Inzet oorlog in Irak: Euro vs dollar

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The secret to a limitless debt: Dollar Hegemony

Normally, a country whose national debt grows rapidly faces serious problems. Investors worry that it will not be able to service its debts, and they begin withdrawing their investments; bankers refuse to provide it fresh loans; and the country soon suffers a balance of payments crisis. If the debtor is a third world country, it is forced to turn for loans to the International Monetary Fund and the World Bank. These two institutions in turn stipulate a programme of 'structural adjustment', which depresses the consumption of the vast majority, depresses the cost of labour power, cheapens the country's raw materials exports, hawks off public sector assets and natural resources to foreign investors at cut-rate prices, and so on.

However, till now the United States has been able to run up a truly giant national debt for a special reason. Being the world's leading capitalist economy, and a military superpower, its currency has been used for payments between countries (and therefore for their reserves of foreign exchange as well). When it needs to pay its debts it merely issues a treasury bond (ie borrows from the capital market) to which investors from around the world rush to subscribe. Foreign investors buy not only bonds issued by the government, but also American corporate bonds, shares, and real estate. These inflows, soaking up as they do the world's savings, ensure that the US is able to import more than it exports, year after year, without suffering the treatment handed out by the IMF and World Bank to countries like Argentina, Brazil, India, and so on.

This endless supply of golden eggs depends on the US remaining the supreme imperialist power and the dollar remaining the currency for international payments. However, that is precisely what is now threatened.

Implications of the euro

In the 1970s, there was no alternative to the dollar. On January 1, 1999, an alternative arose in the form of the euro, the new currency of the European Union (EU). Of course, investors did not immediately flock to the euro. The euro stuttered at birth, falling 30 per cent against the dollar by the end of 2000. In the last year, however, it has picked up sharply, and in recent months has remained at parity with the dollar (ie about one euro per dollar).

The euro has become attractive for three reasons.

First, since the EU is a large imperialist economy, about the same size as the US, it is an attractive and stable investment for foreign investors.

Secondly, since foreign investors' holdings are overwhelmingly in dollars, they wish to diversify and thus reduce the risk of losses in case of a dollar decline: they are increasingly nervous at the size of the US debt mountain and the failure of the US government to tackle this problem.

Thirdly, certain countries smarting under American military domination sense that the rule of the dollar is now vulnerable, and see the switch to the euro as a way to hit back.

Thus even in November 2000, when the euro was 30 per cent down against the dollar, Iraq demanded UN approval to be paid in euros in the UN oil-for-food programme. This despite the fact that the currency markets at the time did not see a rebound for the euro and despite the fact that Iraq would make the switch at considerable immediate cost, losing 10 cents a barrel to compensate buyers for their currency conversion costs. Iraq also asked that the $10 billion in its frozen bank account in New York be converted to euros. The UN, a plaything of the US, resisted the change until Iraq threatened to suspend its oil exports. ('Iraq: Baghdad Moves to the Euro', Radio Free Europe, 1/11/00; 'Iraq uses the euro in its trade deals,' Arabic News.com, 7/9/01)

Real Reasons for the US Invasion:
Military Solution to an Economic Crisis

Indeed the US has taken the contrary course. It plans to reverse the various trends mentioned above by seizing the world's richest oil-producing regions. This it deems necessary for three related reasons.

1. Securing US supplies: First, the US itself is increasingly dependent on oil imports-already a little over half its daily consumption of 20 million barrels is imported. It imports its oil from a variety of sources-Canada, Venezuela, Nigeria, Saudi Arabia, even Iraq. But its own production is falling, and will continue to fall steadily, even as its consumption continues to grow. In future, inevitably, it will become increasingly dependent on oil from west Asia-north Africa-a region where the masses of ordinary people despise the US, where three of the leading oil producers (Iraq, Iran and Libya) are professedly anti-American, and the others (Saudi Arabia, Kuwait, the United Arab Emirates) are in danger of being toppled by anti-American forces. The US of course doing its best to tie up or seize supplies from other regions-west Africa, northern Latin America, the Caspian region.

2. Maintaining dollar hegemony: Secondly, if other imperialist powers were able to displace US dominance in the region, the dollar would be dealt a severe blow. The pressure for switching to the euro would become irresistible and would ring the death knell of dollar supremacy. On the other hand, complete US control of oil would preserve the rule of the dollar (not only would oil producers continue to use the dollar for their international trade, but the dollar's international standing would rise) and hurt the credibility of the euro.

In the 1990s the major OPEC countries, after two decades of discouraging or prohibiting foreign investment in oil and gas fields, raced to invite foreign investment again to carry out massive new developments. In the late 1990s Venezuela, Iran, and Iraq struck massive deals with foreign firms for major fields. Even Saudi Arabia invited proposals for development of its untapped natural gas reserves, a move that oil giants responded to with alacrity in the hope the country's mammoth oil fields too would later be opened to foreign investment. However, American firms were shut out of Iran and Iraq by their own government's sanctions; French, Russian and Chinese firms got the contracts instead. Chavez's increasing assertiveness threatens to shut American firms out of Venezuela as well. The Saudi deal-which the American firms were to lead-stands cancelled, apparently because of the Saudi government's fear of public resentment. Thus, if it does not invade the west Asian region, the US stands to lose dollar hegemony by losing control of the major oil field development projects in the next decade.

3. Oil as a weapon: Thirdly, direct American control of oil would render potential challengers for world or regional supremacy (Europe's imperialist powers, Japan and China) dependent on the US. It is clear the US is following this policy:

In the short term

In the short term, the US anticipates being in a better position than its rivals to absorb the immediate disruption arising from the war. It seems unlikely that the conventional armed forces of the Iraqi regime-depleted anyway to one-third of their 1990 strength-would pose much of a problem for the US's initial occupation of Iraq.

While the oil price hike would have an impact on all countries, the US assesses that it would be in a better position to take the immediate impact of higher oil prices than other countries:
First, it has higher disposable income than the rest of the world, and net energy imports account for just one per cent of its GDP. The US being a bigger, more powerful economy, can better protect itself from the consequences of the price hike.

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Als we alle propaganda over bevrijden van mensen, het maken van democrasien en het voorkomen van verspreiden van WMD even vergeten. Is dit niet een nachtmerrie scenario waartegen Europa zou moeten strijden. Als we dit alles laten gebeuren blijven we als Europa afhankelijk van Amerika en mischien nog wel meer dan nu. Willen we het schoothondje van Amerika blijven, of willen we weer de superpowers worden die we ooit waren?

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Op dinsdag 8 april 2003 19:02 schreef sjun het volgende:
k denk dat de dollarkoers ook zeker meespeelt. Ik verwacht alleen niet dat het Amerika puur om de dollar te doen was geweest. Ik vermoed dat men in het MO zal overgaan tot afrekening in Euro's, al was het maar om Amerika wat te jennen. Dat veranderen ze echt niet middels deze oorlog.

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De instabiliteit in de regio is volgens dit artikel meer gepland dan een bij-effect. Amerika kan zijn energie voorraad aardig op peil houden tijdens zo'n periode dan de rest van de wereld dat kan.

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Will the USD crash in 2003?

The U.S has a massive trade deficit that is soaring at an enormous rate and may soon reach 5% of GDP. In the past these large deficits were offset by investment opportunities in the U.S., which attracted a huge inflow of foreign capital and kept the dollar (USD) strong. In 2002 the U.S equities market and bond market did not attract enough foreign capital as a result of the wave of corruption scandals amongst major corporations and accounting firms, and the USD depreciated 15% against the Euro and 10% against the yen. In fact, the widening deficit is becoming so enormous that the U.S. requires $1.9 billion a day in capital inflow in order to offset the dollars that are fleeing the country (to pay for imports). It is when confidence in the United States is shaken, that the dollar suffers. A destabilizing event could create a detrimental shock and cause the USD to crash. Should a USD crash occur, we expect to see significant movement across all of the major currency pairs, providing exciting opportunities for the active trader. Here are three possible scenarios that could cause a USD crash and how a currency trader can profit on the dollar’s demise:

3 scenarios

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