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Entrepreneur
Join Date: Oct 2002
Location: USA
Posts: 31,429
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Moreover, and perhaps most telling, during 2002 the majority of reserve funds in Iran's central bank have been shifted to euros. It appears imminent that Iran intends to switch to euros for their oil currency.
"More than half of the country's assets in the Forex Reserve Fund have been converted to euro, a member of the Parliament Development Commission, Mohammad Abasspour announced. He noted that higher parity rate of euro against the US dollar will give the Asian countries, particularly oil exporters, a chance to usher in a new chapter in ties with European Union's member countries.
"He said that the United States dominates other countries through its currency, noting that given the superiority of the dollar against other hard currencies, the US monopolizes global trade. The lawmaker expressed hope that the competition between euro and dollar would eliminate the monopoly in global trade." [4]
After toppling Saddam, this administration may decide that Iran's disloyalty to the dollar qualifies them as the next target in the 'war on terror.' Iran's interest in switching to the euro as their currency for oil exports is well documented. Perhaps this MSNBC article alludes to the objectives of neo-conservatives.
"While still wrangling over how to overthrow Iraq's Saddam Hussein, the Bush administration is already looking for other targets. President Bush has called for the ouster of Palestinian leader Yasir Arafat. Now some in the administration -- and allies at D.C. think tanks -- are eyeing Iran and even Saudi Arabia. As one senior British official put it: 'Everyone wants to go to Baghdad. Real men want to go to Tehran.'" [5]
Aside from these political risks regarding Saudi Arabia and Iran, another risk factor is actually Japan. Perhaps the biggest gamble in a protracted Iraq war may be Japan's weak economy. [6]
If the war creates prolonged oil high prices ($45 per barrel over several months), or a short but massive oil price spike ($80 to $100 per barrel), some analysts believe Japan's fragile economy would collapse. Japan is quite hypersensitive to oil prices, and if its banks default, the collapse of the second largest economy would set in motion a sequence of events that would prove devastating to the U.S. economy. Indeed, Japan's fall in an Iraq war could create the economic dislocations that begin in the Pacific Rim but quickly spread to Europe and Russia. The Russian government lacks the controls to thwart a disorderly run on the dollar, and such an event could ultimately force an OPEC switch to euros.
Additionally, other risks might arise if the Iraq war goes poorly or becomes prolonged. It is possible that civil unrest may unfold in Kuwait or other OPEC members including Venezuela, as the latter may switch to euros just as Saddam did in November 2000. This would foster the very situation this administration is trying to prevent: another OPEC member switching to euros as their oil transaction currency.
Incidentally, the final 'Axis of Evil' country, North Korea, recently decided to officially drop the dollar and begin using euros for trade, effective Dec. 7, 2002. [7] Unlike the OPEC-producers, North Korea's switch will have negligible economic impact, but it illustrates the geopolitical fallout of Bush's harsh rhetoric.
Much more troubling are North Korea's recent actions following the oil embargo of their country. They are in dire need of oil and food; and in an act of desperation they have re-activated their pre-1994 nuclear program. Processing uranium appears to be taking place at a rapid pace, and it appears their strategy is to prompt negotiations with the U.S. regarding food and oil. The CIA estimates that North Korea could produce 4-6 nuclear weapons by the second half of 2003. Ironically, this crisis over North Korea's nuclear program further confirms the fraudulent premise for which this war with Saddam was entirely contrived.
Unfortunately, neo-conservatives such as George Bush, Dick Cheney, Donald Rumsfeld, Paul Wolfowitz and Richard Pearle fail to grasp that Newton's Law applies equally to both physics and the geo-political sphere as well: "For every action there is an equal but opposite reaction."
During the 1990s the world viewed the U.S. as a rather self-absorbed but essentially benevolent superpower. Military actions in Iraq (1990-91 and 1998), Serbia and Kosovo (1999) were undertaken with both U.N. and NATO cooperation and thus afforded international legitimacy. President Clinton also worked to reduce tensions in Northern Ireland and attempted to negotiate aresolution to the Israeli-Palestinian conflict.
However, in both the pre and post 9/11 intervals, the 'America first' policies of the Bush administration, with its unwillingness to honor International Treaties, along with their aggressive militarisation of foreign policy, has significantly damaged our reputation abroad. Following 9/11, it appears that President Bush's 'warmongering rhetoric' has created global tensions -- as we are now viewed as a belligerent superpower willing to apply unilateral military force without U.N. approval.
Lamentably, the tremendous amount of international sympathy that we witnessed in the immediate aftermath of the September 11th tragedy has been replaced with fear and anger at our government. This administration's bellicosity has changed the worldview, and 'anti-Americanism' is proliferating even among our closest allies. [8]
Even more alarming, and completely unreported in the U.S media, are some monetary shifts in the reserve funds of foreign governments away from the dollar with movements towards the euro. [9]
It appears that the world community may lack faith in the Bush administration's economic policies, and along with OPEC, seems poised to respond with economic retribution if the U.S. government is regarded as an uncontrollable and dangerous superpower. The plausibility of abandoning the dollar standard for the euro is growing. An interesting U.K. article by Hazel Henderson outlines the dynamics and the potential outcomes:
The most likely end to US hegemony may come about through a combination of high oil prices (brought about by US foreign policies toward the Middle East) and deeper devaluation of the US dollar (expected by many economists). Some elements of this scenario:
1. US global over-reach in the 'war on terrorism' already leading to deficits as far as the eye can see -- combined with historically-high US trade deficits -- lead to a further run on the dollar. This and the stock market doldrums make the US less attractive to the world's capital.
2. More developing countries follow the lead of Venezuela and China in diversifying their currency reserves away from dollars and balanced with euros. Such a shift in dollar-euro holdings in Latin America and Asia could keep the dollar and euro close to parity.
3. OPEC could act on some of its internal discussions and decide (after concerted buying of euros in the open market) to announce at a future meeting in Vienna that OPEC's oil will be re-denominated in euros, or even a new oil-backed currency of their own. A US attack on Iraq sends oil to [euro dollar symbol] 40 (euros) per barrel.
4. The Bush Administration's efforts to control the domestic political agenda backfires. Damage over the intelligence failures prior to 9/11 and warnings of imminent new terrorist attacks precipitate a further stock market slide.
5. All efforts by Democrats and the 57% of the US public to shift energy policy toward renewables, efficiency, standards, higher gas taxes, etc. are blocked by the Bush Administration and its fossil fuel industry supporters. Thus, the USA remains vulnerable to energy supply and price shocks.
6. The EU recognizes its own economic and political power as the euro rises further and becomes the world's other reserve currency. The G-8 pegs the euro and dollar into a trading band -- removing these two powerful currencies from speculators trading screens (a "win-win" for everyone!). Tony Blair persuades Brits of this larger reason for the UK to join the euro.
7. Developing countries lacking dollars or "hard" currencies follow Venezuela's lead and begin bartering their undervalued commodities directly with each other in computerized swaps and counter trade deals. President Chavez has inked 13 such country barter deals on its oil, e.g., with Cuba in exchange for Cuban health paramedics who are setting up clinics in rural Venezuelan villages.
The result of this scenario? The USA could no longer run its huge current account trade deficits or continue to wage open-ended global war on terrorism or evil. The USA ceases pursuing unilateralist policies. A new US administration begins to return to its multilateralist tradition, ceases its obstruction and rejoins the UN and pursues more realistic international cooperation.
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