|Source||News for Social Justice Activists|
|Cost, abuse and danger
By Rudo de Ruijter
THOSE WHO USE dollars outside the US continuously pay a contribution to the US. It comes in the form of an inflation of $1.25 million per minute. This is the result of the fast increase of the US foreign debt. Half of all US’ imports are simply added to the foreign debt and paid for by the foreign dollar holders through inflation.
Moreover these dollar holders do not seem to realise, that the dollar rate they are looking at, is nothing more than a dangerous façade. If they don’t understand what is still keeping it upright, the façade may hit them by surprise. Meanwhile, the dollar is at the center of several US’ conflicts.
World wide demand for dollars: Up to 1971, each US dollar represented a fixed amount of gold. The US disposed of enormous gold reserves, which covered the total value of all issued dollars. When foreign banks had more dollars than they wanted, they could exchange it into gold. That was the main reason why the dollar was accepted worldwide.
In 1971 the gold guarantee for the dollar was lifted. In fact, this was an emergency move of president Nixon: the Vietnam war had cost more than the US could afford and more dollars had been printed than the gold reserves allowed. Since then, the value of the dollar is established by the law of offer and demand on the exchange markets.
In the early seventies the US still produced enough oil for its own consumption. To protect its own oil enterprises against foreign competition, oil imports were limited. In exchange for the lift of limitations, the OPEC countries promised they would only accept dollars for their oil. The dollar was the most used currency in the world trade. So nothing special?
Since 1971 everyone who wants to import oil, has to buy dollars first.  That is where the fun starts for the US. Almost everybody needs oil, so everybody wants dollars.
Oil buyers from all over the world hand over their yens, crowns, francs and other currencies. They receive greenbacks in return. With those dollars they go and buy oil in the OPEC-countries. The OPEC-countries will spend the money again. Of course, they can do that in the US, but also in all other countries in the world. Everybody wants dollars, for everybody will need oil again.
Bankrupt and still continuing: You can see the current debt and you can see how much it grows each second… 45 percent of it is to be paid back to foreign borrowers. The foreign debt is that high, that the US cannot pay back her debt anymore. The US is bankrupt.
Nevertheless dollars are still traded normally. For the purchase of oil and gas they are still needed. And, misled by an apparently healthy exchange rate, the world trade continues to do its transactions in dollars. Business as usual?
According to the usual logic of economics, a lower rate of the dollar should lead to more exports from the US and less imports by the US, as foreign importers can buy cheaper in the US then. However, as long as foreigners are mad enough to accept dollars, the US doesn’t find it a problem to issue some more of these green debt bills.
Pay a bit more for Chinese socks and electronics from Japan? No problem. The US just increases the imports and foreign debt a bit harder. Paying more dollars for a product means inflation. And one percent of inflation means that at the same time the value of the tremendous foreign debt decreases with one percent. So the US has no interest at all in putting a break on its imports!
In the oil trade, generally, a lowering dollar rate does have a logical consequence.. oil exporters will not accept a lower return. When the dollar falls with 10 percent, they will raise the oil price 10 percent, so the value remains the same.
How do you steal oil reserves? There is still another aspect to the abuse of the dollar. During the demonstrations against the US-invasion of Iraq, a lot of demonstrators understood it was not about weapons of mass destruction. Iraq has world’s second largest oil reserves. Some demonstrators thought, the US was after the oil. And that is also true. But how can you steal oil reserves, which are in the ground and so huge you cannot take them with you?
You do it with currencies. By imposing, that this oil can only be traded in dollars, in one move the US becomes owner of this oil. The US is the only country, which has the right to print dollars and thus can dispose of the oil any time. Other countries that want to buy this oil, have to buy dollars first. In fact they pay their oil to the US at that moment. The dollars they receive are rights to collect a quantity of oil. (Just like when you go to Ikea to buy furniture, you pay first and you receive a note, with which you can collect your furniture at the shop’s back door.) So, basically, dollars are rights to collect oil. And because everybody needs oil, everybody wants these green notes.
So, Saddam’s switch to the Euro at the start of November 2000 was not just an attack on the rate of the dollar. The switch implied at the same time the US could not dispose freely of the oil anymore. The US would have to buy euros to dispose of it.
Since switching back the dollar on 5 June 2003 , the US has, financially, free disposal of the Iraqi oil again. Now it is a matter of installing a strawman-government and to prevent the Iraqi oil trade from switching away from the dollar once again. That is easy to say, but turns out to be more difficult than expected.