the dollar and the euro...a struggle for monetary hegemony?

[McKenzie]

The real reasons for the invasion of Iraq seem to be based more on maintaining the dollar as the world's de facto reserve currency than simply securing strategic oil supplies. Just running a simple search string on Google threw up dozens of articles that discuss the Iraq war as economic warfare based upon maintaining dollar hegemeony. It seems this isn't about military supremacy per se, it's about the very basis of the US economy, the mighty petrodollar. Further evidence of economic warfare with Europe can be seen in the baffling failure to prop up the dollar. It seems to be a way of damaging European
exports, eventually weakening the euro thus making it less to be adopted as a reserve currency.

These articles span a period of roughly 18 months but there is a similar thread across all of them...if the dollar ceases to be the world's de facto reserve currency the party is over for the US.


This article is the oldest of those I've posted having been written in April 2003. I've included it because it is uncannily prescient in discussing the likelihood of Iran being targetted on the spurious premise of having nukes.

http://home.austarnet.com.au/mickdenley/anarchy/articles/TheRealReasonForWar.html

<snip>

Once in Iraq, the US would also quickly move to revert Iraq’s foreign currency reserves back into US dollars and take steps to discourage further use of the Euro as a petrodollar (ie, follow the invasion of Iraq with an invasion of Iran - the groundwork is already being laid with stories of Iranian nuclear developments - and with the overthrow of the Chavez government in Venezuela).

<snip>

http://www.uslaboragainstwar.org/article.php?id=7077

<snip>

The Iranians are about to commit an "offense" far greater than Saddam Hussein's conversion to the euro of Iraqs oil exports in the fall of 2000.  Numerous articles have revealed Pentagon planning for future military operations against Iran as early as 2005.  While the publicly-stated reasons will be Iran's nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare -- Iran's upcoming euro-based oil Bourse.

<snip>

http://www.dedefensa.org/article.php?art_id=1286

<snip>

The second pillar of American dominance in the world is the dominant role of the U.S. dollar as reserve currency. Until the advent of the Euro in late 1999, there was no potential challenge to this dollar hegemony in world trade. The Petrodollar has been at the heart of the dollar hegemony since the 1970’s. The dollar hegemony is strategic to the future of American global pre-dominance, in many respects as important if not more so, than the overwhelming military power. 

<snip>

[Kellanved]

1. hmm

Quite an interesting set of articles, although it took me a moment to realize that there is no punchline.
Probably belongs upstairs, or is this a valiant attempt to GD-ize the Lounge?

;-)

[McKenzie]

2. thnx...alerted the mods in case they want to move it. n/t

[brainshrub]

3. What we face:

We face an oil shortage, a water crisis, a currency collapse and an impeding environmental emergency.

And the man we have in charge is a wanker. *sigh*

[Deja Q]

5. What's there to wank? I think Saddam had * wanking it until it dropped off

[Mojambo]

4. When the dollar loses, it's going to be the Euro vs the Smart Bomb

Believe it.

[tritsofme]

6. I have always seen way more structural problems in the eurozone economies

than in the US.

The eurozone has been in a multi-year funk of high unemployment and anemic growth. The stability pact restricts individual governments from enacting the right fiscal policy to get them out of this funk by limiting the size of the budget deficit or imposing fines. The ECB's fiscal policy has also been way too tight, and this accounts for at least some of the euro's overstated strength.

They are on the verge of a retirement crisis that makes our social security problems look desirable. In the years after WWII the Europeans built up an extremely generous welfare state, that was fine when the majority of the population was young and they could afford it, but now their birth rates are dangerously low, and they need to institute drastic reforms in the next few years to fix it. There is also a higher aversion to immigration in Europe than there is in the US, and this closes the door in many respects to one solution of a low birth rate.

[TreasonousBastard]

7. Not that many more...

since Europe is almost entirely self-sufficient. They grow enough food and make enough stuff for themselves and and for export. Their import needs may be forest products and a few rare commodities, but not nearly as much as we have to deal with. Absorbing Eastern Europe gives them even more low-wage and educated employees. If the US, and then the world, economy collpases, My bet is on the Europeans to come out of it with the least damage. Still will be a lot of damage, though.

They are well aware of the problem of declining birthrates, having had that problem for years. Britain once even offered "bounties" to women having children. The idea of "guest workers" is not new to them-- they've been around for years. What is new to them is the changing population as the Turks, Arabs, and Africans have been there for generations, and more are moving in. The questions of national culture and identity are looming large. Questions of offering citizenship are also looming.

At least the Europeans are facing the problems head-on. Our "growth" is a chimera with far too much of it based on extreme credit, cheap imports, and back-door encouragement of cheap imported labor.

While much of the world depends on us as the major market, we also depend upon them to keep buying dollars so we can keep buying their stuff. At some point the balance will tip and 400 million Europeans, a billion Indians, 2 billion Chinese... will also be seen as markets and just not financiers of our debt.

That, btw, is the real point of PNAC. Moreso than military hegemony, the PNAC documents inisted that the US maintian economic hegemony, and throw banana peels under any economy that could challenge us. Germany was specifically mentioned as a threat, being the largest European production and growth engine. The PNACers advised doing whatever we could to slow German growth. Maybe Japan, too, but I don't specifically recall that.

[Kellanved]

8. I'm not so sure about that

It is very difficult to judge the Eu's economic future.
Too much depends on political decisions not yet made, too many rely on simple predictions. I disagree on the Euro's strength being overstated, a simple price comparison shows one thing pretty clearly: a Euro buys a lot more than a Dollar.

Also I don't see how statements about the whole EU and social opinions regard immigration etc. can be made; those vary between regions, let alone between member-nations. As to the generosity of the welfare state and the unemployment - the (pardon me) US-way of locking poor people up is not a lot cheaper than a welfare state.

I have the impression that too many US economists tend to only look on the German numbers, as their indicator for the EU as a whole. This may hold true for the moment, but is missing one major thing: the German reunification.
The German economy is pretty much absorbed by the reunification process, and will continue that way for at least another decade. After that, all bets are off - studies show that no other economy in the world would have been able to absorb an essentially defunct state the relative size of the GDR without collapsing instantly. Yet the west German Economy is pretty much alive, the East German is getting the first positive predictions since the early nineties.

Be careful with generalizations; while Rifkin's standpoint might not be entirely realistic, neither is the "EU-is-doomed" oversimplification.