Economically, the American Empire was born in 1945.
by Krassimir Petrov
Currently teaching Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria.
email is: Krassimir_Petrov@hotmail.com
"Economically, the American Empire was born in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold."
"An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold.
However, the guns-and-butter policy of the I960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax - the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that the U.S. imposed on the rest of the world."
"When in 1970-1971 foreigners demanded payment for their dollars in gold. The U.S. Government defaulted on its payment on August 15, 1971.
While the 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 U.S. Government_. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond - the world was taxed and it could not do anything about it."
"From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and the reason was OIL."
"In 1971, as it became clearer and clearer that the U.S. Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saudi in exchange for accepting "only" U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars.
Because the world had to buy oil from the Arab oil countries, it had a reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil."
"The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world."
If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind."
"The man that actually did demand EURO for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably EURO and Yen, the danger to the dollar was clear and present, and a punitive action was to order Bush's Shock and Awe in Iraq. The war was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even seizing oil fields: it was about defending the dollar, the
American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. dollars would likewise be punished."
"Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields - he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq. Bush must have went into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the oil for food program was terminated, the Iraq EURO accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with EUROs. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished - he had successfully defended the U.S. dollar, and thus the American Empire."
"Now we have the Iranian Oil Bourse. The Iranian government has finally developed the ultimate 'nuclear' weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a EURO-oil-trading mechanism that naturally implies payment for oil in EURO. In economics terms, this represents a much greater threat to the hegemony of the dollar than Saddam's because it will allow anyone willing either to buy or sell oil for EURO to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this EURO oil system."
"The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies.
This will benefit the European at the expense of the Americans."
"The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with EUROs, thus protecting themselves against the depreciation of the dollar."
"The Russians have inherent economic interest in adopting the EURO – the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. The Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the EURO will stab the Americans, they will gladly do it and smugly watch the Americans bleed."
"The Arab oil-exporting countries will eagerly adopt the EURO as a means of diversifying against rising mountains of depreciating dollar. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy."
End of Quote!