After reading this article??
The 2 countries behind Euro are France and Germany
Among the many articles: Henry Liu, in the Asia Times last June, it has been a hot topic on the Feasta forum, an Irish-based group exploring sustainable economics, and W. Clark's The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth has been published by the 'Sierra Times', 'Indymedia.org', and 'ratical.org'. Dr Colin Campbell's Peak Oil, a presentation at the Technical University of Clausthal in December 2000, is a clear exposition of the world's declining oil reserves. This debate is not about whether America would suffer from losing the US dollar monopoly on oil trading or from not gaining control of oil — that is a given — rather it is about exactly how hard the USA would be hit. The smart money seems to be saying the impact would be in the range from severe to catastrophic. For example, Charles A. Kupchan makes no bones about the parlous state of the US economy versus the strength of the European economies in his The Atlantic Monthly article, The End of the West.
OIL DOLLARS
The key to it all is the fiat currency for trading oil.
Under an OPEC agreement, all oil has been traded in US dollars since 1971 (after the dropping of the gold standard) which makes the US dollar the de facto major international trading currency. If other nations have to hoard dollars to buy oil, then they want to use that hoard for other trading too. This fact gives America a huge trading advantage and helps make it the dominant economy in the world. As an economic bloc, the European Union is the only challenger to the USA's economic position, and it created the euro to challenge the dollar in international markets. However, the EU is not yet united behind the euro — there is a lot of jingoistic national politics involved, not least in Britain — and in any case, so long as nations throughout the world must hoard dollars to buy oil, the euro can make only very limited inroads into the dollar's dominance.
In 2000, Iraq, with the world's second largest oil reserves, switched to trading its oil in euros. American analysts fell about laughing; Iraq had just made a mistake that was going to beggar the nation. But two years on, alarm bells were sounding; the euro was rising against the dollar, Iraq had given itself a huge economic free kick by switching.
Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including America's bкte noire, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market. The greenback's grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the US's economy and its dominance of world trade.
HOW DOES THE US GET ITS DOLLAR ADVANTAGE?
Imagine this: you are deep in debt but every day you write cheques for millions of dollars you don't have — another luxury car, a holiday home at the beach, the world trip of a lifetime. Your cheques should be worthless but they keep buying stuff because those cheques you write never reach the bank! You have an agreement with the owners of one thing everyone wants, call it petrol/gas, that they will accept only your cheques as payment. This means everyone must hoard your cheques so they can buy petrol/gas. Since they have to keep a stock of your cheques, they use them to buy other stuff too. You write a cheque to buy a TV, the TV shop owner swaps your cheque for petrol/gas, that seller buys some vegetables at the fruit shop, the fruiterer passes it on to buy bread, the baker buys some flour with it, and on it goes, round and round — but never back to the bank.
You have a debt on your books, but so long as your cheque never reaches the bank, you don't have to pay. In effect, you have received your TV free. This is the position the USA has enjoyed for 30 years — it has been getting a free world trade ride for all that time. It has been receiving a huge subsidy from everyone else in the world. As it debt has been growing, it has printed more money (written more cheques) to keep trading. No wonder it is an economic powerhouse!
Then one day, one petrol seller says he is going to accept another person's cheques, a couple of others think that might be a good idea. If this spreads, people are going to stop hoarding your cheques and they will come flying home to the bank. Since you don't have enough in the bank to cover all the cheques, very nasty stuff is going to hit the fan!
But you are big, tough and very aggressive. You don't scare the other guy who can write cheques, he's pretty big too, but given a 'legitimate' excuse, you can beat the tripes out of the lone gas seller and scare him and his mates into submission.
And that, in a nutshell, is what the USA is doing right now with Iraq.
THE WORLD'S DECLINING OIL RESERVES
At various times in recent years, the world has been pleasantly surprised to be told that oil reserves are higher than previously thought. The message — the energy driven party can go on forever. But world oil expert, Dr Colin Campbell, is firmly raining on that parade. The announcements were not about new finds or even reserves that were significantly bigger than previously known. Rather, they were about the public announcement of reserves that actually were known, technological developments which will allow a little more extraction from known reserves (but at extra expense) and some small finds.
In fact, he points out that the biggest oil finds date back to the 1930s and 1940s and that there have been no big new finds since 1965. Technological developments and new knowledge which it was supposed would aid the uncovering of massive new oil deposits have done the opposite -- they have helped confirm the limitations of oil reserves. They have helped measure the reserves of existing fields and uncover some very small new deposits, but they have also made it clear that the conditions for oil simply do not exist in vast areas previously thought of as possibly harbouring oil.
And while more and more technological expertise has found less and less oil, consumption has been rising steadily so today it is far in excess of the amount of new oil found. Peak discovery of oil was in 1965; production, checked in the 1970s by the oil crisis, will peak just 40 years later, in 2005, Dr Campbell predicts, then it will start to decline.
America has limited reserves, the North Sea has more, but not much, and both, but particularly America, have to contend with huge consumption that far outstrips their supplies. Africa, Latin America, Eurasia and most of all, the Gulf, are where the oil is. Whoever owns that oil is set to profit as they hold the energy-hungry industrialised world to ransom.
AMERICA'S PRECARIOUS ECONOMIC POSITION
America is so eager to attack Iraq right now because of the speed with which the euro fire could spread. If Iran, Venezuela and Russia join Iraq and sell large quantities of oil for euros, the euro would have the leverage it needs to become a much more powerful force in general international trade very quickly. Other nations would have to start swapping some of their dollars for euros.
The dollars the USA has printed, the 'cheques' it has written, would start to fly home, stripping away the illusion of value behind them. The USA's real economic condition is about as bad as it could be; it is the most debt-ridden nation on earth, owing about US$12,000 for every single one of it's 280 million men, women and children. It is worse than the position of Indonesia when it imploded economically a few years ago, or more recently, that of Argentina.
Even if OPEC did not switch to euros wholesale (and that would make a very nice non-oil profit for the OPEC countries, including minimising the various contrived debts America has forced on some of them), the US's difficulties would build. If only a small part of the oil trade went euro, that would do three things immediately:
* Increase the attractiveness to EU members of joining the 'eurozone', which in turn would make the euro stronger and make it more attractive to oil nations as a trading currency and to other nations as a general trading currency.
* Start the US dollars flying home demanding value when there isn't enough in the bank to cover them.
* Cause the usual panic attack in the world financial markets and in no time, the US dollar's value would be spiraling down.
The question of oil ownership or control is longer term — but only in terms of as handful of years. If the USA does not make its grab now while it still has control of the oil trading currency and is still the world's biggest economic power, the opportunity would be lost.
In a few years time, America will still be far and away the world's largest military power — its current stocks of weapons will see to that -- but if it is on the economic slide because it failed to contain the euro's growth as an international trading currency, the rest of the world would be in a much stronger position to stare it down and contain it.
For America, with an economy and life style wholly dependent on cheap oil energy, that would be a disaster. President Bush promised Americans they could continue driving their petrol guzzling SUVs. An America lacking control of oil stocks in an era of declining oil production would have to park its SUVs and walk.
THE US SOLUTION
America's response to the euro and oil shortage threat was predictable. It has come out fighting.
It aims to achieve six primary things by going to war with Iraq:
* Safeguard the American economy by returning Iraq to trading oil in US dollars, so the greenback is once again the exclusive oil currency and is reaffirmed as the reserve currency for world trade.
* Send a very clear message to any other oil producers just what will happen to them if they do not stay in the dollar circle. Iran has already received one message — remember how puzzled you were that in the midst of moderation and secularization, Iran was named as a member of the axis of evil? Venezuela is on the receiving end of another nasty message.
* Safeguard the USA's supply of oil by placing the second largest reserves of oil in the world under direct American control and putting the itself in a position to control through threat or actual invasion the rest of the Gulf oil. The US needs a secular, subject state where it can maintain a huge force (perhaps with nominal elements from allies such as Britain and Australia) to dominate the Middle East and its vital oil.
* Severely setback the expansion of the influence of the European Union and its euro, the only trading bloc and currency strong enough to attack the USA's dominance of world trade through the dollar.
* Provide cover for the US to run a covert operation to overturn the democratically elected government of Venezuela and replace it with an America-friendly military supported junta which would put Venezuela's oil into US hands and ensure oil trading in US dollars.
* Secure Israel's position — the aim of an unlikely coalition of Christian and Jewish fundamentalists within the Bush administration which fits in handily with the power and economic ambitions of the hard-headed old conservatives in the back room.
Locking the world back into dollar oil trading would consolidate America's current position and make it all but impregnable as the dominant world power — economically and militarily. A splintered Europe (the US is working hard to split Europe; Britain was easy, but other Europeans have offered support in terms of UN votes) and its euro would suffer a serious setback and might take decades to recover. Physical control of oil would secure the supplies which underpin the high energy consumption US economy and place the US in a position to profit directly from higher world oil prices resulting from the growing shortage of oil, a further boost to its economy, while disadvantaging economic challengers by forcing them to pay more for energy.
Establishing a strong military presence in Iraq would enable the US to avoid or reduce its military presence in what it sees as the unreliable Turkey, the politically impossible Israel and surely the next state in its sights after Iran, Saudi Arabia, the birthplace of al Qaeda and a hotbed of anti-American sentiment. The USA, with a stable military base in Iraq no longer constrained by treaties and agreements such as it has had to negotiate with host nations to date or by the host's links with the EU, would also independent of Europe and able to give the faint whiff of military threat to Europe itself. America is making the boldest grab for absolute power the world has seen in modern times. It is hardly likely to allow the possible slaughter of a few tens of thousand Iraqis stand between it and world domination.
President Bush promised to protect the American way of life. This is what he meant.
The 2 countries behind Euro are France and Germany
Among the many articles: Henry Liu, in the Asia Times last June, it has been a hot topic on the Feasta forum, an Irish-based group exploring sustainable economics, and W. Clark's The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth has been published by the 'Sierra Times', 'Indymedia.org', and 'ratical.org'. Dr Colin Campbell's Peak Oil, a presentation at the Technical University of Clausthal in December 2000, is a clear exposition of the world's declining oil reserves. This debate is not about whether America would suffer from losing the US dollar monopoly on oil trading or from not gaining control of oil — that is a given — rather it is about exactly how hard the USA would be hit. The smart money seems to be saying the impact would be in the range from severe to catastrophic. For example, Charles A. Kupchan makes no bones about the parlous state of the US economy versus the strength of the European economies in his The Atlantic Monthly article, The End of the West.
OIL DOLLARS
The key to it all is the fiat currency for trading oil.
Under an OPEC agreement, all oil has been traded in US dollars since 1971 (after the dropping of the gold standard) which makes the US dollar the de facto major international trading currency. If other nations have to hoard dollars to buy oil, then they want to use that hoard for other trading too. This fact gives America a huge trading advantage and helps make it the dominant economy in the world. As an economic bloc, the European Union is the only challenger to the USA's economic position, and it created the euro to challenge the dollar in international markets. However, the EU is not yet united behind the euro — there is a lot of jingoistic national politics involved, not least in Britain — and in any case, so long as nations throughout the world must hoard dollars to buy oil, the euro can make only very limited inroads into the dollar's dominance.
In 2000, Iraq, with the world's second largest oil reserves, switched to trading its oil in euros. American analysts fell about laughing; Iraq had just made a mistake that was going to beggar the nation. But two years on, alarm bells were sounding; the euro was rising against the dollar, Iraq had given itself a huge economic free kick by switching.
Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including America's bкte noire, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market. The greenback's grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the US's economy and its dominance of world trade.
HOW DOES THE US GET ITS DOLLAR ADVANTAGE?
Imagine this: you are deep in debt but every day you write cheques for millions of dollars you don't have — another luxury car, a holiday home at the beach, the world trip of a lifetime. Your cheques should be worthless but they keep buying stuff because those cheques you write never reach the bank! You have an agreement with the owners of one thing everyone wants, call it petrol/gas, that they will accept only your cheques as payment. This means everyone must hoard your cheques so they can buy petrol/gas. Since they have to keep a stock of your cheques, they use them to buy other stuff too. You write a cheque to buy a TV, the TV shop owner swaps your cheque for petrol/gas, that seller buys some vegetables at the fruit shop, the fruiterer passes it on to buy bread, the baker buys some flour with it, and on it goes, round and round — but never back to the bank.
You have a debt on your books, but so long as your cheque never reaches the bank, you don't have to pay. In effect, you have received your TV free. This is the position the USA has enjoyed for 30 years — it has been getting a free world trade ride for all that time. It has been receiving a huge subsidy from everyone else in the world. As it debt has been growing, it has printed more money (written more cheques) to keep trading. No wonder it is an economic powerhouse!
Then one day, one petrol seller says he is going to accept another person's cheques, a couple of others think that might be a good idea. If this spreads, people are going to stop hoarding your cheques and they will come flying home to the bank. Since you don't have enough in the bank to cover all the cheques, very nasty stuff is going to hit the fan!
But you are big, tough and very aggressive. You don't scare the other guy who can write cheques, he's pretty big too, but given a 'legitimate' excuse, you can beat the tripes out of the lone gas seller and scare him and his mates into submission.
And that, in a nutshell, is what the USA is doing right now with Iraq.
THE WORLD'S DECLINING OIL RESERVES
At various times in recent years, the world has been pleasantly surprised to be told that oil reserves are higher than previously thought. The message — the energy driven party can go on forever. But world oil expert, Dr Colin Campbell, is firmly raining on that parade. The announcements were not about new finds or even reserves that were significantly bigger than previously known. Rather, they were about the public announcement of reserves that actually were known, technological developments which will allow a little more extraction from known reserves (but at extra expense) and some small finds.
In fact, he points out that the biggest oil finds date back to the 1930s and 1940s and that there have been no big new finds since 1965. Technological developments and new knowledge which it was supposed would aid the uncovering of massive new oil deposits have done the opposite -- they have helped confirm the limitations of oil reserves. They have helped measure the reserves of existing fields and uncover some very small new deposits, but they have also made it clear that the conditions for oil simply do not exist in vast areas previously thought of as possibly harbouring oil.
And while more and more technological expertise has found less and less oil, consumption has been rising steadily so today it is far in excess of the amount of new oil found. Peak discovery of oil was in 1965; production, checked in the 1970s by the oil crisis, will peak just 40 years later, in 2005, Dr Campbell predicts, then it will start to decline.
America has limited reserves, the North Sea has more, but not much, and both, but particularly America, have to contend with huge consumption that far outstrips their supplies. Africa, Latin America, Eurasia and most of all, the Gulf, are where the oil is. Whoever owns that oil is set to profit as they hold the energy-hungry industrialised world to ransom.
AMERICA'S PRECARIOUS ECONOMIC POSITION
America is so eager to attack Iraq right now because of the speed with which the euro fire could spread. If Iran, Venezuela and Russia join Iraq and sell large quantities of oil for euros, the euro would have the leverage it needs to become a much more powerful force in general international trade very quickly. Other nations would have to start swapping some of their dollars for euros.
The dollars the USA has printed, the 'cheques' it has written, would start to fly home, stripping away the illusion of value behind them. The USA's real economic condition is about as bad as it could be; it is the most debt-ridden nation on earth, owing about US$12,000 for every single one of it's 280 million men, women and children. It is worse than the position of Indonesia when it imploded economically a few years ago, or more recently, that of Argentina.
Even if OPEC did not switch to euros wholesale (and that would make a very nice non-oil profit for the OPEC countries, including minimising the various contrived debts America has forced on some of them), the US's difficulties would build. If only a small part of the oil trade went euro, that would do three things immediately:
* Increase the attractiveness to EU members of joining the 'eurozone', which in turn would make the euro stronger and make it more attractive to oil nations as a trading currency and to other nations as a general trading currency.
* Start the US dollars flying home demanding value when there isn't enough in the bank to cover them.
* Cause the usual panic attack in the world financial markets and in no time, the US dollar's value would be spiraling down.
The question of oil ownership or control is longer term — but only in terms of as handful of years. If the USA does not make its grab now while it still has control of the oil trading currency and is still the world's biggest economic power, the opportunity would be lost.
In a few years time, America will still be far and away the world's largest military power — its current stocks of weapons will see to that -- but if it is on the economic slide because it failed to contain the euro's growth as an international trading currency, the rest of the world would be in a much stronger position to stare it down and contain it.
For America, with an economy and life style wholly dependent on cheap oil energy, that would be a disaster. President Bush promised Americans they could continue driving their petrol guzzling SUVs. An America lacking control of oil stocks in an era of declining oil production would have to park its SUVs and walk.
THE US SOLUTION
America's response to the euro and oil shortage threat was predictable. It has come out fighting.
It aims to achieve six primary things by going to war with Iraq:
* Safeguard the American economy by returning Iraq to trading oil in US dollars, so the greenback is once again the exclusive oil currency and is reaffirmed as the reserve currency for world trade.
* Send a very clear message to any other oil producers just what will happen to them if they do not stay in the dollar circle. Iran has already received one message — remember how puzzled you were that in the midst of moderation and secularization, Iran was named as a member of the axis of evil? Venezuela is on the receiving end of another nasty message.
* Safeguard the USA's supply of oil by placing the second largest reserves of oil in the world under direct American control and putting the itself in a position to control through threat or actual invasion the rest of the Gulf oil. The US needs a secular, subject state where it can maintain a huge force (perhaps with nominal elements from allies such as Britain and Australia) to dominate the Middle East and its vital oil.
* Severely setback the expansion of the influence of the European Union and its euro, the only trading bloc and currency strong enough to attack the USA's dominance of world trade through the dollar.
* Provide cover for the US to run a covert operation to overturn the democratically elected government of Venezuela and replace it with an America-friendly military supported junta which would put Venezuela's oil into US hands and ensure oil trading in US dollars.
* Secure Israel's position — the aim of an unlikely coalition of Christian and Jewish fundamentalists within the Bush administration which fits in handily with the power and economic ambitions of the hard-headed old conservatives in the back room.
Locking the world back into dollar oil trading would consolidate America's current position and make it all but impregnable as the dominant world power — economically and militarily. A splintered Europe (the US is working hard to split Europe; Britain was easy, but other Europeans have offered support in terms of UN votes) and its euro would suffer a serious setback and might take decades to recover. Physical control of oil would secure the supplies which underpin the high energy consumption US economy and place the US in a position to profit directly from higher world oil prices resulting from the growing shortage of oil, a further boost to its economy, while disadvantaging economic challengers by forcing them to pay more for energy.
Establishing a strong military presence in Iraq would enable the US to avoid or reduce its military presence in what it sees as the unreliable Turkey, the politically impossible Israel and surely the next state in its sights after Iran, Saudi Arabia, the birthplace of al Qaeda and a hotbed of anti-American sentiment. The USA, with a stable military base in Iraq no longer constrained by treaties and agreements such as it has had to negotiate with host nations to date or by the host's links with the EU, would also independent of Europe and able to give the faint whiff of military threat to Europe itself. America is making the boldest grab for absolute power the world has seen in modern times. It is hardly likely to allow the possible slaughter of a few tens of thousand Iraqis stand between it and world domination.
President Bush promised to protect the American way of life. This is what he meant.
