The Coming Depression
Date: Friday, September 16 2005
Topic: Eye on Uncle Sam
By Patrick Meloy
Sept 11, 2005
The United States is pushing towards a war with Iran with the stated reason that Iran is attempting to build nuclear weapons. We now know that Iraq’s alleged “weapons of mass destruction” that were said to be poised to annihilate the free world at a moment’s notice, did not exist. The United States and Britain used weak and false intelligence to spread this fallacy in an effort to legitimize a war of aggression and they are trying to do the same thing again. Iraq did indeed pose a real and serious threat to the United States, but not by way any military weapons. Iraq had the power to destroy the value of the American Dollar and along with it, the American Economy.
To understand this true weapon of mass destruction, you must understand the position the American Dollar holds in the world economy.
After WWII, Europe lay in ruins. The United States instituted the Marshall Plan where the US loaned massive amounts of money to European nations with the condition that goods and services be purchased from the United States. It was a great success; Europe was quickly able to rebuild its infrastructure and industry while US companies made fortunes supplying Europe’s needs. Because so many countries had so many US dollars, they ended up using them to purchase goods and services from other countries as well - including oil from the Middle East. In fact, two energy exchanges, the International Petroleum Exchange (IPE) in London, and the New York Mercantile Exchange (NYMEX) emerged as the only places to trade energy products and everything was priced in US dollars. In the 1970s, after the US made deal with Saudi Arabia, virtually the only currency you could use to purchase oil was the US dollar. This made the Greenback the dominant currency in the world, used for most (Western) trade and all energy purchases. This was a great deal for the United States - the value of the US dollar gained strength rapidly and they could afford to print huge sums of money without risk of devaluing their currency. Most of the newly printed money ended up offshore, in the vaults of central banks around the world that needed it for trade and energy.
Due to Free Trade, Globalization, and Reaganomics, American manufacturing fled to low-wage countries in search of higher profits. American output fell; unemployment rose, and the Federal government started borrowing madly to maintain spending levels; at the same time, their ability to pay shrank. America is now in a worse economic position than that of either Brazil or Korea when those countries’ economies melted down. The United States has an advantage that neither of those countries had though, massive amounts of their own currency sitting in other countries’ central banks collecting dust. America was able to borrow back its own currency from a multitude of countries that were happy to have their reserves earning interest instead of just laying around. This process of printing money for use outside the country and then having it come back as investments is known as “Recycling the Petro Dollar”.
Most of the world now realizes that the main reason for the USA to invade Iraq was to take its oil. What most governments, but few citizens, know, is that the rush to war was due to Saddam Hussain’s committing the high crime of accepting Euro dollars for oil under the “Oil for Food” program. While oil sales from Iraq were minimal due to UN sanctions, the act of defiance did not go unnoticed. Iran, Venezuela, and North Korea all started to dump portions of their US dollar reserves, and OPEC itself received European Union representatives who gave a presentation on the advantages of using the Euro currency for oil sales. The EU today is actually a larger market than the USA. It has more people and more money, and uses more oil than the United States. As OPECs largest single customer, it makes sense to use their currency. With Europe posing a major threat to the hegemony of the US Greenback, the USA decided it had to do something drastic to show OPEC that it would not allow a switch to the Euro. This is why; shortly after Iraq’s conversion to the Euro in late 2000, the USA used the excuse of 9/11 to invade Iraq - not to fight terrorism, but to perpetrate terror itself in order to keep OPEC in line. One can understand the reticence of Germany, France, and Russia when it came to invading Iraq, as switching to the Euro would have been a strategic economic victory.
In 2003, Iran began selling oil for Euros to a large number of Euro-dominated countries. The Euro was already making inroads as a replacement trade currency and this switch to the Euro for oil has played a large part in the US dollar’s declining value. As if this crime against the USA wasn’t enough, Iran also announced its intention to open its own Oil Bourse (exchange) in late 2005 (now delayed until spring 2006), competing with the two American owned exchanges, NYMEX and IPE. The last technical hurdle to the Euro taking over as both world trade and energy currency would be eliminated; the US dollar would likely go into freefall as central banks dumped their Greenbacks and bought Euros. The US has been working hard overtly, with its weapons of mass destruction smear campaign, as well as covertly, using its own cadre of terrorists, the M.E.K, to destabilize the Iranian government. The USA lacks the troops to invade and Dick Cheney has asked the Pentagon to draft a plan to use nuclear weapons against Iran. Assuming that Russia and China do not retaliate with a missile attack against the USA and its assets, using nuclear weapons against Iran could push the rest of the world to use its only real defense against the USA, dumping the Greenback and destroying the US economy. If the US does not attack, the oil bourse will open and the ultimate result will likely be the same: the end of the USA as a world power and the start of a new “Great Depression”.