The historic US-Saudi relationship cannot bounce back

April 25 2023

US imports of Saudi oil are at historic lows, Chinese purchases of Saudi oil continue to grow, and Russian-Saudi energy interests have fully converged. If it’s ‘all about the economy,’ then Saudi-US ties may never quite recover.

Photo Credit: The Cradle

By Mohamad Hasan Sweidan

“Our allies in the Gulf no longer honor the deal that was made decades ago even though we still have a big physical military presence in the Gulf, bigger than ever before, and we keep giving Gulf nations a pass on human rights violations. Too often our Middle East allies act in conflict with our security interests.”

– Chairman of the Subcommittee on Near East, South Asia, Central Asia, and Counterterrorism of Committee on Foreign Relations in the US Senate, Senator Chris Murphy, July 2022.

The war in Ukraine and the intensification of Great Power competition have cast a shadow over global markets and prompted some surprising changes in the foreign policies of states. The Kingdom of Saudi Arabia is among those countries, and its relationship with the US is currently passing through a very critical period. Today, Riyadh seeks a more conditional relationship with Washington, one that takes into account converging Saudi interests with non-western states.

There are many reasons why the kingdom is adopting a more pragmatic foreign policy. One of the key factors is energy relations, particularly as Riyadh seeks to preserve and grow its mutual interests with other major powers, such as China and Russia.

The birth of the petrodollar

The “Nixon Shock” in 1971 marked a shift in economic policy for the US, which sought to prioritize its own economic growth and stability over that of other states. This led to the end of the Bretton Woods Agreement and the convertibility of US dollars into gold. Washington moved instead to establish a new system in which the US dollar was pegged to a commodity with global demand in order to maintain its position as the world’s dominant reserve currency.

In 1974, the petrodollar agreement was struck, in which Saudi Arabia agreed to sell oil exclusively in US dollars in exchange for US military, security, and economic development assistance. The deal effectively tied the value of the US dollar to global demand for oil and ensured its continued dominance as the world’s primary reserve currency.

US dependence on Saudi oil

After the petrodollar agreement, Saudi oil exports to the US surged, making Saudi Arabia’s security all the more critical for Washington. By 1991, the US imported 1.7 million barrels per day (bpd) of Saudi oil, a sharp increase from 438,000 bpd in 1974.

This represented 29.5 percent of the total US oil imports in 1991, and 26.4 percent of the total Saudi oil exports – further emphasizing for Washington the importance of maintaining Saudi Arabia’s security and stability. But the staggering dependence on foreign – and Saudi – oil imports also created political blowback in the US, which launched plans to reduce its imports and ramp up domestic oil production.

This was motivated by several factors, including the potential negative impact of any energy market shocks – such as the decline in Iranian oil exports after the 1979 Islamic Revolution – on the US economy, the potential impact of geopolitical disputes on West Asian oil exports, and technological advances that facilitated increased oil production in the US.

Over the following decades, Washington was able to successfully reduce its oil imports from Saudi Arabia: In 2020, the US only imported 356,000 bpd of Saudi oil, which accounted for just 6 percent of all US oil imports and 4.8 percent of all Saudi oil exports.

Changing oil market dynamics

In this process, Saudi Arabia lost much of its value as a market for the Americans, and the US is no longer dependent on Saudi Arabia as a significant oil source. Furthermore, the US’ significant increase in shale oil production created a major new competitor in the energy market, which raised concerns in Riyadh about its declining influence as a strategic supplier of oil to the world.

To diversify its oil export options, Saudi Arabia began turning eastward to China, the world’s largest oil importer. Over the past two decades, Saudi Arabia has gradually become China’s primary source of oil, with Chinese oil imports from Saudi Arabia increasing by 16.3 percent between 1994 and 2005, reaching 1.75 million bpd in 2022.

Strengthening economic and diplomatic relations with Beijing has become a necessity for Riyadh, which derives 70 percent of its export revenues from oil. The same applies to China, a global power that actively seeks to diversify its oil sources to prevent reliance on a single country.

In recent years, Russia has also emerged as an essential oil industry partner for the Saudis. The creation of OPEC+ was a response to falling crude oil prices caused partly by the substantial increase in US shale oil production since 2011.

Russia and Saudi Arabia are the world’s top oil exporters, and their cooperation has proven vital for controlling prices by coordinating the quantities of oil pumped into the markets. This led to the 2016 expansion of OPEC – which is controlled by Saudi Arabia – and the establishment of OPEC+ to include Russia.

OPEC+ cooperation after price war

After the negative consequences of the 2020 price war among key oil producers, both Riyadh and Moscow recognized the importance of cooperation to safeguard their energy interests.

In March of that year, OPEC+ had convened in Vienna to address the decline in oil demand caused by the COVID-19 pandemic. At the meeting, Saudi Arabia, the organization’s largest producer, proposed reducing production to stabilize prices at a reasonable, higher level, while Russia, the largest non-OPEC producer in OPEC +, opposed the cuts and moved to increase its oil production.

In response to Moscow’s move, the Saudis increased their own production and announced unexpected cuts in oil prices ranging from $6 and $8 per barrel for importers in Europe, Asia, and the US. This announcement triggered a sharp drop in oil prices, with Brent crude plummeting by 30 percent – marking the biggest decline since the 1991 Gulf War – while the WTI benchmark fell by 20 percent.

On 9 March, global stock markets experienced significant losses, and the Russian ruble declined by 7 percent against the US dollar, reaching its lowest level in four years.

The oil price war lasted for approximately a month before OPEC+ members reached a new agreement in April that included historic oil production cuts of 10 million bpd. This experience marked the beginning of uninterrupted energy cooperation between Moscow and Riyadh.

Saudi Arabia: prioritizing its interests

Since the outbreak of the Ukraine war in February 2022, the US has pressured its allies to comply with western sanctions against Russia. Washington has sought to persuade OPEC leader Riyadh to increase oil production to curb the price hike caused by the conflict, but so far, the Saudis have refused these demands.

This has led to heightened US-Saudi tensions, which prompted US President Joe Biden’s unsuccessful visit to Jeddah in July 2022 to try to convince Crown Prince Mohammed bin Salman (MbS) to raise oil production levels.

Furthermore, western attempts to establish a price ceiling on Russian oil served only to alarm Saudi Arabia, as it would open the door for customers to impose oil prices on sellers. Despite aggressive attempts to undermine Russia’s energy sector, the US-European western alliance has been unable to do so, and in fact, led to an increase in Russian energy exports to Europe, China, and India last year.

A number of countries, including Saudi Arabia, have helped buoy Russian energy exports by purchasing Russian oil and re-exporting it to needy European markets – or using it locally to boost their export revenues. As Russia is the second-largest exporter of oil worldwide, its isolation from the markets would otherwise have significant repercussions, especially for oil-exporting states.

The war in Ukraine demonstrated that Riyadh is prepared to confront Washington when it feels its energy interests are under threat. Today, the US is no longer an energy partner for Saudi Arabia, but rather a competitor. In its stead, Beijing and Moscow have risen to become essential partners for Riyadh, and the mutual energy interests are a major factor behind MbS’ efforts to diversify his country’s foreign policy options.

The US and Saudi Arabia: No longer energy allies

Since the Cold War era began, oil has been a key pillar of the Russian (and former Soviet) economy. It has long been a US priority to be able to influence prices as a pressure tool against Moscow. Since Saudi Arabia is considered an oil superpower, Washington’s cooperation with Riyadh – despite its own dramatically reduced Saudi oil imports – is at the heart of US economic strategies to counter Russia.

For example, in the mid-eighties, during the Soviet invasion of Afghanistan, the US asked the Saudis to flood oil markets in order to lower prices and undermine the oil revenue-reliant USSR. In 1986, oil prices dropped by two-thirds, from $30 per barrel to nearly $10 per barrel, ultimately crippling the Soviet economy and its geopolitical reach.

But attitudes have sharply altered during the intervening 37 years. Saudi Arabia now views the US as an energy market competitor due to Washington’s increased shale oil production and disinterest in boosting oil imports.

Between 2010 and 2021, US shale oil production grew from approximately 0.59 million bpd to 9.06 million bpd. Riyadh’s response to this new geo-economic development was to raise oil production in 2016, with the aim of lowering prices to undercut the US shale industry, which operates at significantly higher costs.

The Saudis indeed fear a declining role as a strategic supplier of global oil, in large part due to expanded US shale production and energy self-sufficiency. This has driven the Saudis to try and reimpose their oil superiority by lowering prices to undercut competitors with higher production costs – despite the short-term domestic damage caused by increased Saudi oil production.

To this day, Saudi Arabia continues to present an obstacle to US energy interests, and has instead found most common ground with Washington’s main adversaries – Russia, China, Iran – with whom Riyadh’s energy interests intersect.

Contrary to expectations since the outbreak of the Ukraine war in February 2022, all US efforts to persuade Riyadh to flood global oil markets have failed, and the Russians have managed to maintain both their exports and their economy. It has become manifestly clear to Washington’s decision-makers that Saudi Arabia today is not the Saudi Arabia of 1985, willing to undermine its own revenues and energy interests in order to serve a US geopolitical agenda.

Discussions in Washington today have likewise turned to the feasibility of maintaining the US commitment to Saudi Arabia’s security, particularly since Riyadh neither provides Americans with energy nor follows its political diktats.

Some believe that the US’ role of acting as a security guarantor in the Persian Gulf merely serves Beijing’s interests by securing China’s main energy sources. Yet others argue that a US military withdrawal from the Persian Gulf will create a vacuum filled by Beijing, which will keenly seek to ensure its own energy security.

The one point of clarity, however, is that US-Saudi energy interests are no longer synergistic and that Riyadh’s interests line up far more closely with those of Beijing and Moscow. This remains a key factor driving Saudi Arabia’s foreign policy and economic diversification today.

What remains to be seen is how far the Saudis – deeply and historically bound to western interests – will be willing to challenge the US’ regional hegemony as their goals diverge and Riyadh finds common cause with Washington’s rivals.

The views expressed in this article do not necessarily reflect those of The Cradle.

Author

Mohamad Hasan Sweidan

@mhmdsweidan

Keywords

Chinaenergy sectoroil pricesoil production cutsOPECPersian Gulf securitypetrodollarRussiaSaudi ArabiaUS

Old Way, New Way

July 14, 2022

By Dmitry Orlov and posted with permission

The hardest part of living through a time of wrenching change is that nobody particularly bothers to inform you that the times have changed and that nothing will be the same again. Certainly not the talking heads on TV, who are often the last to know. You have to figure it out for yourself if you can. But I am here to help.

It all has to do with energy. Not with technology—that’s incidental; not with military superiority—that’s fleeting and largely imaginary; certainly not with any sort of political or cultural self-righteousness—that’s delusional. There is no substitute for energy. If you run low, you can’t switch to running your industrial economy on fiddlesticks. It just shuts down. What’s worse, energy sources are not even particularly substitutable for each other. If you run low on gas, you can’t just switch to coal or to dried dung, even if you are up to your neck in it. Modern industry runs on oil, natural gas, and coal, in that order, and they can be substituted for each other in very limited ways.

Furthermore, energy has to be very cheap. Oil has to be about the cheapest liquid you can buy—cheaper than milk; cheaper even than bottled water. If energy isn’t cheap enough, then all the energy-hungry industry that runs on it becomes unprofitable and shuts down. That’s the stage at which we are now in much of the world. So, what happened?

Once upon a time the US produced most of the oil in the world. But then the prolific wells in West Texas ran out and Saudi Arabia took over as the biggest oil producer. But the US wasn’t about to take that sitting down and hatched an ingenuous plan: Saudi Arabia will sell its oil for printed US dollars, then take most of those dollars and give them back to the US by “investing” it in US “debt”. Everybody else who needed oil had to figure out a way to earn US dollars to buy it, and any US dollars they had left over after buying oil also had to be used to buy up US debt just because: “Nice economy you have there! Now we wouldn’t want anything bad to happen to it, would we?”

Indeed, a few people didn’t get the message (Saddam of Iraq, Qaddafi of Libya) and got their countries bombed. And a whole lot of other defenseless countries got bombed just to keep the others scared. But then Syria, which refused to get the message too, asked the Russians for help. The Russians helped Syria, and now nobody is afraid of the US any more. Meanwhile, the US became spoiled by all this free money, grew fat, lazy, degenerate and weak and amassed the hugest pile of “debt” (in quotes because there is no question of ever repaying it) in all of human history.

In the meantime Russia, being the largest energy-producing country in the world, decided that it has had enough. Under the old scheme, Russia exported its resources cheaply, spend 1/3 of the revenue on imports and allowed 2/3 to leak out of the country, quite a lot of it also used to buy US “debt”. It couldn’t do anything about this right away, and so it spent the last decade developing its military to a point where now the US/NATO are afraid to go near it and its economy to a point where it doesn’t need much of the imports, at least not for a few years. And then a silly thing happened: the US confiscated Russia’s holdings of US “debt,” making everyone in the world take notice and start dumping it—even the Japanese!—sending the entire financial scheme into a tailspin.

Meanwhile, Russia has started to switch from selling its energy exports for dollars and euros, which then leave the country, where they can be confiscated, to selling them for rubles, which stay inside the country. Do you want to buy some Russian energy? Well, figure out how to earn some rubles! And if your own anti-Russian sanctions prevent you from doing so—well, la-di-da, whose fault is that? Also, given that there is now a worldwide energy shortage, the Russians asked themselves: Why sell lots of oil and gas for a little money when you can sell less of them for more money?

These are not projected developments; they are happening now and in real-time. “Hostile nations” (which is all of the West) now need rubles to buy Russian natural gas and there is a plan to extend this scheme to oil exports. And just a couple of days ago Russia’s finance minister, Anton Siluanov, announced that there isn’t much point for Russia to export anything for dollars or euros since Russia doesn’t need them for anything and advised exporters to start using barter arrangements instead. Barter is rather inconvenient, but if offering dollars (or euros) just gets you punched in the teeth, then that’s all there is left.

What sorts of barter arrangements? Well, for instance, there is a very nice gigantic chemical plant in Germany, the Ludwigshafen Chemical Complex in Germany, owned by BASF, that is about to shut down due to a shortage of its main feedstock, which is Russian natural gas. That equipment could be crated up and shipped off to Russia in exchange for some energy products, fertilizer and other key supplies that the Germans will need to keep body and soul together over this coming winter. Are anti-Russian sanctions in the way? Well, la-de-da again! They are not Russia’s problem; somebody else has to find a way around them.

Meanwhile, lots of dead ideas, systems and institutions are piling up in the West. Dead is the Green New Deal (a scheme concocted by people who know neither physics nor even arithmetic) and the Great Reset, and Build Back Better (whatever that was), and the rules-based international order, and Mutual Assured Destruction (if you ask for it, Russia will destroy it, but how mutual is that?). And we are all standing by, waiting for a shout of “Timber!” when the dollar/euro/yen debt pyramid begins to topple.

The world is also waiting with bated breath for a whole lot of pompous but useless busybodies to disappear from public view. Dumping that pompous blowhard Boris Johnson was a good start, but what about Scholz, Macron, Duda, von der Lyin’, Zelensky and a whole host others? Biden is in a category of his own, since it clearly doesn’t matter who is the US president or even if there is one.

The world has changed, but social reality hasn’t yet caught up with political and physical reality. This is the summer of anticipation. The winter of discontent is next. Come next spring, we will all be living on a strange and different planet.

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The US wants to keep its status as a superpower at any cost

May 14, 2022

Source

By Zamir Awan

The US is desperate to sustain its hegemony and supremacy. It is taking extreme measures and can go to any extent to keep its hegemony and supremacy. Its Petrodollars policy has been playing a significant role, but, facing challenges recently and the US is getting nervous and crazy.

The petrodollar is any U.S. dollar paid to oil-exporting countries in exchange for oil. The dollar is the preeminent global currency. As a result, most international transactions, including oil, are priced in dollars. Oil-exporting nations receive dollars for their exports, not their own currency.

In addition, most oil-exporting nations own their oil industries. That makes their national income depends on the dollar’s value. If it falls, so does their government’s revenue. As a result, most of these oil exporters also peg their currencies to the dollar. That way, if the dollar’s value falls, so does the price of all their domestic goods and services. That helps these countries avoid wide swings in inflation or deflation.

The petrodollar system is tied to the history of the gold standard. After World War II, the United States held most of the world’s supply of gold. It agreed to redeem any U.S. dollar for its value in gold if the other countries pegged their currencies to the dollar. Other countries signed this deal at the 1944 Bretton Woods conference. It established the U.S. dollar as the world’s reserve currency.

On February 14, 1945, President Franklin D. Roosevelt initiated the alliance with Saudi Arabia.1 He met with Saudi King Abd al-Aziz. The United States built an airfield at Dhahran in return for military and business training. This alliance was so critical that it survived subsequent years of differences of opinion over the Arab-Israeli conflict.

The 1945 agreement between the United States and Saudi Arabia cemented the relationship between the dollar and oil. The petrodollar was born. In 1971, U.S. stagflation prompted runs on the dollar. Many countries asked to redeem their U.S. dollars for gold. To protect the remaining U.S. gold reserves, President Richard Nixon removed the dollar from the gold standard. As a result, the value of the dollar plummeted. That helped the U.S. economy as its export values also decreased, making them more competitive. A falling dollar hurt oil-exporting countries because contracts were priced in U.S. dollars. Their oil revenue dropped along with the dollar. The cost of imports, denominated in other currencies, increased.

In 1973, Nixon asked Congress for military aid to Israel in the Yom Kippur War. The newly-formed Organization of the Petroleum Exporting Countries halted oil exports to the United States and other Israeli allies. The OPEC oil embargo quadrupled the price of oil in six months. Prices remained high even after the embargo ended. In 1979, the United States and Saudi Arabia negotiated the United States-Saudi Arabian Joint Commission on Economic Cooperation. They agreed to use U.S. dollars for oil contracts. The U.S. dollars would be recycled back to America through contracts with U.S. companies. These companies improve Saudi infrastructure through technology transfer.

The United States uses the power of petrodollars to enforce its foreign policy. But many countries don’t fight back. They are afraid it would mean the collapse of the petrodollar system.

However, there was strong thinking against the Petrodollar concept and few Arab leaders declared to trade oil; in local currencies or any other currency, de-linking from dollars. The leading role was played by President Sadden Hussain, Col. Qaddafi of Libya, and the Syrian President. The US has punished them and changed the regimes in such countries.

China called for a replacement of the U.S. dollar as a global currency. Although, it is one of the largest foreign holders of the dollar. China influences the U.S. dollar by pegging its currency, the yuan, to it. China has signed a currency swap agreement with more than twenty countries and already trading with them in Yuan or local currencies. China is importing oil and gas from a few Arab nations in Yuan.

Russia has demanded to settle Gas bills in Rubles and a few European countries are already agreed to pay in Rubles. EU has also no objections if any member state pays in Rubles instead of Dollars. Russia is trading with few other nations in Rubles or local currencies instead of Dollars.

Russia has slashed the value of the dollar and the euro by 30% in a jiffy by linking the Russian Ruble to the value of gold and declaring to supply oil only against the Russian Ruble. Russia’s move means that now the entire world, especially Western Europe and Japan will buy the Russian Ruble by selling dollars in huge quantities, as the Russian Ruble has become the world’s most stable currency overnight after being linked to gold.

America, which does not mass-produce anything other than weapons and ammunition, is caught in a terrible economic crisis. In the event of a shrinking dollar, the US cannot cover its 306 billion budget deficit. This will cause severe unemployment and adversely affect the social safety net. This is the economic atom bomb that Joe Biden was aware of when he was talking about the removal of Putin in Poland.

Putin orders European countries to make payments of Gas and Oil in terms of Rubble and open the account in Russian banks. It will weaken the American sanctions on Russia. Although Russia has not retaliated against the American sanctions so aggressively, introduced its policies to counter the sanctions successfully.

The rapid decline of the US has made its leadership nervous and crazy. They are taking all possible measures to sustain their hegemony and supremacy. Even, though the Ukraine war is only a phenomenon, the objective is to maintain status-co. unfortunately, the US is not interested in global peace, stability, or saving human lives. The only priority is to maintain its hegemony and supremacy. To achieve this goal, the US can sacrifice Ukraine, Europe, or any heavy price. The US policy in the Ukraine war is to add fuel to fire, there is no will to stop the war, ceasefire, or save human lives. They are providing weapons, and arming civilians to lead toward a prolonged civil war, to bleed Russian and keep many countries over-engaged and let the US maintain its monopoly and the upper hand.

Russia was reluctant to attack Ukraine and has been observing restrains for quite along. Showing its genuine security concerns and alarming the US with serious consequences, but, the US kept its policy to encircle Russia.

The haphazard joining of NATO by Finland and the defense agreement with the UK is also equally a genuine threat to Russia. Russia and Finland share a long common border. Joining NATO, means, the deployment of NATO forces along the Russian border, which is a direct threat. Joining NATO by other Scandinavian nations is also a serious and matter of deep concern for Russia.

It seems the US has only one priority which is to sustain its position in the geopolitics, it ignores the genuine concerns of other nations. We are scared of the future of geopolitics and afraid the days to come may be harsh for humankind.

In history, many nations rose to the status of superpowers and ruled the world for a certain period of time, then, meltdown and passed the status of superpower to other rising nations. Like Roman Empire, Ottoman Empire, Greek Empire, British, and French empires, etc. But, The US is not willing to accept the natural cycle of superpowers and can go to any extent to keep its status of superpower forever, which is not rational nor natural, it might cause irrecoverable loss to humankind. Unfortunate!

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Author: Prof. Engr. Zamir Ahmed Awan, Sinologist (ex-Diplomat), Editor, Analyst, Non-Resident Fellow of CCG (Center for China and Globalization). (E-mail: awanzamir@yahoo.com).

الحرب الأهلية الرأس المالية في العالم: قراءة اقتصادية سياسية للمواجهة في أوكرانيا

الثلاثاء 5 نيسان 2022

زياد حافظ

يعتبر بعض المراقبين الدوليين المخضرمين كسفير الهند السابق م. ك. بهادرا كومار والذي يؤكّدها مراقب آخر مرموق الستير كروك الضابط السابق في المخابرات البريطانية وصاحب موقع «كونفليكت فوروم» (منتدى الصراعات) أنّ المواجهة في أوكرانيا هي مواجهة بين روسيا والولايات المتحدة. هذه مقاربة صحيحة إلاّ أنها لا تفسّر لماذا؟ فالمواجهة التي نشهدها على الصعيدين الدولي والإقليمي هي بين محور صاعد ومحور متراجع على وشك الانفراط وهي فعلياً حرب أهلية بين رأس ماليتين: رأس مالية صناعية إنتاجية ورأس مالية ريعية مالية. المحور الصاعد هو محور الرأس المالية الصناعية الإنتاجية التي تقوده الكتلة الأوراسية ومعها دول الجنوب الإجمالي بينما المحور الثاني هو الرأس المالية الريعية الإنتاجية المالية التي تقوده الولايات المتحدة ومعها دول الغرب وخاصة دول التحالف الانكلوساكسوني. فالمحور الانكلوساكسوني انتهج سياسة اقتصادية منذ خمسة عقود فرضها على حلفائه في أوروبا أدّت إلى التخلّي عن الإنتاج الصناعي للدخول في عصر ما بعد التصنيع عبر التركيز على الخدمات بشكل عام والخدمات المالية بشكل خاص. والتحوّلات في البنية الاقتصادية والسياسية التي حصلت من جرّاء سياسات مالية ونقدية أدّت إلى تغلّب الريع على المصادر الأخرى لإنتاج الثروة.

ولتجنّب فقدان القوّامة والهيمنة في المشهد الاقتصادي الدولي اعتبرت النخب الحاكمة في الغرب من الطيف النيوليبرالي أن السيطرة على المال والنقد تكفي للسيطرة على الاقتصاد وبالتالي على الدول. هذه هي نظرية كيسنجر الذي اعتبر ان السياسة النقدية هي مفتاح السيطرة على العالم والتي روّج قوّامتها في ما بعد الاقتصادي ميلتون فريدمان وعلى الصعيد السياسي مارغاريت تاتشر ورونالد ريغان. لكن هذه النظرية كانت خاطئة منذ اللحظة الأولى لأنّ السيطرة على العالم تأتي من بوّابة السيطرة على الغذاء والطاقة والموارد الطبيعية وليس على المال كما أكدته التطوّرات خلال العقود الخمسة الماضية. هذا هو جوهر الصراع بين الرؤية النيوليبرالية الضيّقة الأفق والواقعية السياسية في الصراع الجيوسياسي للسيطرة على الجزيرة الأوراسية حيث تكمن موارد العالم في الغذاء والطاقة والمعادن. الانسان لم يعد قيمة اساسية في النظام النيوليبرالي الغربي الذي تمّت دحرجته إلى مستهلك ممنوع عنه التفكير وتقرير المصير.

السيطرة على الإعلام الشركاتي

 لذلك كانت الموجة للسيطرة على الاعلام عبر التمركز الشركاتي في العالم الغربي وسلب حرّياته الدستورية في التعبير.

والهيمنة الاقتصادية في النظام النيوليبرالي كانت عبر البوّابة المالية عندما تحوّل الدولار إلى عملة الاحتياط الأولي وحتى الوحيدة في العالم. لم يكن ليحصل ذلك لولا قرارين أساسيين اتخذتهما إدارة ريشار نيكسون في 1971 و1973. فالقرار الأول هو قطع صلة الرحم بين الدولار والذهب والقرار الثاني بعد حرب تشرين عندما اقنعت الإدارة الأميركية بلاد الحرمين ومن خلال الأخيرة جميع الدول النفطية في منظمة أوبك تسعير برميل النفط بالدولار. هذا القرار مع القرار السابق بقطع العلاقة مع الذهب مكّن الإدارات الأميركية المتتالية في طباعة الدولار دون أي مساءلة أو محاسبة ما سمح لها بتمويل العجر المتفاقم في الموازنة الأميركية. وهذا العجز ساهم في تمويل الحروب الخارجية الأميركية ومشاريع زعزعة الاستقرار العالمي أينما شاءت في المكان والزمان.

العجز في الموازنة الأميركية ساهم في تكوين الدين العام الذي تجاوز 30 تريليون دولار ناهيك عن الدين الخاص الذي يعود للشركات والأفراد الذي يقدّر ب 38 تريليون دولار. أما الناتج الداخلي فلا يتجاوز 23 تريليون دولار أي بمعنى آخر فإن الدين العام يشكل 130 بالمائة من الناتج الداخلي بينما الدين الخاص تجاوز 165 بالمائة من الناتج الداخلي. ومجموع الدين العام والدين الخاص يقدّر في 2022 إلى 68 تريليون دولار أي 296 بالمائة من الناتج الداخلي. هذا يعني أن الولايات المتحدة مفلسة وإن كانت لديها موارد تستطيع أن تنقذها. لكن السياسات التي اتبعتها خلال العقود الخمسة الماضية أدّت إلى حالة افلاس. لكن هذا الإفلاس تمّ تمويله عبر جعل الدولار العملة الاحتياطية الأساسية في العالم مما سمح للولايات المتحدة طباعة الدولار لتمويل رفاهية في الحكومة وفي القطاع الخاص على حساب مصالح الدول الأخرى. هذه السياسة لم تعد ممكنة وقد يكون لها عواقب مهمة.

فهذا الإفلاس الذي هو أكثر من افتراضي ويهدّد وجود الكيان الأميركي. لذلك أصبحت السيطرة على المقدّرات الاقتصادية في العالم ضرورة للبقاء للولايات المتحدة. وهذه السيطرة تستدعي حروبا مستدامة إما للقضاء على الخصوم المحتملين في الحدّ الأقصى أو لاستنزافهم في الحدّ الأدنى. فالإفلاس هو المحرّك لسياسات عدوانية لا نهاية لها إلا بنهاية النموذج الأميركي القائم حاليا في الاقتصاد وفي السياسة. لذلك نفهم الاستشراس في السياسات الأميركية عبر مقولة ما لنا هو لنا فقط وما هو لكم هو لنا أيضاً فأنتم وكلاء لنا فقط لا غير. والمقصود بـ «لنا» هو النخب الحاكمة وليس المواطن الأميركي! هذا ما صرّح به بشكل واضح الرئيس الأميركي السابق دونالد ترامب الذي عبّر عن يقين السياسات الأميركية تجاه الدول النفطية حيث اعتبر النفط العربي ملكا للولايات المتحدة.

السياسات النقدية والمالية التي اتبعتها الولايات المتحدة خلال العقود الأربعة الماضية أدّت إلى سيطرة الدولار على العالم وبالتالي ساهمت في تكوين ريع افتراضي للولايات المتحدة ساهم في الإمعان في تلك السياسات. فعندما أصبح الدولار عملة الاحتياط للدول فهذا أدّى إلى تمويل العجز في الموازنة الأميركية بدون كلفة. فالدول التي تملك احتياطاً بالدولار مضطرة إلى شراء سندات الخزينة التي هي الوسيلة لتمويل العجز. تمّ التعامل بذلك حتى أقدمت الولايات المتحدة على حجز أموال المصرف المركزي الإيراني ثم الليبي ثم الفنزويلي ثم الافغاني ثم الروسي. هذا يعني أنّ الدول التي تملك احتياطاً نقديا بالدولار مهدّدة في أي وقت بخسارة أموالها إذا كانت سياساتها متناقضة مع سياسات الولايات المتحدة. هيمنة الدولار كعملة احتياط انتهت عندما احتجزت أموال دولة عظمى. هل تستطيع الولايات المتحدة التعامل مع الواقع الجديد؟ في رأينا كلا ولكن هذا حديث آخر!

لكن هذا جزء بسيط من نتائج تلك السياسات. فالبنية الاقتصادية أصبحت عاجزة عن التنافس في الإنتاجية وبالتالي في النمو الفعلي. بمعنى آخر إنّ الناتج الداخلي الذي ارتفع من 1،7 تريليون دولار سنة 1975 إلى 23 تريليون دولار سنة 2020 أيّ 14 ضعفا لم يجار الارتفاع بقيمة البورصة لنفس الفترة حيث ارتفع الداو جونز بنسبة 54 أضعاف. فكيف يمكن أن ترتفع قيمة الشركات بتلك النسبة التي تفوق ارتفاع الناتج الداخلي كمّاً ونسبياً؟ وهنا لم نتكلّم عن الخسارات المحتملة في البورصات الأميركية خاصة في المشتقات الورقية التي تعود إلى اقتراض مفرط مبني على تقديرات للمستقبل دون أيّ سند. فالخسارات المحتملة قد تكون بالكوادريليونات من الدولار أي أرقام فلكية. وإذا اعتمدنا الإحصاءات التي تقدّر القيمة السوقية للشركات الأميركية المتداولة في الأسواق أي ما يوازي 68 تريليون دولار فهذا يعنى أن هناك ثروة معظمها افتراضية لا تتماهى مع الإنتاج الفعلي. فمن أين اتى ذلك الفارق؟

الفارق مصدره السياسات النقدية المعتمدة وخاصة خلال العقود الثلاثة الماضية حيث التسهيل الكمي النقدي التي اعتمدها الاحتياط المركزي أدّى إلى إمداد الشركات بأموال (وبالتالي إلى تفاقم دينها) ليس لزيادة الطاقة الإنتاجية بل لرفع قيمة أسهمها! فالمسؤولون في الشركات الأميركية يتقاضون أتعابهم عبر الأسهم التي يأخذونها وبالتالي أصبحت اولويتهم رفع قيمة تلك الأسهم وإن كان على حساب الشركة التي يديرونها! والأمور لم تتوقف عند هذا الحد. فالاقتراض المسهّل بفوائد منخفضة جدّا أدّى إلى تدمير البنية الإنتاجية عبر وأد التنافس. فالعقود الثلاثة الماضية شهدت تمركزاً شديداً لمعظم القطاعات الاقتصادية في المال والنقل الجوي وإنتاج السيارات وشركات التواصل والمؤسسات المالية وذلك على سبيل المثال وليس الحصر. فالاقتصاد الأميركي أصبح اقتصاداً تحكمه الحالة الاحتكارية وليست التنافسية ما أدّى إلى تراجع الحوافز للتجديد والابداع وبالتالي التقدّم التكنولوجي.

أرقام صينية مرعبة

الصورة مختلفة كلّياً إذا نظرنا إلى النموذج الصيني حيث حقّقت الصين معدلات نمو قياسية خلال العقود الأربعة الماضية وصلت إلى ثلاث أضعاف معدّلات النمو في الولايات المتحدة. السياسات المالية والنقدية أدّت إلى ارتفاع الاستثمارات في البنى التحتية والتعليم وفي الطاقات الإنتاجية وليس لدعم أسهم الشركات! الاستثمار كان في البشر كما كان في الحجر! لذلك استطاعت رفع أكثر من 250 مليون صيني من مستوى الفقر إلى مستوى الطبقة الوسطى بينما نشهد انقراض الطبقة الوسطى في الولايات المتحدة والغرب الذي يتبع النموذج الأميركي عموما (بما فيه لبنان!). والصين استفادت من التكنولوجيا الغربية لتمكين وتطوير قاعدتها الإنتاجية حيث أصبحت أكبر دولة صناعية في العالم. والنموذج الصيني استند إلى دعم الدولة للقطاعات الإنتاجية سواء كانت مملوكة من القطاع العام أو من القطاع الخاص كما حافظت على التنافس وكبحت من الاحتكار. فالاحتكار هو مصدر ريعي بامتياز للثروة بينما الإنتاج مصدر عيني لها.

النموذج الصيني مزج بين قيادة سياسية مركزية متسلّطة حصرت في الدولة مركزية التخطيط بينما النموذج الغربي اعتمد على قوّامة المؤسسة المالية في فرض الخيارات الاقتصادية على السوق. فالمؤسسات المالية المهيمنة، وهي خمس مؤسسات فقط تملكها أربع شركات استثمار وتوظيف فقط، هي التي تحدّد الخيارات مع الاحتياط الاتحادي الذي هو أيضاً مملوك من مصارف خاصة. أي بمعنى آخر الدولة خارج إطار التوجيه للاقتصاد العام وتتكل على «حكمة» السوق الذي تسيطر عليه الشركات المالية. فلا عجب التراجع في الإنتاجية والقدرات التنافسية، ولا عجب في الانكشاف تجاه الخارج بشكل عام والصين بشكل خاص لتلبية حاجاتها. النخب الحاكمة أدركت تلك المفارقة ولكن بعد أن فات الأوان. وهي تجهد منذ عقد من الزمن كبح النمو الصيني عبر وسائل عدة ولكنها لم تنجح بينما كان من المفترض مراجعة سياساتها ونموذجها الاقتصادي والعودة إلى عهد التصنيع بدلاً من الخدمات الريعية.

محاصرة الصين للانقضاض عليها تتطلب التخلّص من تحالفها مع روسيا. لذلك المواجهة مع روسيا التي بدأت فعلا بعد مؤتمر ميونيخ للأمن سنة 2007 حيث حذّر الرئيس الروسي بوتين من القطبية الواحدة وضرورة إعادة صوغ الامن الدولي على قاعدة احترام مصالح الدول بينما الولايات المتحدة المتفرّدة بالقرار الدولي لا تقبل بأيّ مشاركة. حاولت الولايات المتحدة كبح الصعود الروسي بقيادة بوتين الذي قضى على النخب المتحكمة بروسيا التي أوجدتها الولايات المتحدة بعد انهيار الاتحاد السوفيتي. فكان عصر صعود الاوليغارشيات الروسية ومعها الغربية لنهب ثروات روسيا. مع وصول بوتين إلى السلطة توقّفت هذه العملية إلى حد كبير وهذا ما أزعج الولايات المتحدة التي حاولت محاصرة روسيا. فكانت موجة الثورات الملوّنة في أوكرانيا وجورجيا وحتى مؤخرا في كازخستان. والمواجهة المباشرة مع روسيا بدأت في عهد الرئيس الأميركي أوباما وفي أوكرانيا بالذات سنة 2014 مع الانقلاب الأميركي ضد النظام القائم في أوكرانيا والمنتخب ديمقراطيا. أدركت روسيا أنّ المواجهة مع الأطلسي لا مفرّ منها وبدأت التخطيط لها. لحظة المواجهة حددتها روسيا بعد أن أيقنت أن الأطلسي يهدف إلى قلب النظام في روسيا وعبر استنزافها في «مستنقع» أوكرانيا. غير أن الرياح الروسية لم تكن كما اشتهت السفن الأطلسية بشكل عام والأميركية بشكل خاص فكانت المواجهة التي نشهدها الآن والتي تنذر بزوال أوكرانيا وهزيمة الأطلسي والولايات المتحدة.

المهم في هذه المقاربة هو التركيز على التنافس بين رأس ماليتين. فالرأس المالية الريعية الأميركية الغربية لم تعد قادرة على التحكّم بالاقتصاد العيني بل فقط بالاقتصاد الافتراضي المالي وذلك عبر سيطرتها على شرايين المال. المواجهة مع روسيا عجّلت في العمل على إقامة نظام مالي خارج سيطرة الولايات المتحدة. والقرار الروسي بعدم التعامل في مبيعات الغاز الروسي للاتحاد الأوروبي يشكّل ضربة قاسمة لهيمنة الدولار وأو اليورو ويكرّس جدوى التعامل بالعملات الوطنية كالروبل واليووان الصيني والروبية الهندية وسائر العملات الوطنية للدول الرافضة للهيمنة الأميركية، وذلك وفقاً للاقتصاديين الأميركيين المرموقين ريتشارد ولف ومايكل هدسون. وفقدان النظام الرأس المالي الريعي المالي القدرة على السيطرة على شرايين المال يضرب في الصميم النموذج الذي اعتمدته الولايات المتحدة منذ أن قرّرت توطين قاعدتها الإنتاجية خارج الولايات المتحدة. وجاءت جائحة كورونا لتكشف هشاشة ما تبقّى من القاعدة الإنتاجية الأميركية حيث معظم قطع الغيار للمصانع الأميركية تأتي من الخارج وخاصة من الصين. فالولايات المتحدة أصبحت بحاجة إلى العالم أكثر مما العالم بحاجة إلى الولايات المتحدة.

هذا هو الدافع المركزي لدى النخب الحاكمة في الولايات المتحدة لمواجهة روسيا. فهي معركة بقاء لنموذج اقتصادي سياسي يعتمد تمركز الثروة في يد القلّة ويؤثّر على المجتمع الأميركي الذي تحوّل إلى سوق استهلاكي فقط لا غير دون أن يكون له أي رأي. وكذلك الأمر في الاعلام الغربي عموما حيث الرأي الواحد هو السائد. فتمركز الاعلام الأميركي بيد ست شركات فقط يساهم في السيطرة على السردية السياسية المطلوبة ويضبط تدفق المعلومات. كذلك الأمر بالنسبة لشركات التواصل الاجتماعي التي لا يتجاوز عددها أصابع اليد الواحدة. وقد اتبعت هذه الشركات سياسة «إلغاء» الرأي الآخر ضاربة عرض الحائط الحق الدستوري في حرّية التعبير. كما يقوم الاعلام الشركاتي المهيمن وشركات وسائل التواصل الاجتماعي بتحويل انتباه المواطن الأميركي عن القضايا الأساسية عبر التركيز على قضايا أخلاقية وثقافية لا تمسّ بمصالح الراس المالية الريعية المالية. فخلال جائحة كورونا تمّ تغييب الحديث عن البطالة التي حصلت من جرّاء الجائحة وإقفال المشاريع. كما أنه تمّ استبدال الخطاب الثقافي بالخطاب المسائل لتوجهات الحكومة على الصعيد الاقتصادي والسياسي. كما تمّ أيضا تحميل مسؤولية تردّي الأوضاع الاقتصادية للرئيس الروسي بوتين كما جاء على لسان الرئيس الأميركي بايدن عندما صرّح بأن ارتفاع الأسعار في الولايات المتحدة هو من صنع بوتين!

ما يسيطر في الاعلام الأميركي ووسائل التواصل الاجتماعي هو انقلاب على المفاهيم والقيم المجتمعية عبر ترويج ثقافة الوعي التي تريد إعادة هندسة القيم المجتمعية كالجنوسية التي تريد الغاء التمايز بين الذكور والإناث حتى عند الأطفال أي التسيّب في تحديد الجنس أو ، وثقافة مكافحة العنصرية التي امتدت إلى كل شيء لا يتماهى مع مصالح النخب الحاكمة. فكل ذلك يتيح الفرصة للتكتلات الاقتصادية الاحتكارية الحفاظ على مصالحها دون أي مساءلة أو محاسبة. فالوضع الاقتصادي اليوم في الولايات المتحدة على وشك الانفجار السياسي والاجتماعي وما زالت النخب الحاكمة تعتقد انه باستطاعتها السيطرة على الأمور عبر السيطرة في الاعلام ووسائل التواصل الاجتماعي. الاستثمارات التي تحصل في الولايات المتحدة لا تعود إلى تنمية وتطوير الطاقة الإنتاجية لأن هدف النمو لم يعد لتحسين الأوضاع الاقتصادية للمجتمع بل لزيادة أرباح المستثمرين وإن كانت تلك الأرباح وهمية وافتراضية.

هذا التمركز الإعلامي الضاغط على حرية التعبير موجود أيضا في كل من الصين وروسيا. لكن الفارق هو أن الحكومتين استطاعتا أن تقدما للمواطن ما يريده. لذلك نرى تماسكا اجتماعيا في كل من روسيا والصين يمكن الحكومات من الاستمرار في بناء مجتمع أفضل على قاعدة التزاوج بين اقتصاد السوق وحكومة مركزية قوية تضبط إيقاع السوق عبر التخطيط المركزي. فالتخطيط المركزي ضرورة لضبط إيقاع اقتصاد معقد ومركّب مع تزايد السكان. الحل في الغرب هو عبر السيطرة على الشعوب عبر نزع حرّياتها في الحد الأدنى وتخفيض أعدادها في الحد الأقصى كما دعا كل من كيسنجر وبيل غيتس وكلوس شواب رئيس منتدى دافوس.

الجدل حول جدوى اللقاحات…

هذا ما غذّى الجدل حول جدوى اللقاحات في جائحة كورونا. في القرن التاسع عشر كان البريطانيون يروّجون لتجارة الافيون للسيطرة على القارة الآسيوية. في القرن الحادي والعشرين الافيون الجديد هو ما ابتكرته وسائل التواصل الاجتماعي لتخدير الناس وخاصة الشباب عن متابعة القضايا الجوهرية عبر التركيز على الملذّات. الهدف هو إفقار الناس ولكن برضاهم وجعلهم سعداء في ذلك الفقر!

الصراع بين الرأس الماليتين هو صراع بين سيطرة الأسواق المالية على المقدرات الاقتصادية (الرأس المالية الريعية المالية) وبين التمازج بين التخطيط المركزي وقوّامة الدولة من جهة مع مقتضيات اقتصاد السوق (الرأس المالية الإنتاجية). النموذج الأول لا يكترث بمصلحة الشعوب بل يكترث لمصلحة المساهمين فقط لا غير بينما النموذج الثاني يعتبر سعادة الانسان الهدف الرئيسي. لذلك وجدنا أن النموذج الريعي المالي لا يستثمر في البنية التحتية التي يستفيد منها الجميع بينما النموذج الثاني استثمر بكثافة في البنية التحتية وخاصة في التربية والتعليم.

هذا لا يعني أن الرأس المالية الإنتاجية هي معصومة من الخطأ الأخلاقي إلاّ أنها تحاول تخفيف من سطوة رأس المال على العمل. هذا هو دور الحزب الشيوعي الحاكم في الصين وهذا هو دور الدولة القوية في روسيا. إعادة توزيع الثروة بشكل عادل يساهم في الحفاظ على النموذج الاقتصادي. هذا ما قامت به الرأس المالية الغربية عندما كانت إنتاجية وليست ريعية. فمنذ ثلاثينات القرن الماضي أدركت ضرورة توزيع الثروة وإن بالحد الأدنى عبر مشاريع اقتصادية اجتماعية لمنع انتشار الشيوعية. لكن بعد سقوط الاتحاد السوفيتي لم تجد النخب الحاكمة في الغرب أي مبرر لتوزيع الثروة بل أقدمت على إجراءات أدّت إلى تمركز الثروة بيد القلة. وهدف النخب الحاكمة النيوليبرالية في الراس المالية الريعية الإطاحة بما تبقّى من الدولة الريعية كالضمان الاجتماعي. ففي معتقد هذه النخب وذلك النموذج تحوّلت إلى الحقوق الاجتماعية إلى امتيازات يجب دفع ثمنها. المواطن لا حق له بالعمل او التعليم أو الاستشفاء أو الإسكان فهذه امتيازات عليه أن يدفع ثمنها. هذا هو الحال في لبنان! أما في النموذج الرأس المالي الإنتاجي وخاصة مع وجود الحزب الشيوعي في الحكم فإن العمل والتعليم والاستشفاء والإسكان حقوق وليست امتيازات. كذلك الأمر في روسيا وفي كلّ الدول التي تعتبر رفاهية المواطن واجب.

*باحث وكاتب اقتصادي سياسي والأمين العام السابق للمؤتمر القومي العربية وعضو المنتدى الاقتصادي والاجتماعي في لبنان

The American Empire self-destructs. But nobody thought that it would happen this fast

MARCH 08, 2022

Source

by Michael Hudson

Empires often follow the course of a Greek tragedy, bringing about precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow motion.

The basic assumption of economic and diplomatic forecasting is that every country will act in its own self-interest. Such reasoning is of no help in today’s world. Observers across the political spectrum are using phrases like “shooting themselves in their own foot” to describe U.S. diplomatic confrontation with Russia and allies alike. But nobody thought that The American Empire would self-destruct this fast.

For more than a generation the most prominent U.S. diplomats have warned about what they thought would represent the ultimate external threat: an alliance of Russia and China dominating Eurasia. America’s economic sanctions and military confrontation have driven these two countries together, and are driving other countries into their emerging Eurasian orbit.

American economic and financial power was expected to avert this fate. During the half-century since the United States went off gold in 1971, the world’s central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds. The resulting Treasury-bill Standard has enabled America to finance its foreign military spending and investment takeover of other countries simply by creating dollar IOUs. U.S. balance-of-payments deficits end up in the central banks of payments-surplus countries as their reserves, while Global South debtors need dollars to pay their bondholders and conduct their foreign trade.

This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the rest of the world, without having to use much military force of its own except to grab Near Eastern oil.

The recent escalation of U.S. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China has imposed enormous opportunity costs – the cost of lost opportunities – on U.S. allies. And the recent confiscation of the gold and foreign reserves of Venezuela, Afghanistan and now Russia,^[1] along with the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, enticed by the hope for the return of their sequestered accounts), has ended the idea that dollar holdings – or now also assets in sterling and euro NATO satellites of the dollar – are a safe investment haven when world economic conditions become shaky.

So I am somewhat chagrined as I watch the speed at which this U.S.-centered financialized system has de-dollarized over the span of just a year or two. The basic theme of my Super Imperialism has been how, for the past fifty years, the U.S. Treasury-bill standard has channeled foreign savings to U.S. financial markets and banks, giving Dollar Diplomacy a free ride. I thought that de-dollarization would be led by China and Russia moving to take control of their economies to avoid the kind of financial polarization that is imposing austerity on the United States.^[2] But U.S. officials are forcing Russia, China and other nations not locked into the U.S. orbit to see the writing on the wall and overcome whatever hesitancy they had to de-dollarize.

I had expected that the end of the dollarized imperial economy would come about by other countries breaking away. But that is not what has happened. U.S. diplomats themselves have chosen to end international dollarization, while helping Russia build up its own means of self-reliant agricultural and industrial production. This global fracture process actually has been going on for some years, starting with the sanctions blocking America’s NATO allies and other economic satellites from trading with Russia. For Russia, these sanctions had the same effect that protective tariffs would have had.

Russia had remained too enthralled by free-market neoliberal ideology to take steps to protect its own agriculture and industry. The United States provided the help that was needed by imposing domestic self-reliance on Russia. When the Baltic states obeyed American sanctions and lost the Russian market for their cheese and other farm products, Russia quickly created its own cheese and dairy sector – while becoming the world’s leading grain exporter.

Russia is discovering (or is on the verge of discovering) that it does not need U.S. dollars as backing for the ruble’s exchange rate. Its central bank can create the rubles needed to pay domestic wages and finance capital formation. The U.S. confiscations of its dollar and euro reserves may finally lead Russia to end its adherence to neoliberal monetary philosophy, as Sergei Glaziev has long been advocating, in favor of Modern Monetary Theory (MMT).

The same dynamic of undercutting ostensible U.S aims has occurred with U.S. sanctions against the leading Russian billionaires. The neoliberal shock therapy and privatizations of the 1990s left Russian kleptocrats with only one way to cash out on the assets they had grabbed from the public domain. That was to incorporate their takings and sell their shares in London and New York. Domestic savings had been wiped out, and U.S. advisors persuaded Russia’s central bank not to create its own ruble money.

The result was that Russia’s national oil, gas and mineral patrimony was not used to finance a rationalization of Russian industry and housing. Instead of the revenue from privatization being invested to create new Russian means of protection, it was burned up on nouveau-riche acquisitions of luxury British real estate, yachts and other global flight-capital assets. But the effect of sanctions making the dollar, sterling and euro holdings of Russian billionaires hostage has been to make the City of London too risky a venue in which to hold their assets – and for the wealthy of any other nation potentially subject to U.S. sanctions. By imposing sanctions on the richest Russians closest to Putin, U.S. officials hoped to induce them to oppose his breakaway from the West, and thus to serve effectively as NATO agents-of-influence. But for Russian billionaires, their own country is starting to look safest.

For many decades now, the U.S. Federal Reserve and Treasury have fought against gold recovering its role in international reserves. But how will India and Saudi Arabia view their dollar holdings as Biden and Blinken try to strong-arm them into following the U.S. “rules-based order” instead of their own national self-interest? The recent U.S. dictates have left little alternative but to start protecting their own political autonomy by converting dollar and euro holdings into gold as an asset free from political liability of being held hostage to the increasingly costly and disruptive U.S. demands.

U.S. diplomacy has rubbed Europe’s nose in its abject subservience by telling its governments to have their companies dump their Russian assets for pennies on the dollar after Russia’s foreign reserves were blocked and the ruble’s exchange rate plunged. Blackstone, Goldman Sachs and other U.S. investors moved quickly to buy up what Shell Oil and other foreign companies were unloading.

Nobody thought that the postwar 1945-2020 world order would give way this fast. A truly new international economic order is emerging, although it is not yet clear just what form it will take. But the confrontations resulting from “prodding the Bear” with the U.S./NATO aggression against Russia has passed critical-mass level. It no longer is just about Ukraine. That is merely the trigger, a catalyst for driving much of the world away from the US/NATO orbit.

The next showdown may come within Europe itself as nationalist politicians seek to lead a break-away from the over-reaching U.S. power-grab over its European and other allies to keep them dependent on U.S.-based trade and investment. The price of their continuing obedience is to impose cost-inflation on their industry while subordinating their democratic electoral politics to America’s NATO proconsuls.

These consequences cannot really be deemed “unintended.” Too many observers have pointed out exactly what would happen – headed by President Putin and Foreign Minister Lavrov explaining just what their response would be if NATO insisted on backing them into a corner while attacking Eastern Ukrainian Russian-speakers and moving heavy weaponry to Russia’s Western border. The consequences were anticipated. The neocons in control of U.S. foreign policy simply didn’t care. Recognizing Russian concerns was deemed to make one a Putinversteher.

European officials did not feel uncomfortable in telling the world about their worries that Donald Trump was crazy and upsetting the apple cart of international diplomacy. But they seem to have been blindsided by the Biden Administration’s resurgence of visceral Russia-hatred via Secretary of State Blinken and Victoria Nuland-Kagan. Trump’s mode of expression and mannerisms may have been uncouth, but America’s neocon gang have much more globally threatening confrontation obsessions. For them, it was a question of whose reality would emerge victorious: the “reality” that they believed they could make, or economic reality outside of U.S. control.

What foreign countries have not done for themselves to replace the IMF, World Bank and other strongarms of U.S. diplomacy, American politicians are forcing them to do. Instead of European, Near Eastern and Global South countries breaking away as they calculate their own long-term economic interests, America is driving them away, as it has done with Russia and China. More politicians are seeking voter support by asking whether their countries would be better served by new monetary arrangements to replace dollarized trade, investment and even foreign debt service.

The energy and food price squeeze is hitting Global South countries especially hard, coinciding with their own Covid-19 problems and the looming dollarized debt service coming due. Something must give. How long will these countries impose austerity to pay foreign bondholders?

How will the U.S. and European economies cope in the face of their sanctions against imports of Russian gas and oil, cobalt, aluminum, palladium and other basic materials. American diplomats have made a list of raw materials that their economy desperately needs and which therefore are exempt from the trade sanctions being imposed. This provides Mr. Putin a handy list of U.S. pressure points to use in reshaping world diplomacy and helping European and other countries break away from the Iron Curtain that America has imposed to lock its satellites into dependence on high-priced U.S. supplies?

The Biden Inflation

But the final breakaway from NATO’s adventurism must come from within the United States itself. As this year’s midterm elections approach, politicians will find a fertile ground in showing U.S. voters that the price inflation led by gasoline and energy is a policy byproduct of the Biden Administration’s blocking of Russian oil and gas exports. (Bad news for owners of big SUV gas guzzlers!) Gas is needed not only for heating and energy production, but to make fertilizer, of which there already is a world shortage. This situation is exacerbated by blocking Russian and Ukrainian grain exports to the United States and Europe, causing food prices already to soar.

There already is a striking disconnect between the financial sector’s view of reality and that promoted in the mainstream NATO media. Europe’s stock markets plunged at their opening on Monday, March 7, while Brent oil soared to $130 a barrel. The BBC’s morning “Today” news broadcast featured Conservative MP Alan Duncan, an oil trader, warning that the near doubling of prices in natural gas futures threatened to bankrupt companies committed to supplying gas to Europe at the old rates. But returning to the military “Two Minutes of Hate” news, the BBC kept applauding the brave Ukrainian fighters and NATO politicians urging more military support. In New York, the Dow Jones Industrial Average plunged 650 points, and gold soared to over $2,000 an ounce – reflecting the financial sector’s view of how the U.S. game is likely to play out. Nickel prices rose by even more – 40 percent.

Trying to force Russia to respond militarily and thereby look bad to the rest of the world is turning out to be a stunt aimed simply at ensuring Europe contribute more to NATO, buy more U.S. military hardware and lock itself deeper into trade and monetary dependence on the United States. The instability that this has caused is turning out to have the effect of making the United States look as threatening as Russia is claimed to be by the NATO West.

1. Libya’s gold also disappeared after NATO’s overthrow of Muammar Gaddafi in 2011. ↑
2. See most recently Radhika Desai and Michael Hudson (2021), “Beyond Dollar Creditocracy: A Geopolitical Economy,” Valdai Club Paper No. 116. Moscow: Valdai Club, 7 July, repr. in Real World Economic Review (97), https://rwer.wordpress.com/2021/09/23. ↑

The Triffin Dilemma and the Gold/Dollar Standard: Never made to last.

February 02, 2022

by Francis Lee

There was always going to be a fundamental incompatibility of the dollar between the attainment of 1. An anchor currency for international trade fixed against gold at $35 per ounce, and 2. A single and flexible national currency for the internal economy of the US – the $. From the outset this dual mandate for the US$ was problematic. As a global reserve currency, the US$ has to be the anchor of the world’s trading system; however, it must also serve as the domestic internal currency of the US. This meant that the dollar needed to have sufficient flexibility for internal economic policy, but at the same time must serve as an international and invariant gold-backed currency. Thus, at the heart of the dollar’s value was a structural incongruity for the dual and contradictory roles of this currency.

During the Bretton Woods ‘golden age’ which lasted from 1944 until 1971, the US$ was fixed against gold at $35 per oz. However, the cost of US wars of choice in Korea and Indochina, as well as ambitious social programmes like US President Lyndon Baines Johnson’s ‘Great Society’, bore witness to a global build-up of surplus dollars accumulating in dollar states around the world. These superfluous dollar countries in Europe and East Asia then began trading in their excess dollars for gold at the gold window at the Federal Reserve Board (the US Central Bank). This was a situation which the US could not tolerate as demand for gold meant the precious metal was flying out of the US to various overseas bank venues as foreign states were exchanging their inessential dollars for US gold.

These alarming developments had for a long time passed unnoticed until they became too obvious to ignore. From the American perspective this situation had to be stopped, and, as it was, that on August 15, 1971, that President Nixon in a TV statement suspended dollar/gold convertibility for a temporary period, which in fact morphed into a permanent arrangement – an arrangement which persists to this day. The gold standard was replaced with the US$ fiat standard. The dollar was to be regarded as being as good as gold, which was rather more like an act of faith than rational economic policy.

See Below the effect of the US$ devaluation in 1971. From being a surplus nation, the US is now a debtor nation. Whether the rest of the trading world will put up with this ‘exorbitant privilege’ forever is a moot point, however.

It was the maverick Belgian economist Robert Triffin who first drew attention to this anomaly during the 1960s in his seminal work Gold and the Dollar Crisis: The Future of Convertibility. He observed that having the US dollar performing the role of the world’s reserve currency created fundamental conflicts of interest between domestic and international economic objectives. Namely and on the one hand the international economy needed dollars for liquidity purposes and to satisfy demand for reserve assets. But this forced, or at least made it easy, for the US to run consistently large current account deficits. These deficits were brought about by a strong dollar policy which gave rise to an outflow of US dollars to surplus states in Europe and East Asia. The situation arose whereby dollars overseas were now poised to exceed gold holding undermining the whole post-WW2 structures.

Suffice it to say that this policy had unfortunate side effects for local investors which became manifest during the East Asian crisis episode in 1997. These investors, both local and global were committed to an investment policy based upon highly leveraged positions. But a local investor borrowing in his own currency was in a vulnerable position: woe betide him if US dollar interest rates increased which they did. He would have to find the additional cash to pay back his borrowed dollars or go broke.

Triffin had argued that a policy of running persistent deficits would eventually put pressure on the dollars convertibility and ultimately lead to the demise of the Bretton Woods system of international exchange which is exactly what happened in 1971.

This arrangement led to what in effect were tangible advantages for the US, at least in the current situation.

‘’A controversial benefit’’ (among others) ‘’of the dollars international currency status is the real resources that other countries provide the United States in order to obtain our dollars. It costs only a few cents at the Bureau of Engraving to produce a $100 bill, but other countries have to pony up $100 of real goods and services to obtain one. (The difference between what it costs the government to print the note and a foreigner to procure it is known as seignories after the right of the medieval lord, or seigneur, to coin money and keep for himself some of the precious metal from which it was made. At that time about $500 billion of US currency circulated around the world outside the United States, for which foreigners have had to provide $500 billion to the US for actual goods and services.’’ (Barry Eichengreen – Exorbitant Privilege – pp.3/4)

Nice work if you can get it. International trade as denominated in US$’s meant that the US$ acting as the world reserve currency could use its dollars to buy foreign assets and pay for them in dollars. These dollars were then held by foreigners who could no longer convert surplus dollars into gold but could only purchase more US Treasuries (Bonds) and other US dollar-denominated assets which were never going to be repaid. Surplus dollar countries would sell their hard-earned dollars to purchase US Treasuries which pushed up the value of the dollar and kept US interest rates low; and the US in turn would buy goods and services from these same surplus countries.

It worked rather like this: a foreign computer company – say ‘Japcom’ – sells you a computer by lending you the money (US$s) to buy it! This was the ultimate free lunch!

But of course, there’s always a catch! The effect of a strong dollar which raised domestic US industries costs, lead to the hollowing out of the US domestic economy which ultimately could not compete with more efficient overseas competition. The last thing that the US rust belt needed was/is a strong dollar which had the effect of making its export industries less competitive. This left the US in an economic quandary. Namely, that the United States must on the one hand simultaneously run a strong/dollar, policy and on the other a weak/dollar policy; or put another way must allow for an outflow of dollars to satisfy the global demand for the currency but must also engineer an inflow of dollars to make its domestic industries more competitive. As explained thus: when the Federal Reserve  cuts interest rates, investors sell dollar-denominated assets and buy foreign assets, which tends to weaken the dollar’s exchange rate.

Having it both ways! Which of course is hardly possible.

Moreover, it is a moot point as to whether the rest of the world will continue to support this ‘exorbitant privilege’ in perpetuity. So far, the Vichy-Quisling-Petainst regimes in Europe and East Asia have to touch their forelocks and prostrate themselves before their Lords and Masters, but it would be wrong to imagine that this can continue as a permanent arrangement. Ironically, however, the US hegemon treats its friends and allies considerably worse than its putative enemies. Such is the nature of geopolitics. I’ll leave the last word to Barry Eichengreen.

‘’ The dollar-system’s problems should not have come as a surprise. There was an obvious flaw in the system whose operation rested upon the commitment of the United States to provide 2 assets, gold and dollars, both at a fixed price, but where the supply of one was elastic (paper money FL) whilst the other (gold metal FL) was not.’’

Addendum

The causes of the East Asian Crisis during the 1990s were related to and described as being the nemesis of the actually existing and defunct gold-dollar system and its consequences. At that time and throughout East Asia there were massive and unregulated, speculative flows of footloose capital. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their gross domestic product (GDP). The achievement was known as the “Asian economic miracle.” But a significant risk was embedded in the achievement.

The economic developments in the countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favourable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy.

In the mid-1990s, following the recovery of the U.S. from a recession, the Federal Reserve raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market, leading to an appreciation of the U.S. dollar. (my emphasis – FL)

Those currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. With a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw.

These massive capital outflows caused a depreciation pressure on the currencies of the Asian countries. The Thai government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian countries soon after.

The countries that were most severely affected by the Asian Financial Crisis included Indonesia, Thailand, Malaysia, South Korea, and the Philippines. They saw their currency exchange rates, stock markets, and prices of other assets all plunge. The GDPs of the affected countries even fell by double digits.

The long hard road back to growth from 1998 which still persisted as late as 2007 should be an object lesson in how not to borrow at the margin and pump and leverage up in foreign currencies.

Weaponizing Dollar | 10 Minutes

Sep 1, 2021

Watch this episode of 10 minutes to find out more

EU/Germany parting of the ways?

February 12, 2021

By Francis Lee for the Saker Blog

From its inception the European Union was an ambitious strategy to build an economic bloc which would serve as a counter-weight to the US’s global economic dominance. (1) One of the primary conditions of this overall construction involved the creation of a single strong currency, the euro, that could become the rival to the US$. This was not just a political question, it also involved financial, economic and possibly even geopolitical dimensions. The Germans in particular were involved in the EU blueprint ever since the initial Treaty of Rome or EEC Treaty, as it was called, brought about the creation of the European Economic Community (the EEC). The treaty was signed on 25 March 1957 by Belgium, France, Italy, Luxembourg, the Netherlands and (West) Germany, and it came into force on 1 January 1958. At the outset Germany was on board the launch and prepared to give up her much beloved Deutschmark (DM) in order to eventually adopt the euro. A European super-state was envisioned complete with its own currency and act as a counterweight to the US Leviathan.

EXORBITANT PRIVILEGE

Since the end of the Bretton Woods system in 1971 the US dollar had become the global currency – a pure fiat currency without any gold backing – and had been used widely and routinely by other states as international reserves; as monies circulating in the dollarized countries; and as a means of payment in international trade. Ever since the US had allowed its currency to float freely the US trade balance has been negative. Surplus European countries, but which also included Japan, had earned US dollars which at one time had only been redeemable in gold payments by the US. But this arrangement ended when Nixon took the dollar off the gold standard in August 1971. From this time on the surplus countries could only swap their dollars for US Treasury Bills, that is to say, American debt.

In this way the US has appropriated real goods and services from the surplus countries and exported debt back to those same countries.

In the trade this is called seigniorage.

‘’This term was used to describe the right of the medieval lord, or seigneur, to coin money and keep for himself some of the precious metals from which it was made. About $500 billion of US currency circulated outside of the United States, for which foreigners have had to provide the United States with $500 billion for real goods and services.’’ (2) This was an exchange of real value as embodied in goods and services, for fictitious value contained in little green paper substitutes. Nice little racket. Who says you can’t get something for nothing! This didn’t go down at all well in the European mainland and was described by the French politician Valery Giscard D’Estaing as being an ‘exorbitant privilege’. Monsieur D’Estaing certainly had a point.

The evolution of the euro has emerged as the only real challenger to the US$’s seigniorage. The preconditions to any such challenge rested on a dual criteria: The euro had to represent a real currency on the same scale as that of the United States, and, in addition, it had to be a strong currency, it needed to be strong even at its design stage. The birth-pangs of the euro underwent a long pregnancy, and it was not until 1999 that the EU monetary authorities announced the birth of the new currency. It should be pointed out that not every country in the European Union was/is a member of this currency union; some countries kept their own national currencies – e.g. the UK, Sweden, Denmark, and most of Eastern Europe, and that remains the case even today.

Germany was of course the key player in this process. The euro was to be a hard Teutonic currency which mirrored Germany’s powerful position as a globally competitive manufacturing base. It was envisioned that the euro currency would be extended to other parts of the eurozone. (3) However, the euro was unwisely broadened to include peripheral countries which were far from the levels of productivity – and thus of international competitiveness – needed to contribute to making the euro a strong currency. This was particularly the case in Europe’s southern periphery. These nations simply could not compete with Germany since their unit costs were too high and productivity levels were lower than Germany’s (and for the rest of the northern European bloc). Moreover, the get-out-of-jail ‘solution’ by Greece, Spain, Ireland, Portugal, and the Baltics, of a currency devaluation was closed since these states were all members of the Eurozone who had abandoned their old currencies and now used the euro.

In passing it could be argued that devaluation is not necessarily an optimal economic policy. Certainly, devaluation makes exports cheaper, and provides a breathing space for indebted states; but the obverse side of this practise is that it also makes imports more expensive. Imports which include strategic commodities such as oil, foodstuffs, drinks and tobacco, motor vehicles, chemicals, machinery and transport equipment, mineral fuels, and lubricants. The rise in prices in these imported goods and services may well lead to imported cost-push inflation.

Thus Europe’s southern periphery attempted to skirt around the devaluation problem with what became known as a policy of internal devaluation. This involved engineered austerity, whereby a country seeks to regain competitiveness through lowering wage costs and increasing productivity and not reducing the external value of the exchange rate. This enforced policy has resulted in what can only be described as a disaster as country after country in the southern bloc clocked up larger and larger trade deficits whilst the North European bloc including both members and non-members of the euro, e.g., Sweden and Denmark, clocked up big trade surpluses with the Eurozone in the southern periphery. In any case Germany had pre-empted this internal depreciation by its own earlier competitive devaluation as contained in the Hartz reforms.(4)

TRANSITION STATES

Things were not much better on the Eastern periphery. Present current growth figures for Czech Republic 0% Poland -0.1% Croatia N/A Hungary 0-1% Bulgaria -1.6% and Romania -4.4% all struggle with trade deficits.

At some stage during the 1990s, it became common to refer to these Eastern European countries as “transition states” or the ‘New Europe’ an interesting description by Donald Rumsfeld (See below).This implied an optimistic future, a linear progression, a transformation from a failed communist past to a stable western European future. Surely one of the most obvious lessons from the financial crisis and recession of recent years, however, is that the idea of such a transition is misplaced. If the societies of central-eastern Europe are indeed in transition, the mode of transit is that of the covered trailer, haphazardly attached to a juggernaut, driven by remote political and economic forces. And it is very unclear what the destination will be, given the continued economic upheavals and displacement across the whole of Europe.

The result of the transition so far seems to have been the creation of a low-wage hinterland, a border economy on the fringes of the highly developed European core, and this has had wider political and social ramifications for the entire European project – in effect shifting the goalposts of what it means to be European.

It is worth pointing out that, as is always the case, not everyone lost out. Shock therapy had its domestic supporters, people entranced by the ideas of neoclassical and Hayekian economics. Sometimes this was based on genuine intellectual engagement, as neoliberal western economists gained fervent followers in the universities and colleges of Warsaw, Prague, Bucharest, and Budapest. More often, however, the new disciples of neoliberalism were cynical converts from communism, the prospectors of a new capitalist order. Through incorporation into western institutions, such as NATO/EU, some of the new capitalists hoped to entrench their situations as the primary political arbitrators, a new elite of western-influenced reformers. All very reminiscent of the Yeltsin years. (5)

THE US INTERVENTION

US Defence Secretary Donald Rumsfeld’s ‘New Europe’ involved a geopolitical incorporation whereby the ex-soviet republics, and Warsaw Bloc allies were enrolled into the EU and more importantly were brought into NATO. Membership of the NATO was mandatory for all new EU entrants. Rumsfeld opined that “You’re thinking of Europe as Germany and France. I don’t. I think that’s ‘old Europe … If you look at the entire NATO Europe today, the centre of gravity is shifting to the East. And there are a lot of new members. And if you just take the list of all the members of NATO and all of those who have been invited in recently — what is it, 26, something like that? [But] you’re right. Germany has been a problem, and France has been a problem.”

If this was not a blatant intrusion into European affairs I stand to be corrected. This was the creation of a geopolitical beach-head militarily primed and ready to go; its purpose was to prevent any modus vivendi crystallising between Europe as a whole, and, in particular Russia. Central to this strategy …

‘’There was an overarching strategic concept of sorts in the double enlargement – strategic and economic – it was a strategy for Americanising the social structures of Europe within the NATO security perimeter whilst Americanising the hinterland beyond the perimeter. Firstly the Central European and Eastern Countries (CEECs) have become and will continue to be a significant middle-class market for western multinationals grabbing market share there at will, using the Single Market Rules embodied in the European Agreements to legitimise their market domination. Secondly, the CEECs will offer a limitless supply of cheap labour for western multinationals to use for the labour-intensive parts of the production circuits. Thirdly these attractions will be used by big capital in Western Europe to threaten to exit eastwards unless Western Europe Americanises its labour markets and turns the welfare state into minimal safety nets and allows British and American levels of social inequality, poverty, urban decay, and prison populations. Western Europe will then be distinguishable from the USA only by the virulence of its internal racist, neo-fascist, and xenophobic movements. (6)

WITHER GERMANY?

At the present time and at the beginning of a new and even bigger crisis in the global economy the future of the EU depends on the interests of the different factions of the German ruling elite. This is nowhere better instanced than in the Nordstream-2 episode. One faction, German big business, which has extensive investment in Russia together with other financially strong countries wants to reorientate its long-term strategies seeking an expansion of Germany toward China and Russia. There are several reasons for this;

‘’Firstly Both Russia and China have immense resources and reserves of raw materials. Secondly, the level of China’s economic growth and the size of its market are way above those of the EU. Thirdly, Germany’s technological superiority is the ideal condition for intra-trade appropriation of Chinese surplus value. Fourthly, if bi-lateral trade relations were to continue at the current pace Beijing will become Germany’s main trading partner by 2021. Fifthly, for China, Germany is the European state with the most optimal investment opportunities; China is the second largest non-European investor in Germany after the United States. Finally, China’s ultimately likely goal is to lessen US influence in Europe by forging its own close ties to the EU – and Germany is China’s strategic foothold in Europe. These are ideal conditions for German expansionism to scale down its interests in Europe and redirecting its attention to the East.’’(7)

The other faction in Germany are the geriatric Atlanticists, political, security (BND) and military elites, with the Greens in tow of course, who are apparently still fixedly stuck in an Americo-centric NATO bloc not knowing which way the wind is blowing and on which side their bread is buttered. The Nordstream-2 issue is crystallising these fault-lines among the German ruling elites with Frau Merkel being pulled hither and yon between Germany’s reactionaries and its more forward-looking business class which is enamoured of the pro-China-Russia siren songs. Moreover, given the centrifugal drift within the Eurozone there seems sufficient reason to believe that a new bloc of northern European states, grouped around Germany, Holland, Scandinavia, and possibly including the Tax Havens of Switzerland, Luxembourg, and Liechtenstein, could coalesce around the establishment of a new Northern Euro. This delinking from the ‘weak’ euro by the Northern bloc could well be the strategy that Germany, that is to say, its business elite, pushes – or at least does not oppose – the default of the weaker countries in the south and the east so that they leave the Eurozone.

At the present time this is conjecture, but the slow but inexorable economic and geopolitical underground shifts make change inevitable.

NOTES

(1) It should be noted in passing that this was never intended to take on the contours of a European geopolitical alternative to the American continental hegemon. That came later. At the time there was a school of thought that held the creation of a European alliance to act as a third force based upon social-democratic and unaligned neutrality which would act as a buffer between US imperialism and Russian communism, and as an alternative to the two heavily armed super-states. Alas that was not to be. The collapse of the Soviet Union was regarded in Anglo-American right-wing circles and their euro proxies – the UK, Poland, and the Baltics – as a wonderful opportunity to punish and over-run the prostrate and weakened Russian state. It almost succeeded as an enlarged NATO gobbled up ex-soviet republics pushing right up to Russia’s western borders.

(2) Barry Eichengreen – Exorbitant Privilege 2018 – pps3/4

(3) The Eurozone is composed of 19 out of 27 European States. The following use the euro as their currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia, Spain

(4) The Hartz Reforms. These reforms involved the restructuring of Germany’s internal labour markets involving a lowering of labour costs and introducing ‘mini’ jobs wage and welfare cuts. So the reduced share of unemployed in the German work-force was achieved at the expense of the real incomes as those in work. Fear of low benefits if you became unemployed, along with the threat of moving businesses abroad into the rest of the Eurozone or Eastern Europe, combined to force German workers to accept exceptionally low wage increases whilst capitalists reaped an excessively big profit expansion. Real wages in Germany have fallen during the Eurozone era and are now below the level of 1999. This whilst real GDP per capita has risen nearly 30%.

(5) The accession states of Eastern Europe are simply an entrenched euro version of a US/Mexico periphery grouping on the border of the US southern states. These maquiladoras have certain tax advantages which make them attractive to US businesses. These US businesses can capitalize on a cheaper labor force in Mexico and also receive the benefits of doing business in the U.S. The presence of maquiladoras contributed significantly to the industrialization of the Mexican-American border.

(6) Peter Gowan – The Global Gamble – p.317.

(7) Guglielmo Carchadi – From Crisis of Surplus Value to Crisis of the Euro – A Global Analysis of Marx’s Law of Profitability. – p.419

What Wall Street fears

January 30, 2021

By The Ister for the Saker Blog

The origin of modern banking can be found in the early days of the gold trade. In the Middle Ages, goldsmiths accepted deposits of gold in return for paper notes, which could be exchanged for the deposits at a later date. Because these paper notes were more convenient for commercial use than physical metal, they were usually not redeemed for gold right away. The goldsmiths noticed their customers’ deposits could be used in the meantime to generate interest and began surreptitiously lending out the savings of their depositors. Over time fractional reserve banking developed from this tendency of lending out money in excess of the actual reserves being held.

Goldsmith became banker, and from this early monetary system, banking families emerged. Prior to the existence of modern financial institutions, these houses were the entities which could be relied upon for large amounts of credit. A reputable surname gave confidence to depositors that their gold was in good hands, and from the intergenerational accumulation of wealth grew large pools of loanable capital. As nobles required weapons and pay for their armies, the conflicts of medieval Europe were fueled by families such as the Medici, Fuggers, and Welsers. Today, it is the Federal Reserve which finances America’s enormous military and conquests abroad.

To truly understand banking, the concept of free markets must be cast aside. Just as oil is a strategic resource for the real economy capitalist, gold and silver are strategic resources for the financial capitalist. Physical bullion is the basis from which all other lines of credit extend; we know this because the same central banks which publicly proclaim gold to be a barbarous relic still feel the need to maintain enormous hordes in their vaults.

As in oil markets, pricing is not influenced primarily by a large number of producers and buyers but by concentrated cartel dynamics. So while we witness yet another energy battle between OPEC and Russia unfold, it should be understood that similar dynamics are at play in the upper echelons of the monetary world as bankers seek to fix prices and control physical bullion flows in a manner which is beneficial to their interests.

A key difference from oil is that while the pump leads to the refinery and the refinery to the end-user, bankers do not generally like to part with their gold. Accordingly, markets have been designed so that prices are determined not by physical delivery but by the trading of unbacked or fractionally backed “claims” on the underlying metal: certificates, ETFs, and futures. We can be certain that there is not enough physical bullion to cover all these paper metal claims, just like the medieval goldsmith did not hold his deposits in full.

These paper markets set the price, although bars rarely leave the vault

Where is the vault? While Fort Knox claims the largest holdings, the price is set by the London Bullion Market Association and CME Group which together account for around 70% and 20% of global trading volume respectively. The London Bullion Market began in 1850, when N. M. Rothschild and Sons and several other banking families created a cartel to oversee the operations of the global gold market, including the establishment of the “London good delivery” list which created trading standards for size, dimensions, shape and fineness of bullion; today trading on London markets requires a high purity and being between 350-450 ounces.

This domination of the world’s gold market was not achieved through peaceful means: look into the forces behind the conquest of Transvaal’s gold mines, for it bears a direct parallel to America’s invasions of oil-rich nations today. Another similarity with oil markets is that military interventions have a habit of “liberating” the target nation of their gold: just ask Muammar Gaddafi.

The price of such a strategic resource could not be determined by an open market, thus alongside good delivery standards the “gold fix” was established in 1919 and was held in the offices of New Court until 2004, when its operations were passed on to a cartel of bullion banks such JP Morgan and HSBC. Ever since, these banks have been investigated and convicted countless times of manipulating and spoofing the prices.

How do we know that there isn’t enough gold to cover physical deliveries? Back in the 1970s the dollar was under a lot of pressure and Western banks maintained secret gentlemen’s agreements not to request delivery of bullion. In 1971 Dutch central bank chief Jelle Zjilstra ignored these formalities and planned to convert $600 million of the Dutch dollar reserves to gold, prompting Federal Reserve chair Paul Volcker to fly out to the Netherlands and warn him: “you’re rocking the boat.” Shortly after Zijlstra refused Volcker’s pressure and continued with the purchase, the US decoupled from the gold standard.

Abandonment of the gold standard risked a reduction in dollar demand, so Nixon enlisted Wall Street scion Gerry Parsky to negotiate with oil exporting Arab nations. After discussion, the Saudi state agreed to sell oil priced exclusively in dollars and to invest the proceeds of oil sales in America.

To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military.

Look at the somber fates of those that tried to ditch the dollar for gold or the Euro: Libya in a state of permanent civil war; starving Syrians picking through landfills in search of food only miles from occupied wheat fields.

So maintaining confidence in our reserve currency requires the undermining of confidence in gold, as its reemergence would unnecessarily democratize the international monetary order. Confidence is undermined first by price suppression, which is accomplished by the manipulation of precious metals futures markets. While it would be hugely wasteful for a private individual or consortium to manipulate such a market with their own money, that is where the unlimited fiat available at central bank trading desks come in: and we know central banks are secretly trading precious metals futures due to leaked documents from CME Group.

Leo Melamed, chairman of CME Group and the putative father of modern commodity futures markets noted in his book Escape to the Futures that CME’s Globex system was inspired by the original London gold fix:

Sandner, Kilcollin and I were in London with the chairman of the Rothschild Bank seeking his advice on how to bring the “gold fix” to Chicago. From the heated debate that followed one would have concluded that Kilcollin knew more about the subject than the legendary Rothschilds, the people who had founded the concept ages before.

What we can see from this is that strategic commodities such as gold and oil are far from a free market: recall my previous article The Empire is Losing the Energy War which described how the Saudi state functions as a price-suppression weapon against Russia’s oil exports. This global commodity suppression schema allows the importation of the planet’s finite resources at a fraction of the true cost in return for theoretically unlimited currency. Recall Fed governor Kevin Warsh’s comments in December of 2011 when gold hit an all time high that banks were:

“finding it tempting to pursue financial repression- suppressing market prices that they don’t like”

There are signs, however, that the thin pool of physical bullion which exists to maintain confidence in paper markets is drying up. In March of 2020, CME Group had to relax its own requirement of 100oz bars to allow 400oz London good delivery bars to be shipped from overseas and used for trade settlement. Some would say: if price suppression exists then why has the gold price gone up over the last few years?

The middle ground between setting the price to very low or very high levels, say, $100 or $10,000, is that the prices are set high enough to minimize outflows from vaults, while at the same time using futures to hammer down the prices at psychologically important levels and initiating margin calls on those who are long gold using leverage. Those who have watched gold for a long time can attest to the sudden and inexplicable drops which originate in the futures market and which occur every time the gold price appears *just* ready to break out.

It’s a very complicated charade for the bullion bank cartel. Allow the price per ounce to go too low and you risk running out of the gold necessary to facilitate markets. At the same time, if the price rises too high it attracts international attention and risks gold reemerging in monetary policy. Notice how as soon as the supply shortages became apparent in March 2020 the bankers were forced to reset gold from $1230 to over $2000 in order to stem the outflows of physical delivery.

Putin is intentionally exacerbating this drought of physical gold in Western banks by expanding the Russian central bank’s purchases of gold. For the past few years Russia has been the number one global purchaser of bullion, having spent over $40 billion to bring Moscow’s reserves to the highest level in history: a sum close to the annual military budget because it is a strategic asset.

Just last week, Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion, highlighted by the central bank as part of Putin’s de-dollarization agenda. Given that purchases have grown at roughly 15% per year we can predict that even if the price does not rise, the value of these holdings will be around $1 trillion in three years. Read the anxious commentary about these purchases in Bloomberg and Forbes, and remember the nervousness in the business press when Germany demanded its gold back in 2013, which would only exist if behind-the-scenes physical gold flows were disjointed and there was internal muttering in the financial world as to whether the demand could be fulfilled.

To any who doubt that this is an overt move, in the pre-WW2 monetary system the mass accumulation of gold was well understood among central bankers as an aggressive act intended to starve competitor states of their ability to create credit. For example, French and American hoarding resulted in hyperinflation for Germany and forced Britain’s pound sterling off the gold standard.

Russia’s acquisition of precious metal is a direct threat to the financial system. How funny that the system is so fraudulent that it is an act of aggression to simply demand in physical form what one has paid for in full on an open market; an act which the designers of the system cannot protest lest they reveal their own bankruptcy. Just as it did in the 1920s, the hoarding of gold in the East will eventually limit the West’s ability to extend credit, it is simply unfolding on a longer time frame.

So why is a tiny stock like GameStop causing billionaire Leon Cooperman to cry on CNBC, and why is the SEC threatening small-time investors?

Simply, the financial markets are being revealed as a highly illiquid house of cards. Retail investors from Reddit began trolling short-sellers by rapidly buying small stocks and causing hedge funds to blow up from expensive margin calls. The losses are now estimated at around $70 billion, and as these small-time investors funnel their unemployment and stimulus checks into their aggressive trades they have fought wealthy investors in a more effective way than Occupy Wall Street ever did. They have now turned their eyes to the small and illiquid silver market…

Look at the fate of the Hunt brothers fortune: they were oil billionaires who tried to exercise their legal right to take physical delivery of a large volume of silver futures contracts and had CME pull the rug out from under them before it could be achieved. CME Group defeated the Hunt brothers by instituting Silver Rule 7 which limited the dollar amount of physical silver that an individual investor could buy. But how will that stop the hordes of young low net worth traders who are now telling one another to purchase physical bullion and intentionally strain the rigged silver market?

This arcane financial system is doomed to fail because it is based on ever-higher and more unstable abstractions of underlying wealth: CDOs squared and cubed, dark pool derivatives markets totaling trillions of dollars, and so on: all of which depends on the financial sector sucking as much money as possible out of a shrinking global economy through securitization. Now that people are demanding the underlying assets themselves, change is beginning.

What an interesting timeline: where Russia and unemployed youths have come to the same conclusion for how to defeat the banks.

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The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America

America Escalates its “Democratic” Oil War in the Near East

January 05, 2020

by Michael Hudson exclusively for the Saker Blog

The mainstream media are carefully sidestepping the method behind America’s seeming madness in assassinating Islamic Revolutionary Guard general Qassim Suleimani to start the New Year. The logic behind the assassination this was a long-standing application of U.S. global policy, not just a personality quirk of Donald Trump’s impulsive action. His assassination of Iranian military leader Suleimani was indeed a unilateral act of war in violation of international law, but it was a logical step in a long-standing U.S. strategy. It was explicitly authorized by the Senate in the funding bill for the Pentagon that it passed last year.

The assassination was intended to escalate America’s presence in Iraq to keep control the region’s oil reserves, and to back Saudi Arabia’s Wahabi troops (Isis, Al Quaeda in Iraq, Al Nusra and other divisions of what are actually America’s foreign legion) to support U.S. control o Near Eastern oil as a buttress o the U.S. dollar. That remains the key to understanding this policy, and why it is in the process of escalating, not dying down.

I sat in on discussions of this policy as it was formulated nearly fifty years ago when I worked at the Hudson Institute and attended meetings at the White House, met with generals at various armed forces think tanks and with diplomats at the United Nations. My role was as a balance-of-payments economist having specialized for a decade at Chase Manhattan, Arthur Andersen and oil companies in the oil industry and military spending. These were two of the three main dynamic of American foreign policy and diplomacy. (The third concern was how to wage war in a democracy where voters rejected the draft in the wake of the Vietnam War.)

The media and public discussion have diverted attention from this strategy by floundering speculation that President Trump did it, except to counter the (non-)threat of impeachment with a wag-the-dog attack, or to back Israeli lebensraum drives, or simply to surrender the White House to neocon hate-Iran syndrome. The actual context for the neocon’s action was the balance of payments, and the role of oil and energy as a long-term lever of American diplomacy.

The balance of payments dimension

The major deficit in the U.S. balance of payments has long been military spending abroad. The entire payments deficit, beginning with the Korean War in 1950-51 and extending through the Vietnam War of the 1960s, was responsible for forcing the dollar off gold in 1971. The problem facing America’s military strategists was how to continue supporting the 800 U.S. military bases around the world and allied troop support without losing America’s financial leverage.

The solution turned out to be to replace gold with U.S. Treasury securities (IOUs) as the basis of foreign central bank reserves. After 1971, foreign central banks had little option for what to do with their continuing dollar inflows except to recycle them to the U.S. economy by buying U.S. Treasury securities. The effect of U.S. foreign military spending thus did not undercut the dollar’s exchange rate, and did not even force the Treasury and Federal Reserve to raise interest rates to attract foreign exchange to offset the dollar outflows on military account. In fact, U.S. foreign military spending helped finance the domestic U.S. federal budget deficit.

Saudi Arabia and other Near Eastern OPEC countries quickly became a buttress of the dollar. After these countries quadrupled the price of oil (in retaliation for the United States quadrupling the price of its grain exports, a mainstay of the U.S. trade balance), U.S. banks were swamped with an inflow of much foreign deposits – which were lent out to Third World countries in an explosion of bad loans that blew up in 1972 with Mexico’s insolvency, and destroyed Third World government credit for a decade, forcing it into dependence on the United States via the IMF and World Bank).

To top matters, of course, what Saudi Arabia does not save in dollarized assets with its oil-export earnings is spent on buying hundreds of billion of dollars of U.S. arms exports. This locks them into dependence on U.S. supply o replacement parts and repairs, and enables the United States to turn off Saudi military hardware at any point of time, in the event that the Saudis may try to act independently of U.S. foreign policy.

So maintaining the dollar as the world’s reserve currency became a mainstay of U.S. military spending. Foreign countries to not have to pay the Pentagon directly for this spending. They simply finance the U.S. Treasury and U.S. banking system.

Fear of this development was a major reason why the United States moved against Libya, whose foreign reserves were held in gold, not dollars, an which was urging other African countries to follow suit in order to free themselves from “Dollar Diplomacy.” Hillary and Obama invaded, grabbed their gold supplies (we still have no idea who ended up with these billions of dollars worth of gold) and destroyed Libya’s government, its public education system, its public infrastructure and other non-neoliberal policies.

The great threat to this is dedollarization as China, Russia and other countries seek to avoid recycling dollars. Without the dollar’s function as the vehicle for world saving – in effect, without the Pentagon’s role in creating the Treasury debt that is the vehicle for world central bank reserves – the U.S. would find itself constrained militarily and hence diplomatically constrained, as it was under the gold exchange standard.

That is the same strategy that the U.S. has followed in Syria and Iraq. Iran was threatening this dollarization strategy and its buttress in U.S. oil diplomacy.

The oil industry as buttress of the U.S. balance of payments and foreign diplomacy

The trade balance is buttressed by oil and farm surpluses. Oil is the key, because it is imported by U.S. companies at almost no balance-of-payments cost (the payments end up in the oil industry’s head offices here as profits and payments to management), while profits on U.S. oil company sales to other countries are remitted to the United States (via offshore tax-avoidance centers, mainly Liberia and Panama for many years). And as noted above, OPEC countries have been told to keep their official reserves in the form of U.S. securities (stocks and bonds as well as Treasury IOUs, but not direct purchase of U.S. companies being deemed economically important). Financially, OPEC countries are client slates of the Dollar Area.

America’s attempt to maintain this buttress explains U.S. opposition to any foreign government steps to reverse global warming and the extreme weather caused by the world’s U.S.-sponsored dependence on oil. Any such moves by Europe and other countries would reduce dependence on U.S. oil sales, and hence on U.S. ability to control the global oil spigot as a means of control and coercion, are viewed as hostile acts.

Oil also explains U.S. opposition to Russian oil exports via Nordstream. U.S. strategists want to treat energy as a U.S. national monopoly. Other countries can benefit in the way that Saudi Arabia has done – by sending their surpluses to the U.S. economy – but not to support their own economic growth and diplomacy. Control of oil thus implies support for continued global warming as an inherent part of U.S. strategy.

How a “democratic” nation can wage international war and terrorism

The Vietnam War showed that modern democracies cannot field armies for any major military conflict, because this would require a draft of its citizens. That would lead any government attempting such a draft to be voted out of power. And without troops, it is not possible to invade a country to take it over.

The corollary of this perception is that democracies have only two choices when it comes to military strategy: They can only wage airpower, bombing opponents; or they can create a foreign legion, that is, hire mercenaries or back foreign governments that provide this military service.

Here once again Saudi Arabia plays a critical role, through its control of Wahabi Sunnis turned into terrorist jihadis willing to sabotage, bomb, assassinate, blow up and otherwise fight any target designated as an enemy of “Islam,” the euphemism for Saudi Arabia acting as U.S. client state. (Religion really is not the key; I know of no ISIS or similar Wahabi attack on Israeli targets.) The United States needs the Saudis to supply or finance Wahabi crazies. So in addition to playing a key role in the U.S. balance of payments by recycling its oil-export earnings are into U.S. stocks, bonds and other investments, Saudi Arabia provides manpower by supporting the Wahabi members of America’s foreign legion, ISIS and Al-Nusra/Al-Qaeda. Terrorism has become the “democratic” mode of today U.S. military policy.

What makes America’s oil war in the Near East “democratic” is that this is the only kind of war a democracy can fight – an air war, followed by a vicious terrorist army that makes up for the fact that no democracy can field its own army in today’s world. The corollary is that, terrorism has become the “democratic” mode of warfare.

From the U.S. vantage point, what is a “democracy”? In today’s Orwellian vocabulary, it means any country supporting U.S. foreign policy. Bolivia and Honduras have become “democracies” since their coups, along with Brazil. Chile under Pinochet was a Chicago-style free market democracy. So was Iran under the Shah, and Russia under Yeltsin – but not since it elected Vladimir Putin president, any more than is China under President Xi.

The antonym to “democracy” is “terrorist.” That simply means a nation willing to fight to become independent from U.S. neoliberal democracy. It does not include America’s proxy armies.

Iran’s role as U.S. nemesis

What stands in the way of U.S. dollarization, oil and military strategy? Obviously, Russia and China have been targeted as long-term strategic enemies for seeking their own independent economic policies and diplomacy. But next to them, Iran has been in America’s gun sights for nearly seventy years.

America’s hatred of Iran is starts with its attempt to control its own oil production, exports and earnings. It goes back to 1953, when Mossadegh was overthrown because he wanted domestic sovereignty over Anglo-Persian oil. The CIA-MI6 coup replaced him with the pliant Shah, who imposed a police state to prevent Iranian independence from U.S. policy. The only physical places free from the police were the mosques. That made the Islamic Republic the path of least resistance to overthrowing the Shah and re-asserting Iranian sovereignty.

The United States came to terms with OPEC oil independence by 1974, but the antagonism toward Iran extends to demographic and religious considerations. Iranian support its Shi’ite population an those of Iraq and other countries – emphasizing support for the poor and for quasi-socialist policies instead of neoliberalism – has made it the main religious rival to Saudi Arabia’s Sunni sectarianism and its role as America’s Wahabi foreign legion.

America opposed General Suleimani above all because he was fighting against ISIS and other U.S.-backed terrorists in their attempt to break up Syria and replace Assad’s regime with a set of U.S.-compliant local leaders – the old British “divide and conquer” ploy. On occasion, Suleimani had cooperated with U.S. troops in fighting ISIS groups that got “out of line” meaning the U.S. party line. But every indication is that he was in Iraq to work with that government seeking to regain control of the oil fields that President Trump has bragged so loudly about grabbing.

Already in early 2018, President Trump asked Iraq to reimburse America for the cost of “saving its democracy” by bombing the remainder of Saddam’s economy. The reimbursement was to take the form of Iraqi Oil. More recently, in 2019, President Trump asked, why not simply grab Iraqi oil. The giant oil field has become the prize of the Bush-Cheney post 9-11 Oil War. “‘It was a very run-of-the-mill, low-key, meeting in general,” a source who was in the room told Axios.’ And then right at the end, Trump says something to the effect of, he gets a little smirk on his face and he says, ‘So what are we going to do about the oil?’”^[1]

Trump’s idea that America should “get something” out of its military expenditure in destroying the Iraqi and Syrian economies simply reflects U.S. policy.

In late October, 2019, The New York Times reported that: “In recent days, Mr. Trump has settled on Syria’s oil reserves as a new rationale for appearing to reverse course and deploy hundreds of additional troops to the war-ravaged country. He has declared that the United States has “secured” oil fields in the country’s chaotic northeast and suggested that the seizure of the country’s main natural resource justifies America further extending its military presence there. ‘We have taken it and secured it,’ Mr. Trump said of Syria’s oil during remarks at the White House on Sunday, after announcing the killing of the Islamic State leader, Abu Bakr al-Baghdadi.” ^[2] A CIA official reminded the journalist that taking Iraq’s oil was a Trump campaign pledge.

That explains the invasion of Iraq for oil in 2003, and again this year, as President Trump has said: “Why don’t we simply take their oil?” It also explains the Obama-Hillary attack on Libya – not only for its oil, but for its investing its foreign reserves in gold instead of recycling its oil surplus revenue to the U.S. Treasury – and of course, for promoting a secular socialist state.

It explains why U.S. neocons feared Suleimani’s plan to help Iraq assert control of its oil and withstand the terrorist attacks supported by U.S. and Saudi’s on Iraq. That is what made his assassination an immediate drive.

American politicians have discredited themselves by starting off their condemnation of Trump by saying, as Elizabeth Warren did, how “bad” a person Suleimani was, how he had killed U.S. troops by masterminding the Iraqi defense of roadside bombing and other policies trying to repel the U.S. invasion to grab its oil. She was simply parroting the U.S. media’s depiction of Suleimani as a monster, diverting attention from the policy issue that explains why he was assassinated now.

The counter-strategy to U.S. oil, and dollar and global-warming diplomacy

This strategy will continue, until foreign countries reject it. If Europe and other regions fail to do so, they will suffer the consequences of this U.S. strategy in the form of a rising U.S.-sponsored war via terrorism, the flow of refugees, and accelerated global warming and extreme weather.

Russia, China and its allies already have been leading the way to dedollarization as a means to contain the balance-of-payments buttress of U.S. global military policy. But everyone now is speculating over what Iran’s response should be.

The pretense – or more accurately, the diversion – by the U.S. news media over the weekend has been to depict the United States as being under imminent attack. Mayor de Blasio has positioned policemen at conspicuous key intersections to let us know how imminent Iranian terrorism is – as if it were Iran, not Saudi Arabia that mounted 9/11, and as if Iran in fact has taken any forceful action against the United States. The media and talking heads on television have saturated the air waves with warnings of Islamic terrorism. Television anchors are suggesting just where the attacks are most likely to occur.

The message is that the assassination of General Soleimani was to protect us. As Donald Trump and various military spokesmen have said, he had killed Americans – and now they must be planning an enormous attack that will injure and kill many more innocent Americans. That stance has become America’s posture in the world: weak and threatened, requiring a strong defense – in the form of a strong offense.

But what is Iran’s actual interest? If it is indeed to undercut U.S. dollar and oil strategy, the first policy must be to get U.S. military forces out of the Near East, including U.S. occupation of its oil fields. It turns out that President Trump’s rash act has acted as a catalyst, bringing about just the opposite of what he wanted. On January 5 the Iraqi parliament met to insist that the United States leave. General Suleimani was an invited guest, not an Iranian invader. It is U.S. troops that are in Iraq in violation of international law. If they leave, Trump and the neocons lose control of oil – and also of their ability to interfere with Iranian-Iraqi-Syrian-Lebanese mutual defense.

Beyond Iraq looms Saudi Arabia. It has become the Great Satan, the supporter of Wahabi extremism, the terrorist legion of U.S. mercenary armies fighting to maintain control of Near Eastern oil and foreign exchange reserves, the cause of the great exodus of refugees to Turkey, Europe and wherever else it can flee from the arms and money provided by the U.S. backers of Isis, Al Qaeda in Iraq and their allied Saudi Wahabi legions.

The logical ideal, in principle, would be to destroy Saudi power. That power lies in its oil fields. They already have fallen under attack by modest Yemeni bombs. If U.S. neocons seriously threaten Iran, its response would be the wholesale bombing and destruction of Saudi oil fields, along with those of Kuwait and allied Near Eastern oil sheikhdoms. It would end the Saudi support for Wahabi terrorists, as well as for the U.S. dollar.

Such an act no doubt would be coordinated with a call for the Palestinian and other foreign workers in Saudi Arabia to rise up and drive out the monarchy and its thousands of family retainers.

Beyond Saudi Arabia, Iran and other advocates of a multilateral diplomatic break with U.S. neoliberal and neocon unilateralism should bring pressure on Europe to withdraw from NATO, inasmuch as that organization functions mainly as a U.S.-centric military tool of American dollar and oil diplomacy and hence opposing the climate change and military confrontation policies that threaten to make Europe part of the U.S. maelstrom.

Finally, what can U.S. anti-war opponents do to resist the neocon attempt to destroy any part of the world that resists U.S. neoliberal autocracy? This has been the most disappointing response over the weekend. They are flailing. It has not been helpful for Warren, Buttigieg and others to accuse Trump of acting rashly without thinking through the consequences of his actions. That approach shies away from recognizing that his action did indeed have a rationale—do draw a line in the sand, to say that yes, America WILL go to war, will fight Iran, will do anything at all to defend its control of Near Eastern oil and to dictate OPEC central bank policy, to defend its ISIS legions as if any opposition to this policy is an attack on the United States itself.

I can understand the emotional response or yet new calls for impeachment of Donald Trump. But that is an obvious non-starter, partly because it has been so obviously a partisan move by the Democratic Party. More important is the false and self-serving accusation that President Trump has overstepped his constitutional limit by committing an act of war against Iran by assassinating Soleimani.

Congress endorsed Trump’s assassination and is fully as guilty as he is for having approved the Pentagon’s budget with the Senate’s removal of the amendment to the 2019 National Defense Authorization Act that Bernie Sanders, Tom Udall and Ro Khanna inserted an amendment in the House of Representatives version, explicitly not authorizing the Pentagon to wage war against Iran or assassinate its officials. When this budget was sent to the Senate, the White House and Pentagon (a.k.a. the military-industrial complex and neoconservatives) removed that constraint. That was a red flag announcing that the Pentagon and White House did indeed intend to wage war against Iran and/or assassinate its officials. Congress lacked the courage to argue this point at the forefront of public discussion.

Behind all this is the Saudi-inspired 9/11 act taking away Congress’s sole power to wage war – its 2002 Authorization for Use of Military Force, pulled out of the drawer ostensibly against Al Qaeda but actually the first step in America’s long support of the very group that was responsible for 9/11, the Saudi airplane hijackers.

The question is, how to get the world’s politicians – U.S., European and Asians – to see how America’s all-or-nothing policy is threatening new waves of war, refugees, disruption of the oil trade in the Strait of Hormuz, and ultimately global warming and neoliberal dollarization imposed on all countries. It is a sign of how little power exists in the United Nations that no countries are calling for a new Nurenberg-style war crimes trial, no threat to withdraw from NATO or even to avoid holding reserves in the form of money lent to the U.S. Treasury to fund America’s military budget.

Michael Hudson

1. https://www.axios.com/trump-to-iraqi-pm-how-about-that-oil-1a31cbfa-f20c-4767-8d18-d518ed9a6543.html. The article adds: “In the March meeting, the Iraqi prime minister replied, ‘What do you mean?’ according to the source in the room. And Trump’s like, ‘Well, we did a lot, we did a lot over there, we spent trillions over there, and a lot of people have been talking about the oil.’” ↑
2. Michael Crowly, “‘Keep the Oil’: Trump Revives Charged Slogan for new Syria Troop Mission,” The New York Times, October 26, 2019. https://www.nytimes.com/2019/10/26/us/politics/trump-syria-oil-fields.html. The article adds: “‘I said keep the oil,’ Mr. Trump recounted. ‘If they are going into Iraq, keep the oil. They never did. They never did.’” ↑

IMF who? Lagarde shows ECB is the top dollar job in QE age

July 17, 2019

by Ramin Mazaheri for the Saker blog (cross-posted with PressTV by permission)

(Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea, and elsewhere. He is the author of “I’ll Ruin Everything You Are: Ending Western Propaganda on Red China.”)

Christine Lagarde just quit her top post at the International Monetary Fund in order to run the European Central Bank. This shows just far the euro has come (and central bankers), and represents either a historic step backwards or a leap of faith forward in the fight against the global domination of the US dollar.

The dollar’s dominance is what allows Washington to impose murderous, illegal sanctions on countries like Iran, Cuba, Korea and elsewhere, which is why many are so keen to end it.

The dollar’s imposition began after World War II, when the war-ravaged powers were forced to accept equating US paper with (but actually above) gold, a move which Charles de Gaulle bitterly referred to as the “exorbitant privilege” of the United States. The logic is simple: a $100 dollar bill cost Washington only the price of a piece of paper, whereas everyone else still had to mine, barter, earn or steal $100 worth of gold (or its equivalent in goods) to acquire that banknote.

The expensive US failure in Vietnam caused Richard Nixon to end this policy in 1971, but QE – printing money out of thin air – was opposed back then, so a replacement tool had to be quickly found in order to maintain US empire. The solution to effectively maintain the Bretton Woods system was found with the “petrodollar” agreement of 1973: every barrel of Saudi oil sold to anyone had to be purchased in dollars, and surplus Saudi profit would be invested in US banks and in US debt securities (“petrodollar recycling”, per Henry Kissinger).

Washington had no qualms about propping up the ruthless, reactionary House of Saud to maintain US economic hegemony. The system expanded to other oil producers to the point where: no dollars? No oil.

The petrodollar keeps money flowing into the US and allows the US to “print gold” – it finances their huge budget deficits, high demand for the dollar fights off their inflation, it gives their banks a source of income for which they do zero genuine work, and the US themselves can buy “as much oil as they can print” from the Saudis. This is obviously a tremendous bargain for the US – the only reason the Saudis accept it is because they know they have absolutely zero legitimacy and would be deposed instantly without US arms and military support.

But the great deal is only for some in the US, as they are rabid neoliberal capitalists: from 1980 onwards the US elite funnelled these huge monies into Wall Street and other asset classes which only their fellow elite can touch, as opposed to intelligently and patriotically using the income to improve the overall conditions of their own nation, or even just raising wages (neoliberals call these concepts “socialism”).

Pick your poison: the US or the IMF?

The IMF, which is always led by a European, has long-pushed something to end this scam that weakens everyone for the US’ benefit, via the concept of the SDR (special drawing rights): a basket of international currencies which could replace the dollar as the world’s backing currency. Who needs the Fed when the SDR can provide international liquidity and financial stability? It wasn’t a great system, but it was closer to the IMF’s original aim of having an international monetary system, instead of the current US empire system of (petrodollar) tribute, which is no different from the Roman era.

The Great Recession pushed the superiority of the SDR to the fore – in 2009 China publicly supported, for the first time, that an international reserve currency be based on the SDR and be run by the IMF. The immorality and business failures of US bankers caused the Great Recession – it was only logical that the Americans lose their banking primacy.

The IMF was thus poised to become top banker, and one of their own was even about to be democratically elected.

In 2011 then-current IMF chief Dominique Strauss-Kahn, a major backer of the SDR basket, was outpolling Nicolas Sarkozy 2 to 1 to head the world’s 5th-largest economy and the neo-imperialist master of North and West Africa. He was certain to win, but on American soil he was accused of attempted rape of a hotel maid, dooming his presidency. The charges were dropped, but Strauss-Kahn admitted the liaison. People screamed “conspiracy” – I always found it highly coincidental that Strauss-Kahn found a maid whose native language was French in a country where seemingly all the cleaning women are Latinas? Conspiracy theorists assumed Sarkozy was behind it, with few noting how the IMF, the SDR and Strauss-Kahn threatened US economic hegemony.

QE means the US’ 1% never have to pay for their crimes

The US pushed back the IMF with one arm while the other arranged the current global financial regime – Quantitative Easing.

QE has been a total failure for the average person worldwide, but nowhere more so than in Europe. Incredibly, 1.5 years after it became official, PressTV and I remain one of the very few people to write about the statistical reality of Europe’s “Lost Decade”. I saw it happening in painful slow-motion, being PressTV’s chief correspondent in Paris.

The reason the Mainstream Media doesn’t want to talk about the failure of QE to provide broad economic growth is because their pro-capitalist media are owned by the same billionaires who get all the profit from QE.

The printing of trillions of paper money (which are certainly not backed by trillions in newly-mined gold) has, just like the oil-produced fruits of the petrodollar, gone to remake the same asset bubbles which sparked the Great Recession.

Once again, only the wealthy are profiting from shady capitalist practices: Housing Bubble II, new stock market records despite the endemic failure of the “real-economy” (evidenced by the Lost Decade), and absurd records in the prices of absurd luxury goods like MBS’ purchase of a da Vinci painting – this has all been paid for by the neoliberal-neoimperialist policy of QE which has failed the average Western citizen and continued the economic misery of the developing world.

But QE has proven one thing: governments are the most powerful forces in society, not bankers. This is something which socialist-inspired democracies are based on, but which only the 1% appear to take advantage of in Western liberal democracies.

Lagarde moving from the IMF to ECB would have been thought of as a step down pre-QE, mainly because nobody imagined that the head of the ECB could create several trillions of dollars simply by tapping a keyboard, as her predecessor Mario Draghi did. The IMF has a lot of money, but they do not have the power to create money.

Lagarde: More bad news for Europe’s 99%

When Lagarde was announced as the new head of the ECB the Western mainstream media provided – of course – none of this background, nor any perspective which fairly criticises the record of neoliberal thought and practice. Instead, their leading media justified Lagarde on one criterion – gender. The New York Times’ article was, “In Tense Times, ‘Call in the Woman’: Lagarde Will Lead the E.C.B”.

The Times championed Lagarde’s own claim that she deserved the job because she was not a male: “As I have said many times, if it had been Lehman Sisters rather than Lehman Brothers, the world might well look a lot different today.”

Such a claim is preposterous and shows how little Lagarde understands the principles and practices of neoliberal economics. However, everyone can quickly see that it also denies the existence of empresses, queens, Thatchers and Clintons; it also denies that women have played any role in shaping the positive and negative aspects of our modern world; it is a justification entirely based on divisive, distracting “identity politics” instead of a class-based true feminism.

Certainly, nobody would claim that simply being a male would be all that is necessary to head the ECB. And yet, such nonsense is all it takes in 2019 – we must all cheer simply because the new boss is female. This is what works with the average American today.

But the ECB is not American – why Lagarde?

The Times repeated the same misleading claim – that Lagarde is an “antitrust lawyer by training” : she worked for the world’s biggest law firm, based in Chicago (the Qom of neoliberal capitalist thought), meaning that she likely worked to manipulate the law in order to maintain trusts, not to dismantle trusts. The Times was forced to acknowledge that she has no experience as a central banker and will thus have a “steep learning curve”.

The West continues to put people in power based on the most absurd pretences of qualification for public service, even when such posts are unelected.

Investopedia had the same assessment as The Times: “However, the absence of an economics background or a discernible opinion on monetary policy means she would have to rely on financial technocrats a fair amount. Lagarde, who says she faced sexism and discrimination in her professional life….”

Lagarde clearly does not have the background required – just like The Times, Investopedia ignores this to assert her “gender qualifications”.

Pity the poor European Mainstream Media reader: Largarde is only a shiny tool whose ascension will do nothing but put an unqualified person in charge of the QE money-printing scheme. She will obviously kowtow to “technocrats” who insist that QE will eventually, one day stop creating Lost Decades.

Lagarde thus got the job not her qualifications but her ideology: it is not Islamic, nor socialist, nor moral – she believes in phony technocratism, because for Lagarde and her ilk “technocrats” are synonymous with “the 1%”. I know Lagarde well from covering the “Tapie Affair” in France: she was found guilty of negligence and misuse of public funds in a case where she got Sarkozy’s friend Bernard Tapie a hugely controversial 400-million euro payout from the French public coffers.

She only doesn’t have a criminal record and didn’t go to jail, which would seemingly have disqualified her for the ECB Post because…because France’s judicial system is not independent but totally corrupted by 1% influence – the judge simply decided to let her go scot-free, despite her guilt.

Negligence, misuse of public funds, payouts for millionaires – now we understand why Lagarde is considered to be “qualified” to run the ECB, and their QE scam, and to continue the phony “the 99% must work their nation out of debt” justification for austerity policies. More “Western-style leadership”…..

The leap of faith forward I mentioned at the start is this: the ECB runs the world’s largest macro-economy – it is possible they could decouple themselves from the dollar’s decades of exorbitant privilege, and the Chicago school of (neoliberal) capitalism, and start pursuing policies which do not flood the 1% with cheap credit to buy cheaply the lives of people across Europe.

However, the legal structures of the EU and the Eurozone are written in post-1989 language which is even more typically American than what underpins the system of the US itself. Therefore we can have little basis for faith that the cabal of bankers and public-into-private national finance minsters which is the Eurogroup, which runs the Eurozone with zero democratic accountability or even transparency, is going to start caring about the 99% in any of their respective nations.

The selection of the French Lagarde illustrate that Europe is no longer sovereign, but content to be a tool of US economic hegemony.

The BRICS countries hold out hopes for ending the petrodollar-fuelled US global finance domination, but they have effectively lost Brazil via the US-orchestrated coup against Dilma Roussef, and they have foolishly not offered to make it BRIICS, with the second ‘I’ standing for Iran. No need, really: China, Russia and Iran continue to make the most headway against the dollar, via the Belt and Road Initiative but especially the unstoppable petroyuan.

Cryptocurrency is another unstoppable way for countries to oppose US control over the global financial system, which is why The New York Times and the US treasury secretary just screamed, “Cryptocurrencies Pose National Security Threat, Mnuchin Says”. Cryptocurrency was indeed created in order to end the US petrodollar and QE schemes, which is why they are so wonderful and why they must be supported.

Lagarde leaving the IMF for the ECB is definitely a historic shift in the (Western) priority rankings. It is simply tragic for the West’s billion of innocents that unaccountable, unelected central bankers and their ineffective, corrupt cronies have become their political elite. This, of course, has equally lamentable consequences for those nations suffering under neoimperialism, illegal sanctions and other Washington-based policies.