Dollar Imperialism
ta
"Text of author's presentation at an international conference held in
Feldkirch, Austria, September 2003.
It's accepted wisdom that the United States, despite recent problems,
is still the strongest growth locomotive for the world economy, the
pillar of the global system. What if we were to discover that, instead
of being the pillar, that the United States was, in fact, the heart of
a dysfunctional economic system, which is spreading instability,
unemployment, and depression globally?
No other nation on earth comes near to the commanding US military
superiority in smart bombs, military IT, or in sheer force
capabilities. The US position in the world since 1945, and especially
since 1971, has rested on two pillars, however: The superiority of the
US military over all, and, the role of the dollar as world reserve
currency. That dollar is the Achilles heel of American hegemony today.
In my view, the world has entered a new, highly dangerous phase since
the collapse of the US stock market bubble in 2001. I am speaking
about the unsustainable basis of the very Dollar System itself. What
is that Dollar System?
How the Dollar System works
After 1945, the US emerged from war with the world's gold reserves,
the largest industrial base, and a surplus of dollars backed by gold.
In the 1950's into the 1960's Cold War, the US could afford to be
generous to key allies such as Germany and Japan, to allow the
economies of Asia and Western Europe to flourish as a counter to
communism. By opening the US to imports from Japan and West Germany, a
stability was reached. More importantly, from pure US self-interest, a
tight trade area was built which worked also to the advantage of the
US.
That held until the late 1960's, when the costly Vietnam war led to a
drain of US gold reserves. By 1968 the drain had reached crisis
levels, as foreign central banks holding dollars feared the US
deficits would make their dollars worthless, and preferred real gold
instead.
In August 1971, Nixon finally broke the Bretton Woods agreement, and
refused to redeem dollars for gold. He had not enough gold to give.
That turn opened a most remarkable phase of world economic history.
After 1971 the dollar was fixed not to an ounce of gold, something
measurable. It was fixed only to the printing press of the Treasury
and Federal Reserve.
The dollar became a political currency—do you have "confidence" in the
US as the defender of the Free World? At first Washington did not
appreciate what a weapon it had created after it broke from gold. It
acted out of necessity, as its gold reserves had got dangerously low.
It used its role as the pillar of NATO and free world security to
demand allies continue to accept its dollars as before.
Currencies floated up and down against the dollar. Financial markets
were slowly deregulated. Controls were lifted. Offshore banking was
allowed, with unregulated hedge funds and financial derivatives. All
these changes originated from Washington, in coordination with New
York banks.
The dollar debt paradox
What soon became clear to US Treasury and Federal Reserve circles
after 1971, was that they could exert more global influence via debt,
US Treasury debt, than they ever did by running trade surpluses. One
man's debt is the other's credit. Because all key commodities, above
all, oil, were traded globally in dollars, demand for dollars would
continue, even if the US created more dollars than its own economy
justified.
Soon, its trade partners held so many dollars that they feared to
create a dollar crisis. Instead, they systematically inflated, and
actually weakened their own economies to support the Dollar System,
fearing a global collapse. The first shock came with the 1973 increase
in oil by 400%. Germany, Japan and the world was devastated,
unemployment soared. The dollar gained.
This Dollar System is the real source of a global inflation which we
have witnessed in Europe and worldwide since 1971. In the years
between 1945 and 1965, total supply of dollars grew a total of only
some 55%. Those were the golden years of low inflation and stable
growth. After Nixon's break with gold, dollars expanded by more than
2,000% between 1970 and 2001!
The dollar is still the only global reserve currency. This means other
central banks must hold dollars as reserve to guarantee against
currency crises, to back their export trade, to finance oil imports
and such. Today, some 67% of all central bank reserves are dollars.
Gold is but a tiny share now, and Euros only about 15%. Until creation
of the Euro, there was not even a theoretical rival to the dollar
reserve currency role.
What is little understood, is how the role of US trade deficits and
the Dollar System are connected. The United States has followed a
deliberate policy of trade deficits and budget deficits for most of
the past two decades, so-called benign neglect, in effect, to lock the
rest of the world into dependence on a US money system. So long as the
world accepts US dollars as money value, the US enjoys unique
advantage as the sole printer of those dollars. The trick is to get
the world to accept. The history of the past 30 years is about how
this was done, using WTO, IMF, World Bank and George Soros to name a
few.
What has evolved is a mechanism more effective than any the British
Empire had with India and its colonies under the Gold Standard. So
long as the US is the sole military superpower, the world will
continue to accept inflated US dollars as payment for its goods.
Developing countries like Argentina or Congo or Zambia are forced to
get dollars to get the IMF seal of approval. Industrial trading
nations are forced to earn dollars to defend their own currencies. The
total effect of US financial and political and trade policy has been
to maintain the unique role of the dollar in the world economy. It is
no accident that the greatest financial center in the world is New
York. It's the core of the global Dollar System.
It works so: A German company, say BMW, gets dollars for its car sales
in the USA. It turns the dollars over to the Bundesbank or ECB in
exchange for Marks or Euros it can use.
The German central bank thus builds up its dollar currency reserves.
Since the oil shocks of the 1970's, the need to have dollars to import
oil became national security policy for most countries, Germany
included. Boosting dollar exports was a national goal. But since the
Bundesbank no longer could get gold for their dollars, the issue
became what to do with the mountain of dollars their trade earned.
They decided to at least earn an interest rate by buying safe, secure
US Treasury bonds. So long as the US had a large Budget deficit, there
were plenty of bonds to buy.
Today, most foreign central banks hold US Treasury bonds or similar US
government assets as their "currency reserves." They in fact hold an
estimated $1 trillion to $1.5 trillion of US Government debt. Here is
the devil of the system. In effect, the US economy is addicted to
foreign borrowing, like a drug addict. It is able to enjoy a far
higher living standard than were it to have to use its own savings to
finance its consumption. America lives off the borrowed money of the
rest of the world in the Dollar System. In effect, the German workers
at BMW build the cars and give it away to Americans for free, when the
central bank uses the dollars to buy US bonds.
Today, the US trade deficit runs at an unbelievable $500 billion, and
the dollar does not collapse. Why? In May and June alone, the Bank of
China and Bank of Japan bought $100 billion of US Treasury and other
government debt! Even when the value of those bonds was falling. They
did it to save their exports by manipulating the Yen to dollar to
prevent a rising yen.
Because the world payments system, and most importantly, the world
capital markets---stocks, bonds, derivatives—are dollar markets, the
dollar overwhelms all others. The European Central Bank could offer an
alternative. So far it does not. It only reacts to a dollar world.
German banks destroy the German economy as they rush to imitate US
banks. The Dollar System is destroying the German industrial base.
German national economic policy as well as Bundesbank and now ECB
policy is oriented on the far smaller export sector, to maximize trade
surplus dollars, or to the big banks, to attract as many dollars as
possible.
China plays a key role today
The biggest dollar surplus country today is China. Globalization is in
fact just a code word for dollarization. The Chinese Yuan is fixed to
the dollar. The US is being flooded with cheap Chinese goods, often
outsourced by US multinationals. China today has the largest trade
surplus with the US, more than $100 billion a year. Japan is second
with $70 billion. Canada with $48 bn, Mexico with $37 bn and Germany
with $36 bn make the top 5 trade deficit countries, a total deficit of
almost $300 billion of the colossal $480 deficit in 2002. This gives a
clue to US foreign policy priorities.
What is perverse about this system is the fact that Washington has
succeeded in getting foreign surplus countries to invest their own
savings, to be a creditor to the US, buying Treasury bonds. Asian
countries like Indonesia export capital to the US instead of the
reverse!
The US Treasury and Greenspan are certain that its trade partners will
be forced to always buy more US debt to prevent the global monetary
system from collapsing, as nearly happened in 1998 with the Russia
default and the LTCM hedge fund crisis.
Washington Treasury officials have learned to be masters at the
psychology of "monetary chicken." Treasury Secretary Snow used an
implied threat of letting the dollar collapse, after the Iraq war, to
warn Germany about the risk of trying to be too close to France with
the Euro. Some weeks after the dollar had fallen sharply, and German
export industry was screaming pain, Snow reversed his stand and the
dollar stabilized. Now the dollar again rises as foreign money flows
back in.
But debt must be repaid you say? Does it ever? The central banks just
keep buying new debt, rolling the old debts over. The debts of the USA
are the assets of the rest of the world, the basis of their credit
systems!
The second key to the Dollar System deals with poorer debtor
countries. Here the US influence is strategic in the key multilateral
institutions of finance—World Bank and IMF, WTO. Entire countries like
Argentina or Brazil or Indonesia are forced to devalue currencies
relative to the dollar, privatize key state industries, cut subsidies,
all to repay dollar debt, most often to private US banks. When they
resist selling off their best assets, tehy are charged with being
corrupt. The growth of offshore money centers in the Caribbean, a key
part of the drug money cycle, is also a direct consequence of the
decisions in Washington in the 1970's and after, to deregulate
financial markets and banks. As long as the dollar is the global
currency, the US gains, or at least its big banks.
This is a kind of Dollar Imperialism more slick than anything the
British Empire even dreamed of. It is a part of the current America
"Empire" debate no one mentions. Instead of the US investing in
colonies like England to earn profits on the trade, the money comes
from the client states into the US economy. The problem is that
Washington has allowed this perverse system to get out of all control
to the point today it threatens to bring the entire world to the point
of collapse. Had the US instead promoted long-term policy of investing
in the economic growth and self-sufficiency of countries like
Argentina or Congo, rather than bleeding them in repayment of
unpayable dollar debts, the world would look far less unstable today.
The internal debt bomb in the USA
The question is if the Dollar System is reaching its real limits? The
Dollar System for the past 30 years has been built on growing dollar
debt. What if the rest of the world decides it no longer wants to give
its savings to the US Treasury to finance its deficits or its wars?
What if China decides that it should diversify its risk by buying Euro
debt? Or Japan or Russia? That day may come sooner than we think.
In addition to colossal debts to the rest of the world, the US
internal debt burdens have reached alarming levels in the past three
decades, especially the past decade.
The total US debt—public and private—has more than doubled since 1995.
It is now officially over $34 trillion. It was just over $16 trillion
in 1995, and "only" $7 trillion in 1985. Most alarming it has grown
faster than income to service it, or GDP.
Since the Asia crisis in 1998, the US debt situation has exploded. The
heart of the debt explosion is in US private consumer debt. And the
heart of consumer debt is the home mortgage debt growth, helped by two
semi-government agencies—Fannie Mae and Freddie Mac. Since 2001 and
the collapse of the stock market wealth, the Federal Reserve has cut
interest rates 13 times to a 45 year low.
US Households took on new home mortgage debt in the first six months
this year at an annual rate of $700 billion, double the debt growth in
2000. Total mortgage debt in the US totals just under $5 trillion,
double the debt in 1996. It has grown far faster than personal income
per capita. That is larger than the GDP of most nations.
The aim has been to inflate a housing speculation market in order to
keep the economy rolling. The cost has been staggering new debt
levels. Because it was created with record low interest rates, when
rates again rise, millions of Americans will suddenly find the burden
impossible, especially as unemployment rises. Fannie Mae and Freddie
Mac combined guarantee $3 trillion in US home mortgages. The US
banking system holds much of their bonds. When the housing bubble
collapses, a new banking crisis is pre-programmed as well, with JP
Morgan/Chase, Wells Fargo and BankAmerica the worst.
The US economy has only managed to avoid a severe recession since the
collapse of the stock market three years ago, by a record amount of
consumer borrowing. "Shop until you drop" is a popular American
expression. The Federal Reserve has pushed interest rates down to 1%,
the lowest in 45 years. The aim is to keep the cost of the debt low
such that families continue to borrow, in order to spend! Some 76% of
the US economy GDP today is consumer spending. And most of that is
tied to a record boom in home buying.
But the rate of new debt growth among families is rapidly reaching
alarm levels, while the overall manufacturing economy continues to
stagnate or decline. Today US factories only operate at 74% of
capacity, near historic lows. With so much unused capacity, there is
little chance companies will soon invest in new factories or jobs.
They are going to China.
So Greenspan continues to rely on foreign money to prop up his
consumer debt bubble, at low interest rates. Were foreign money to
stop propping the US economy, now at some $2.5 billion daily, the
Federal Reserve would be forced to raise its interest rates to make
dollar investments more attractive. Higher rates would trigger a
crisis in consumer debt, mortgage defaults, credit card and car loan
failures. Higher rates would plunge the US economy into a depression.
This may be about to happen, despite poor George Bush's desires to get
reelected.
There is a limit how much debt US families can pay to keep the economy
afloat.
There is no US recovery, merely a debt spending boom based on this
home buying explosion.
Total US household debt reached a high in June of $8.7 trillion,
double that of 1994. Families are agreeing to longer debt payments for
basics like homes or cars. The length of new car loans now averages
60.7 months, and the amount of car debt financed increased to $27,920,
and the average new home costs $243,000.
With rapidly rising unemployment and a real economy that is not
growing, at some point there will come a violent reality clash, as the
market for home lending reaches its limit. At that point the danger is
the consumer will stop buying, and the manufacturing economy will not
be able to create new jobs and a real recovery. The jobs have gone to
China!
We might already be at or very close to that point. In the past six
weeks, US interest rates have risen sharply, as owners of US bonds
have started to sell in panic levels, fearing the bonanza in real
estate may be over, and trying to get out with some profit before bond
prices collapse. The European Central Bank is advising member banks to
not buy any more US Freddie Mac or government agency debts.
The problem is this process of creating debt, domestic and foreign, to
keep the US economy going, has gathered so much momentum it risks
destroying what remains of the US manufacturing and technology base.
Henry Kissinger warned in a conference of Computer Associates in June,
that the US risked destroying its own middle class, and its key
strategic industries via outsourcing to China, India and other cheap
areas. Today only 11% of the total workforce is in manufacturing. In
1970, it was 30%. Post-industrial America is a bubble economy about to
pop.
Fed chief Greenspan even warned China about the rate of its trade
increase with the US, pressuring China to upvalue the Renminbi to make
its goods less competitive in dollar markets, and slow the job loss.
But this is dangerous. China holds $340 billion in US Treasury bonds
and other reserve assets. The US needs the Chinese dollar savings to
finance its soaring deficits.
It is caught in its own web: American jobs, hi-tech jobs as well as
factory jobs, are vanishing permanently as US factories source to
China, India or other cheap areas. If Washington pressures China and
others to cut back exports they risk to kill the goose that lays
golden dollar eggs. Who will buy that growing Government dollar debt?
Private bond traders are desperately trying to sell their US bonds.
Germany can only buy so much dollar debt, also Japan.
The US waged war in Iraq not out of fundamental strength but
fundamental weakness. It is economic weakness however, not military.
Oil and food, and money as strategic weapon
The fundamental reason for the Iraq war, beyond agendas of Richard
Perle or other hawks, is hence, strategic in my view. US economic
hegemony in this distorted Dollar System increasingly depends on a
rising rate of support from the rest of the world to sustain US debt
levels. Like the old Sorcerers' Apprentice. But the point is past
where this can be gotten easily. That is the real significance of the
US shift to unilateralism and military threats as foreign policy.
Europe can no longer be given a piece of the Third World debt pie as
in the 1980's. Japan has to cough up even more, as does China now.
Even ordinary Americans have to give up their pension promises. If the
Dollar System is to remain hegemonic, it must find major new sources
of support. That spells likely destabilization and wars for the rest
of the world.
Could it be that in this context, some long-term thinkers in
Washington and elsewhere have devised a strategy of establishing US
military control of all strategic sources of oil for the one potential
power rival, Eurasia, from Brussels to Berlin to Moscow and Beijing?
The dollar vulnerability and debt problems are well known in leading
policy circles.
As Henry Kissinger once noted, "Who controls the food supply controls
the people; who controls the energy can control whole continents; who
controls money can control the world."
F. William Engdahl is a Global Research Contributing Editor and author
of the book, ‘A Century of War: Anglo-American Oil Politics and the
New World Order,’ Pluto Press Ltd. He has completed a soon-to-be
published book on GMO titled, ‘Seeds of Destruction: The Hidden
Political Agenda Behind GMO’. He may be contacted through his website,
www.engdahl.oilgeopolitics.net.
F. William Engdahl is a frequent contributor to Global Research.
Global Research Articles by F. William Engdahl"
jos boersema
I don't buy this story at all. There is no need in non-American banks
or central banks to hold a single dollar bill, where it not for the
threat of military attack by the USA if another nation doesn't play
by the rules Washington enforces through Blitz Krieg, CIA / ONI / ...
sponsored coups and trade wars. There is no reason oil is traded in
Dollars except for the threat of USA war.
The nation XYZ, with its own production, has a backing of wealth in its
won production and soil. If its Government desires to have a reserve
for emergencies (real emergencies like giant droughts for example),
then such a Government might want to use whatever of value is laying
around. This might be other nations their currency, or gold, or oil
(real oil), etc etc. However that's merely a precautionary measure.
No nation needs the USA, and most nations would potentially do a lot
better and would be much richer if it wasn't for the USA military
threat.
USA is the hoodlum & robber of the whole world, that is the role of the
USA imho. Nations aren't the same as people in a nation, it seems that
Americans often think that other nations are there to be dominated and
oppressed that as if there isn't a central Imperial opressor that then
somehow there would be chaos. Truth is that there might be war and chaos
exactly like there is if the USA dominates because then the USA causes
the bulk of the war and chaos in its own criminal interest. Maybe I
should say "global financial ruling classes," because for them America
is probably merely a pawn in a game. One day they might use this nation
against that nation, another day other nations. It is more of a class
war against all people then national tribal wars imho.
> What is little understood, is how the role of US trade deficits and
> the Dollar System are connected. The United States has followed a
> deliberate policy of trade deficits and budget deficits for most of
> the past two decades, so-called benign neglect, in effect, to lock the
> rest of the world into dependence on a US money system. So long as the
> world accepts US dollars as money value,
"Or else get bombed like Iraq, who went off the dollar denominated oil
game ..." What is "benign" ?
> the US enjoys unique
> advantage as the sole printer of those dollars.
Indeed, and the explanation for why the world would put up with such a
scam and a racket is: USA military force, under direction of a
completely self-absorbed population who will support any crazy war for
whatever pretence.
> The trick is to get
> the world to accept.
Yeah.
> The history of the past 30 years is about how
> this was done, using WTO, IMF, World Bank and George Soros to name a
> few.
Super hornet, the USS Ronald Raegon, cruise missiles, school of the
Americas torture school, CIA organized coups against foreign democracies
to name a few more. ;)
Not that other nations their ruling classes wouldn't have done the same,
they are all the same the world over, all against all people, especially
their domestic people whom they fear most for being closest.
> What has evolved is a mechanism more effective than any the British
> Empire had with India and its colonies under the Gold Standard. So
> long as the US is the sole military superpower, the world will
> continue to accept inflated US dollars as payment for its goods.
Say it: "the world will be forced to ..." Quit the Orwellian doublespeak
and peer the snake (eagle, the old Roman standard) in the eyes.
Saying that: what other ruling classes use a Roman standard, or a
Babylonian standard, it is all the same. The ruling class of Japan isn't
the victim of this, both the USA people and the Japanese people are.
Nobody gains from these wars between ruling class fractions, both ruling
class fractions may win but the people on both sides tend to lose: the
principle enemy of the ruling classes.
> Developing countries like Argentina or Congo or Zambia are forced to
> get dollars to get the IMF seal of approval. Industrial trading
> nations are forced to earn dollars to defend their own currencies. The
> total effect of US financial and political and trade policy has been
> to maintain the unique role of the dollar in the world economy. It is
> no accident that the greatest financial center in the world is New
> York. It's the core of the global Dollar System.
>
> It works so: A German company, say BMW, gets dollars for its car sales
> in the USA. It turns the dollars over to the Bundesbank or ECB in
> exchange for Marks or Euros it can use.
>
> The German central bank thus builds up its dollar currency reserves.
> Since the oil shocks of the 1970's, the need to have dollars to import
> oil became national security policy for most countries, Germany
> included. Boosting dollar exports was a national goal. But since the
> Bundesbank no longer could get gold for their dollars, the issue
> became what to do with the mountain of dollars their trade earned.
> They decided to at least earn an interest rate by buying safe, secure
> US Treasury bonds. So long as the US had a large Budget deficit, there
> were plenty of bonds to buy.
To complete the circle: the USA attempts to control countries with oil
reserves, to force them to sell for dollars; that's how the Saudi
Arabian people get a ruling tirany that they don't seem to want.
Parable: in the desert, control the single oil well in town and you can
get rich doing nothing (except the violence to keep it under control).
> Today, most foreign central banks hold US Treasury bonds or similar US
> government assets as their "currency reserves." They in fact hold an
> estimated $1 trillion to $1.5 trillion of US Government debt. Here is
> the devil of the system. In effect, the US economy is addicted to
> foreign borrowing, like a drug addict. It is able to enjoy a far
> higher living standard than were it to have to use its own savings to
> finance its consumption. America lives off the borrowed money of the
> rest of the world in the Dollar System. In effect, the German workers
> at BMW build the cars and give it away to Americans for free, when the
> central bank uses the dollars to buy US bonds.
>
> Today, the US trade deficit runs at an unbelievable $500 billion, and
> the dollar does not collapse. Why? In May and June alone, the Bank of
> China and Bank of Japan bought $100 billion of US Treasury and other
> government debt! Even when the value of those bonds was falling. They
> did it to save their exports by manipulating the Yen to dollar to
> prevent a rising yen.
USA also has the A-bomb, and the insane corrupt leadership to use it.
> Because the world payments system, and most importantly, the world
> capital markets---stocks, bonds, derivatives?are dollar markets, the
> dollar overwhelms all others. The European Central Bank could offer an
> alternative. So far it does not. It only reacts to a dollar world.
> German banks destroy the German economy as they rush to imitate US
> banks. The Dollar System is destroying the German industrial base.
German wage slaves are more unruly then many in the third world, hence
the global ruling classes may see in Europe and any nation with a somewhat
active and rights demanding people a strategic enemy. Rights in one
nation may lead to rights in another ... The appeal of cheap labor
enforces that mechanism economically, and is a reason for enhancing low
wage abusive nations, and to destroy nations that do well and have a
good set of laws / culture.
> German national economic policy as well as Bundesbank and now ECB
> policy is oriented on the far smaller export sector, to maximize trade
> surplus dollars, or to the big banks, to attract as many dollars as
> possible.
>
> China plays a key role today
>
> The biggest dollar surplus country today is China. Globalization is in
> fact just a code word for dollarization. The Chinese Yuan is fixed to
> the dollar. The US is being flooded with cheap Chinese goods, often
> outsourced by US multinationals. China today has the largest trade
> surplus with the US, more than $100 billion a year. Japan is second
> with $70 billion. Canada with $48 bn, Mexico with $37 bn and Germany
> with $36 bn make the top 5 trade deficit countries, a total deficit of
> almost $300 billion of the colossal $480 deficit in 2002. This gives a
> clue to US foreign policy priorities.
>
> What is perverse about this system is the fact that Washington has
> succeeded in getting foreign surplus countries to invest their own
> savings, to be a creditor to the US, buying Treasury bonds. Asian
> countries like Indonesia export capital to the US instead of the
> reverse!
>
> The US Treasury and Greenspan are certain that its trade partners will
> be forced to always buy more US debt to prevent the global monetary
> system from collapsing, as nearly happened in 1998 with the Russia
> default and the LTCM hedge fund crisis.
Seems like a good explanation for why USA is so pre-occupied with the
proliferation of nuclear bombs. They want to hold these bombs over other
nations so they keep hoarding dollars for no reason or else get nuked.
Doesn't work so well if other nations also have nukes, or if a world
coalition of nuclear countries could mass the power to wipe the USA out.
> Washington Treasury officials have learned to be masters at the
> psychology of "monetary chicken." Treasury Secretary Snow used an
> implied threat of letting the dollar collapse, after the Iraq war, to
> warn Germany about the risk of trying to be too close to France with
> the Euro. Some weeks after the dollar had fallen sharply, and German
> export industry was screaming pain, Snow reversed his stand and the
> dollar stabilized. Now the dollar again rises as foreign money flows
> back in.
>
> But debt must be repaid you say? Does it ever? The central banks just
> keep buying new debt, rolling the old debts over. The debts of the USA
> are the assets of the rest of the world, the basis of their credit
> systems!
If it is never repayed then it isn't an asset but a parasitic relation.
If military power is the cause for the economic drain on the world by
the USA, it may never end (until the USA is destroyed or goes through a
social revolution that causes its military to withdraw its threat and
results in peace (http://www.socialism.nl is how).)
> The second key to the Dollar System deals with poorer debtor
> countries. Here the US influence is strategic in the key multilateral
> institutions of finance?World Bank and IMF, WTO. Entire countries like
> Argentina or Brazil or Indonesia are forced to devalue currencies
> relative to the dollar, privatize key state industries, cut subsidies,
> all to repay dollar debt, most often to private US banks. When they
> resist selling off their best assets, tehy are charged with being
> corrupt. The growth of offshore money centers in the Caribbean, a key
> part of the drug money cycle, is also a direct consequence of the
> decisions in Washington in the 1970's and after, to deregulate
> financial markets and banks. As long as the dollar is the global
> currency, the US gains, or at least its big banks.
>
> This is a kind of Dollar Imperialism more slick than anything the
> British Empire even dreamed of. It is a part of the current America
> "Empire" debate no one mentions. Instead of the US investing in
> colonies like England to earn profits on the trade, the money comes
> from the client states into the US economy. The problem is that
> Washington has allowed this perverse system to get out of all control
> to the point today it threatens to bring the entire world to the point
> of collapse. Had the US instead promoted long-term policy of investing
> in the economic growth and self-sufficiency of countries like
> Argentina or Congo, rather than bleeding them in repayment of
> unpayable dollar debts, the world would look far less unstable today.
If the USA was an honorable country with a fair foreign policy, its
troops would be on its own soil and it would busy itself with itself and
what comes accross the border in trade and people. USA doesn't need to
invest in Argentina or Congo, all it needs to do is mind its own
business and leave other people alone. USA has enormous internal
problems that it can't solve, more then enough to do.
> The internal debt bomb in the USA
>
> The question is if the Dollar System is reaching its real limits? The
> Dollar System for the past 30 years has been built on growing dollar
> debt. What if the rest of the world decides it no longer wants to give
> its savings to the US Treasury to finance its deficits or its wars?
> What if China decides that it should diversify its risk by buying Euro
> debt? Or Japan or Russia? That day may come sooner than we think.
USA drops the bombs ? That's the idea right ?
> In addition to colossal debts to the rest of the world, the US
> internal debt burdens have reached alarming levels in the past three
> decades, especially the past decade.
>
> The total US debt?public and private?has more than doubled since 1995.
> It is now officially over $34 trillion. It was just over $16 trillion
> in 1995, and "only" $7 trillion in 1985. Most alarming it has grown
> faster than income to service it, or GDP.
>
> Since the Asia crisis in 1998, the US debt situation has exploded. The
> heart of the debt explosion is in US private consumer debt.
Isn't that a trick to fight the public: cut wages but allow extreme
consumer credit to get many people to over-extend themselves, then
suddenly cause shocks to wages/income and have people plummet into
poverty. The key is that you can blame these people themselves for
having over-extended on debt, so that you maintain political supremacy
over the people as a ruling class network.
> And the
> heart of consumer debt is the home mortgage debt growth, helped by two
> semi-government agencies?Fannie Mae and Freddie Mac. Since 2001 and
> the collapse of the stock market wealth, the Federal Reserve has cut
> interest rates 13 times to a 45 year low.
>
> US Households took on new home mortgage debt in the first six months
> this year at an annual rate of $700 billion, double the debt growth in
> 2000. Total mortgage debt in the US totals just under $5 trillion,
> double the debt in 1996. It has grown far faster than personal income
> per capita. That is larger than the GDP of most nations.
>
> The aim has been to inflate a housing speculation market in order to
> keep the economy rolling.
... keep it rolling while giving people too little wage to meet their
needs, or their former consumption level. The other option is to give
better wages, but that no ruling class ever does without a fight from
the people. Good to remember the motives here: not to keep the economy
going, but to impoverish the people and turn them into mush. For that to
work psychologically: extend 'the good times' into a debt based
consumption, then pull the rug and laugh while the people point fingers
at each other.
> The cost has been staggering new debt
> levels. Because it was created with record low interest rates, when
> rates again rise, millions of Americans will suddenly find the burden
> impossible, especially as unemployment rises. Fannie Mae and Freddie
> Mac combined guarantee $3 trillion in US home mortgages. The US
> banking system holds much of their bonds. When the housing bubble
> collapses, a new banking crisis is pre-programmed as well, with JP
> Morgan/Chase, Wells Fargo and BankAmerica the worst.
>
> The US economy has only managed to avoid a severe recession since the
> collapse of the stock market three years ago, by a record amount of
> consumer borrowing. "Shop until you drop" is a popular American
> expression. The Federal Reserve has pushed interest rates down to 1%,
> the lowest in 45 years. The aim is to keep the cost of the debt low
> such that families continue to borrow, in order to spend!
In order to have them not ask real wage increases !
Americans are apparently dumb enough to fall for the debt bait.
> Some 76% of
> the US economy GDP today is consumer spending. And most of that is
> tied to a record boom in home buying.
A nation being set up for some sort of collapse if you ask me ?
The ruling classes positioning themselves psychologically to 'keep the
girl on the back of the beast'.
> But the rate of new debt growth among families is rapidly reaching
> alarm levels, while the overall manufacturing economy continues to
> stagnate or decline. Today US factories only operate at 74% of
> capacity, near historic lows. With so much unused capacity, there is
> little chance companies will soon invest in new factories or jobs.
> They are going to China.
Very very dumb indeed, Europe is also doing this. It hollows out the
very economic substance of a nation, also setting it up for collapse.
But remember that the ruling classes are at war with any person who
demands a fair wage. You see higher wages in Europe then in China,
therefore the ruling classes want to gut the western industries, keeping
them happy on a drugged binge of cheap luxury from wage slaves in China.
Once the rich nations have been gutted sufficiently that they would
experience severe hardships if the drug of cheap slave products is
removed, they'll pull the drug and attempt to establish 3rd world
conditions in Euorpe and USA (and where they can). They do that for
power, to destroy democracy and get back to dictatorship. Look at the
middle ages in Europe: autocratic state power was at its peak,
predictable the people where suffering also at a peak.
The people are extremely dumb not to have managed sufficient level of
state democracy to stop outsourcing and close borders for slave
products, keep industries alive at home, pay for their products with
real work, don't go unto a cheap luxury binge. I note that the strategic
criminal element its designs also lign up with what is economically
natural in terms of profit maximization (hence I'm not sure what extend
is accidental and what is on purpose, result could be the same though.)
Sounds like bullshit, why not simply limit total imports or add serious
tarriffs to stimulate domestic production ? Trying to blame someone else
for USA exporting away its production industry ?
> But this is dangerous. China holds $340 billion in US Treasury bonds
> and other reserve assets. The US needs the Chinese dollar savings to
> finance its soaring deficits.
>
> It is caught in its own web: American jobs, hi-tech jobs as well as
> factory jobs, are vanishing permanently as US factories source to
> China, India or other cheap areas.
It isn't caught in its own web at all, you think the USA people and its
ruling class are one, but they are two and at war with each other.
Classic mistake imho. No it is all working fine for the USA ruling
class, with some luck they can turn the USA into a 3rd world nation.
Thus expanding the reach of corruption and crime, and reduce cost of
labor a lot more. It will reduce the size of the rich and ruling classes
a lot though, so that is an internal struggle that is also going on.
The ruling and richt class of a 3rd world nation is very rich, corrupt
and powerful and ruthless, but it is also a lot smaller imho. Thus a
squeeze happens. I saw some reports that this had already occured, some
300 individuals or families or whatever where the inner circle. Hence it
is also a fight between the most cunning and corrupt against lesser
corrupt parts of a larger ruling economic/rich/parasitic class.
The big threat to this is of course popular uprising, constituting
revolution I'd prefer, which is the answer to all this
http://www.socialism.nl/~joshb/sheet3.txt
> China, India or other cheap areas. If Washington pressures China and
> others to cut back exports they risk to kill the goose that lays
> golden dollar eggs. Who will buy that growing Government dollar debt?
> Private bond traders are desperately trying to sell their US bonds.
> Germany can only buy so much dollar debt, also Japan.
>
> The US waged war in Iraq not out of fundamental strength but
> fundamental weakness. It is economic weakness however, not military.
>
> Oil and food, and money as strategic weapon
>
> The fundamental reason for the Iraq war, beyond agendas of Richard
> Perle or other hawks, is hence, strategic in my view. US economic
> hegemony in this distorted Dollar System increasingly depends on a
> rising rate of support from the rest of the world to sustain US debt
> levels. Like the old Sorcerers' Apprentice. But the point is past
> where this can be gotten easily. That is the real significance of the
> US shift to unilateralism and military threats as foreign policy.
> Europe can no longer be given a piece of the Third World debt pie as
> in the 1980's. Japan has to cough up even more, as does China now.
>
> Even ordinary Americans have to give up their pension promises. If the
> Dollar System is to remain hegemonic, it must find major new sources
> of support. That spells likely destabilization and wars for the rest
> of the world.
Not to mention a need to distract the people with war, to keep them from
rising up against the ruling classes. Let the revolutionaries kill each
other in tribal combat, it is an old game to keep power imho. WW1 was
probably fought because of that, WW2 also.
> Could it be that in this context, some long-term thinkers in
> Washington and elsewhere have devised a strategy of establishing US
> military control of all strategic sources of oil for the one potential
> power rival, Eurasia, from Brussels to Berlin to Moscow and Beijing?
> The dollar vulnerability and debt problems are well known in leading
> policy circles.
>
> As Henry Kissinger once noted, "Who controls the food supply controls
> the people; who controls the energy can control whole continents; who
> controls money can control the world."
>
> F. William Engdahl is a Global Research Contributing Editor and author
> of the book, ?A Century of War: Anglo-American Oil Politics and the
> New World Order,? Pluto Press Ltd. He has completed a soon-to-be
> published book on GMO titled, ?Seeds of Destruction: The Hidden
> Political Agenda Behind GMO?. He may be contacted through his website,
> www.engdahl.oilgeopolitics.net.
>
> F. William Engdahl is a frequent contributor to Global Research.
> Global Research Articles by F. William Engdahl"
> http://www.globalresearch.ca/index.php?context=va&aid=3482
Zerkon
> As Henry Kissinger once noted, "Who controls the food supply controls
> the people; who controls the energy can control whole continents; who
> controls money can control the world."
Who controls past history controls opinion. Who controls opinion controls
the mind.
http://en.wikipedia.org/wiki/Edward_Bernays
"The conscious and intelligent manipulation of the organized habits and
opinions of the masses is an important element in democratic society.
Those who manipulate this unseen mechanism of society constitute an
invisible government which is the true ruling power of our country. ...We
are governed, our minds are molded, our tastes formed, our ideas
suggested, largely by men we have never heard of. This is a logical
result of the way in which our democratic society is organized. Vast
numbers of human beings must cooperate in this manner if they are to live
together as a smoothly functioning society. ...In almost every act of our
daily lives, whether in the sphere of politics or business, in our social
conduct or our ethical thinking, we are dominated by the relatively small
number of persons...who understand the mental processes and social
patterns of the masses. It is they who pull the wires which control the
public mind."