Saturday, January 12, 2008

Falling Dollar, Falling Empire?

Losing status as world’s reserve currency spells big trouble for American Empire, good news for peoples in rest of the world.

It’s not often that a Brazilian super model reveals the approaching collapse of an empire. Such was the case when Gisele Bundchen - one of the richest models in the world - insisted that her $30 million dollar fees for the first half of 2007 be paid not in American dollars - but in euros.
Bundchen isn’t the only one wary of the dollar. Over the last few years the dollar has been slowly losing ground to the euro. With the sub-prime mortgage crisis, tremendous trade imbalances, and two grinding wars, the American Empire is starting to show its cracks.
But it is not so much the value of the dollar as the role that the dollar plays in the global economy that has kept the US dominant for the last several decades. Since 1970, when President Nixon took the dollar off the gold standard, the US has been able to do something that no other country on Earth can do - finance its debts by just printing more money. Every other country that has done the same has immediately faced hyper-inflation. For example, after WWI, Germany paid off its war debts by printing more money - so Germans started using the soon worthless currency to burn instead of firewood.
This doesn’t happen to the US because most oil producing countries are dominated by the US and conduct all their oil sales in dollars. Want to buy some oil from Saudi Arabia? You’ll need dollars. This forces other countries to buy massive amounts of dollars and accept dollars when they sell their exports to the US. This keeps the dollar artificially high and allows the US to support a massive trade imbalance that hit a record monthly high of $68.13 billion in October (The US has not exported more than it imported since 1975!). The inflation then gets put on to people outside the US when they pay higher prices for their commodities - a hidden tax on the people of the world to fund the wars and consumerism of the American Empire.
Once the dollar loses its status as the worlds’ reserve currency, inflation will explode in the US and their 737 foreign military bases would be unaffordable - something the US has been desperate to avoid. Saddam Hussein switched Iraqi oil sales to the euro. After the US bombed, invaded and occupied Iraq, the oil accounts were switched back to dollars. In 2002, the CIA backed a failed coup against the democratically elected government of Venezuela after that country’s ambassador to Russia spoke of switching to the euro for their oil sales. More recently, when Iran stated that they would start using the euro or the yen for their oil sales, the White House started a campaign to launch a war against Iran, using the same false propaganda that was used to justify the war against Iraq. The US would sooner kill millions of people through its wars than lose the tool that allows them to dominate the global economy. But as the saying goes: Todays’ empire, tomorrows’ ashes!