End to USA financial dominance in the works?
Looks like it's the end for USA's ambitions for global
dominance.
The dollar then did not become a ‘petrodollar’ although
Kissinger spoke about the process of ‘recycling petrodollars.’
Instead what he referred to was the initiation of a new phase of US
global hegemony in which the ‘petrodollar’ export earnings of OPEC
oil lands would be recycled into the hands of the major New York
and London banks and re-lent in form of dollar loans to oil deficit
countries like Brazil or Argentina, creating what soon came to be
known as he Latin American Debt Crisis.
The dollar at that time had been a fiat currency since August
1971 when President Richard Nixon first abrogated the Bretton Woods
Treaty and refused to redeem US dollars held by foreign central
banks for gold bullion. The dollar floated against other major
currencies, falling more or less until it was revived by the turbo
change of the 1973-4 oil price shock.
What the 1973 oil shock achieved for the sagging dollar was a
sudden injection of global demand from nations confronted with 400%
higher oil import bills. At that time, by postwar convention and
convenience, as the dollar was the only reserve currency held
around the world other than gold, oil was priced by all OPEC
members in dollars as a practical exigency.
With the 400% price rise, nations such as France, Germany, Japan
and other importers suddenly found reason to try to buy their oil
directly in their own currencies—French Franc, German Deutschemarks
or Japanese Yen—in order to lessen the pressure on their rapidly
declining reserves of trade dollars. The US Treasury and Pentagon
made certain that did not happen, partly with some
Kissinger secret diplomacy, bullying threats, and a whopping big US
military agreement with the key OPEC producer, Saudi Arabia. At
that time it helped that the late Shah of Iran was seen in
Washington to be a vassal of Kissinger.
The point was not that the dollar became a ‘petro’ currency.
The point was
that the reserve status of the dollar, now a paper currency,
was bolstered by the 400% increase in
world demand for dollars to buy oil. But that was only a
part of the dollar story. In 1979, following the
accession to power of the Ayatollah Khomeini in Iran, oil prices
shot through the roof for the second time in six years. Yet,
paradoxically, later that year the dollar began a precipitous
free-fall, not rise. It was no ‘petrodollar.’
Foreign dollar holders began dumping their dollars as a protest
to the foreign policies of the Jimmy Carter Administration. It was
to deal with that dollar crisis that Carter was forced to bring in
Paul Volcker to head the Federal Reserve in 1979. In October 1979
Volcker gave the dollar another turbo-charge by allowing interest
rates in the US to rise some 300% in weeks, to well over 20%. That
in turn forced global interest rates through the roof, triggered a
global recession, mass unemployment and misery. It also ‘saved’ the
dollar as sole reserve currency. The dollar was not a
‘petrodollar.’ It was the currency of issue of the greatest
Superpower, a superpower determined to do what it needed to keep it
that way.
The F-16 dollar backing
Since 1979 the
US power establishment from Wall Street to Washington has
maintained the status of the dollar as unchallenged global reserve
currency. The role, however, is not a purely
economic one. Reserve currency status is an adjunct of global
power, of the US determination to dominate other nations and the
global economic process. The US didn’t get reserve currency status
by a democratic vote of world central banks, nor did the British
Empire in the 19th Century. They fought wars for it.
For that
reason, the status of the dollar as reserve currency depends on the
status of the United States as the world’s unchallenged military
superpower. In a sense, since August 1971 the
dollar is no longer backed by gold. Instead, it is backed by F-16’s
and MI Abrams battle tanks, operating in some 130 US bases around
the world, defending liberty and the dollar...
http://www.globalresearch.ca/index.php?context=va&aid=2076