Posted on 15-5-2003

Wither $US
By Garda Boeninger



The U.S. real economy is in virtual shambles. It is the most debt-ridden
country in the world, with every American having an average debt of
$12,000. Its position is worse than that of Indonesia when it imploded in
1998, and it is even worse than that of Argentina. In February and March
of 2003 another half a million Americans were laid off from their jobs.
U.S. has a record trade deficit of nearly 5% of GDP, a $6.3 trillion
dollar deficit (55% of GDP which is $9 trillion) and is looking at annual
budget deficits in the hundreds of billions. There is massive debt
manipulation, unaffordable tax cuts, massive current account deficits,
trade deficits, corporate accounting fraud running into billions,
unsustainable credit expansion, and near zero personal savings. The
dollar is surviving all this economic turmoil only because it is the
international fiat currency (i.e."petro dollar") for global oil
transactions. The U.S. prints billions of these fiat petro-dollars to be
used by other countries when purchasing oil from OPEC and other
producers. These dollars are then recycled back into the U.S. via
Treasury Bills or other assets such as U.S. stocks, real estate, etc. as
W. Clark says in his article "The Real but Unspoken Reasons for the Iraq
War".


"World trade is now a game in which the U.S. produces dollars and the
rest of the world produces things that dollars can buy. The world's
interlinked economies no longer trade to capture a comparative advantage;
they compete in exports to capture needed dollars to service
dollar-denominated foreign debts and to accumulate dollar reserves to
sustain the exchange value of their domestic currencies. To prevent
speculative and manipulative attacks on their currencies, the world's
central banks must acquire and hold dollar reserves in corresponding
amounts to their currencies in circulation. The higher the market
pressure to devalue a particular currency, the more dollar reserves its
central bank must hold. This creates a built-in support for a strong
dollar that in turn forces the worlds central banks to acquire and hold
more dollar reserves, making it stronger."


"This phenomenon is known as dollar hegemony, which is created by the
geo-politically constructed peculiarity that critical commodities, most
notably oil, are denominated in dollars. Everyone accepts dollars because
dollars can buy oil. The recycling of petro-dollar is the price that the
U.S. has extracted from oil-producing countries for U.S. tolerance of the
oil-exporting cartel since 1973."


Clark goes on to say that those dollar reserves must be invested in U.S.
assets, so as to create a capital-accounts surplus for the U.S. economy.
Hence even today the U.S. stock valuation is at a 25-year high and
trading is at a 56% premium. When oil is denominated in dollars and the
dollar is the fiat currency, then basically the U.S. owns the worlds oil
for free. U.S. has had such an agreement with Saudi Arabia for the past
30 years. This strategy has allowed the Federal Reserve to create a
massive debt and credit expansion which is sustainable only as long as
(1) countries continue to buy oil for their survival, and (2) the fiat
reserve currency for global oil transactions remains the dollar. This
second point is what is becoming very tricky for the U.S. The Euro has
been growing in strength. In December 2002 ten more countries agreed to
become members of the Euro-zone. When this goes into effect in May 2004
it will result in an aggregate GDP of $9.6 trillion and 450 million
people for the Euro-zone. This will mean an oil consuming/purchasing
population 33% larger than the U.S. More than half of OPEC oil will be
sold to the EU as of mid-2004. This is a real economic threat to the U.S.
economy, which has an aggregate GDP of $10.5 trillion and 280 million
people. One year ago in April 2002 in Spain, the Head of OPECs market
analysis department talked about switching from the dollar to the Euro as
the fiat currency. While this fact has been frequently published in
European media, it is completely suppressed in the American media. In
addition, EU members do more trade with OPEC members than the U.S. does.
Hence there are compelling reasons to make the Euro the fiat currency for
global trading. Britain and Norway have not yet joined the EU. If they
do, it can certainly shift the balance of economic power to the Euro,
especially as these two countries have the largest oil reserves in
Europe. A major argument hitherto for keeping the fiat currency in the
dollar has been that U.S. is such a big importer of oil. However, the
Euro-zone  all EU members combined  is an even larger importer of oil
and petroleum products than U.S.. The trading between the Euro-zone and
OPEC countries is large, with 45% of imports of OPEC MCs (member
countries) coming from the Euro-zone, and in reverse the OPEC MCs are the
main suppliers of oil and crude oil products to the Euro-zone. It would
appear a natural stream of events for the fiat currency to change to the
Euro.

<bold>

</bold>While it may appear today that there are substantial marginal
benefits from this war, those benefits will in time be eroded by
expansion of the war to the entire Middle East, Korea, and South American
countries. It will not be a small disaster overseas. It will become World
War IV, and the costs  both economic and human  will be immeasurable.
No part of the world will be spared from these costs and sufferings. It
is completely unrealistic to think that the U.S. can inflict such vast
damage around the world and not have to pay a price for that  both
economic and human. Hence the American people should be prepared to pay
heavily for the unbounded arrogance of the American government. Despite
U.S. economic collapse, despite the steady inroad of the Euro in world
trading, Bush and company will not cease in their imperialist economic
agenda. At present the ratio of Euro to dollar is 1 to 1.06 and the
dollar continues to drop in value. It means that due to Bush creating an
unprecedented debt both by giving a tax rebate and going to war, the U.S.
is going to face complete economic collapse. If Al Gore had come to
power, we would have faced a different scenario, as Gore would not have
given a tax rebate. He may have instead raised taxes. Gore would also not
have gone to war. However, even with Gore as president, the Euro would
have gained ground even faster and hence the U.S. economy was doomed
regardless of who became president.


We need a system wherein people, communities and countries own the
productive assets on which their livelihoods depend, wherein they will be
free from illegitimate foreign debts, and wherein they have the right to
manage the flow of goods and money across their borders and set their own
economic priorities. In such a system, there would be no scope for
affluent countries to demand access to the markets or resources of weaker
countries against their will and interests. Corporations wishing to do
business in another part of the world would have to apply to that
government and be subject to that governments laws and taxes.


U.S. imperialist wars (be it Iraq, Iran, Venezuela or Columbia) are all a
symptom of unlimited human greed of a few individuals at the highest
levels of power. That unlimited greed is given free license in the
economic system called capitalism and now global capitalism or
globalisation. The harm to humanity as a consequence of this greed is
incalculable, and must be stopped. The way to stop it is to convince the
people from the ground up, from the grassroots level, that there are
better economic systems being developed by the idealistic lovers of
humanity, and these economic systems do not create stark disparities in
wealth. These new economic systems cater fully to the largest number of
people and particularly to the poorest of the poor. They ensure that
every citizen has adequate purchasing power and the five minimum
necessities of life, i.e., food, clothing, shelter, education and medical
care. We need to go back to local people becoming self-sufficient by
growing their own food, producing their own necessities and controlling
the conditions of their lives. In this scenario, the issue of price and
even GDP becomes irrelevant. It becomes our duty to study these systems
and teach them to others, so as to finally put the economic power into
the hands of the people. As was declared at the United Nations Conference
on Indigenous Peoples,


"The majority of the world does not find its roots in Western culture or
tradition. The majority of the world finds its roots in the natural
world, and it is the natural world, and the tradition of the natural
world, which must prevail."


And in the words of the great economist, Prabhat Ranjan Sarkar,


"There is only one way to stop economic exploitation and alleviate the
plight of the common people, and that is to implement a policy of
decentralised economy in all the sectors of the economy. Successful
planning can never be done by sitting in an air-conditioned office
thousands of miles away from the place where planning is to be
undertaken. Centralised economy can never solve the economic problems of
remote villages. Economic planning must start from the lowest level,
where the experience, expertise and knowledge of the local people can be
harnessed for the benefit of the members of a socio-economic unit. All
types of economic problems can be solved only when economic structures
are built on the basis of decentralised economy."




The full article of 7 pages is available at
www.proutworld.org/news/apr/20030428eco.htm>http://www.proutworld.org/news/apr/20030428eco.htm