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PaulaFarrell Donating Member (840 posts) Send PM | Profile | Ignore Sat Nov-17-07 03:17 AM
Original message
The dollar's decline: from symbol of hegemony to shunned currency
Source: Independent (UK)

The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible.

After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar.

"An American businessman over here who is given the choice would take anything but the dollar," David Buik of Cantor Index said yesterday. "I would want to be paid in yen, and if not yen then the euro or sterling."

<snip>

Kenneth Froot, a Harvard university professor and former consultant to the US Federal Reserve, warned yesterday: "Part of the depreciation is permanent. There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity

Read more: http://news.independent.co.uk/world/americas/article316...
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MADem Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 03:20 AM
Response to Original message
1. Well, what goes up must come down.
I remember a time when the yen was in the toilet.

The one good thing about a cheap dollar is that it will reverse the flow of cash. There are BARGAINS to be found over this way.... a cheap dollar will help our fucked up balance of trade.
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indepat Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:39 AM
Response to Reply #1
4. Will be hard to export enough for us to buy imported oil at inflated prices with a sharply devalued
dollar: we is met the enemy and it is we who now we are permanently fucked in this new Amurikan century of neocon wet dreams of perpetual war and hegemony.
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ixion Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:54 AM
Response to Reply #4
5. yep, and add that to the fact that we don't make anything here anymore
means that no only are we screwed but we've shipped overseas the ability to get ourselves out of the hole.
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Solar_Power Donating Member (422 posts) Send PM | Profile | Ignore Sun Nov-18-07 09:52 PM
Response to Reply #4
23. Dollar lost 28% in 5 years
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CJCRANE Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 08:18 AM
Response to Reply #1
9. Doesn't it also mean
Edited on Sat Nov-17-07 08:21 AM by CJCRANE
that foreign corporations and govts can buy up American assets at rock-bottom prices?

(Remember how the Bush-Republicans tried to sell off American ports? I would guess there could potentially be a lot more of that kind of thing. I also think that if a Democrat is elected in '08 there will be a big buy-in, to the US economy, while the dollar is still weak).

On edit: I also wonder if it's a deliberate ploy by Cheney. He shifts his assets into foreign currencies, runs the dollar down, then just before he leaves office he buys back into the dollar thus making a huge profit.
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kineneb Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:57 AM
Response to Reply #9
11. Abu Dhabi just bought an 8.1% share in AMD
http://www.democraticunderground.com/discuss/duboard.ph...

looks like the fire sale has already started

this becomes an easy way to dump the rapidly-devaluing dollars they have from oil sales, without sending the markets into a quick(er) nosedive...
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gmoney Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 03:47 AM
Response to Original message
2. Thanks George
Asshat...
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ClintonTyree Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:37 AM
Response to Original message
3. It's difficult to believe....
that one man could so totally fuck up a country as George Bush has. You almost have to be TRYING to ruin an economy and domestic and foreign policies to the degree George Bush has. He's been a total disaster as President and will go down in history books as the prime example of what NOT to look for in a President.

But at least he wasn't "stiff" and "verbose" like Gore and Kerry. :eyes: Thank Koresh one of THEM didn't land in the White House. :sarcasm:

Nope, we got "W" and his own special "folksy" brand of verbal incontinence shoved down our throats. I hope all of those people who wanted to sit down and have a beer with him get their wish. I don't imagine he'd get the same reactions from those people now as he would have back then. George Bush being elected President (twice) is proof positive that the American populace is only slightly more intelligent than pocket lint.

A disaster of a human being: George Bush.
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Toots Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:25 AM
Response to Reply #3
6. It isn't one man, it is an established cult called the GOP
One man could not do anything alone. The GOP has walked in lock-step toward this situation. They say with Confidence that Government doesn't work and set about with full intensity to prove it..They are in reality nothing but blowhards that can actually do nothing of worth in this world..
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:39 AM
Response to Reply #3
7. I called it The Contra Goverment in 2002
The Contra Government
May 5, 2002

"The twentieth century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy." - Alex Carey

How does one describe a government that is intent upon the destruction of "government?" The word contrarian comes to mind because it is for all intents and purposes, an anti-government movement within the government. There are those among the citizenry who wish to see the end of the government for a variety of reasons. Some associated with David Koresh and the Branch Davidians were "dooms day-ers" or "cultists" and wished a departure from our society - it appears they got their wish. Some militias have attempted secession from the United States (Bo Gritz of Idaho, the Texas Constitutional Militia and the Freemen in Montana come to mind). We can see from the actions of George W. Bush and his administration that he, too, wishes to end our government as we have known it.

Bush has taken our Securities and Exchange Commission and given it to the very folks that it is to monitor. He has taken the Environmental Protection Agency and given it to the polluters. He has taken the State Department and given it to a radical fringe. He has taken the Justice Department and given it to a fundamentalist zealot. He has taken the Federal Energy Regulatory Commission and given it to the power companies. He has taken the Department of the Interior and given it to the companies that will profit from the removal of public resources.

We have the former Alcoa CEO, Paul O'Neil, as the Treasury Secretary who advocates that corporate taxes should be completely abolished and that "able-bodied adults who have the ability to earn income have an obligation not to pass part of their own responsibility on to a broader population." Bush appointed a commission to find the best way to dismantle our Social Security trust fund entirely. We have Michael Powell, son of Colin Powell, as the man in charge of the Federal Communications Commission (this is the segment of government that monitors the use of our publicly owned airwaves). Michael believes that he can only look at mergers one at a time and not look at the change in the landscape of the past in determining the landscape of the future.

Looking at the appointment of John Negroponte as Ambassador to the United Nations, one can only shudder. Mr. Negroponte helped conceal from Congress the murder, kidnaping and torture abuses of a CIA equipped and trained Honduran military unit, Battalion 3-16. Bush's recess-appointee, Otto Reich (also of Iran-Contra fame) as interim Assistant Secretary of State for Western Hemisphere Affairs was involved in the CIA assisted attempt to overthrow Venezuela's democratically elected President, Hugo Chavez.

Most of George W. Bush's appointees have a common bond. They hold membership in two groups: one known as the "Federalist Society" and the other as the "Council for National Policy." These innocuous sounding names have been a part of a winning strategy for the radical fringe of the conservative movement. It is only in looking behind the facade of bland and vanilla pronouncements that one can see that the intertwined objectives of these two groups are to radically alter all three branches of our government. By securing the placement of members of these organizations to judicial appointments or upon advisory boards and councils, the landscape of our country begins to shift before us. Small steps have assumed the proportions of major victories. We now have a United States Supreme Court that has shown a disregard for the interpretation of our Constitution and Bill of Rights (April 2001 decision regarding warrantless arrest for misdemeanor charges - in this one case of failure to wear a seatbelt). This USSC decision easily places the security of all citizens in doubt and can lead to a police state.

The financial backing from these groups helps to assure that advertising is skewed toward the victories (through election) of like-minded individuals. The word "conservative" has been taken as a mantle to cover the deeds and intentions of these radical organizations. It was not so very long ago that I, too, thought that I was "conservative" in my thinking. I now realize that the "party of Lincoln" is no longer about justice for all, but about the destruction of our democracy.

There is a place in our society for conserving and progressing. We, the people, have been taken for a ride. The United States, has gone from being the world's greatest producer to being the world's largest debtor. As our deficits skyrocket and our production declines, our debts mount. It is only a matter of time before we are no longer able to repay the monies that we owe. Much of our debt is held publicly, but other portions are held by foreign interests. We should question all things that are being done in our names and with us as cosigners on loans that have no chance for repayment. For sixteen of the past seventeen months, the lay off of non-farm workers in the United States has exceeded 100,000 people per month. Our unemployment rate is higher than anytime in the past eight years. The creation of new jobs has in no way matched the losses of the "old" jobs, and there appears to be no immediate recovery in sight.

The radical policy makers of the current administration have proven they cannot be trusted. What they are showing is their agenda for America's future.. This agenda includes the corruption of the judicial system; the abuse of Christian principles to impose a theocracy (through the "faith-based" initiative); the destruction of the Constitution and Bill of Rights (through the USA Patriot Act); the destruction of democratic organizations (such as unions - as in the prevention of the UAL strike, which thwarted legitimate employee grievances); the dismantling of the public education system (through under-funding in excess of $10.5 Billion); the transfer of public and private assets (through eminent domain - recently in Mississippi the Courts ruled that independent landowners could not refuse to sell their land to Japanese-owned Nissan). We also have the continued usurpation of our public airwaves through media mergers. All major media is now controlled by fewer than ten (10) corporations. Their agenda is to shift our country from being one of individual liberty (as enumerated in the Bill of Rights) to one controlled by the ruling class of a self-selected few, which is known as an oligarchy.
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Ghost Dog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 11:50 AM
Response to Reply #7
10. You were (and are) very clear-sighted, UiA.
Will I find this and other very fine writing of yours in DU (apart from SMW), or have you been publishing elsewhere?
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:29 PM
Response to Reply #10
12. well, thank you GD! f
Coming from you - that is quite the compliment :blush:

A lot of my earlier stuff can be found in the AmericaHeldHostile archives - http://www.americaheldhostile.com/edit_2001-2002.shtml and http://www.americaheldhostile.com/edit_2003.shtml

after James got really sick and quit updating his site, my later things don't really have a cohesive place -

now, I work for a print only publication and haven't put anything out on the web in a couple of years.

:hi:
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Ghost Dog Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 12:02 AM
Response to Reply #12
17. I, and I'm sure many of us, would love to see that kind of well-informed-and-analysed writing
in, I'm thinking, The Economist (where I may have contacts I have never used before).

No hurry (relatively, I guess), but do you want to think about it?

PM, if so, OK? :hi: world
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Red Zelda Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:57 AM
Response to Reply #3
8. Magnificently put
"... the American populace is only slightly more intelligent than pocket lint."

bravo!
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calimary Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:15 PM
Response to Reply #3
13. "...his own special 'folksy' brand of verbal incontinence" - God what a great line!
Edited on Sat Nov-17-07 07:17 PM by calimary
Verbal incontinence it absolutely IS! Yay, ClintonTyree! Couldn't have said it better myself. That schmuck is a veritable Hershey-squirter of orators.

:applause:
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Zhade Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 12:24 AM
Response to Reply #3
19. I wish it was just him. it's not. He's a symptom of the problem, not the entire problem.
We've been doing horrible things as a country for, well, a couple of centuries.

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ozone_man Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:30 PM
Response to Original message
14. Is this proof that God does not exist?
If our money says "In God We Trust" and our dollar is failing, it's logical to conclude that God does not exist, otherwise he wouldn't let that happen. Perhaps we should change it "In Gold We Trust"? :shrug:
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reprobate Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 02:23 AM
Response to Reply #14
20. I would think the opposite, that it is more proof of the retribution from God.


Look at what we've done as a nation to others. You can even start even further back to the treatment of the Carib indians by Columbus. If you are a religious person and believe in a God, you would have to come to the conclusion that all that maltreatment of others would have to demand some kind of punishment.

As one who is not religious, I put it down to the universe restoring balance.

Or it could just be the natural devolution of a society as has happened to every society throughout history.
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LynnTheDem Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 09:25 PM
Response to Original message
15. The Becomming of a Thirld World Nation.
Blame Bill Clinton, of course. :eyes:
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Solar_Power Donating Member (422 posts) Send PM | Profile | Ignore Sat Nov-17-07 11:20 PM
Response to Reply #15
16. This how the Administration tries to keep people from travelling abroad
if that makes any sense. Europe has become very expensive.
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Zhade Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 12:23 AM
Response to Original message
18. Well, it's not like a country that's done so much evil doesn't deserve this.
We DO, sadly.

And yet some idiots still think we're the best country, like, ever.

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gulliver Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 02:53 PM
Response to Original message
21. Europeans looking to retire here. Pretty soon ...
... we'll start seeing ads in European newspapers for "American wives." George W. Bush, president.

However, the pendulum is not done swinging by any means, IMO. Bush and the crook infestation he symptomizes have brought the country low, of course. It's not just the dollar that has tanked. It's the whole country, tangibles and intangibles included. In every way, we are a worse country whether judged internally or from outside, whether judged on cash flow or assets, even when judged on integrity, grace, good nature, and intelligence. We have fallen far. But the plague is ending.

The low dollar will start to turn around once U.S. sanity and credibility are restored. Then it's full faith and credit will start to mean something again. You can't have a bunch of Laffer curve imbeciles, fatted parasitic cheats, wide-eyed robotic stooges, blindered/hobbled regulatory agencies, American jihadists, and mama's boys running the country and expect respect.

The "Under New Management" signage is at the printers. It can't go up too soon. When it does, watch the rebound. I think it is gonna be a doozy.
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Buttercup McToots Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 03:50 PM
Response to Reply #21
22. Google OPEC...Long Post but important..
OPEC ministers are dissing the dollar.
Dollar is going down Monday morning. Good luck.


http://www.energybulletin.net/7707.html


Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse
by William Clark

RELATED NEWS:
All eyes upon OPEC - Nov 17...

Oil producers - Nov 17...

OPEC onstage - Nov 18...

Oil prices and supplies - Nov 15...

Hubbert on the Nature of Growth...


This notion that the United States is getting ready to attack Iran is simply ridiculous...Having said that, all options are on the table.
President George W. Bush, February 2005


Contemporary warfare has traditionally involved underlying conflicts regarding economics and resources. Today these intertwined conflicts also involve international currencies, and thus increased complexity. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Irans nuclear intentions, and likely include a proposed Iranian petroeuro system for oil trade.

Similar to the Iraq war, military operations against Iran relate to the macroeconomics of petrodollar recycling and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.

It is now obvious the invasion of Iraq had less to do with any threat from Saddams long-gone WMD program and certainly less to do to do with fighting International terrorism than it has to do with gaining strategic control over Iraqs hydrocarbon reserves and in doing so maintain the U.S. dollar as the monopoly currency for the critical international oil market. Throughout 2004 information provided by former administration insiders revealed the Bush/Cheney administration entered into office with the intention of toppling Saddam Hussein.<1><2>

Candidly stated, Operation Iraqi Freedom was a war designed to install a pro-U.S. government in Iraq, establish multiple U.S military bases before the onset of global Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency (i.e. petroeuro).<3> However, subsequent geopolitical events have exposed neoconservative strategy as fundamentally flawed, with Iran moving towards a petroeuro system for international oil trades, while Russia evaluates this option with the European Union.

In 2003 the global community witnessed a combination of petrodollar warfare and oil depletion warfare. The majority of the worlds governments especially the E.U., Russia and China were not amused and neither are the U.S. soldiers who are currently stationed inside a hostile Iraq. In 2002 I wrote an award-winning online essay that asserted Saddam Hussein sealed his fate when he announced in September 2000 that Iraq was no longer going to accept dollars for oil being sold under the UNs Oil-for-Food program, and decided to switch to the euro as Iraqs oil export currency.<4>

Indeed, my original pre-war hypothesis was validated in a Financial Times article dated June 5, 2003, which confirmed Iraqi oil sales returning to the international markets were once again denominated in U.S. dollars not euros.

The tender, for which bids are due by June 10, switches the transaction back to dollars -- the international currency of oil sales - despite the greenback's recent fall in value. Saddam Hussein in 2000 insisted Iraq's oil be sold for euros, a political move, but one that improved Iraq's recent earnings thanks to the rise in the value of the euro against the dollar <5>


The Bush administration implemented this currency transition despite the adverse impact on profits from Iraqis export oil sales.<6> (In mid-2003 the euro was valued approx. 13% higher than the dollar, and thus significantly impacted the ability of future oil proceeds to rebuild Iraqs infrastructure). Not surprisingly, this detail has never been mentioned in the five U.S. major media conglomerates who control 90% of information flow in the U.S., but confirmation of this vital fact provides insight into one of the crucial yet overlooked rationales for 2003 the Iraq war.

Concerning Iran, recent articles have revealed active Pentagon planning for operations against its suspected nuclear facilities. While the publicly stated reasons for any such overt action will be premised as a consequence of Iran's nuclear ambitions, there are again unspoken macroeconomic drivers underlying the second stage of petrodollar warfare Iran's upcoming oil bourse. (The word bourse refers to a stock exchange for securities trading, and is derived from the French stock exchange in Paris, the Federation Internationale des Bourses de Valeurs.)

In essence, Iran is about to commit a far greater offense than Saddam Hussein's conversion to the euro for Iraqs oil exports in the fall of 2000. Beginning in March 2006, the Tehran government has plans to begin competing with New York's NYMEX and London's IPE with respect to international oil trades using a euro-based international oil-trading mechanism.<7>

The proposed Iranian oil bourse signifies that without some sort of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project of U.S. global domination, Tehrans objective constitutes an obvious encroachment on dollar supremacy in the crucial international oil market.

From the autumn of 2004 through August 2005, numerous leaks by concerned Pentagon employees have revealed that the neoconservatives in Washington are quietly but actively planning for a possible attack against Iran. In September 2004 Newsweek reported:

Deep in the Pentagon, admirals and generals are updating plans for possible U.S. military action in Syria and Iran. The Defense Department unit responsible for military planning for the two troublesome countries is busier than ever, an administration official says. Some Bush advisers characterize the work as merely an effort to revise routine plans the Pentagon maintains for all contingencies in light of the Iraq war. More skittish bureaucrats say the updates are accompanied by a revived campaign by administration conservatives and neocons for more hard-line U.S. policies toward the countries

administration hawks are pinning their hopes on regime change in Tehran by covert means, preferably, but by force of arms if necessary. Papers on the idea have circulated inside the administration, mostly labeled "draft" or "working draft" to evade congressional subpoena powers and the Freedom of Information Act. Informed sources say the memos echo the administration's abortive Iraq strategy: oust the existing regime, swiftly install a pro-U.S. government in its place (extracting the new regime's promise to renounce any nuclear ambitions) and get out. This daredevil scheme horrifies U.S. military leaders, and there's no evidence that it has won any backers at the cabinet level.<8>


Indeed, there are good reasons for U.S. military commanders to be horrified at the prospects of attacking Iran. In the December 2004 issue of the Atlantic Monthly, James Fallows reported that numerous high-level war-gaming sessions had recently been completed by Sam Gardiner, a retired Air Force colonel who has run war games at the National War College for the past two decades.<9> Col. Gardiner summarized the outcome of these war games with this statement, After all this effort, I am left with two simple sentences for policymakers: You have no military solution for the issues of Iran. And you have to make diplomacy work. Despite Col. Gardiners warnings, yet another story appeared in early 2005 that reiterated this administrations intentions towards Iran. Investigative reporter Seymour Hershs article in The New Yorker included interviews with various high-level U.S. intelligence sources. Hersh wrote:


In my interviews , I was repeatedly told that the next strategic target was Iran. Everyone is saying, You cant be serious about targeting Iran. Look at Iraq, the former intelligence official told me. But the say, Weve got some lessons learned not militarily, but how we did it politically. Were not going to rely on agency pissants. No loose ends, and thats why the C.I.A. is out of there.<10>


The most recent, and by far the most troubling, was an article in The American Conservative by intelligence analyst Philip Giraldi. His article, In Case of Emergency, Nuke Iran, suggested the resurrection of active U.S. military planning against Iran but with the shocking disclosure that in the event of another 9/11-type terrorist attack on U.S. soil, Vice President Dick Cheneys office wants the Pentagon to be prepared to launch a potential tactical nuclear attack on Iran even if the Iranian government was not involved with any such terrorist attack against the U.S.:


The Pentagon, acting under instructions from Vice President Dick Cheney's office, has tasked the United States Strategic Command (STRATCOM) with drawing up a contingency plan to be employed in response to another 9/11-type terrorist attack on the United States. The plan includes a large-scale air assault on Iran employing both conventional and tactical nuclear weapons. Within Iran there are more than 450 major strategic targets, including numerous suspected nuclear-weapons-program development sites. Many of the targets are hardened or are deep underground and could not be taken out by conventional weapons, hence the nuclear option. As in the case of Iraq, the response is not conditional on Iran actually being involved in the act of terrorism directed against the United States. Several senior Air Force officers involved in the planning are reportedly appalled at the implications of what they are doing that Iran is being set up for an unprovoked nuclear attack but no one is prepared to damage his career by posing any objections.<11>


Why would the Vice President instruct the U.S. military to prepare plans for what could likely be an unprovoked nuclear attack against Iran? Setting aside the grave moral implications for a moment, it is remarkable to note that during the same week this nuke Iran article appeared, the Washington Post reported that the most recent National Intelligence Estimate (NIE) of Irans nuclear program revealed that, Iran is about a decade away from manufacturing the key ingredient for a nuclear weapon, roughly doubling the previous estimate of five years.<12>

This article carefully noted this assessment was a consensus among U.S. intelligence agencies, contrast with forceful public statements by the White House. The question remains, Why would the Vice President advocate a possible tactical nuclear attack against Iran in the event of another major terrorist attack against the U.S. even if Tehran was innocent of involvement?

Perhaps one of the answers relates to the same obfuscated reasons why the U.S. launched an unprovoked invasion to topple the Iraq government macroeconomics and the desperate desire to maintain U.S. economic supremacy. In essence, petrodollar hegemoy is eroding, which will ultimately force the U.S. to significantly change its current tax, debt, trade, and energy policies, all of which are severely unbalanced. World oil production is reportedly flat out, and yet the neoconservatives are apparently willing to undertake huge strategic and tactical risks in the Persian Gulf. Why? Quite simply their stated goal is U.S. global domination at any cost.

To date, one of the more difficult technical obstacles concerning a euro-based oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil marker as it is referred to in the industry. The three current oil markers are U.S. dollar denominated, which include the West Texas Intermediate crude (WTI), Norway Brent crude, and the UAE Dubai crude. However, since the summer of 2003 Iran has required payments in the euro currency for its European and Asian/ACU exports although the oil pricing of these trades was still denominated in the dollar.<13>

Therefore a potentially significant news story was reported in June 2004 announcing Irans intentions to create of an Iranian oil bourse. This announcement portended competition would arise between the Iranian oil bourse and Londons International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX).

The macroeconomic implications of a successful Iranian bourse are noteworthy. Considering that in mid-2003 Iran switched its oil payments from E.U. and ACU customers to the euro, and thus it is logical to assume the proposed Iranian bourse will usher in a fourth crude oil marker denominated in the euro currency. This event would remove the main technical obstacle for a broad-based petroeuro system for international oil trades. From a purely economic and monetary perspective, a petroeuro system is a logical development given that the European Union imports more oil from OPEC producers than does the U.S., and the E.U. accounted for 45% of exports sold to the Middle East. (Following the May 2004 enlargement, this percentage likely increased).

Despite the complete absence of coverage from the five U.S. corporate media conglomerates, these foreign news stories suggest one of the Federal Reserves nightmares may begin to unfold in the spring of 2006, when it appears that international buyers will have a choice of buying a barrel of oil for $60 dollars on the NYMEX and IPE - or purchase a barrel of oil for 45 - 50 euros via the Iranian Bourse. This assumes the euro maintains its current 20-25% appreciated value relative to the dollar and assumes that some sort of US "intervention" is not launched against Iran.

The upcoming bourse will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world - global oil and gas trades. In essence, the U.S. will no longer be able to effortlessly expand its debt-financing via issuance of U.S. Treasury bills, and the dollars international demand/liquidity value will fall.

It is unclear at the time of writing if this project will be successful, or could it prompt overt or covert U.S. interventions thereby signaling the second phase of petrodollar warfare in the Middle East. Regardless of the potential U.S. response to an Iranian petroeuro system, the emergence of an oil exchange market in the Middle East is not entirely surprising given the domestic peaking and decline of oil exports in the U.S. and U.K, in comparison to the remaining oil reserves in Iran, Iraq and Saudi Arabia.

What we are witnessing is a battle for oil currency supremacy. If Irans oil bourse becomes a successful alternative for international oil trades, it would challenge the hegemony currently enjoyed by the financial centers in both London (IPE) and New York (NYMEX), a factor not overlooked in the following (UK) Guardian article:


Iran is to launch an oil trading market for Middle East and Opec producers that could threaten the supremacy of London's International Petroleum Exchange.

Some industry experts have warned the Iranians and other OPEC producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.

The IPE, bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley, was unwilling to discuss the Iranian move yesterday. We would not have any comment to make on it at this stage, said an IPE spokeswoman. <14>


During an important speech in April 2002, Mr. Javad Yarjani, an OPEC executive, described three pivotal events that would facilitate an OPEC transition to euros.<15> He stated this would be based on (1) if and when Norway's Brent crude is re-dominated in euros, (2) if and when the U.K. adopts the euro, and (3) whether or not the euro gains parity valuation relative to the dollar, and the EUs proposed expansion plans were successful.

Notably, both of the later two criteria have transpired: the euros valuation has been above the dollar since late 2002, and the euro-based E.U. enlarged in May 2004 from 12 to 22 countries. Despite recent no votes by French and Dutch voters regarding a common E.U. Constitution, from a macroeconomic perspective, these domestic disagreements do no reduce the euro currencys trajectory in the global financial markets and from Russia and OPECs perspective do not adversely impact momentum towards a petroeuro. In the meantime, the U.K. remains uncomfortably juxtaposed between the financial interests of the U.S. banking nexus (New York/Washington) and the E.U. financial centers (Paris/Frankfurt).

The most recent news reports indicate the oil bourse will start trading on March 20, 2006, coinciding with the Iranian New Year.<16> The implementation of the proposed Iranian oil Bourse if successful in utilizing the euro as its oil transaction currency standard essentially negates the previous two criteria as described by Mr. Yarjani regarding the solidification of a petroeuro system for international oil trades. It should also be noted that throughout 2003-2004 both Russia and China significantly increased their central bank holdings of the euro, which appears to be a coordinated move to facilitate the anticipated ascendance of the euro as a second World Reserve Currency. <17> <18>

Chinas announcement in July 2005 that it was re-valuing the yuan/RNB was not nearly as important as its decision to divorce itself from a U.S. dollar peg by moving towards a basket of currencies likely to include the yen, euro, and dollar.<19> Additionally, the Chinese re-valuation immediately lowered their monthly imported oil bill by 2%, given that oil trades are still priced in dollars, but it is unclear how much longer this monopoly arrangement will last.

Furthermore, the geopolitical stakes for the Bush administration were raised dramatically on October 28, 2004, when Iran and China signed a huge oil and gas trade agreement (valued between $70 - $100 billion dollars.) <20> It should also be noted that China currently receives 13% of its oil imports from Iran. In the aftermath of the Iraq invasion, the U.S.-administered Coalition Provisional Authority (CPA) nullified previous oil lease contracts from 1997-2002 that France, Russia, China and other nations had established under the Saddam regime. The nullification of these contracts worth a reported $1.1 trillion created political tensions between the U.S and the European Union, Russia and China.

The Chinese government may fear the same fate awaits their oil investments in Iran if the U.S. were able to attack and topple the Tehran government. Despite U.S. desires to enforce petrodollar hegemony, the geopolitical risks of an attack on Irans nuclear facilities would surely create a serious crisis between Washington and Beijing.

It is increasingly clear that a confrontation and possible war with Iran may transpire during the second Bush term. Clearly, there are numerous tactical risks regarding neoconservative strategy towards Iran. First, unlike Iraq, Iran has a robust military capability. Secondly, a repeat of any Shock and Awe tactics is not advisable given that Iran has installed sophisticated anti-ship missiles on the Island of Abu Musa, and therefore controls the critical Strait of Hormuz where all of the Persian Gulf bound oil tankers must pass.<21>

The immediate question for Americans? Will the neoconservatives attempt to intervene covertly and/or overtly in Iran during 2005 or 2006 in a desperate effort to prevent the initiation of euro-denominated international crude oil sales? Commentators in India are quite correct in their assessment that a U.S. intervention in Iran is likely to prove disastrous for the United States, making matters much worse regarding international terrorism, not to the mention potential effects on the U.S. economy.


If it intervenes again, it is absolutely certain it will not be able to improve the situationThere is a better way, as the constructive engagement of Libyas Colonel Muammar Gaddafi has shown...Iran is obviously a more complex case than Libya, because power resides in the clergy, and Iran has not been entirely transparent about its nuclear programme, but the sensible way is to take it gently, and nudge it to moderation. Regime change will only worsen global Islamist terror, and in any case, Saudi Arabia is a fitter case for democratic intervention, if at all.<22>


A successful Iranian bourse will solidify the petroeuro as an alternative oil transaction currency, and thereby end the petrodollar's hegemonic status as the monopoly oil currency. Therefore, a graduated approach is needed to avoid precipitous U.S. economic dislocations. Multilateral compromise with the EU and OPEC regarding oil currency is certainly preferable to an Operation Iranian Freedom, or perhaps another CIA-backed coup such as operation "Ajax from 1953. Despite the impressive power of the U.S. military, and the ability of our intelligence agencies to facilitate interventions, it would be perilous and possibly ruinous for the U.S. to intervene in Iran given the dire situation in Iraq. The Monterey Institute of International Studies warned of the possible consequences of a preemptive attack on Irans nuclear facilities:


An attack on Iranian nuclear facilitiescould have various adverse effects on U.S. interests in the Middle East and the world. Most important, in the absence of evidence of an Iranian illegal nuclear program, an attack on Irans nuclear facilities by the U.S. or Israel would be likely to strengthen Iran's international stature and reduce the threat of international sanctions against Iran.<23>


Synopsis:
It is not yet clear if a U.S. military expedition will occur in a desperate attempt to maintain petrodollar supremacy. Regardless of the recent National Intelligence Estimate that down-graded Irans potential nuclear weapons program, it appears increasingly likely the Bush administration may use the specter of nuclear weapon proliferation as a pretext for an intervention, similar to the fears invoked in the previous WMD campaign regarding Iraq.

If recent stories are correct regarding Cheneys plan to possibly use another 9/11 terrorist attack as the pretext or casus belli for a U.S. aerial attack against Iran, this would confirm the Bush administration is prepared to undertake a desperate military strategy to thwart Irans nuclear ambitions, while simultaneously attempting to prevent the Iranian oil Bourse from initiating a euro-based system for oil trades.

However, as members of the U.N. Security Council; China, Russia and E.U. nations such as France and Germany would likely veto any U.S.-sponsored U.N. Security Resolution calling the use of force without solid proof of Iranian culpability regarding a terrorist attack in the U.S. A unilateral military strike on Iran would isolate the U.S. government in the eyes of the world community, and it is conceivable that such an overt action could provoke other industrialized nations to strategically abandon the dollar en masse.

Indeed, such an event would create pressure for OPEC and Russia to move towards a monopoly petroeuro system in an effort to cripple the U.S. dollar and thwart the U.S. global military presence. I refer to this in my book as the rogue nation hypothesis. (A similar tactic was used by the U.S. to end the 1956 Suez crisis.)

While central bankers throughout the world community would be extremely reluctant to dump the dollar, the reasons for any such drastic reaction are likely straightforward from their governments perspective the global community is dependent on the oil and gas energy supplies found in the Persian Gulf.

Hence, industrialized nations would likely move in tandem on the currency exchange markets in an effort to thwart the neoconservatives from pursuing their desperate strategy of dominating the worlds largest hydrocarbon energy supply. Any such efforts that resulted in a dollar currency crisis would be undertaken not to cripple the U.S. dollar and economy as punishment towards the American people per se but rather to thwart further unilateral warfare and its potentially destructive effects on the critical oil production and shipping infrastructure in the Persian Gulf.

Barring a U.S. attack, it appears imminent that Irans euro-denominated oil bourse will open in March 2006. Logically, the most appropriate U.S. strategy is compromise with the E.U. and OPEC towards a dual-currency system for international oil trades.



Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes...known instruments for bringing the many under the domination of the fewNo nation could preserve its freedom in the midst of continual warfare.
James Madison, Political Observations, 1795

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