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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Op zaterdag 12 april 2003 15:30 schreef SuperG het volgende:
maar waren de VN leden nog steeds aan het diplomatiek bakkeleien over VN Irak inspectie resoluties en werden aan het lijntje gehouden door saddam.

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What is being planned in Iraq is not reconstruction but robbery

On April 6, deputy defence secretary Paul Wolfowitz spelled it out: there will be no role for the UN in setting up an interim government in Iraq. The US-run regime will last at least six months, "probably longer than that". And by the time the Iraqi people have a say in choosing a government, the key economic decisions about their country's future will have been made by their occupiers. "There has to be an effective administration from day one," Wolfowitz said. "People need water and food and medicine, and the sewers have to work, the electricity has to work. And that's coalition responsibility."
The process of how they will get all this infrastructure to work is usually called "reconstruction". But American plans for Iraq's future economy go well beyond that. Rather than rebuilding, the country is being treated as a blank slate on which the most ideological Washington neo-liberals can design their dream economy: fully privatised, foreign-owned and open for business.

The $4.8m management contract for the port in Umm Qasr has already gone to a US company, Stevedoring Services, and there are similar deals for airport administration on the auction block. The United States Agency for International Development has invited US multinationals to bid on everything from rebuilding roads and bridges to distributing textbooks. The length of time these contracts will last is left unspecified. How long before they meld into long-term contracts for water services, transit systems, roads, schools and phones? When does reconstruction turn into privatisation in disguise?

Republican congressman Darrel Issa has introduced a bill that would require the defence department to build a CDMA cellphone system in postwar Iraq in order to benefit "US patent holders". As Farhad Manjoo noted in the internet magazine Salon, CDMA is the system used in the US, not in Europe, and was developed by Qualcomm, one of Issa's most generous donors.

Then there's oil. The Bush administration knows it can't talk openly about selling Iraq's oil resources to ExxonMobil and Shell. It leaves that to people like Fadhil Chalabi, a former Iraqi petroleum minister and executive director of the Center for Global Energy Studies. "We need to have a huge amount of money coming into the country. The only way is to partially privatise the industry," Chalabi says.

He is part of a group of Iraqi exiles that has been advising the state department on how to implement privatisation in such a way that it isn't seen to be coming from the US. Helpfully, the group held a conference in London on April 6 and called on Iraq to open itself up to oil multinationals shortly after the war. The Bush administration has shown its gratitude by promising that there will plenty of posts for Iraqi exiles in the interim government.

Some argue that it's too simplistic to say this war is about oil. They're right. It's about oil, water, roads, trains, phones, ports and drugs. And if this process isn't halted, "free Iraq" will be the most sold country on earth.

It's no surprise that so many multinationals are lunging for Iraq's untapped market. It's not just that the reconstruction will be worth as much as $100bn; it's also that "free trade" by less violent means hasn't been going that well lately. More and more developing countries are rejecting privatisation, while the Free Trade Area of the Americas, Bush's top trade priority, is wildly unpopular across Latin America. World Trade Organisation talks on intellectual property, agriculture and services have all got bogged down amid accusations that the US and Europe have yet to make good on past promises.

So what is a recessionary, growth-addicted superpower to do? How about upgrading from Free Trade Lite, which wrestles market access through backroom bullying at the WTO, to Free Trade Supercharged, which seizes new markets on the battlefields of pre-emptive wars? After all, negotiations with sovereign countries can be hard. Far easier to just tear up the country, occupy it, then rebuild it the way you want. Bush hasn't abandoned free trade, as some have claimed, he just has a new doctrine: "Bomb before you buy".

It goes much further than one unlucky country. Investors are openly predicting that once privatisation takes root in Iraq, Iran, Saudi Arabia and Kuwait will all be forced to compete by privatising their oil. "In Iran, it would just catch like wildfire," S Rob Sobhani, an energy consultant, told the Wall Street Journal. Pretty soon, the US may have bombed its way into a whole new free trade zone.

So far, the press debate over the reconstruction of Iraq has focused on fair play: it is "exceptionally maladroit", in the words of the European Union's commissioner for external relations, Chris Patten, for the US to keep all the juicy contracts for itself. It has to learn to share: Exxon should invite France's TotalFinaElf to the most lucrative oil fields; Bechtel should give Britain's Thames Water a shot at the sewer contracts.

But while Patten may find US unilateralism galling, and Tony Blair may be calling for UN oversight, on this matter it's beside the point. Who cares which multinationals get the best deals in Iraq's pre-democracy, post-Saddam liquidation sale? What does it matter if the privatising is done unilaterally by the US, or multilaterally by the US, Europe, Russia and China?

Entirely absent from this debate are the Iraqi people, who might - who knows? - want to hold on to a few of their assets. Iraq will be owed massive reparations after the bombing stops, but in the absence of any kind of democratic process, what is being planned is not reparations, reconstruction or rehabilitation. It is robbery: mass theft disguised as charity; privatisation without representation.

A people, starved and sickened by sanctions, then pulverised by war, is going to emerge from this trauma to find that their country had been sold out from under them. They will also discover that their new-found "freedom" - for which so many of their loved ones perished - comes pre-shackled by irreversible economic decisions that were made in boardrooms while the bombs were still falling. They will then be told to vote for their new leaders, and welcomed to the wonderful world of democracy.

bron

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how the poor are financing the rich.

his short report outlines the role the US deficit has played in driving the process of globalisation. Secondly, it analyses the way in which poor countries are financing the US deficit and therefore the high living standards of US citizens. The following are our chief conclusions:

The US deficit as the real driving force behind globalisation

- The growing US deficit has, since the 1960s, been the dominant driving force behind financial globalisation. Elected representatives of the US and UK have actively promoted international financial liberalisation, or globalisation to finance the US deficit. Globalisation has not, we argue, been primarily driven by corporations or by developments in new technology.

- Today capital liberalisation is once again as in the 1920s and 30s leading to financial instability and growing international tensions. Above all financial liberalisation leads to the loss of policy autonomy by democratic as well as undemocratic governments.

- The exceptions are those highly indebted states dominant in the global economy, the United States and the United Kingdom whose indebtedness has not led to major economic adjustments nor to the loss of policy autonomy.

The US a heavily indebted country

- The accumulated external debt of the worlds richest country, the United States of America, is equal to $2.2 trillion. This is almost the exact amount owed by the whole of the developing world, including India, China and Brazil $2.5 trillion.

- In other words, three hundred million people in the US owe as much to the rest of the world, as do five billion people in all of the developing countries.

- Or to put it differently, every American citizen owes the rest of the world $7,333 while every citizen of all the developing countries only owes the rest of the world $500.

- Moreover, while developing country economies are bled dry through debt service repayments totalling more than $300bn per year, the US must only pay $20bn per year to service an almost equivalent amount of debt.

- Americans have been engaged in a consumer binge, which has led to the largest current account deficit in history, a staggering $445 billion or 4% of US GDP. This deficit has been increasing by 50% a year in recent years, and economists predict it will rise to $730bn by 2006.

- Given this daily defecit of up to £2bn, plus capital outflow of $2bn, the US in effect has to borrow $4bn from the pool of world savings every day.

How the US deficit is being financed by the poor of the world

- The US deficit is financed by a) the thifty savers of East Asia, in particular Japan, China and Singapore; but also b) by surpluses built up by countries like France and Switzerland.

- More disturbingly, the US deficit is being financed by the poor through a) capital flight from poor countries and b) the forced holdings of high levels of dollar reserves.

- To build up reserves, poor countries are borrowing hard currency from the US at interest rates as high as 18%; and lending this back to the US (in the form of interest on US Treasury Bonds) at 3%.

- Asian and African countries are forced, by the financial instability caused by globalisation, to maintain dollar reserves, at 14% and 7% of GDP respectively. The US in contrast holds only about 1.3% of her GDP in reserves.

- The cumulative cost for developing countries of holding such high dollar reserves may be as much as 24% of GDP over ten years; which represent a significant drag on growth rates.

- Inflows of capital into the US and UK: a) help to lower interest rates and therefore borrowing costs for the people of these countries and b) inflate the value of their currencies by about 20%. This enables rich countries, therefore, to purchase imports from the rest of the world 20% cheaper than they would otherwise have been able to.

- If it were not for capital flight, at least 25 African countries would be net creditors, not debtors.

- Countries like Argentina find that their governments are borrowing hard currency, only to find it promptly leaves the country (in the form of capital flight) for Wall St., London, Zurich or Madrid a legitimate process under capital liberalisation.

- However the poor in these countries are then saddled with huge public debts. Argentina's total external debt of $150 bn is almost exactly equal to unrecorded capital flight of $130bn.

The next crisis?

- The US deficit is not sustainable. The issue before us is the form that the necessary adjustment takes?

- While there is much debate about when or how this will happen, our report notes that it is inevitably the poor countries that will bear the highest costs of any correction to the US's unsustainable debts.

- Some countries will also lose substantial inflows of private capital.

- Countries that are dollarised, like Ecuador, will bear the brunt of high interest rates, as the US is forced to ratchet up rates to attract new capital.

- Other countries will pay in the form of declining terms of trade; those exporting commodities will be hit the hardest.

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