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World News See other World News Articles Title: Petrodollar Warfare: The Common Thread Linking Venezuela and Iran At its root, a currency has power because people believe it does. As belief in and fealty to the dollar continue to erode, we can expect the U.S. to fight, brutally when deemed necessary, to maintain the status quo that made it an empire. WASHINGTON — Last Wednesday, U.S. Secretary of State Mike Pompeo gave a disturbing interview to Fox Business Network in which he divulged his plans to form a NATO-type alliance against Iran. The U.S. has long accused Iran of supporting terrorism, accusations that have ramped up under the Trump administration. Pompeo said, without a hint of irony, that Iran’s government was leading the country into wars in Syria, Yemen, Iraq, and Lebanon, against the will of the Iranian people. Furthermore, the absurd accusation that Hezbollah is in Venezuela seemed a crude attempt to link the two countries in order to delegitimize both of their governments at the same time. The announcement foreshadows the potential for an abrupt and extreme escalation of U.S. attacks on Iran, similar to the recent escalation of U.S.-Venezuela relations. Washington’s playbook for regime change has become more and more obvious as it is used more frequently. In the cases of countries with powerful militaries like Venezuela, Iran, North Korea, or China, outright invasion is unfeasible, as disapproving public opinion would drag morale down. Demonizing the target via some pretext to isolate it from the international community has been the preferred model to deal with larger threats. The U.S. imposes financial sanctions under the guise of “targeting regime figureheads and their inner circle of cronies,” and sweeping banking restrictions that cut a country’s entire economy off from investment and foreign reserves. As the country deteriorates under the weight of these sanctions, Washington points to the chaos it has created and says — again, without a hint of irony — “This is clearly a consequence of a neglectful and incompetent regime that must be overthrown.” The time period between the present and that unknown future date when the U.S. escalates is a crucial time for Iran to prepare itself for the worst case scenario. The U.S. is able to dictate these econo-warfare policies through its disproportionate control of the world financial system. Iran has been sounding warnings about this strategy for some time and has been a vocal advocate of creating a new global financial system that will bypass U.S. control of the existing global financial system. Iran, though, is not the only country interested in such an arrangement. Russia, China, and Venezuela have all found themselves facing arbitrary economic penalties levied by the U.S. and have also taken steps to wean the world off the dollar and use alternative currencies to conduct business, a global trend that could seriously impact U.S. dominance over the world economy. But in order to understand where “King Dollar” is going, we have to understand where it came from. The Birth of the Petrodollar One of the first lessons we learn in Econ 101 is that money has value only because we believe it does. In a practical sense, this means the currencies that are most used or most needed to purchase things are the most valuable. A reserve currency is simply a widely accepted currency. Most countries have both a domestic currency for domestic use and foreign reserves, which are designated for foreign trade and other international activities. A few powerful countries issue reserve currencies, or widely recognized and accepted currencies, and have an advantage in international trade because they can simply print world reserve currencies instead of exchanging currencies or selling goods to acquire that currency. Today, the U.S. dollar holds the status of world reserve currency because it is the most recognizable and widely used unit of currency in the world. You can take a dollar to any random country, any market on the side of the street, and show them a greenback and chances are they will accept that funny little paper as payment. If I decide to start a seashell-based currency today, chances are I won’t be able to buy anything with my seashells. There is nothing inherently more special about our green piece of paper than someone else’s blue paper, red paper, or yellow paper; the dollar is special only because it represents a very special country, the United States of America, a superpower the likes of which the world has never seen. Where American power goes, its money always follows to become the region’s unit of economic measurement. The currency that goods are priced in is very important because if, for example, oil is priced in dollars, you need dollars to buy oil. This creates demand for dollars and not yen or rubles, giving a tremendous advantage to the country that prints dollars at no cost. Before the international dollar standard, there were other world reserve currencies. The worldwide dominance of the Dutch East India Company made the Dutch guilder the world reserve currency in the 17th and 18th centuries. With the ascendance of the British Empire came the ascendance of the Pound Sterling to world reserve currency status. As the world’s leading exporter of manufactured goods and services, British banks had accumulated a large amount of gold deposits. The Bank of England issued sterling certificates, paper that could be exchanged for gold, making the sterling as “good as gold.” This gave foreigners confidence that the paper sterling was not just paper but backed up by something of tangible value. British investors chasing higher returns expanded the reach of sterling further by making sterling-denominated long-term investments (read loans) around the world. At its height, over 60 percent of world trade was denominated in pound sterling. But, as had all empires before it, the British Empire over-expanded and collapsed, unable to militarily control the land it claimed as its own. However, as the British cities were reduced to rubble in the Second World War, the United States, untouched throughout the war, got rich selling weapons to the other allied powers. Through exporting weapons, ammunition, equipment, and food, America’s war economy accumulated 75 percent of the world’s gold, making it the undisputed economic power of the capitalist world. No other country had enough gold to back its currency’s value. Recognizing this, the leaders of the European capitalist powers agreed to make the dollar the new world reserve currency by pegging the dollar to gold at a fixed exchange rate of 35 dollars per ounce of gold. Other countries could exchange their currency for dollars instead of gold, the logic being the dollar was as good as gold. The International Monetary Fund was set up to ensure the U.S. maintained this exchange rate and the IMF acted as a lender of last resort if a country’s currency value fell too low compared to the dollar. This was not just a convenient arrangement but a necessary one, as the European capitalist empires had fallen and needed to pass their power on to an heir. It was the recognition that now the United States was the only country powerful enough to organize and enforce worldwide markets. In addition, the use of nuclear weapons to wipe Hiroshima, Nagasaki, and 200,000 Japanese civilians off the map sent a message to the world that the United States was more militarily advanced and ruthless than any other country on the planet. A new global empire was born. Post Comment Private Reply Ignore Thread
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