I have authored an academic article under the title of "Islamic theory
of social change", put in the annex of a Ph.D. thesis deposited at the
The prediction is based on a reading of presently unfolding events in the world under the 'fraudulent' economic leadership of the USA as linked to a 'reading' of the well known Islamic Prophesies of the 'Dajjal', aqua Imposter or Antichrist.
The logical deductions sustaining the above prediction, as contextually developed, can be found in the archive of the 'Bewleyupdates' internet discussion list.
The following article, although lacking any predicted date for would be change, sustains to a certain extent my original thesis.
Youcef Kadri
Batna on
US
Dollar Hegemony”
“When Saddam Hussein switched to the euro in late 2000 and converted
$10 billion reserve fund at the UN to euro, some analysts commented that this
political gesture would have a heavy economic cost. But against all
expectations, he actually made a profit when the euro staged a recovery.
another country which in 2002 converted more than half its foreign exchange
reserves to euros. Both
of their shifting currency allegiances would be significant.”
Friday, February 16, 2007
EPW Commentary
March 19, 2005
US Dollar Hegemony - The Soft Underbelly of Empire
http://emre-iseri.blogspot.com/2007/02/epw-commentary-march-19-2005-us-dollar.ht\
ml
The costs of sustaining the US's new 'Empire' will become apparent to its
public
only when these costs directly accrue to them. This will happen, as this
article
suggests, only when
(i) other nations stop subsidising
the US's imperial
adventures by colluding in them and
(ii) the dollar loses its role as the world's reserve currency.
Rohini Hensman, Marinella Correggia
What we intend to argue below is that if the US’s ability to undertake
imperial conquests like that of Iraq depends on its obvious military supremacy,
this in turn is ultimately based on the use of the US dollar as the world’s
reserve currency. It is the dominance of the dollar that underpins US financial
dominance as a whole as well as the apparently limitless spending power that
allows it to keep hundreds of thousands of troops stationed all over the world.
Destroy US dollar hegemony, and ‘Empire’ will collapse.
David Ludden’s article ‘
the world’s most recent empire with remarkable clarity. Constituting itself at
a
time when decolonisation was well under way and other
empires were
disintegrating,
disguised itself as the defender of democracy against communism; when the
Union
security and national interest were invoked as the rationale for global
dominance.
Ludden’s description evokes the image of US citizens
(and a few others) living
in a ‘Truman Show’ world, a bubble of illusion created by state deception and
media complicity that prevents them from being aware of the reality of empire
although everyone outside can see it only too clearly. It sounds quite credible
that ‘the empire will not be undone until its reality and costs become visible
to Americans’ (Ludden: 4777).
However Ludden’s claim that ‘US taxpayers and voters
pay the entire cost of
the
Americans would see their empire and oppose it; the Democrats would have put up
a principled anti-war, anti-occupation candidate at the recent presidential
elections, and the overwhelming majority of the
for her or him. But it is the rest of the world that has been paying for the
empire: that is why it is almost invisible within
the
As Emmanuel Todd wrote, 2 an imperial economy depends on drawing wealth from
abroad, without any reciprocity. The
world than the rest of the world on the
only their strategic need to get their hands on the world’s resources, but also
their need for hegemony. To counterbalance their economic dependence, they must
keep themselves – at least symbolically – at the centre of the world. They must
demonstrate their ‘omnipotence’: that is why they wage so many wars against
militarily weak enemies. At the same time they must appear as benefactors –
hence their whirlwind tour of the countries devastated by the tsunami disaster
in order to make use of the photo opportunities it provided.
History of Dollar Hegemony
The core advantage of the
is the peculiar role of the
reserve currency that the
trade) and depend on the world’s generosity. It needs a subsidy of at least 1.2
billion dollars per day to keep up its level of spending. Its military
superiority is one reason why it it is unlikely ever
to face an embargo, but
more importantly, it can continue to live beyond its means because of US dollar
hegemony. But for long?
The dollar mechanism has been described extensively elsewhere,3
so we will
merely summarise here. The strength of the
enabled the US dollar, backed by gold, to become the world’s reserve currency.
When the US abandoned the gold standard in 1971, the dollar remained supreme,
and its position was further boosted in 1974 when the US came to an agreement
with Saudi Arabia that the oil trade would be denominated in dollars.4
Most countries in the world import oil, and it made sense for them to
accumulate dollars in order to guard against oil shocks. Third world countries
had even more reason to hoard dollars so as to protect their fragile economies
and currencies from sudden collapse. With everyone clamouring
for dollars, all
the
payment for their exports. These dollars then flowed back into the
invested in treasury bonds and similar instruments, offsetting the outflow.
As a reserve currency fulfils world needs in addition to the functions of a
domestic currency, the favoured country can build up
debt for a protracted
period on a scale that would wreck any other country’s currency. But this
advantage is a double-edged sword.5 It allowed the US economy to decline
unnoticed, its fiscal and trade deficits to climb steeply: by 2004 the US trade
deficit had reached $503 billion, the current account deficit $413 billion, the
gross national debt around $7 trillion. Globalisation
destroyed the
manufacturing nation; the outsourcing of services means that even this sector
is
gradually being shifted out of the US.6 Only its
pre-eminence in the global
financial services industry remains intact.7 And this is underpinned by US
dollar hegemony.
As Pierre Lecomte, a French financial analyst and
supporter of the campaign
‘Dette et dollar’ (to reject the dollar as world
currency) says, “while the rest
of the world must toil hard to earn dollars which are needed to buy goods
internationally, or to pay off foreign debt, the US just needs to print
dollars”.8 And as Frederic Clairmont wrote in Le
Monde Diplomatique (April
2003): “Living on credit is the credo of the foremost power in the world”.
Various campaigns around the world have asked people to ‘boycott Brand
Therefore refusing to buy such things may reduce royalties to
not seriously undermine
and most widely seen American ‘brand’ in the rest of the world is almost
certainly not Coca-Cola nor McDonalds, but rather the US dollar.’10
Taking this into account, the secretariat of the international ‘Boycott Bush
campaign,’ based at the Mother Earth association in Belgium, recently asked
members if they were ready to open another front, ‘to boycott the dollar’. Most
of them have responded ‘yes’.
Dollar hegemony is what concealed the costs of Empire, which were effectively
being paid for by the rest of the world, from US citizens. Other countries were
compelled to accept fiat dollars because they had no choice. It was the world’s
only reserve currency.
Choosing the Euro
Until…the euro came into being. Even then, the choice
was only a potential
one, as the euro initially lost value, making it unattractively risky as a
reserve currency. The first non-European countries that made a move in its
direction did so for political rather than economic reasons. When Saddam
Hussein
switched to the euro in late 2000 and converted Iraq’s $10 billion reserve fund
at the UN to euro, some analysts commented that this political gesture would
have a heavy economic cost.11 But against all expectations, he actually made a
profit when the euro staged a recovery.12 Iran is another country which in 2002
converted more than half its foreign exchange reserves to euros.13 Both Iraq
and
Iran being oil-producing countries, the impact of their shifting currency
allegiances would be significant.
By contrast,
2002 14 was negligible from the standpoint of the world economy, yet it
signified a trend that
Bush’s diatribe against the ‘Axis of Evil’, which seemed so arbitrary and
laughable at the time, does not appear quite so funny. Add to this picture the
fact that Hugo Chavez – against whom the
who continues to be under attack by the Bush regime – has taken a large part of
compulsions driving
Military might alone does not seem to be a sufficient basis for sustaining an
empire: economic power is crucial. And for the declining
supremacy is essential for maintaining its economic clout. This is no longer
unchallenged. Before the
magazine, L’Indépendant, suggested that Islamic
businessmen and countries should
drop the dollar as their foreign exchange reserve currency, in order to weaken
the
deteriorating relations between the
Asian oil-exporting countries have begun to increase the proportion of
international settlements made in euros.
Reportedly,
representative suggested in a speech in
be increasingly traded in euros in future.
they may begin to hold more of their foreign currency assets in euros instead
of
dollars. An article in China Daily on September 28, 2004 by Jiang
Ruiping, the
director of International Economics at the China Foreign Affairs University,
pointed out that China is already losing due to the dollar slide and would lose
even more if it crashes, and recommended moving out of dollars into euros and
possibly also yen, as well as using its dollar reserves to stock up on oil.16
Other countries like South Korea and Taiwan also plan to shift some of their
foreign currency assets out of dollars.17 All this has weakened the US dollar,
but this does not necessarily mean that it will decline to the point where it
ceases to function as world currency. There are contradictory pressures, both
from the
that a weaker dollar would spur exports, but this now seems unlikely, given how
uncompetitive US industry has become.18
More importantly, the US deficits shrink as the dollar declines. Federal
Reserve chairman Alan Greenspan summed up the
speech where he seemed to accept the inevitability of the dollar decline in
order to help ease US deficits. This would be a boon to the
dollar retained its role as world currency, but it would inflict enormous
losses
on countries that have amassed large quantities of dollar reserves. China and
Japan alone hold about a trillion dollars, and while countries like India (and
smaller economies) may hold much smaller quantities, the devaluation of those
reserves is already hitting them, and would hit them even more if the dollar
crashes.19 These countries could therefore think of selling dollars and moving
their reserves to some other currency, which in turn would jeopardise
the status
of the dollar as the world currency.20
An attempt to counteract this is probably what was responsible for rumours in
January 2005 that the Federal Reserve might hike interest rates. For countries
exporting to the
of dollars in order to hold down the value of the yen and keep its exports
competitive. In the short term, it may benefit from propping up the dollar,
even
though it would lose massively if the dollar crashes. Debtor countries would
gain from a dollar slide, since their debt is denominated in dollars; but if
they have foreign exchange reserves in dollars, these would be devalued, and
they would also suffer if they depend on exports to the
longer be able to afford.
Thus there are also powerful forces resisting the displacement of the dollar
as the world’s reserve currency. This brings us back to the dilemma posed by
David Ludden. The costs of empire will become
apparent to the
when they have to pay those costs, and this will happen only when
(a) other nations stop subsidising its imperial
adventures by colluding in
them, and
(b) the dollar loses its role as the world’s reserve currency.
A weakening of the dollar while it retains its role as world currency, which
is what has been happening so far, could actually help
reducing the value of its fiscal and trade deficits; only when there is a
large-scale shift away from dollar reserves will the rest of the world stop
paying for the
entirely to economic forces, and meanwhile the occupation of Iraq and Palestine
will go on, Iran may be invaded (as Bush has threatened repeatedly), and so on
and so forth.
On the other hand, if currency speculators get into the act and the dollar
goes into free fall, it could pull down the world economy with it! Avoiding
this, too, requires planning and coordination.
Courses of Action
For citizens of the world who are opposed to US
imperialism, that suggests
several possible courses of action. The ‘world’s second superpower’, world
public opinion, made a hugely impressive showing prior to the invasion of
yet it failed to stop the invasion itself; stronger action is required. But the
armed struggle taking place in
of Iraqis and thousands of Americans, most of them from poor families; surely
this is not desirable. The alternative we propose is non-violent
non-cooperation
with the imperial monster. For example:
(1) Putting pressure on all other governments not to participate in the
occupation of Iraq in any way, and/or voting out of power governments which are
colluding in this enterprise and voting in alternatives who promise to pull out
of Iraq. In
commitment to withdraw British troops from
including those who would normally vote for Labour or
Left parties, should
campaign for them in the forthcoming elections. Similarly
with other governments
backing the
running their empire fairly and squarely on the shoulders of the
administration.
(2) Refusing to use the US dollar except within the
done on an individual basis, it will have the effect of undermining the role of
the dollar as the world currency. Other economic actors, like the international
fair trade movement, should also shift to other currencies for their
international trade: the movement is increasing, and it would be an important
gesture symbolically. Both academics and activists should stop using dollar
equivalents to measure incomes in third world countries, etc; for the moment,
the euro can be used as a standard. Mass action of this sort played a major
role
in ending British rule in
wider scale, it can help to undermine the
(3) Putting pressure on governments in third world countries to shift foreign
currency assets out of dollars, and to create regional currencies to strengthen
regional commercial and economic ties. This would not only be a gesture of
solidarity to the beleaguered peoples of Iraq, Palestine and others oppressed
by
the US empire, but would also make good economic sense. The dollar is sliding,
and developing countries which hold all or most of their foreign exchange
reserves in dollars are losing money as it loses value. If it crashes, their
reserves could be wiped out.
(4) Putting pressure on governments in oil-producing countries not to
denominate
their oil trade in US dollars. This does not necessarily involve a wholesale
shift to the euro. Venezuela has concluded several barter deals with other
Latin
American countries including Cuba, giving them oil in exchange for goods and
services,21 and this is a pattern other oil-producing countries could consider.
For example, tens of thousands of migrant workers from south and south-east
work in Gulf countries; if their remittances in dinars,
dirhams, etc, can be
used directly for oil imports, all parties would benefit. Barter deals which do
not involve oil could also be concluded between developing countries.
(5) Changing world trading patterns. If the dollar sinks drastically with world
trade unchanged, many countries which now rely on exports to the
affected adversely by its inability to import their goods with a weakened
dollar. A reorientation of trade away from the
For example, plans to constitute SAFTA as a regional bloc free of tariff and
immigration barriers should be pursued at greater speed, and
trade with other
countries promoted at the same time. The European Union and MERCOSUR in
America
creditors of the
to work out alternative trade patterns to safeguard their economies.
(6) Campaigning nationally and internationally for policies of employment
creation, protection of workers’ rights, shorter working hours, enforced
payment
of minimum wages that are adequate to support a decent standard of living, and
so on. This will redirect resources from hugely wasteful military expenditures
into social consumption (nutrition, health, education, etc) and expand mass
markets, especially in third world countries but even in
America
(7) In addition to these economic measures, ending US imperialism would require
pressing for the development and implementation of international humanitarian
law, international law and multilateral treaties (such as the Geneva
Conventions, Rome Treaty of the International Criminal Court, Chemical Weapons
Convention, Biological Weapons Convention, Comprehensive Test Ban Treaty, Land
Mine Treaty, ILO Core Conventions, CEDAW and the Kyoto Protocol), and the
strengthening and democratisation of multilateral
institutions (like the UN, ILO
and WTO).
A recent example of such action was the open letter by eminent South Africans
(including former president Nelson Mandela and Archbishop Desmond Tutu)
protesting against US attempts to oust Kofi Annan, which says, ‘Those who call
for his resignation betray the objectivity his position as secretary-general
demands, and regard the United Nations as a mouthpiece to extol and exonerate
the politics of the US, right or wrong.’22 Also important are actions ‘trying’
the US for violations of international law, as in the world tribunal on Iraq
which is being carried out in various countries by hundreds of movements. Of
course the effectiveness of international law and multilateral institutions is
seriously undermined by
countries persist in working for global democracy, the
greater pressure to comply.
Even if all possible adjustments are made, there is no doubt that the decline
and fall of the dollar as world currency will cause pain, both within and
outside the
cannot much longer survive having a heavily armed rogue state on the rampage in
violation of all international law and multilateral treaties. The world economy
cannot afford to depend on the currency of a bankrupt nation with a colossal
military budget. And the earth itself is put at risk by a country which devours
massive quantities of fossil fuels and spews out greenhouse gases at a
catastrophic rate.
unlimited supply of blank cheques extended to it by
the rest of the world, so it
is the responsibility of the rest of the world to withdraw that source of
funding. The beast has to be killed by attacking it at the point where it is
most vulnerable. Meanwhile, if enough people in the US work to ensure that the
next elections (2008) install a president and representatives who undertake to
abandon the pursuit of empire and instead seek to reintegrate the US into the
international community as a law-abiding, fiscally-responsible, non-polluting
member, the result will be a far safer and more stable global order, world
economy and environment.
email: rohinihensman@...
Notes
1 David Ludden, ‘
XXXIX, No 44, Mumbai,
2 Emmanuel Todd, Dopo l’impero – la dissoluzione dell’impero americano, Marco
Tropea editore (Italian
translation, 2003).
3 William Clarke in particular makes an impressive case, with a great deal of
evidence, in his web-based essay ‘Revisited: The Real Reasons for the Upcoming
War with
(www.ratical.org/ratville/CAH/RriraqWar.html January 2004), which is a revised
version, with addenda, of his original essay of January 2003. Many of the
references in this article are taken from him. See also Henry C K Liu, ‘US
Dollar Hegemony Has Got to Go,’ Asia Times,
‘A Strategy to Stop the War, Economic and Political Weekly,
4 David E Spiro, The Hidden Hand of American Hegemony:
Petrodollar Recycling
and International Markets,
5 Paul Craig Roberts, ‘The Coming Currency Shock,’ Counterpunch,
2004
6 Paul Craig Roberts, op cit.
7
Industry,’ www.financialforum.umb.edu/documents/Franko
per cent, 20 Fin per
cent, 20 Svcs per cent, 20 Global per cent 20 Comp.pdf, October 2004.
8 Pierre Lecomte, Comment sortir du piège américain? (ed), F X de Guibert,
Paris 2003.
9 Such campaigns are coordinated by the network ‘Boycott
Bush’, www.
boycottbush.org
10
11 See for example Charles Recknagel, ‘
Free Europe,
12 Faisal Islam, ‘
Observer,
13 ‘Forex Fund Shifting to Euro’,
14 Caroline Gluck, ‘
2002
15 William Clark, op cit.
16 Gary North, ‘Asian Doubts Regarding the Dollar’,
www.LewRockwell.com/north/north308.html,
17 Phillip Day and Hae Won Choi,
‘Asian Central Banks Consider Alternatives to
Big Dollar Holdings’, Wall Street Journal,
18 Roberto Panizza, ‘Movimenti
Internazionali di Capitali dal Rinascimento
ai
Nostri Giorni’, in Gli spazi della
globalizzazione, edited by F M Parenti,
Diabasis, Reggio Emilia, 2004.
19 See, for example, Ila Patnaik,
‘Day of the Declining Dollar – How should
India Be Responding to This Trend?’, The Indian
Express,
20 Mike Dolan, ‘Dollar Fall Will Come at a Price for All,’
Reuters,
21, 2004
6876686
21 Hazel Henderson, ‘Beyond Bush’s Unilateralism: Another Bipolar World or a
New Era of Win-Win?’ InterPress Service, June 2002.
22 M P Muttiah, ‘US Backs Out on Annan’,
Sunday Observer,
12, 2004