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
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