Dollar Diplomacy Redux
Here it goes. It started last century. Wikipedia: Dollar Diplomacy is a name used to allege a United States policy of using its economic power to exert influence over other countries.
If a country starts publishing its currency, the currency gets deflated.
Not if other countries want to hoard it. We know every country hoards US dollars. India has some $130 billion dollars in cash reserves. NRI's have deposited another $30 Billion dollars. These figures have doubled in last 2-3 years. China has 5 times this much dollars in cash reserves. Most of international trade happens in dollars.
Why would anyone want to do it? Why is keeping dollars safe? Because of Oils. If you have dollars, it can be used to buy oil.
Every country needs and is going to need oil.
US benefits, and makes sure oil countries only trade in dollar by doing what they did to Iraq, a country which tried to go from dollars to euros.
I remembered reading all this in some article I read long time back. I got the following someplace too:
I have absolutely no idea how reliable or unreliable that site is, but a page on berkley.edu says:Since the USA is inflating its money supply to cover huge trade and consumer debt,
the USA must export the inflation-depreciated US Dollars to foreign investors
or suffer declining USA living standards.
Since the USA no longer manufactures anything (except military weapons) that foreigners might want to buy, why should foreign investors hold US Dollars?
If the US Dollar were the only reserve currency on Earth, foreigners would have nothing else to buy. However, since 2000 the Euro has been a possible alternative reserve currency.
How can the USA force foreigners be forced to buy US Dollars?
Either:
- by the USA controlling all oil sales and forcing them to be made in US Dollars; or
- or by the USA using direct military force against any foreigner who makes alternative investments.
Until the year 2000, the USA saw to it that all oil sales on Earth were made in US Dollars. Then, in 2000, Iraq changed its oil sales from US Dollars to Euros.
Since the Euro has increased in value from about US$ 0.86 in 2000 to almost US$ 1.10 in 2003, Iraq has made money by switching to Euros, and other countries, including Venezuela and Iran, have begun to contemplate switching.
In order to stop the profitable trend to the Euro, the USA has fallen back onto covert action against the Venezuela government (according to an article by W. Clark: "... the Bush administration quickly endorsed the failed military-led coup of Hugo Chavez in April 2002. Although the coup collapsed after 2 days, various reports suggest the CIA ... approved and may have been actively involved ...".), direct military force against Iraq, and preliminary threats of military force against Iran.
The Unstated US Goal of Preserving Dollar Hegemony Over the Global Oil MarketAs conspiracy theory-ish as it might sound like, I do not hear/can not think of many/any arguments against this argument [please enlighten me if you know of any].
Dominance of Middle Eastern oil will mean in effect maintaining dollar hegemony over the world oil economy. Given its present strategies, the US is constrained to demand no less. As I explain in this extract from my book, Drugs, Oil, and War (pp. 41-42, 53-54), the present value of the US dollar, unjustified on purely economic grounds, is maintained by political arrangements, one of the chief of which is to ensure that all OPEC oil purchases will continue to be denominated in US dollars. (This commitment of OPEC to dollar oil sales was secured in the 1970s by a secret agreement between the US and Saudi Arabia, before the two countries began to drift apart over Israel and other issues.) <8>
The chief reason why dollars are more than pieces of green paper is that countries all over the world need them for purchases, principally of oil. This requires them in addition to maintain dollar reserves to protect their own currency; and these reserves, when invested, help maintain the current high levels of the US securities markets.
Is Scott being naive by ignoring this argument? Does he not know the Reason he can sustain the standard of living he has right now? Are Americans trying to hide this little fact from becoming well known as that might cost them what they value most, the (unearned) American life style?



