suprematie du dollar: Le Talon d’Achille des
USA’, appeared April 4, 2003. It details a French analysis of the
vulnerability of the dollar system on the eve of Iraq war.
(2) Government Budget Deficit to set record $521 Billion in 2004 fiscal
year
Date: Mon, 2 Feb 2004 22:15:42 -0500 From: "David Chiang"
<chiang.d@worldnet.att.net>
U.S. Expects to Borrow $177 Bln in Q1
Monday February 2, 4:36 pm ET
By Jonathan Nicholson
http://biz.yahoo.com/rb/040202/economy_treasury_debt_4.html
WASHINGTON (Reuters) - Coming off of a record borrowing binge in the
final three months of 2003, the U.S. Treasury Department on Monday said
it expects to borrow even more money from capital markets in the current
quarter. In its quarterly borrowing estimate, the Treasury said it
borrowed a slightly smaller-than-expected $113 billion in the
October-December quarter. However, that was still above the previous
record $111 billion the Treasury borrowed from private investors in the
January-March quarter of 2003. The Treasury is forced to sell debt to
finance the government budget deficit, which is expected to set a record
at $521 billion in the 2004 budget year, which began Oct. 1. That
follows a record-setting $374 billion gap in 2003.
The deficit is shaping up to be a campaign issue for President Bush as
he seeks another term in the White House. After the 2000 election Bush
pledged to pay off most of the national debt, but he has been forced to
wrestle with surging budget deficits. Democrats say the deficits show
Bush's tax cuts were unaffordable, while the administration says the
gaps are the result of a sluggish economy and needed spending on the
military and homeland security.
In November, Treasury had thought it would borrow slightly more in the
final quarter of 2003, about $117 billion. It said the difference was
made up mostly by lower spending.
For the current January-March quarter, the Treasury estimated it will
borrow $177 billion, up from a projection of $160 billion made in
November.
"The increase in borrowing is due to lower receipts, primarily from an
increase in tax refunds, and higher outlays," Treasury said. According
to the Treasury's Office of Tax Analysis, the biggest kick from the
accelerated individual income tax cuts enacted last year will actually
come early this year, as taxpayers get their refunds. The tax cuts are
expected to reduce cash flow to the U.S. Treasury by $39.3 billion in
the January-March period and $60.5 billion in the April-June quarter. | | | | Alpha | | Posted: Mon Mar 01, 2004 8:07 pm Post subject: Iraq and the hidden euro-dollar wars |
| Iraq and the hidden euro-dollar wars by F. William Engdahl
Date: Tue, 3 Feb 2004 01:44:57 +1000 From: "makichris"
<chrispaul@netpci.com>
Current Concerns Current Concerns - The monthly journal for independent
thought, ethical standards and moral responsibility.
No 4, 2003, P.O. Box 223, CH-8044 Zurich, Phone +41-1-350 65 50, Email:
editors@currentconcerns.ch
A New American Century? Iraq and the hidden euro-dollar wars by F.
William Engdahl, USA/Germany
http://williambowles.info/guests/dollar_euro.html
also at
http://www.currentconcerns.ch/config_03/print.php?source=../archive/2003/04/source/20030409.html&issue=No%204,%202003
Despite the apparent swift U.S. military success in Iraq, the U.S.
dollar has yet to benefit as safe haven currency. This is an unexpected
development, as many currency traders had expected the dollar to
strengthen on the news of a U.S. win. Capital is flowing out of the
dollar, largely into the Euro. Many are beginning to ask whether the
objective situation of the U.S. economy is far worse than the stock
market would suggest. The future of the dollar is far from a minor issue
of interest only to banks or currency traders. It stands at the heart of
Pax Americana, or as it is called, The American Century, the system of
arrangements on which America’s role in the world rests.
Yet, even as the dollar is steadily dropping against the Euro after the
end of fighting in Iraq, Washington appears to be deliberately worsening
the dollar fall in public comments. What is taking place is a power game
of the highest geopolitical significance, the most fateful perhaps,
since the emergence of the United States in 1945 as the world’s leading
economic power.
The coalition of interests which converged on war against Iraq as a
strategic necessity for the United States, included not only the vocal
and highly visible neo-conservative hawks around Defense Secretary
Rumsfeld and his deputy, Paul Wolfowitz. It also included powerful
permanent interests, on whose global role American economic influence
depends, such as the influential energy sector around Halliburton, Exxon
Mobil, ChevronTexaco and other giant multinationals. It also included
the huge American defense industry interests around Boeing,
Lockheed-Martin, Raytheon, Northrup-Grumman and others. The issue for
these giant defense and energy conglomerates is not a few fat contracts
from the Pentagon to rebuild Iraqi oil facilities and line the pockets
of Dick Cheney or others. It is a game for the very continuance of
American power in the coming decades of the new century. That is not to
say that profits are made in the process, but it is purely a bypro-duct
of the global strategic issue.
In this power game, least understood is the role of preserving the
dollar as the world reserve currency, as a major driving factor
contributing to Washington’s power calculus over Iraq in the past
months. American domination in the world ultimately rests on two
pillars - its overwhelming military superiority, especially on the
seas; and its control of world economic flows through the role of the
dollar as the world’s reserve currency. More and more it is clear that
the Iraq war was more about preserving the second pillar ? the dollar
role ? than the first, the military. In the dollar role, oil is a
strategic factor.
American Century: the three phases
If we look back over the period since the end of World War II, we can
identify several distinct phases of evolution of the American role in
the world. The first phase, which began in the immediate postwar period
1945-1948 and the onset of Cold War, could be called the Bretton Woods
Gold Exchange system.
Under the Bretton Woods system in the immediate aftermath of the World
War, the order was relatively tranquil. The United States had emerged
from the War clearly as the one sole superpower, with a strong
industrial base and the largest gold reserves of any nation. The initial
task was to rebuild Western Europe and to create a NATO Atlantic
alliance against the Soviet Union. The role of the dollar was directly
tied to that of gold. So long as America enjoyed the largest gold
reserves, and the U.S. economy was far the most productive and efficient
producer, the entire Bretton Woods currency structure from French Franc
to British Pound Sterling and German Mark was stable. Dollar cre-dits
were extended along with Marshall Plan assistance and credits to finance
the rebuil-ding of war-torn Europe. American companies, among them oil
multinationals, gained nicely from dominating the trade at the onset of
the 1950’s. Washington even encouraged creation of the Treaty of Rome in
1958 in order to boost European economic stability and create larger
U.S. export markets in the bargain. For the most part, this initial
phase of what Time magazine publisher Henry Luce called ‘The American
Century’, in terms of economic gains, was relatively ‘benign’ for both
the U.S. and Europe. The United States still had the economic
flexibility to move.
This was the era of American liberal foreign policy. The United States
was the hegemonic power in the Western community of nations. As it
commanded overwhelming gold and economic resources compared with Western
Europe or Japan and South Korea, the United States could well afford to
be open in its trade relations to European and Japanese exports. The
tradeoff was European and Japanese support for the role of the United
Sates during the Cold War. American leadership was based during the
1950’s and early 1960’s less on direct coercion and more on arriving at
consensus, whether in GATT trade rounds or other issues. Organizations
of elites, such as the Bilderberg meetings, were organized to share the
evolving consensus between Europe and the United States.
This first, more benign phase of the Ameri-can Century came to an end by
the early 1970’s.
The Bretton Woods Gold Exchange began to break down, as Europe got on
its feet economically and began to become a strong exporter by the
mid-1960’s. This growing economic strength in Western Europe coincided
with soaring U.S. public deficits as Johnson escalated the tragic war in
Vietnam. All during the 1960’s, France’s de Gaulle began to take its
dollar export earnings and demand gold from the U.S. Federal Reserve,
legal under Bretton Woods at that time. By November 1967 the drain of
gold from U.S. and Bank of England vaults had become critical. The weak
link in the Bretton Woods Gold Exchange arrangement was Britain, the
‘sick man of Europe’. The link broke as Sterling was devalued in 1967.
That merely accelerated the pressure on the U.S. dollar, as French and
other central banks increased their call for U.S. gold in exchange for
their dollar reserves. They calculated with the soaring war deficits
from Vietnam, it was only a matter of months before the United States
itself would be forced to devalue against gold, so better to get their
gold out at a high price.
By May 1971 the drain of U.S. Federal Reserve gold had become alarming,
and even the Bank of England joined the French in demanding U.S. gold
for their dollars. That was the point where rather than risk a collapse
of the gold reserves of the United States, the Nixon Administration
opted to abandon gold entirely, going to a system of floating currencies
in August 1971. The break with gold opened the door to an entirely new
phase of the American Century. In this new phase, control over monetary
policy was, in effect, privatized, with large international banks such
as Citibank, Chase Manhattan or Barclays Bank assuming the role that
central banks had in a gold system, but entirely without gold. ‘Market
forces’ now could determine the dollar. And they did with a vengeance.
The free floating of the dollar, combined with the 1973 rise in OPEC oil
prices by 400% after the Yom Kippur War, created the basis for a second
phase of the American Century, the Petrodollar phase.
Recycling petrodollars
Beginning the mid-1970’s the American Century system of global economic
dominance underwent a dramatic change. An Anglo-American oil shock
suddenly created enormous demand for the floating dollar. Oil importing
countries from Germany to Argentina to Japan, all were faced with how to
export in dollars to pay their expensive new oil import bills. OPEC oil
countries were flooded with new oil dollars. A major share of these oil
dollars came to London and New York banks where a new process was
instituted. Henry Kissinger termed it, ‘recycling petrodollars’. The
recycling strategy was discussed already in May 1971 at the Bilderberger
meeting in Saltsjoebaden, Sweden. It was presented by American members
of Bilderberg, as detailed in the book Mit der Ölwaffe zur Weltmacht.[1]
OPEC suddenly was choking on dollars it could not use. U.S. and UK banks
took the OPEC dollars and relent them as Eurodollar bonds or loans, to
countries of the Third World desperate to borrow dollars to finance oil
imports. The buildup of these petrodollar debts by the late 1970’s, laid
the basis for the Third World debt crisis in the 1980’s. Hundreds of
billions of dollars were recycled between OPEC, the London and New York
banks and back to Third World borrowing countries.
By August 1982 the chain finally broke and Mexico announced it would
likely default on repaying Eurodollar loans. The Third World debt crisis
began when Paul Volcker and the U.S. Federal Reserve had unilaterally
hiked U.S. interest rates in late 1979 to try to save the failing
dollar. After three years of record high U.S. interest rates, the dollar
was ‘saved’, but the entire developing sector was choking economically
under usurious U.S. interest rates on their petrodollar loans. To
enforce debt repayment to the London and New York banks, the banks
brought the IMF in to act as ‘debt policeman’. Public spending for
health, education, welfare was slashed on IMF orders to ensure the banks
got timely debt service on their petrodollars.
The Petrodollar hegemony phase was an attempt by the United States
establishment to slow down its geopolitical decline as the hegemonic
center of the postwar system. The IMF ‘Washington Consensus’ was
developed to enforce draconian debt collection on Third World countries,
to force them to repay dollar debts, prevent any economic independence
from the nations of the South, and keep the U.S. banks and the dollar
afloat. The Trilateral Commission was created by David Rockefeller and
others in 1973 in order to take account of the recent emergence of Japan
as an industrial giant and try to bring Japan into the system. Japan, as
a major industrial nation, was a major importer of oil. Japanese trade
surpluses from export of cars and other goods was used to buy oil in
dollars. The remaining surplus was invested in U.S. Treasury bonds to
earn interest. The G-7 was founded to keep Japan and Western Europe
inside the U.S. dollar system. From time to time into the 1980’s various
voices in Japan would call for three currencies - dollar, German mark
and yen - to share the world reserve role. It never happened. The
dollar remained dominant.
From a narrow standpoint, the Petrodollar phase of hegemony seemed to
work. Underneath, it was based on ever-worsening economic decline in
living standards across the world, as IMF policies destroyed national
economic growth and broke open markets for globalizing multinationals
seeking cheap production outsourcing in the 1980’s and especially into
the 1990’s. Yet, even in the Petrodollar phase, American foreign
economic policy and military policy was dominated by the voices of the
traditional liberal consensus. American power depended on negotiating
periodic new arrangements in trade or other issues with its allies in
Europe, Japan and East Asia.
A Petro-euro rival?
The end of the Cold War and the emergence of a new Single Europe and the
European Monetary Union in the early 1990’s, began to present an
entirely new challenge to the American Century. It took some years, more
than a decade after the 1991 Gulf War, for this new challenge to emerge
full-blown. The present Iraq war is only intelligible, as a major battle
in the new, third phase of securing American dominance. This phase has
already been called, ‘democratic imperialism’, a favorite term of Max
Boot and other neo-conservatives. As Iraq events suggest, it is not
likely to be very democratic, but definitely likely to be imperialist.
Unlike the earlier periods after 1945, in the new era, the U.S. freedom
to grant concessions to other members of the G-7 is gone. Now raw power
is the only vehicle to maintain American long-term dominance. The best
expression of this argument comes from the neo-conservative hawks around
Paul Wolfowitz, Richard Perle, William Kristol and others. The point to
stress, however, is that the neo-conservatives enjoy such influence
since September 11 because a majority in the U.S. power establishment
finds their views useful to advance a new aggressive U.S. role in the
world.
Rather than work out areas of agreement with European partners,
Washington increasingly sees Euroland as the major strategic threat to
American hegemony, especially ‘Old Europe’ of Germany and France. Just
as Britain in decline after 1870 resorted to increasingly desperate
imperial wars in South Africa and elsewhere, so the United States is
using its military might to try to advance what it no longer can by
economic means. Here the dollar is the achilles heel.
With creation of the Euro over the past five years, an entirely new
element has been added to the global system, one which defines what we
can call a third phase of the American Century. This phase, in which the
latest Iraq war plays a major role, threatens to bring a new, malignant
or imperial phase to replace the earlier phases of American hegemony.
The neo-conservatives are open about their imperial agenda, while more
traditional U.S. policy voices try to deny it. The economic reality
faced by the dollar at the start of the new Century, defines this new
phase in an ominous way.
There is a qualitative difference emerging between the two initial
phases of the American Century - that of 1945-1973, and of 1973-1999
- and the new emerging phase of continued domination in the wake of the
9.11 attacks and the Iraq War. Post-1945 American power before now, was
predominately that of a hegemon. While a hegemon is the dominant power,
in an unequal distribution of power, its power is not generated by
coercion alone, but also by consent among its allied powers. This is
because the hegemon is compelled to perform certain services to the
allies such as military security or regulating world markets for the
benefit of the larger group, itself included. An imperial power has no
such obligations to allies, and not the freedom for such, only the raw
dictates of how to hold on to its declining power - what some call
‘imperial overstretch’. This is the world which neo-conservative hawks
around Rumsfeld and Cheney are suggesting America has to dominate, with
a policy of pre-emptive war.
A hidden war between the dollar and the new Euro currency for global
hegemony is at the heart of this new phase.
To understand the importance of this unspoken battle for currency
hegemony, we first must understand that since the emergence of the
United States as the dominant global superpower after 1945, U.S.
hegemony has rested on two un-challengeable pillars. First, the
overwhelming U.S. military superiority over all other rivals. The United
States today spends on defense more than three times the total for the
entire European Union, some $ 396 billion versus $118 billion last year,
and more than the next 15 largest nations combined. Washington plans an
added $ 2.1 trillion over the coming five years on defense. No nation or
group of nations can come close in defense spending. China is at least
30 years away from becoming a serious military threat. No one is serious
about taking on U.S. military might.
The second pillar of American dominance in the world is the dominant
role of the U.S. dollar as reserve currency. Until the advent of the
Euro in late 1999, there was no potential challenge to this dollar
hegemony in world trade. The Petrodollar has been at the heart of the
dollar hegemony since the 1970’s. The dollar hegemony is strategic to
the future of American global pre-dominance, in many respects as
important if not more so, than the overwhelming military power.
Dollar fiat money
The crucial shift took place when Nixon took the dollar off a fixed gold
reserve to float against other currencies. This removed the restraints
on printing new dollars. The limit was only how many dollars the rest of
the world would take. By their firm agreement with Saudi Arabia, as the
largest OPEC oil producer, the ‘swing producer’ Washington guaranteed
that the world ’s largest commodity, oil, the essential for every
nation’s economy, the basis of all transport and much of the industrial
economy, that oil could only be purchased in world markets in dollars.
The deal had been fixed in June 1974 by Secretary of State Henry
Kissinger, establishing the U.S.-Saudi Arabian Joint Commission on
Economic Cooperation. The U.S. Treasury and the New York Federal Reserve
would ‘allow’ the Saudi central bank, SAMA, to buy U.S. Treasury bonds
with Saudi petrodollars. In 1975 OPEC officially agreed to sell its oil
only for dollars. A secret U.S. military agreement to arm Saudi Arabia
was the quid pro quo.
Until November 2000, no OPEC country dared violate the dollar price
rule. So long as the dollar was the strongest currency, there was little
reason to as well. But November was when French and other Euroland
members finally convinced Saddam Hussein to defy the United States by
selling Iraq’s oil-for-food not in dollars, ‘the enemy currency’ as Iraq
named it, but only in euros. The euros were on deposit in a special UN
account of the leading French bank, BNP Paribas. Radio Liberty of the
U.S. State Department ran a short wire on the news and the story was
quickly hushed.[2]
This little-noted Iraq move to defy the dollar in favor of the euro, in
itself, was insignificant. Yet, if it were to spread, especially at a
point the dollar was already weakening, it could create a panic selloff
of dollars by foreign central banks and OPEC oil producers. In the
months before the latest Iraq war, hints in this direction were heard
from Russia, Iran, Indonesia and even Venezuela. An Iranian OPEC
official, Javad Yarjani, delivered a detailed analysis of how OPEC at
some future point might sell its oil to the EU for euros not dollars. He
spoke in April, 2002 in Oviedo Spain at the invitation of the EU. All
indications are that the Iraq war was seized on as the easiest way to
deliver a deadly pre-emptive warning to OPEC and others, not to flirt
with abandoning the Petro-dollar system in favor of one based on the
euro.
Informed banking circles in the City of London and elsewhere in Europe
privately confirm the significance of that little-noted Iraq move from
petro-dollar to petro-euro. ‘The Iraq move was a declaration of war
against the dollar’, one senior London banker told me recently. ‘As soon
as it was clear that Britain and the U.S. had taken Iraq, a great sigh
of relief was heard in London City banks. They said privately, “now we
don’t have to worry about that damn euro threat”’.
Why would something so small be such a strategic threat to London and
New York, or to the United States that an American President would
apparently risk fifty years of alliance relations globally, and more to
make a military attack whose justification could not even be proved to
the world? The answer is the unique role of the petro-dollar to underpin
American economic hegemony.
How does it work? So long as almost 70% of world trade is done in
dollars, the dollar is the currency which central banks accumulate as
reserves. But central banks, whether China or Japan or Brazil or Russia,
do not simply stack dollars in their vaults. Currencies have one
advantage over gold. A central bank can use it to buy the state bonds of
the issuer, the United States. Most countries around the world are
forced to control trade deficits or face currency collapse. Not the
United States. This is because of the dollar reserve currency role. And
the underpinning of the reserve role is the petrodollar. Every nation
needs to get dollars to import oil, some more than others. This means
their trade targets dollar countries, above all the U.S.
Because oil is an essential commodity for every nation, the Petrodollar
system, which exists to the present, demands the buildup of huge trade
surpluses in order to accumulate dollar surpluses. This is the case for
every country but one - the United States which controls the dollar
and prints it at will or fiat. Because today the majority of all
international trade is done in dollars, countries must go abroad to get
the means of payment they cannot themselves issue. The entire global
trade structure today works around this dynamic, from Russia to China,
from Brazil to South Korea and Japan. Everyone aims to maximize dollar
surpluses from their export trade.
To keep this process going, the United States has agreed to be ‘importer
of last resort’ because its entire monetary hegemony depends on this
dollar recycling.
The central banks of Japan, China, South Korea, Russia and the rest all
buy U.S. Treasury securities with their dollars. That in turn allows the
United States to have a stable dollar, far lower interest rates, and run
a $ 500 billion annual balance of payments deficit with the rest of the
world. The Federal Reserve controls the dollar printing presses, and the
world needs its dollars. It is as simple as that.
The U.S. foreign debt threat
But, not so simple perhaps. This is a highly unstable system, as U.S.
trade deficits and net debt or liabilities to foreign accounts are now
well over 22% of GDP as of 2000, and climbing rapidly. The net foreign
indebtedness of the United States - public as well as private - is
beginning to explode ominously. In the past three years since the U.S.
stock collapse and the re-emergence of budget deficits in Washington,
the net debt position, according to a recent study by the Pestel
Institute in Hanover, has almost doubled. In 1999, the peak of the
dot.com bubble fury, U.S. net debt to foreigners was some $ 1.4
trillions. By the end of this year, it will exceed an estimated $ 3.7
trillion! Before 1989, the United States had been a net creditor,
gaining more from its foreign investments than it paid to them in
interest on Treasury bonds or other U.S. assets. Since the end of the
Cold War, the United States has become a net foreign debtor nation to
the tune of $3.7 trillion! This is not what Hilmar Kopper could call
‘peanuts’.
It does not require much foresight to see the strategic threat of these
deficits to the role of the United States. With an annual current
account (mainly trade) deficit of some $500 billion, some 5% of GDP, the
United States must import or attract at least $1.4 billion every day, to
avoid a dollar collapse and keep its interest rates low enough to
support the debt-burdened corporate economy. That net debt is getting
worse at a dramatic pace. Were France, Germany, Russia and a number of
OPEC oil countries to now shift even a small portion of their dollar
reserves into euro to buy bonds of Germany or France or the like, the
United States would face a strategic crisis beyond any of the postwar
period. To pre-empt this threat, was one of the most strategic hidden
reasons for the decision to go for ‘regime change’ as it is known, in
Iraq. It is as simple and as cold as this. The future of America’s sole
superpower status depended on pre-empting the threat emerging from
Eurasia and Euroland especially. Iraq was and is a chess piece in a far
larger strategic game, one for the highest stakes.
The euro threatens the hegemony
When the euro was launched at the end of the last decade, leading EU
government figures, bankers from Deutsche Bank’s Norbert Walter, and
French President Chirac went to major holders of dollar reserves -
China, Japan, Russia - and tried to convince them to shift out of
dollars at least a part of their reserves, and into euros. However, that
clashed with the need to devalue the too-high euro, so German exports
could stabilize Euroland growth. A falling euro was the case until 2002.
Then, with the debacle of the U.S. dot.com bubble bursting, the Enron
and Worldcom finance scandals, and the recession in the U.S., the dollar
began to lose its attraction for foreign investors. The euro gained
steadily until the end of 2002. Then, as France and Germany prepared
their secret diplomatic strategy to block war in the UN Security
Council, rumors surfaced that the central banks of Russia and China had
quietly began to dump dollars and buy euros. The result was a dollar
free-fall on the eve of war. The stage was set should Washington lose
the Iraq war, or it turn into a long, bloody debacle.
But Washington, leading New York banks and the higher echelons of the
U.S. establishment clearly knew what was at stake. Iraq was not about
ordinary chemical or even nuclear weapons of mass destruction. The
‘weapon of mass destruction’ was the threat that others would follow
Iraq and shift to euros out of dollars, creating mass destruction of the
United States’ hegemonic economic role in the world. As one economist
termed it, an end to the dollar reserve role would be a ‘catastrophe’
for the United States. Interest rates of the Federal Reserve would have
to be pushed higher than in 1979 when Paul Volcker raised rates above
17% to try to stop the collapse of the dollar then. Few realize that
1979 dollar crisis was also a direct result of moves by Germany, and
France, under Schmidt and Giscard, to defend Europe together with Saudi
Arabia and others who began selling U.S. Treasury bonds to protest
Carter Administration policy. It is also worth recalling that after the
Volcker dollar rescue, the Reagan Administration, backed by many of
today’s neo-conservative hawks, began a huge U.S. military defense
spending to challenge the Soviet Union.
Eurasia versus the Anglo-American Island Power
This fight over petro-dollars versus petro-euros, which started in Iraq,
is by no means over, despite the apparent victory of the United States
in Iraq. The euro was created by French geopolitical strategists for
establishing a multipolar world after the collapse of the Soviet Union.
The aim was to balance the overwhelming dominance of the U.S. in world
affairs. Significantly, French strategists rely on a British
geopolitical strategist to develop their rival power alternative to the
U.S., namely Sir Halford Mackinder.
This past February, a French intelligence-connected newsletter,
Intelligence Online, wrote a piece, ‘The Strategy Behind
Paris-Berlin-Moscow Tie’. Referring to the UN Security Council bloc of
France-Germany-Russia to try to prevent the U.S.-British war moves in
Iraq, the Paris report notes the recent efforts of European and other
powers to create a counterpower to that of the United States. Referring
to the new ties of France with Germany and more recently with Putin,
they note, ‘a new logic, and even dynamic seems to have emerged. An
alliance between Paris, Moscow and Berlin running from the Atlantic to
Asia could foreshadow a limit to U.S. power. For the first time since
the beginning of the 20th Century, the notion of a world heartland - the
nightmare of British strategists - has crept back into international
relations.’[3]
Mackinder, father of British geopolitics, wrote in his remarkable paper,
‘The Geographical Pivot of History’ that the control of the Eurasian
heartland, from Normandy France to Vladivostock, was the only possible
threat to oppose the naval supremacy of Britain. British diplomacy until
1914 was based on preventing any such Eurasian threat, that time around
the expansion policy of the German Kaiser eastwards with the Baghdad
Railway and the Tirpitz German Navy buildup. World War I was the result.
Referring to the ongoing efforts of the British and later Americans to
prevent a Eurasian combination as rival, the Paris intelligence report
stressed, ‘That strategic approach (i.e. to create Eurasian heartland
unity) lies at the origin of all clashes between Continental powers and
maritime powers (UK, U.S. and Japan) ... It is Washington’s supremacy
over the seas that, even now, dictates London’s unshakeable support for
the U.S. and the alliance between Tony Blair and Bush.’
Another well-connected French journal, Reseau Voltaire.net, wrote on the
eve of the Iraq war that the dollar was ‘The achilles heel of the
USA’.[4] That is an understatement to put it mildly.
Iraq was planned long before
This emerging threat from a French-led Euro policy with Iraq and other
countries, led some leading circles in the U.S. policy establishment to
begin thinking of pre-empting threats to the Petro-dollar system well
before Bush was even President. While Perle, Wolfowitz and other leading
neo-conservatives played a leading role in developing a strategy to
preserve the faltering system, a new consensus was shaping which
included major elements of traditional Cold War establishment around
figures like Rumsfeld and Cheney.
In September 2000, during the campaign, a small Washington think-tank,
the Project for a New American Century, released a major policy study:
‘Rebuilding America’s Defenses: Strategies, Forces and Resources for a
New Century’. The report is useful in many areas to better understand
present Administration policy. On Iraq, it states, ‘The United States
has sought for decades to play a more permanent role in Gulf regional
security. While the unresolved conflict with Iraq provides the immediate
justification, the need for a substantial American force presence in the
Gulf transcends the issue of the regime of Saddam Hussein.’
This PNAC paper is the essential basis for the September 2002
Presidential White Paper, ‘The National Security Strategy of the United
States of America ’. The PNAC’s paper supportes a, ‘blueprint for
maintaining global U.S. pre-eminence, precluding the rise of a great
power rival, and shaping the international security order in line with
American principles and interests The American Grand Strategy must be
pursued as far into the future as possible.’ Further, the U.S. must,
‘discourage advanced industrial nations from challenging our leadership
or even aspiring to a larger regional or global role.’ (emphasis added).
The PNAC membership in 2000 reads like a roster of the Bush
Administration today. It included Cheney, his wife Lynne Cheney,
neo-conservative Cheney aide, Lewis Libby; Donald Rumsfeld; Rumsfeld
Deputy Secretary Paul Wolfowitz. It also included NSC Middle East head,
Elliott Abrams; John Bolton of the State Department; Richard Perle, and
William Kristol. As well, former Lockheed-Martin vice president, Bruce
Jackson, and ex-CIA head James Woolsey were on board, along with Norman
Podhoretz, another founding neo-con. Woolsey and Podhoretz speak openly
of being in ‘World War IV’. It is becoming increasingly clear to many
that the war in Iraq is about preserving a bankrupt American Century
model of global dominance. It is also clear that Iraq is not the end.
What is not yet clear and must be openly debated around the world, is
how to replace the failed Petro-dollar order with a just new system for
global economic prosperity and security. Now, as Iraq threatens to
explode in internal chaos, it is important to rethink the entire postwar
monetary order anew. The present French-German-Russian alliance to
create a counterweight to the United States requires not merely a
French-led version of the Petro-dollar system, some Petro-euro system,
that continues the bankrupt American Century, only with a French accent,
and euros replacing dollars. That would only continue to destroy living
standards across the world, adding to human waste and soaring
unemployment in industrial as well as developing nations. We must
entirely rethink what began briefly with some economists during the 1998
Asia crisis, the basis of a new monetary system which supports human
development, and does not destroy it.
1 Engdahl, F. William, Mit der Ölwaffe zur Weltmacht, edition steinherz,
Wiesbaden, 2002. Chapter 9-10 detail the creation and impact of the
Petrodollar recycling and the secret 1973 Saltsjoebaden meeting in
preparing the oil shock.
2 Radio Liberty/RFE press release, Charles Recknagel, ‘Iraq: Baghdad
moves to Euro’, November 1, 2000. The wire was picked up for about 48
hours by CNN and other media and promptly vanished from the headlines.
Since William Clark’s article, ‘The real but unspoken reasons for the
upcoming Iraq war’ appeared in the Internet on February 2, 2003, a
lively online discussion of the oil-euro factor has taken place, but
outside occasional references in the London Guardian press, little in
mainstream media has been said of this strategic background factor in
the Washington decision to go against Iraq.
3 Intelligence Online, no.447: 20/02/2003. ‘The Strategy Behind
Paris-Berlin-Moscow Tie’. Intelligence Online Editor, Guillaume Dasquie,
is a French specialist on strategic intelligence and has worked for
French intelligence services on the bin Laden case and other
investigations. His reference to French Eurasian geopolitics clearly
reflects high-level French thinking.
4 Reseau voltaire.net, ‘Suprematie du dollar: Le Talon d’Achille des
USA’, appeared April 4, 2003. It details a French analysis of the
vulnerability of the dollar system on the eve of Iraq war.
(2) Government Budget Deficit to set record $521 Billion in 2004 fiscal
year
Date: Mon, 2 Feb 2004 22:15:42 -0500 From: "David Chiang"
<chiang.d@worldnet.att.net>
U.S. Expects to Borrow $177 Bln in Q1
Monday February 2, 4:36 pm ET
By Jonathan Nicholson
http://biz.yahoo.com/rb/040202/economy_treasury_debt_4.html
WASHINGTON (Reuters) - Coming off of a record borrowing binge in the
final three months of 2003, the U.S. Treasury Department on Monday said
it expects to borrow even more money from capital markets in the current
quarter. In its quarterly borrowing estimate, the Treasury said it
borrowed a slightly smaller-than-expected $113 billion in the
October-December quarter. However, that was still above the previous
record $111 billion the Treasury borrowed from private investors in the
January-March quarter of 2003. The Treasury is forced to sell debt to
finance the government budget deficit, which is expected to set a record
at $521 billion in the 2004 budget year, which began Oct. 1. That
follows a record-setting $374 billion gap in 2003.
The deficit is shaping up to be a campaign issue for President Bush as
he seeks another term in the White House. After the 2000 election Bush
pledged to pay off most of the national debt, but he has been forced to
wrestle with surging budget deficits. Democrats say the deficits show
Bush's tax cuts were unaffordable, while the administration says the
gaps are the result of a sluggish economy and needed spending on the
military and homeland security.
In November, Treasury had thought it would borrow slightly more in the
final quarter of 2003, about $117 billion. It said the difference was
made up mostly by lower spending.
For the current January-March quarter, the Treasury estimated it will
borrow $177 billion, up from a projection of $160 billion made in
November.
"The increase in borrowing is due to lower receipts, primarily from an
increase in tax refunds, and higher outlays," Treasury said. According
to the Treasury's Office of Tax Analysis, the biggest kick from the
accelerated individual income tax cuts enacted last year will actually
come early this year, as taxpayers get their refunds. The tax cuts are
expected to reduce cash flow to the U.S. Treasury by $39.3 billion in
the January-March period and $60.5 billion in the April-June quarter. | | | | | ©2002-2009 WarWithoutEnd.co.uk |
