Monday, January 19, 2004

F. William Engdahl on the dollar

F. William Engdahl believes (or here) the attack on Iraq was made to stop the process, started by Iraq, of replacing petrodollars with petroeuros by selling oil only for euros rather than dollars, thus undermining the world's consensus that the U. S. dollar is the world's reserve currency. The unique status of the U. S. dollar has allowed the United States, indeed forced the United States, to run increasingly mammoth trade deficits, a state of affairs that cannot be sustainable. Dr. Mahathir has made the obvious point that oil-producing nations are paying an enormous price for selling their oil in rapidly depreciating dollars. On the other hand, these same oil producers have enormous investments in the United States, which would precipitously fall in value if they did anything to undermine the value of the dollar. Some countries are also literally in danger of being invaded by the insane people who run the U. S. if they do anything which could be perceived as an attack on American interests. All we know now is that the current American financial situation cannot continue for long, other power blocks are not going to sit idly by and allow the neocons to take over the rest of the world, and all hell is going to break loose when the U. S. dollar loses its current status as world reserve currency. While those who dislike the current path of the United States might like to see the dollar taken off its pedestal, replacing the almighty dollar by the almighty euro won't do anything for the vast majority of the world, and the shift will actually be harmful to many countries. Engdahl, who is one of the most interesting deep conspiracy writers in the world, writes:

"Now, as Iraq threatens to explode in internal chaos, it is important to rethink the entire postwar monetary order anew. The present French-German-Russian alliance to create a counterweight to the United States requires not merely a French-led version of the Petro-dollar system, some Petro-euro system, that continues the bankrupt American Century, only with a French accent, and euros replacing dollars. That would only continue to destroy living standards across the world, adding to human waste and soaring unemployment in industrial as well as developing nations. We must entirely rethink what began briefly with some economists during the 1998 Asia crisis, the basis of a new monetary system which supports human development, and does not destroy it."

If the American situation is going to have to change anyway, and most of the rest of the world will be damaged by an unmanaged shift in the world reserve currency, now might be the perfect time for the world to decide on the basis of mutual self-interest to completely revamp the world financial system. Unfortunately, one cannot be optimistic that the band of thugs running the United States will listen to any plan that doesn't result in total dominance for American corporate interests in all the world. The current American leadership is just too venal and too stupid to do the right thing.