�The real rulers in Washington are invisible and exercise
power from behind the scenes.� Felix Frankfurter, United States Supreme Court
The U.S. dollar is the
very heart of the empire. It�s the cornerstone upon which the military, the
media and the political establishment rests.
strength however does not come from its comparative value to other currencies,
but from its widespread use as the world�s reserve currency. As the reserve
currency, the dollar defies the fundamental rules for determining �real value,�
that is, the relationship between the nation�s credits and debits and the size
and strength of its economy. Rather, the dollar�s extensive use is the result
of America�s economic dominance since the end of the World War 2, the
profitability of its markets, and its stranglehold on the oil trade.
If the dollar�s
value were simply determined according to America�s national debt, the
faltering dollar would sink like a stone. As it stands, foreign countries are
still willing to take checks (dollars) from a nation that is drowning in $8.3
trillion of red ink.
American leaders have understood the great advantages of controlling the
world�s reserve currency. It allows the Federal Reserve to create money out of
thin air and pass it off to foreign countries for their valuable resources and
manufactured goods. As one critic noted, �It�s like having a mint in your
however, has been thoroughly abused by the Bush administration which has
borrowed trillions from the treasury for lavish tax cuts, �no bid� contracts,
and endless wars. With a trade deficit currently running at $800 billion per
year which is 6.4 percent of GDP, most of these expenses are being financed by
countries in the developing world. The trade deficit with China alone was
nearly $200 billion last year, which means that China unwittingly paid for two
years of the war in Iraq!
War is considerably
less painful when someone else is paying the bill.
present system is ideal for extortion, expropriation, and exploitation, which
is why it is so popular in Washington. Many believe that we are fighting in
Iraq to defend dollar-hegemony. That may not so far fetched. Saddam switched to
the euro just six months before he was pelted with laser-guided munitions in
Shock and Awe. Similarly, the war drums have been beating ferociously since
Iran announced the opening of its oil bourse which would trade oil in euros
rather than dollars. Putin and Chavez have also fallen from grace with
Washington since they�ve shown an eagerness to ditch the dollar and sell oil in
either euros or rubles.
So, what is the
relationship between the dollar and the oil trade and how crucial is it to
America�s continued control over the global economic system?
The supremacy of
the dollar depends almost entirely on the oil trade. Oil is the largest
commodity in the world and its trade is almost exclusively denominated in dollars
through the New York Mercantile Exchange (NYMEX) or London�s International
Petroleum Exchange (IPE). Foreign countries must maintain large stockpiles of
US dollars in order to meet their energy needs. In fact, Arab News recently
noted that nearly $4 trillion in USD are currently held in foreign banks.
Needless to say, if Bush is unable to maintain this de-facto monopoly on the
oil trade, we can expect a massive sell off of greenbacks that will result in
hyper-inflation and, perhaps, depression at home.
By 2030, 60 percent
of the world�s oil will come from the Middle East. The only way that Western
elites and banking giants can maintain their superpower role is by asserting
direct control over the resources of the entire Caspian Basin. This will ensure
that the dollar remains the as the de-facto international currency regardless
of America�s profligate spending and prodigious debt. Foreign nations will have
no choice but to continue to purchase oil in US dollars.
To some people,
this will sound conspiratorial. But that is because critics of the war in Iraq
have focused all their attention on oil as the primary objective. There is a
linkage between oil and the dollar, between the banking establishment and the
oil giants; they are two spokes of the same wheel. Oil underwrites the dollar
in the same way that gold did 40 years ago. It is the new standard for
legitimizing the currency.
Oil is critical to
the maintenance of the system, but the dollar is the system. It is the means of
extorting valuable resources and manufactured goods through the issuance of
worthless, green paper backed by nothing but $8.3 trillion of debt.
America is now
engaged in a transition that has never before been attempted. It has hollowed
out its manufacturing sector (more than 3 million manufacturing jobs have been
lost since Bush took office) looted its treasury, and plunged the country into
irreversible debt. Its major corporations and banks have disconnected from the
mainland and operate as sovereign islands protected by the US military and
international trade law. They have no allegiance to America and are
unaccountable to anyone except their own shareholders.
critical to their ongoing success as it keeps the basic unit of exchange; paper
money, in the control of fellow elites at the Federal Reserve. Absent that
power, American plutocrats would be unable to perpetuate the system of trading
debt for goods and resources.
The most effective
strategy for bringing the dollar into balance with the other currencies is to
�democratize� the system and allow the free exchange of goods and resources in
one�s own currency. This would eliminate the dependence on a reserve currency
and make the United States accountable for its own gigantic debt. It would
force American leaders to revitalize the manufacturing sector as a way of
restoring economic solvency.
The dependence on a
�reserve currency� inevitably creates winners and losers. It invites huge
account imbalances as well as corruption and exploitation. Greater parity among
the currencies should be encouraged as a way of strengthening democracies and
invigorating markets. It�s a way to breathe new life into international trade
by allowing other political models to flourish without fear of being subsumed
into the capitalist prototype.
The dominance of
the greenback has created a global empire which is controlled by a small group
of corporatists and autocrats who depend on intimidation and brute force to
maintain their supremacy. The quickest way to establish greater equity among
the nations of the world is to dislodge the dollar from its lofty perch and
�even the playing field� with the other currencies.
Mike Whitney lives in Washington state. He can be reached at: firstname.lastname@example.org.