A Nightmare
for the US: Why the Dollar Bubble is about to
Burst
The Voice
http://www.scottishsocialistvoice.net/back%20issues%2006/issue%20264.htm
(issue 264 - 11th May 2006 page 8) ran an article beginning, 'Iran
has really gone and done it now. No, they haven't sent their first
nuclear sub in to the Persian Gulf. They are about to launch
something much more deadly -- next week the Iran Bourse will open
to trade oil, not in dollars but in Euros' This apparently
insignificant event has consequences far greater for the US people,
indeed all for us all, than is imaginable.
Currently almost all oil buying and selling is in US-dollars
through exchanges in London and New York. It is not accidental they
are both US-owned.
The Wall Street crash in 1929 sparked off global depression and
World War II. During that war the US supplied provisions and
munitions to all its allies, refusing currency and demanding gold
payments in exchange.
By 1945, 80% of the world's gold was sitting in US vaults. The
dollar became the one undisputed global reserve currency -- it was
treated world-wide as `safer than gold'. The Bretton Woods
agreement was established.
The US took full advantage over the next decades and printed
dollars like there was no tomorrow. The US exported many mountains
of dollars, paying for ever-increasing amounts of commodities, tax
cuts for the rich, many wars abroad, mercenaries, spies and
politicians the world over. You see, this did not affect inflation
at home! The US got it all for free! Well, maybe for a forest or
two.
Over subsequent decades the world's vaults bulged at the seams and
more and more vaults were built, just for US dollars. Each year,
the US spends many more dollars abroad that at home. Analysts
pretty much agree that outside the US, of the savings, or reserves,
of all other countries, in gold and all currencies -- that a
massive 66% of this total wealth is in US dollars!
In 1971 several countries simultaneously tried to sell a small
portion of their dollars to the US for gold. Krassimir Petrov, (Ph.
D. In Economics at Ohio University) recently wrote http://news.goldseek.com/GoldSeek/1137510262.php
, 'The US Government defaulted on its payment on August 15, 1971.
While popular spin told the story of `severing the link between the
dollar and gold', in reality the denial to pay back in gold was an
act of bankruptcy by the US Government.' The 1945 Bretton
Woods agreement was unilaterally smashed.
The dollar and US economy were on a precipice resembling Germany in
1929. The US now had to find a way for
the rest of the world to believe and have faith in the paper
dollar. The solution was in oil, in the
petrodollar. The US viciously bullied first Saudi Arabia and then
OPEC to sell oil for dollars only -- it worked, the dollar was
saved. Now countries had to keep dollars to buy much needed oil.
And the US could buy oil all over the world, free of charge. What a
Houdini for the US! Oil
replaced gold as the new foundation to stop the paper dollar
sinking.
Since 1971, the US printed even more mountains of dollars to spend
abroad. The trade deficit grew and grew. The US sucked-in much of
the world's products for next to nothing. More vaults were
built.
Expert, Coilin Nunan, wrote in 2003 (http://www.feasta.org/documents/review2/nunan.htm)
, 'The dollar is the de facto world reserve currency: the US
currency accounts for approximately two thirds of all official
exchange reserves. More than four-fifths of all foreign exchange
transactions and half of all world exports are denominated in
dollars. In addition, all IMF loans are denominated in
dollars.'
Dr Bulent Gukay of Keele University recently wrote, 'This system of
the US dollar acting as global reserve currency in oil trade keeps
the demand for the dollar `artificially' high. This enables the US
to carry out printing dollars at the price of next to nothing to
fund increased military spending and consumer spending on imports.
There is no theoretical limit to the amount of dollars that can be
printed. As long as the US has no serious challengers, and the
other states have confidence in the US dollar, the system
functions.'
Until recently, the US-dollar has been safe. However, since 1990
Western Europe has been busy growing, swallowing up central and
Eastern Europe. French and German bosses were jealous of the US
ability to buy goods and people the world over for nothing. They
wanted a slice of the free cake too. Further, they now had the
power and established the Euro in late 1999 against massive
US-inspired opposition across Europe, especially from Britain -
paid for in dollars of course. But the Euro succeeded.
Only months after the euro-launch, Saddam's Iraq announced it was
switching from selling oil in dollars only, to euros only --
breaking the OPEC agreement. Iran, Russia, Venezuela, Libya, all
began talking openly of switching too -- were the floodgates about
to be opened?
Then aeroplanes flew into the twin-towers in September 2001. Was
this another Houdini chance to save the US (petro) dollar and the
biggest financial/economic crash in history? War preparations began
in the US. But first war-fever had to be created -- and truth was
the first casualty. Other oil producing countries watched-on. In
2000 Iraq began selling oil in euros. In 2002, Iraq changed all
their petro-dollars in their vaults into euros. A few months later,
the US began their invasion of Iraq.
The whole world was watching: very few aware that the US was
engaging in the first oil currency, or petrodollar war. After the
invasion of Iraq in March 2003, remember, the US secured oil areas
first. Their first sales in August were, of course, in dollars,
again. The only government building in Baghdad not bombed was the
Oil Ministry! It does not matter how many people are murdered --
for the US, the petrodollar must be saved as the only way to buy
and sell oil -- otherwise the US economy will crash, and much more
besides.
In early 2003, Hugo Chavez, President of Venezuela talked openly of
selling half of its oil in euros (the other half is bought by the
US). On 12 April 2003, the US-supported business leaders and some
generals in Venezuela kidnapped Chavez and attempted a coup. The
masses rose against this and the Army followed suit. The coup
failed. This was bad for the US.
In November 2000 the euro/dollar was at $0.82 dollars, its lowest
ever, and still diving, but when Iraq started selling oil in euros,
the euro dive was halted. In April 2002 senior OPEC reps talked
about trading in euros and the euro shot up. In June 2003 the US
occupiers of Iraq switched trading back to dollars and the euro
fell against the dollar again. In August 2003 Iran starts to sell
oil in euros to some European countries and the euro rises sharply.
In the winter of 2003-4 Russian and OPEC politicians talked
seriously of switching oil/gas sales to the euro and the euro rose.
In February 2004 OPEC met and made no decision to turn to the euro
-- and yes, the euro fell against the dollar. In June 2004 Iran
announced it would build an oil bourse to rival London and New
York, and again, the euro rose. The euro stands at $1.27 and has
been climbing of late.
But matters this month became far, far worse for the US dollar. On
5th May Iran registered its own Oil Bourse, the IOB. Not only are
they now selling oil in euros from abroad -- they have established
an actual Oil Bourse, a global trading centre for all countries to
buy and sell their oil!
In Chavez's recent visit to London; he talked openly about
supporting the Iranian Oil Bourse, and selling oil in euros. When
asked in London about the new arms embargo imposed by the US
against Venezuela, Chavez prophetically dismissed the US as 'a
paper tiger'.
Currently, almost all the world's oil is sold on either the NYMEX,
New York Mercantile Exchange, or the IPE, London's International
Petroleum Exchange. Both are owned by US citizens and both sell and
buy only in US dollars. The success of the Iran Oil Bourse makes
sense to Europe, which buys 70% of Iran's oil. It makes sense for
Russia, which sells 66% of its oil to Europe . But worse for the
US, China and India have already stated they are very interested in
the new Iranian Oil Bourse.
If there is a tactical-nuclear strike on - deja-vu - `weapons of
mass destruction' in Iran, who would bet against a certain Oil
Exchange and more, being bombed too?
And worse for Bush. It makes sense for Europe, China, India and
Japan-- as well as all the other countries mentioned above -- to
buy and sell oil in Euros. They will certainly have to stock-up on
euros now, and they will sell dollars to do so.
The euro is far more stable than
the debt-ridden dollar. The IMF has recently
highlighted US economic difficulties and the trade deficit
strangling the US-- there is no way out.
The problem for so many countries now is how to get rid of their
vaults full of dollars, before it crashes? And the US has bullied
so many countries for so many decades around the world, that many
will see a chance to kick the bully back. The US cannot accept even
5% of the world's dollars -- it would crash the US economy dragging
much of the world with it, especially Britain.
To survive, as the Scottish Socialist Voice article stated, 'the
US, needs to generate a trade surplus to get out of this one.
Problem is it can't.' This is spot on. To do that they must force
US workers into near slavery, to get paid less than Chinese or
Indian workers. We all know that this will not happen.
What will happen in the US? Chaos for sure. Maybe a workers
revolution, but looking at the situation as it is now, it is more
likely to be a re-run of Germany post-1929, and some form of
extreme-right mass movement will emerge.
Does Europe and China/Asia have the economic independence and
strength to stop the whole world's economies collapsing with the
US? Their vaults are full to the brim with dollars.
The US has to find a way to pay for its dollar-imperialist
exploitation of the world since 1945. Somehow, eventually, it has
to account for every dollar in every vault in the world.
Bombing Iran could backfire tremendously. It would bring Iran
openly into the war in Iraq, behind the Shiite majority. The US
cannot cope even now with the much smaller Iraqi insurgency.
Perhaps the US will feed into the Sunni v Shiite conflict and turn
it into a wider Middle-East civil-war. However, this is so
dangerous for global oil supplies. Further, they know that this
would be temporary, as some country somewhere else, will establish
a euro-oil-exchange, perhaps in Brussels.
There is one `solution' -- scrap the dollar and print a whole new
currency for the US. This will destroy 66% of the rest of the
world's savings/reserves in one swoop. Imagine the implications?
Such are the desperate things now swimming around heads in the
White House, Wall Street and Pentagon.
Another is to do as Germany did, just before invading Poland in
1938. The Nazis filmed a mock Polish Army attack on Germany, to win
hearts and minds at home. But again, this is a finger in the dam.
So, how is the US going to escape this time? The
only global arena of total superiority left is
military. Who knows what horrors lie
ahead. A new world war is one tool by
which the US could discipline its `allies' into keeping the dollar
in their vaults.
The task of socialists today is to explain to as may as possible,
especially our class, that the coming crisis belongs purely to
capitalism and (dollar) imperialism. Not people of other cultures,
not Islam, not the axis of evil or their so-called WMDs. Their
system alone is to blame.
The new Iranian Oil Bourse, the IOB, is situated in a new building
on the free-trade-zone island of Kish, in the Persian Gulf. Its
computers and software are all set to go. The IOB was supposed to
be up and running last March, but many pressures forced a
postponement. Where the pressure came from is obvious. It was
internationally registered on 5th May and supposed to open mid-May,
but its opening was put off, some saying the oil-mafia was
involved, along with much international pressure. Just google
`pertroeuro'
http://www.google.com/search?hl=en&q=petroeuro&btnG=Search
, and the story lies before you.
From now on, anyone in the know will wake up every morning and,
even before coffee, will check out the latest exchange rate between
the euro and dollar.
The story explains itself.
What makes one accept a piece of paper in return for goods or
services rendered?
While it is impossible to lug bags of gold to buy TV or
computers, most manufacturers and retailers would accept that piece
of paper in return for their efforts. It is all about belief and
confidence. Confidence that, that piece of
paper is backed by the value it is printed with, based on the
issuer's deposits of wealth.
And wealth is measured in either gold or earnings.
The US
economy
In our world, USA is the strongest and richest country in the
world since the 1900s. They have natural resources and coupled with
an intelligent, hardworking and resourceful people situated
together united within a continent, with states/provinces of
several time zones.
In the late 1940s, it was this continent and people
whom had provided the resources for the reconstruction of
the world, ravaged by war started from a racist madman. It was also
this nation that upheld freedom, equality and a need to back up the
value of the paper printed in exchange for goods and services by
gold.
It served a purpose well till the late 1970s. Democracy is
nothing more a kitchen filled with cooks, each with its own
opinions on how the porridge should be cooked, resulted in
frightening opinionated brew. Thus, the agreement to back
currencies by gold was dissolved, but instead used a floating
rate mechanism.
If US had printed 'banana notes' as alledged, they would have
been out of debt a long time ago, or the dollar similar in
value to banana republics in Africa! But it was not. The US
dollar is still and strongly backed by its wealth - its people.
Habits die hard, and as such, the common people still have faith
in a system that had served each other well. The US dollar was
supreme, not because anyone was forced with a gun to use it, but
because of faith and confidence in the american people.
Faith that, that resourceful and freedom seeking people will
continue to fund the world. Faith that they have the resources to
back the dollar. Factual believe that even if they are now
trillions in debt, just a few summer blockbuster movies would be
enough to pay off the debts and have some left over for another
freedom seeking adventure to save mankind.
Such beliefs are not unfounded, for they do have the might and
capability, and had provened to be the greatest consumers and
producers in the world, compared to the penny pinching
europeans.
European
Union.
California, New York and Detroit cannot ever hope to secede from
USA, nor are they stupid to do so. Turkey, Greece and Italy can do
so, anytime they wish. What will happen to their EU dollar then?
And then backed by what wealth?
Compared in terms of stability, the US dollar is still the most
stable. Place you faith in EU and save in EU dollars, then one
must pray hard that the europeans will always stay united as one
common entity.
Iran
What is an exchange or bourse, if not for speculations?
Why would Iran need an exchange when they are already producers
of oil, and profiting from oil?
Why force the world to trade in the semi-stable EU
dollar for oil?
Most important of all, WILL SUCH TRADING IN THE IRANIAN BOURSE
BRING DOWN THE PRICE OF OIL?
Everyone of us better pray hard it wont be succcessful, or we
from non oil producers country will be made bankrupt soon.
Most of us humanity really don't care much for world
affairs. As long as we can survive, with food on our table for an
honest day's work, savings for our future and kids' future, we
really don't bother.
But the price of oil had shot up too much for humanity to bear,
for it raises the price of everything else. We are made to suffer
unnecessarily for another nation's leadership's nuclear weapons
ambition. Then they must pay. Along with the iranian agents and
paid agents for their hogwash propaganda!