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Thursday, January 6

A New American Century? Iraq and the hidden euro-dollar wars :: from www.uruknet.info :: news from occupied Iraq

A New American Century? Iraq and the hidden euro-dollar wars :: from www.uruknet.info :: news from occupied Iraq

The US has to win the war to keep the dollar afloat.




nformed banking circles in the City of London and elsewhere in Europe privately confirm the significance of that little-noted Iraq move from petro-dollar to petro-euro. "The Iraq move was a declaration of war against the dollar", one senior London banker told me recently. "As soon as it was clear that Britain and the U.S. had taken Iraq, a great sigh of relief was heard in London City banks. They said privately, 'now we don't have to worry about that damn euro threat'".

Why would something so small be such a strategic threat to London and New York, or to the United States that an American President would apparently risk fifty years of alliance relations globally, and more to make a military attack whose justification could not even be proved to the world?

The answer is the unique role of the petro-dollar to underpin American economic hegemony.

How does it work? So long as almost 70% of world trade is done in dollars, the dollar is the currency which central banks accumulate as reserves. But central banks, whether China or Japan or Brazil or Russia, do not simply stack dollars in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the United States. Most countries around the world are forced to control trade deficits or face currency collapse. Not the United States. This is because of the dollar reserve currency role. And the underpinning of the reserve role is the petrodollar. Every nation needs to get dollars to import oil, some more than others. This means their trade targets dollar countries, above all the U.S.

Because oil is an essential commodity for every nation, the Petrodollar system, which exists to the present, demands the buildup of huge trade surpluses in order to accumulate dollar surpluses. This is the case for every country but one ó the United States which controls the dollar and prints it at will or fiat. Because today the majority of all international trade is done in dollars, countries must go abroad to get the means of payment they cannot themselves issue. The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Everyone aims to maximize dollar surpluses from their export trade.

To keep this process going, the United States has agreed to be ëimporter of last resortí because its entire monetary hegemony depends on this dollar recycling.

The central banks of Japan, China, South Korea, Russia and the rest all buy U.S. Treasury securities with their dollars. That in turn allows the United States to have a stable dollar, far lower interest rates, and run a $ 500 billion annual balance of payments deficit with the rest of the world. The Federal Reserve controls the dollar printing presses, and the world needs its dollars. It is as simple as that.


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