In 1973, India had a positive balance of trade, a healthy situation for a developing economy. By 1974, India had total foreign exchange reserves of $629 millions with which to pay -- in dollars -- an annual oil import bill of almost double that or $1,241 million. In 1974, Sudan, Pakistan, Philippines, Thailand, Africa and Latin America country after country was faced with gaping deficits in its balance of payments. As a whole, over 1974 developing countries incurred a total trade deficit of $35 billion according to the IMF, a colossal sum in that day, and, not surprisingly, a deficit precisely 4 times as large as in 1973, or just in proportion to the oil price increase.
-Rise and Fall-
Part 6: Globalization and the American New World Order
The Oil Weapon
The Dollar Weapon
Four Steps to Economic Subjugation
The Sad Fate of Labor
The Importer of Last Resort
The Oil Weapon
The present Anglo-American financial domination of virtually the entire world was achieved through a series of coldly calculated and brilliant, yet sinister steps. These steps are explained in the book A Century of War by F. William Engdahl. This hard-to-find but crucially important historical work explores how the Anglo-American Establishment has used its control of oil, the resource that powers the economies of the world, to advance its agenda of global control.
Note: [Used copies of A Century of War can be purchased through www.Amazon.com, or through www.bookfinder.com at prices ranging from $140-$300 a copy. As an alternative I recommend the following site where important excerpts from the book can be read. An excellent review of the book can also be found in Alan B. Jones' book How the World Really Works. The historical education that A Century of War offers is critical and should not be passed up.]
Engdahl explains that in 1928 the previously competing major world oil cartels signed an agreement known as the Achnacarry Agreement, (signed in Achnacarry Scotland), that divided the world's oil resources and markets between the seven major British and American controlled cartels, the legendary 'Seven Sisters.' These seven were Esso (Standard Oil of New Jersey, now Exxon), Mobil (Standard Oil of New York), Gulf Oil, Texaco, Standard Oil of California (Chevron), Royal Dutch Shell, and the Anglo-Persian Oil Company (British Petroleum).
Engdahl writes that after the Achnacarry Agreement the Seven Sisters "were effectively one institution," and that with it, "British and American oil majors agreed to accept the existing market divisions and shares, to set a secret world cartel price, and end the destructive competition and price wars of the last decade." He says that since this 1928 agreement, "the Anglo-American grip over the world's oil reserves has been hegemonic," and that "threats to break that grip have been met with ruthless response..." Engdahl's book documents a number of instances throughout history where this ruthlessness was displayed.
After World War II the global economic system was created at Bretton Woods, New Hampshire, and the American dollar became the world's foundational currency, pegged to gold at $35/ounce. Engdahl writes that the Bretton Woods system was built upon the 'three pillars' of the IMF, the World Bank, and the General Agreement on Tariffs and Trade (GATT), which eventually evolved into the World Trade Organization. Because of the primacy of the dollar, the US Federal Reserve became the real master of the entire system, and the Federal Reserve, of course, is a private enterprise that is not 'Federal,' that possess no reserves, that is owned and controlled by the New York banks.
These same New York banks were, and are, also tightly interlocked with the major American oil cartels. After World War II the Rockefeller faction controlled Chase Manhattan Bank, National City Bank, Chemical Bank, the Bank of New York, Kuhn-Loeb, and others, and also many of the major oil companies including the various Standard Oil franchises and Mobil Oil. It is significant, then, that after the Marshall Plan for rebuilding western Europe was begun, the single greatest European expenditure was on American oil. Engdahl writes that of the hundreds of different commodities purchased through the Marshall Plan, fully 10% of the aid went to buy American oil, and by 1947 the Big Five American oil companies supplied half of western Europe's oil. Big Oil used its monopoly to an advantage and doubled the price of oil between 1945 and 1948, while at the same time refusing to allow European countries to use Marshall Plan aid to rebuild European oil refining capacity.
Over the next two decades western Europe was able to rebuild, and the Third World was able to modernize and industrialize a great deal as well. The Anglo-American problem, however, was that as Europe and the rest of the world became increasingly independent and self-sufficient they became less and less dependent upon American dollars. As the US refused to devalue the dollar against gold, many nations found it worthwhile to cash in their dollars for gold, and by 1971 US gold reserves "represented less than one quarter of her official liabilities." Engdahl explains the situation, and the remedy that the Establishment settled on,
The Wall Street establishment persuaded President Nixon to abandon fruitless efforts to support the dollar against the flood of international demand to redeem for gold. But, unfortunately, they did not want the required dollar devaluation against gold which had been intensely sought for almost a decade.
On August 15, 1971, Nixon took the advice of a close circle of key advisers... That sunny quiet August day, the President of the United States announced a move which rocked the world: formal suspension of dollar convertibility into gold, effectively putting the world completely onto a direct dollar-standard, with no gold backing. By doing this, the US unilaterally ripped the central provision of the 1944 Bretton Woods system apart. Foreign holders of US dollars could no longer redeem their paper for US gold reserves.
After Nixon took the US off the gold standard he then announced that the Fed would pay 8% more for gold, offering $38/ounce. This half-hearted attempt to "devalue" the dollar was ineffective, and in February of 1973 the dollar was again devalued by 10% and the Fed's price for gold was set at $42.22/ounce. This action was also ineffective, and by the end of March the value of the US dollar had plummeted around the world, dropping 40% against the German Deutschmark. However, the Anglo-American financial establishment had an Ace up its sleeve, a card that was first revealed in May of 1973 at the Bilderberg meeting held at Saltsjoebaden, Sweden.
The annual Bilderberg meetings had started at the Bilderberg Hotel near Arnheim in 1954, at the initiative of Prince Bernhard of Holland, and these meetings included the cream of the crop of the Anglo-American establishment, as well as any potential candidates who wanted to join the club and had something to offer. In 1973 the meeting was attended by 84 of the world's top financiers, corporate executives and politicians including Robert O. Anderson of ARCO petroleum, Lord Greenhill of British Petroleum, George Ball of Lehman Brothers, and of course David Rockefeller, who brought along one of his top strategists Zbigniew Brzezinski. Engdahl writes that the high point of the 1973 meeting occurred when CFR member Walter Levy outlined a "scenario" for a 400% increase in the international price of oil. According to Engdahl, "The purpose of the secret Saltsjoebaden meeting was not to prevent the expected oil price shock, but to plan and manage the about-to-be-created flood of oil dollars, a process US Secretary of State Kissinger later called 'recycling the petro-dollar flows.'" Engdahl explains the goal that was outlined at the meeting,
In 1973, the powerful men grouped around Bilderberg decided to launch a colossal assault against industrial growth in the world, in order to tilt the balance of power back to the advantage of Anglo-American financial interests. In order to do this, they determined to use their most prized weapon -- control of the world's oil flows. Bilderberg policy was to trigger a global oil embargo in order to force a dramatic increase in world oil prices. Since 1945, world oil trade had, by international custom, been priced in dollars. American oil companies dominated the postwar market. A sharp sudden increase in the world price of oil, therefore, meant an equally dramatic increase in world demand for US dollars to pay for that necessary oil.
Never in history had such a small circle of interests, centered in London and New York, controlled so much of the entire world's economic destiny. The Anglo-American financial establishment resolved to use their oil power in a manner no one could imagine possible. Their scheme was utterly outrageous, and that was their chief advantage, they clearly reckoned.
The Establishment's number one engineer of the planned global hike in oil prices was Henry Kissinger. It was he who manipulated Egypt and Syria into invading Israel on Yom Kippur in 1973, and it was he who facilitated the Arab oil embargo that ensued. Engdahl writes,
Kissinger, who was by then Nixon's intelligence "czar", consistently suppressed US intelligence reports, including intercepted communications from Arab officials confirming the buildup for war. Washington scripted the war and its aftermath, including Kissinger's infamous "shuttle diplomacy," along the precise lines of the Bilderberg deliberations of the previous May in Saltsjoebaden, some six months before the outbreak of the war. Arab oil-producing nations were to be the scapegoat for the coming rage of the world, while the Anglo-American interests responsible stood quietly in the background.
From 1949 to 1970 the global price of oil, dictated by OPEC from the early 1960s, remained steady at about $1.90/barrel. From 1970 to 1973 it gradually rose, and in early 1973, near the time of the Bilderberg meeting, it jumped to $3.01/barrel. The Yom Kippur war began on October 6, 1973, and on October 16 OPEC members met in Vienna and raised the price of oil by a staggering 70% to $5.11/barrel. This massive price hike was then dwarfed on January 1, 1974, when OPEC raised the price of oil by more than 100% to $11.65/barrel. Overall, from early 1973 to January of 1974 the price of oil jumped over 400%.
To put this price hike in perspective, let's compare it to the current price of gas. Right now gas is somewhere close to $1.90 a gallon. Imagine that it jumped to $3.01 a gallon. Then imagine that a year after that you had to pay $11.65 a gallon for gas. The 1973 oil shock was a hike in oil prices on a similar scale. It was premeditated economic warfare against the entire world.
Throughout the whole affair Nixon remained on the sidelines, unsure of what was happening and unsure of what to do. In 1974 he attempted to put together a plan with the US Treasury to force OPEC to lower prices, but according to a memo from a Nixon official at the time, "It was the banking leaders who swept aside this advice and pressed for a 'recycling' program to accommodate to higher oil prices. This was the fatal decision..."
There were many losers in the new era of high-priced oil, but the "banking leaders" who guided the US Treasury were clear winners. Initially Saudi Arabia was one of the first of the oil producers to ally with the Anglo-American banks, and then by 1975 the new paradigm was secure. At that time OPEC ministers agreed to accept only US Dollars as payment for OPEC-produced oil. In effect, the stable gold standard had been exchanged for the erratic, but for Anglo-American banks highly profitable, oil standard. As a result, global demand for the "petro-dollar" was greatly increased and Anglo-American domination of the global economy was confirmed. The Anglo-American financial establishment and the oil-producing nations were winners, but the rest of the world was the big loser. Engdahl explains,
...the impact of an overnight price increase of 400% in their primary energy source was staggering. The vast majority of the world's less-developed economies, without significant domestic oil resources, were suddenly confronted with an unexpected and unpayable 400% increase in costs of energy imports, to say nothing of costs of chemicals and fertilizers for agriculture derived from petroleum.
Up into the 1970s many developing nations had depended upon the World Bank's low-interest loans to help them industrialize and modernize. However, with the oil shock, the money that went to development was eaten up by the high energy costs. Nations had a choice to make: either stop developing, betray the hopes of their own people, and forget the long-term profits from development that the World Bank's loans were to be paid back with, or borrow money from the IMF to buy oil, service their debts and try to keep developing. This was no easy choice for nations to make and both paths led to even more indebtedness. Engdahl summarizes the situation prior to the pre-engineered "free market revolution" propaganda that flooded the world by 1980,
If the methods reminded us of a perverse variation of the old mafia "protection racket" game, it is understandable. The same Anglo-American interests which manipulated political events to create a 400% increase in oil prices, then turned to the countries which were the victim of their assault, and "offered" to lend them petrodollars to finance the purchase of costly oil and other vital imports, at vastly inflated interest cost, of course.
For the vast majority of the world living in less-developed regions, real industrial and agricultural development suffered the consequences of the Anglo-American oil policy. Petrodollars went to simply refinance deficits, rather then to finance creation of new infrastructure, agriculture, or to improve the living standards of the world's population.
During 1975, the policy organ of the Anglo-American liberal establishment, the New York Council on Foreign Relations, under the direction of New York attorney Cyrus Vance, drafted a series of policy blueprints for the 1980s, much as they had done at the critical turning point in the late 1950s recession. In their account of the future of the global monetary order, the Council stated, "A degree of 'controlled dis-integration' in the world economy is a legitimate objective for the 1980s." What was disintegrating, however, was the entire fabric of traditional industrial and agricultural development, most clearly in the developing sector.
The Dollar Weapon
The destruction of the promise of national self-sufficiency and genuine independence for the Third World, that was to be gained through development, was brought about to a great degree by the 1973 oil shock and the sinister alliance between OPEC and the Anglo-American financial establishment. However, the war on the progress of nations and human potential did not end there. After making oil costly as a source of development, and after tying the purchase of oil to the US Dollar, the Establishment then settled on a campaign to make US Dollars themselves much more expensive to acquire. This occurred only a few years later in the late 1970s under Fed Chairman Paul Volcker, and it took place under the cover of a bogus campaign to fight the shadowy and elusive enemy of "global inflation." It was another way in which the Establishment engineered "controlled disintegration" of the world economy.
When Fed Chairman Paul Volcker began to jack up the Fed's interest rates the price of oil had already reached all-time highs of $40/barrel, which was blamed on the unstable situation in Iran as the Shah fell to the Anglo-American engineered revolution of the Ayatollah Khomeini (See Engdahl Chapter 10 and this article). By raising interest rates Volcker made dollars even more expensive to borrow, and once acquired they could buy even less oil than after the crisis of 1973. Engdahl explains where Paul Volcker's policies originated,
It would be mistaken to think that the monetary shock therapy which Paul Volcker imposed on the United States beginning October 6, 1979, was Volcker's own invention. The policy had been developed, and already implemented months before, in Britain. Volcker and his close circle of New York banking friends... merely imposed the Thatcher government's monetary shock model under US conditions.
In early May 1979 Margate Thatcher won the election against her Labour party opponent, James Callaghan. She campaigned on a platform of "squeezing inflation out of the economy." But Thatcher, and the inner circle of modern-day Adam Smith "free market" ideologues who surrounded her, promoted a consumer fraud, insisting that government deficit spending, and not the 140% increase in the price of oil since the fall of Iran's Shah, was the chief "cause" of Britain's 18% rate of price inflation.
According to the Thatcher government claim, inflated prices could again be lowered simply by cutting the supply of money to the economy, and since the major source of "surplus money", as argued, was from chronic government budget deficits, government expenditure must be savagely cut in order to reduce "monetary inflation." The Bank of England simultaneously restricted credit to the economy by a policy of high interest rates, as their part of the remedy. The effect was predictably depression, but it was called instead the "Thatcher revolution."
Thatcher cut and squeezed. In June, 1979, only one month after taking office, Thatcher's Chancellor of the Exchequer, Sir Geoffrey Howe, began a process of raising Base Rates for the banking system a staggering five percentage points, from 12% up to 17%, in a matter of twelve weeks. This amounted to an unprecedented 42% increase in the cost of borrowing for industry and homeowners, in a matter of weeks. Never in modern history had an industrialized nation undergone such a shock in such a brief period, with the exception of a wartime economic emergency.
The Bank of England simultaneously began to cut the money supply to insure that interest rates remained high. Businesses went bankrupt, unable to pay borrowing costs; families were unable to buy new homes; long-term investment into power plants, subways, railroads, and other infrastructure ground to a virtual halt as a consequence of Thatcher's monetarist revolution...
As Thatcher imposed the policies which earned her the name "The Iron Lady," unemployment in Britain doubled, rising from 1.5 million when she came into office to a level of 3 million by the end of her first eighteen months in office. Labor unions were targeted under Thatcher as obstacles to the success of the monetarist "revolution," the prime cause of the "enemy," inflation. All the time, with British Petroleum and Royal Dutch Shell exploiting astronomical prices of $36 or more per barrel for their North Sea oil, never a word was uttered against big oil or the City of London banks which were amassing huge sums of capital in the situation. Thatcher also moved to accommodate the big City banks be removing exchange controls, so that instead of capital being invested in rebuilding Britain's rotted industrial base, funds flowed out to speculate in real estate in Hong Kong or lucrative loans to Latin America.
Beginning in Britain, then in the United States, and from there radiating outward from the Anglo-American world, the radical monetarism of Thatcher and Volcker spread like a cancer, with its insistent demands to cut government spending, lower taxes, deregulate industry and break the power of organized labor. Interest rates rose around the world to levels never before imagined possible.
In the United States, by early 1980 Volcker's monetary shock policy had driven US interest rates up to British levels, and some months later, beyond, to an astonishing 20% level for select interest rates. The economics of this interest rate austerity were soon obvious to all. For any industrial investment to be "profitable" at 20% or even 17% interest rate levels, would mean that any normal investment which required more than four to five years to complete, was simply not possible. Interest charges on the construction alone prohibited this.
...This entire radical monetarist construct, advanced in the early 1980s first by the British regime of Thatcher, and soon after by the US Federal Reserve and the Reagan Administration, was one of the most cruel economic frauds ever perpetrated. But its aim was far different from what its ideological "supply-side" economics advocates claim.
The powerful liberal establishment circles of the City of London and New York were determined to use the same radical measures earlier imposed by Friedman to break the economy of Chile under Pinochet's military dictatorship, this time in order to inflict a devastating second blow against long-term industrial and infrastructure investment in the entire world economy.
And so the "debt crisis" of Third World nations emerged as a major problem in the early years of the Reagan Administration. As developing nations were continually assaulted on the economic front they threatened to fight back by defaulting on their loans to Anglo-American banks. Some sort of solution had to be arrived at and the Third World and the big banks had to settle on a compromise. The Establishment's solution was unveiled by Secretary of State George Schultz on September 30, 1982 during his address to the UN General Assembly. George Schultz was a friend of Milton Friedman and a former economics student at the University of Chicago and the solution he offered was hardly a solution at all. Schultz advocated bringing in the IMF to police the debt repayment, to restructure developing economies, and to make Third World exports more attractive to the West. It was boldly proclaimed that the "Free Market" would save the Third World, and that they could buy their way out of debt by increasing their sale of raw materials.
One of the most courageous defenders of the developing world was Mexican President Lopez Portillo. In 1976 Mexico was benefiting as a major oil producing nation and President Portillo used the profits to began an ambitious program to industrialize his backward nation. He focused on Mexico's infrastructure and, as Engdahl relates, he began to build roads, ports, petrochemical plants, agricultural complexes, and he even started a nuclear power program (one nuclear reactor can provide power for a modern city of one million people). To address the Mexican "threat" the Establishment orchestrated a run on the Mexican peso, and through a deliberate mass-media campaign advised Western investors to withdraw from Mexico.
The flight of capital out of Mexico forced Portillo to devalue the peso by 30% in early 1982, and this act alone was a crushing blow against his program to modernize Mexico and make it truly free and independent. Because of the devaluation unemployment shot up, inflation shot up, but the price of Mexico's raw materials and average living standard went down. A Mexican case officer of the IMF said at the time, "This was just the right thing to do." Engdahl explains how the Mexican crisis led to a meeting on August 20, 1982 at the New York Federal Reserve where the Mexican Finance Minister addressed more than 100 influential New York bankers and explained to them the situation. Mexico held $82 billion in foreign debt, but its currency reserves had run dry. Mexico could not pay.
On September 1 President Portillo nationalized, with compensation, the nation's private banks as well as the Central Bank, in a move to halt Mexico's economic disintegration. In a speech to his nation he called the banks "speculative and parasitical" and explained how they had stood by as $76 billion fled the country for foreign investment.
On October 1, one day after US Secretary of State George Schultz spoke to the UN, President Portillo took his turn. He blasted the Anglo-American strategy and explained that high interest rates, combined with the drop in prices of raw materials were, "two blades of a pair of scissors that threatens to slash the momentum achieved in some countries, and to cut off the possibilities for progress in the rest." He then threatened to lead the developing world by suspending payments on Mexico's debt. He went on to say, "Mexico and many other countries of the Third World are unable to comply with the period of payment agreed upon under conditions quite different from those that now prevail... We developing countries do not want to become vassals. We cannot paralyze our economies or plunge our people into greater misery in order to pay a debt on which servicing has tripled without our participation or responsibility, and on terms that are imposed on us... Our efforts to grow in order to conquer hunger, disease, ignorance and dependency have not caused the international crisis."
Unfortunately, President Portillo soon faded as a voice supporting the developing world against the onslaught from the Establishment. His term lasted for only two months after his UN address, and he was succeeded by President Miguel de la Madrid Hurtado, who took over Mexico and meekly capitulated to the wishes of the Establishment. The IMF moved in on an international scale as the financiers' policeman and Engdahl describes what happened after that. It was...
...the most concerted organized looting operation in modern history, far exceeding anything achieved during the 1920s.
Contrary to the carefully cultivated impression in Western Europe or the US media, debtor countries paid many times over, literally with blood and the proverbial "pound of flesh" to the modern-day Shylocks of New York and London. It was not the case that after August 1982, large Third World debtor nations refused to pay. They had a "pistol to the head," under IMF pressure, to sign what the banks euphemistically termed "debt work-outs" with the leading private banks, most often led by Citicorp or Chase Manhattan of New York.
Four Steps to Economic Subjugation
As Part 3 of this study documents, the previous decades had seen a concerted Anglo-American campaign against genuine Democracy in countless Third World nations around the globe. By 1980 the leaders of the Third World were, for the most part, simply puppets of the Anglo-American oligarchy, and when the debt crisis hit there were very few Third World leaders willing or able to stand up to their masters. Because of this moral and leadership vacuum, when the IMF was offered as a temporary solution on the way to the "free market" promised land, almost the entire Third World took the bait.
IMF loans were only offered if the victim country agreed to a number of "conditionalities," which included cutting imports, slashing government budgets, raising taxes, and devaluing the currency. Then the debt was renegotiated and restructured and another fee for this "service" was tacked on to the principal. For instance, Mexico was forced to slash subsidies on medicines, foodstuffs, fuel and other necessities, while at the same time the peso was brought down to a level that was beyond criminal. In early 1982, after years of President Portillo's positive economic program, the exchange rate stood at 12 pesos to one US Dollar. Then the 30% devaluation occurred, and then by 1986 the peso had dropped even further to an incredible rate of 862 to the dollar. By 1989, the peso was devalued even further to the unbelievable rate of 2300 pesos per dollar. That is how the Anglo-American Establishment destroyed the Mexican economy. Engdahl compares Mexico to the Germany of the 1920s after similar conditions were imposed by the Anglo-Americans after World War I. But Mexico was only one case, as Engdahl writes,
The same process was repeated in Argentina, Brazil, Peru, Venezuela, and most of black Africa, including Zambia, Zaire, Egypt, and large parts of Asia.
The IMF was the global "policeman" to enforce payment of usurious debts through imposition of the most draconian austerity in history. With the crucial voting block of the IMF firmly controlled by an American-British axis, the institution became the global enforcer of Anglo-American monetary and economic interests in a manner never before seen. It was hardly surprising that victim countries shattered when told that they were to receive an IMF inspection visit...
As debtor after debtor was coerced to come to terms with the IMF and the creditor banks of the Ditchley Group [the bankers' cooperative], a reversal in capital flows of titanic dimensions set in. According to the World Bank, between 1980 and 1986, for a group of 190 debtor countries, payment of interest alone to the creditors on foreign debts totaled $326 billion. Repayment of principal on the same debts totaled another $332 billion, for combined debt service payment of $658 billions on an original debt of $430 billion. But despite this effort, these 109 countries still owed to creditors a sum of $882 billion in 1986. It was an impossible debt vortex. Thus worked the wonders of compounded interest and floating rates.
Studies have shown that throughout the 1980s the nations of the Third World transferred a total of about $400 billion to the United States, the majority of it in the form of debt service. Engdahl writes that "this allowed the Reagan Administration to finance the largest peacetime deficits in world history, while falsely claiming credit for 'the world's longest peacetime recovery.'" This influx of cash to American banks was good for the banks and their shareholders and executives, and it padded the GNP and the numbers at Wall Street, but the windfall in profits failed to trickle down much further and the overall Third World debt crisis was not a good thing for the US economy, as one report discovered. Engdahl explains,
In May 1986, a Staff Study prepared for the Joint Economic Committee of the U.S. Congress on the "Impact of the Latin American Debt Crisis on the US Economy" took note of some of these alarming aspects of how the problem was being handled by the Reagan Administration. The report documented the devastating losses of US jobs and exports as the IMF austerity measures forced Latin America to virtually halt industrial and other imports in order to service the debt. The authors noted, "it is now becoming clear that Administration policies have gone above and beyond what was needed for protecting the money center banks from insolvency... the Reagan Administration's management of the debt crisis has in effect, rewarded the institutions that played a major role in precipitating the crisis and penalized those sectors of the US economy that played no role in causing the debt crisis." The study was promptly buried.
In the early 1990s the major shakeups affecting the global economy were the fall of the Communist Bloc, the first Gulf War against Saddam Hussein, and the continuation of the "Free Trade" agenda through the GATT and regional agreements such as NAFTA. The World Trade Organization was itself created at a GATT meeting in Uruguay on January 1, 1995, and from the beginning it proved to be a tool of the international merchants that are based predominantly in the world's financial capital, New York City.
Investigative journalist Greg Palast refers to the World Bank, the IMF and the WTO as the "iron triangle of globalization," and shows that their combined agenda is a two-pronged attack. On one hand it advocates the complete removal of the role of sovereign governments in the "free market" or in economic development, and on the other hand it empowers the international merchants as masters of the global economy. Democracy and the viability and sovereignty of Nation-States are both being eroded, and in the new political climate money is the supreme arbiter of mankind's destiny, rather than the will of the people as expressed through representative democracies. These anti-State side effects of globalization reveal the "iron triangle" as the most effective force paving the way for the complete elimination of independent nations and the creation of an all-powerful One World Government. Capitalism will create World Government, rather than socialism or communism as so many Conservative conspiracy-theorists fear today. It is the ultimate irony, and also a testament to the Establishment's shrewdness, that many of those who claim to be passionately fighting the New World Order are also the most steadfast supporters of the neo-liberal "free market" ideology on which it is being built.
Greg Palast, in his interview with former World Bank chief economist Joseph Stiglitz, explains that the IMF, World Bank and WTO are "interchangeable masks of a single governance system," and he reveals the Four Steps by which this system has taken control of so many nations:
Step One is Privatization - which Stiglitz said could more accurately be called, ‘Briberization.’ Rather than object to the sell-offs of state industries, he said national leaders - using the World Bank’s demands to silence local critics - happily flogged their electricity and water companies. "You could see their eyes widen" at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.
And the US government knew it, charges Stiglitz, at least in the case of the biggest ‘briberization’ of all, the 1995 Russian sell-off. "The US Treasury view was this was great as we wanted Yeltsin re-elected. We don’t care if it’s a corrupt election. We want the money to go to Yeltsin" via kick-backs for his campaign.
Privatization is a step in which governments are told to get rid of all or most of their property, industries, and national assets, and sell them on the open market. In almost all cases these assets, such as public utilities including electricity and water, as well as oil and other natural resource holdings, are sold off to Western corporations or indigenous Elites at bargain-basement prices, and then the new owners often strip down and sell off their new possessions at a great profit, but at the expense of the people for whom they were designed to serve. Such was the case in Russia under Boris Yeltsin, and Palast writes, "the US-backed oligarchs stripped Russia’s industrial assets, with the effect that the corruption scheme cut national output nearly in half causing depression and starvation."
After briberization, Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is ‘Capital Market Liberalization.’ In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the "Hot Money" cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.
"The result was predictable," said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production and drained national treasuries.
This step towards "liberalization" of the economy according to "free market" ideology can be blamed for almost single-handedly creating the "Asian Crisis" of the 1990s. Prior to the deregulation of their capital markets the Asian Tigers were being lauded as the new masters of the upcoming "Pacific Century," and viewed as the greatest threats to American economic hegemony. But then the Anglo-American economic "experts" were sent in to convince Asian nations to drop their protective rules and allow the "free market" to guide them to even greater profits. They were, to quote Senator Thaddeus Stevens, "shallow dupes who swallowed the bait," and the biggest profits were gained by currency speculators like George Soros. Palast goes on to describe the step that comes after the required loosening of capital restrictions,
At this point, the IMF drags the gasping nation to Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas.
In South Africa, according to the research of journalist Patrick Bond, the World Bank influenced South Africa's water policies in a decidedly "market-oriented" direction, advising the government to "privatise South Africa's water; change tariffs to lower the price to the rich and raise it for low-volume consumers; deny low-income people access on grounds they cannot pay for full operating and maintenance; and maintain extremely low standards of infrastructure (communal taps and pit latrines) even in dense urban areas."
Market Based Pricing does not just focus on commodities such as food, oil and water, but also on services. In Tanzania one of the World Bank's Structural Adjustment Programs (SAPs) called for families to pay a fee for each child that wanted to enroll in public school. Enrollment dropped precipitously of course, but the World Bank was paid. Back in the late 1970s 96% of Tanzania's children were enrolled in free public schools, but now in Tanzania education is another purchased commodity. Today about a third of Tanzania's national budget goes to servicing its debt, which is four times the national education budget. Tanzania is just one instance of how the World Bank views Education, and indeed all other necessary public services, which is from the single-minded perspective of greed and profit. By the way, 51% of the World Bank is owned by the US Treasury. Few Americans realize this embarrassing fact, but it is common knowledge wherever the Bank does its dirty business. When will America's Christian leaders expose the hypocrisy of the US Government profiting from the suffering of the Third World? Was Dr. Martin Luther King Jr. the last genuine Christian voice to be heard in America?
As the prices of essential goods and services are raised in countries in which the iron triangle is involved, the poor people inevitably respond. Palast explains,
This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, ‘The IMF riot.’
The IMF riot is painfully predictable. When a nation is, "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up," as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples - the Bolivian riots over water prices last year and this February, the riots in Ecuador over the rise in cooking gas prices imposed by the World Bank. You’d almost get the impression that the riot is written into the plan.
And it is. What Stiglitz did not know is that, while in the States, BBC and The Observer obtained several documents from inside the World Bank, stamped over with those pesky warnings, "confidential," "restricted," "not to be disclosed." Let’s get back to one: the "Interim Country Assistance Strategy" for Ecuador, in it the Bank several times states - with cold accuracy - that they expected their plans to spark, "social unrest," to use their bureaucratic term for a nation in flames.
That’s not surprising. The secret report notes that the plan to make the US dollar Ecuador’s currency has pushed 51% of the population below the poverty line. The World Bank "Assistance" plan simply calls for facing down civil strife and suffering with, "political resolve" - and still higher prices.
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and teargas) cause new panicked flights of capital and government bankruptcies. This economic arson has it’s bright side - for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.
Palast makes note of the fact that the iron triangle is actually only a half-hearted adherent to genuine "free market" rules, and that they favor government intervention whenever it is needed to bail out their banking friends, such as happened in Indonesia. Nonetheless, they still maintain the rhetoric of "free trade," which is the focus of the next step,
Now we arrive at Step Four of what the IMF and World Bank call their "poverty reduction strategy": Free Trade. This is free trade by the rules of the World Trade Organization and World Bank, Stiglitz the insider likens free trade WTO-style to the Opium Wars. "That too was about opening markets," he said. As in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading our own markets against Third World agriculture.
In the Opium Wars, the West used military blockades to force open markets for their unbalanced trade. Today, the World Bank can order a financial blockade just as effective - and sometimes just as deadly.
Stiglitz is particularly emotional over the WTO’s intellectual property rights treaty (it goes by the acronym TRIPS, more on that in the next chapters). It is here, says the economist, that the new global order has "condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceutical companies for branded medicines. "They don’t care," said the professor of the corporations and bank loans he worked with, "if people live or die."
By the way, don’t be confused by the mix in this discussion of the IMF, World Bank and WTO... They have locked themselves together by what are unpleasantly called, "triggers." Taking a World Bank loan for a school ‘triggers’ a requirement to accept every ‘conditionality’ - they average 111 per nation - laid down by both the World Bank and IMF. In fact, said Stiglitz the IMF requires nations to accept trade policies more punitive than the official WTO rules.
Stiglitz greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse or dissent. Despite the West’s push for elections throughout the developing world, the so-called Poverty Reduction Programs "undermine democracy."
And they don’t work. Black Africa’s productivity under the guiding hand of IMF structural "assistance" has gone to hell in a handbag. Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana. Their trick? "They told the IMF to go packing."
Near the end of Palast's interview with the former World Bank economist (Stiglitz was fired in 1999), he asks him what remedy he would begin with to help the Third World pull itself out of poverty. Stiglitz's answer: Land Reform. It is the necessary remedy at the very heart of every former colonial nation's problems, and it is also the very action that the United States undertook while we governed postwar Japan. Land Reform helped to structure an equitable economic environment in Japan and it led to their quick and easy rise to become the world's second largest economy. However, a strange thing happened once the Cold War shifted into gear. Perspectives changed in a very hypocritical way, and every time Land Reform was attempted by aspiring independent nations it was lambasted by their indigenous Elites and their Anglo-American partners as proof that the nations were "Going Communist." Once Land Reform was attempted anywhere in the Third World it was almost always inevitably followed by a CIA-backed military coup.
The Sad Fate of Labor
In the rush to champion laissez faire capitalism as the only acceptable economic system, middle-class Conservatives have joined sides with the upper class Elites, and together they blame the poor for the injustices that have appeared as globalization has taken over. Welfare and other social services are seen as unnecessary and addictive incentives for the poor to remain lazy, and viewed as the main reason why State budgets in America are increasingly under-funded. But are the poor the real culprits here? If we look at the rate of corporate taxation, as compared to individual taxation over the years, we find that in the early 1950s Big Business paid $0.76 for every dollar that families and individuals paid in Federal, State, and Local Income Taxes. By the late '70s, after two decades of corporate propaganda from Wall Street and from the gurus at the many Conservative economic think tanks, corporations found that they were paying only $0.31 for every dollar, and by the early '90s after twelve years of Reagan and Bush, corporations were paying even less: only twenty-one cents for every dollar paid in taxes by individuals. This decline in corporate taxation coincided with the greatest corporate expansion ever seen, when the profits of corporations and the wages of their pampered CEOs were skyrocketing.
Another favorite target of laissez faire propaganda is Labor. If only workers would stop asking for so much, then the economy would prosper, it is argued. Sure, the numbers on Wall Street might benefit from a drop in Labor costs, but what about the numbers on Main Street? Corporate share prices are a false measure of economic prosperity. The real measure should always be the living standards of the majority of the people. In the article "The Emperor Has No Growth," the authors compare the per capita Gross Domestic Product (GDP) figures of 1960-1980 to the era of globalization of 1980-1998 that arrived with Reagan and Thatcher. In Latin America the per capita GDP grew by 75% in the first period, but only by 6% in the last period. If growth had not fallen in the last two decades Mexico would have nearly twice as much income per person today, and Brazil would easily have more than twice as much per capita income today. In Sub-Saharan Africa, the most populous region of Africa, the numbers are even more frightening. GDP per capita grew by 36% from 1960 to 1980, but since then the GDP per person has fallen by 15%. For the developing world, Globalization has been a scourge, an economic version of the Black Death.
For the worker in general Globalization has been a terrible experiment. Labor is us. Labor is you and me, the middle class and the poor that are the real producers in the economy. In "The Emperor Has No Growth," the authors point out that since 1973 the median real wage in the United States has remained the same. You and I have not received a legitimate pay raise in twenty-seven years, while during the same period the experts were hysterically applauding the "unprecedented economic growth" that America was supposedly experiencing. Growth for whom? In the twenty-seven years prior to 1973, real wages for American workers grew by 80%! Why did wages stop rising? They stopped because after 1973, and especially with Reagan, the policies advocated by the laissez faire Chicago School of Milton Friedman were followed, and those policies place cheap goods and merchant profits over the welfare of the people.
Big Business has always been organized against Labor. Through international bodies such as the WTO; by its domination of the media, and the media's dependence on corporate advertisement; and through the politicians that have been bought off by Big Business with campaign contributions, Big Business has always been united and has always found the money to push forward its agenda.
The same is true for the Big Banks. They have always been organized in their closely-knit Anglo-American alliance, and in 1982, when the "debt crisis" had the world's attention, this alliance became even closer. Engdahl explains in A Century of War,
After October 1982, the onslaught against debtor nations of the developing sector took identifiable stages. The first crucial step came when the private banks of New York and London moved to "socialize" their debt crisis. By publishing numerous interviews in the world media warning of dire consequences to the international banking system of a widespread debt moratorium, the banks secured international support for the debt collection strategy elaborated by Citicorp, Chase Manhattan, Manufacturers' Trust Hanover, Lloyds Bank and others.
These private interests used the crisis to turn the power of major public institutions to enforce the minority interests of that private elite, the creditor banks. The banks banded together following a closed-door meeting in England's Ditchley Park in the fall, to create a de facto creditors' cartel of leading banks, headed by the New York and London banks, later called the Institute for International Finance or, informally, the Ditchley Group. They proceeded to impose what one observer characterized as a peculiar form of "bankers' socialism" -- the private banks socialized their lending risks to the majority of the taxpaying public, while privatizing to themselves all the gains. And the gains were considerable, despite the appearance of crisis.
Big Business has always been organized and has worked to pursue its obvious objectives. The international bankers have also organized to pursue their interests. However, in the era of Globalization, Labor has been continually thwarted in its efforts to organize and to receive the piece of the economic pie that it has honestly earned. One of the first attacks against Labor occurred when Ronald Reagan fired the striking air traffic controllers and dissolved their union in 1981. It was a clear signal to organized Labor, and a shadow of things to come. With Globalization and the Iron Triangle conditionalities imposed on Third World nations, the international merchants found that they were the new bosses and the entire world was their playground. The race to uproot and set up manufacturing bases where Labor was cheapest had begun.
In the United States the loss of its once-dominant manufacturing base was greatly enabled by the Reagan and Bush Administrations and by the US Agency for International Development (AID). The anti-Labor agenda of Reagan/Bush was made clear in a National Labor Committee (NLC) report on AID policies that was published in 1992, entitled "Paying to Lose Our Jobs." Journalist Patricia Horn summarizes the report,
...The report revealed how the federal government, through the Agency for International Development (AID), has persuaded factories throughout the United States, particularly in the Southeast, to relocate to low-wage Caribbean and Central American countries. AID promotes the region's "natural comparative advantage" --low wages, no unions and US taxpayer assistance.
"Paying to Lose Our Jobs" also details how, between 1980 and 1993, the Reagan and Bush administrations funneled more than a billion dollars to investment and trade promotion projects in Central America and the Caribbean through AID. At least half of that money went directly to promote company flight to export-processing, or "free trade" zones in those countries.
Thousands of US workers have lost their jobs as a result, especially in the apparel and electronics industries. In its partial survey of job loss in the apparel industry, the NLC found that -- just since 1990 -- US companies with plants in El Salvador, Guatemala and Honduras have closed 58 plants and conducted 11 mass layoffs that left over 12,000 US workers jobless. Such job loss has helped drive down the wages of remaining apparel workers.
...To those concerned about Third World development, the AID program may not sound like such a bad deal. The jobs lost in the United States create new jobs in Central America and the Caribbean. Except the new jobs in export processing zones are no bargain for workers or local economies. The zones, also known as maquiladoras, free-trade, or tax-free zones, typically set themselves up in industrial parks with clear boundaries. They are considered exempt from most of their host country's customs, tax and trade laws.
What makes zones hard on workers is this isolation. Frequently, zone managers barricade the area behind guards and chain link fences topped with barbed wire. The companies pay their workers 40 to 50 cents an hour, a below poverty-level wage even by these countries' standards. And any hint of organizing to fight for better working conditions routinely results in a worker being fired and her name added to the country's "blacklist," ensuring she will never work in a zone again.
...If these programs are not developing the Caribbean and Central American economies, why is the federal government pursuing them? According to the Labor Fund's Kernaghan and Steve Hellinger, executive director of the Development GAP, an international development nonprofit, the US government encouraged such programs to help corporations gain access to lower wages both abroad and at home.
"Our report breaks down the myth about AID," says Kernaghan. "The government said it was to develop the region, to create jobs, to create democracy. They lied. They did this stuff to give US companies access to low wages. Period. Now the government is finally admitting it."
AID and other programs are the latest steps in a long-term process of corporations relocating south. "You have to remember that this was a Reagan/Bush strategy. They had corporate support and a corporate agenda," says Hellinger. "This is only the latest round of support for the movement of investors from the North to the South to reduce costs and substantially increase their leverage with US unions." Lower wages also keep corporations competitive with the Asian apparel industry which uses cheap, sometimes prison, labor.
...AID supports promotional offices in the United States for at least 11 Central American and Caribbean countries. The goal of those offices is to: (1) sell US companies on their countries' low wages, weak or unenforced health and safety rules, anti-union policies, and "adaptable" workers; (2) dole out US-backed aid; and (3) assist companies in setting up new factories, many of which US monies financed.
Ten days after the NLC's report on AID policies was published the public outcry was so loud that Congress acted against AID and passed bills prohibiting taxpayer money from going to finance corporate relocation abroad. This step was only temporary, because a year later in 1993 the corporations received an even greater boost in their quest for cheaper Labor with the passage of NAFTA in 1993. By the year 2000, after seven years of NAFTA, the US had lost half a million manufacturing jobs, while during the same period workers in Mexico's maquiladoras found that they were working harder (productivity rose by 36%), for an even smaller paycheck (wages dropped by 29%).
The corporate labor camp is not a phenomenon confined to Latin America. It can be found throughout the Third World wherever nations find themselves led by corrupt puppets that have accepted the reforms of the IMF and World Bank. British journalist John Pilger describes the situation in Indonesia, the world's fifth most populous nation, in his book The New Rulers of the World,
Flying into Jakarta, it is not difficult to imagine the city below fitting the World Bank's description of Indonesia. A 'model pupil of globalisation' was the last of many laurels the bank bestowed. That was almost four years ago. Within weeks, short-term global capital had fled the country, the stock market and currency had crashed, and the number of people living in absolute poverty had reached almost 70 million. The next year, 1998, General Suharto was forced to resign after thirty years as dictator, taking with them severance pay estimated at $15 billion, the equivalent of almost 13 per cent of his country's foreign debt, much of it owed to the World Bank.
From the air, it is the industrial design of the city that is striking. Jakarta is ringed by vast, guarded, relatively modern compounds, known as export processing zones, or EPZs. These enclose hundreds of factories that make products for foreign companies: the clothes people buy on the high street in Britain, in shopping malls in North America and Australia: from the high street designer look of Gap to the Nike, Adidas and Reebok trainers that sell in London's Oxford Street for up to £100 a pair. In these factories are thousands of workers earning the equivalent of seventy-two pence a day, about a dollar. This is the official minimum wage in Indonesia, which, says the government, is about half the living wage; and here, that means subsistence, bordering on working pauperism. Nike workers get about 4 per cent of the retail price of the shoes they make, which is not enough to buy the laces. Still, they count themselves lucky: they have jobs. The 'booming, dynamic economic success' (another World Bank accolade) has left more than 36 million Indonesians without work.
Posing as a London fashion buyer (for the filming of my ITV documentary The New Rulers of the World) I was given a tour of one such factory, which makes Gap clothes for Britain and America. I found more than a thousand mostly young women working, battery-style, under the glare of strip lighting, in temperatures that reach 40 degrees Centigrade. The only air-conditioning was upstairs, where the Taiwanese bosses were. What struck me was the claustrophobia, the sheer frenzy of the production and a fatigue and sadness that were like a presence. The faces were silent, the eyes downcast; limbs moved robotically. The women have no choice about the hours they must work, including a notorious 'long shift': 36 hours without going home. I was assured that, if I wanted to place a last-minute order, that was 'no problem' because 'we just make the workers stay longer'.
The economic system that the international
financiers and merchants have created and forced upon the world is a brutal
system of cutthroat competition, outright greed, and shameless exploitation.
When the "free market" is allowed to operate unchecked, guided and protected by
undemocratic institutions such as the World Trade Organization, without any
oversight from the will of the majority acting through democratic nations, the
result is a primal climate where the powerful rule over the week, where the rich
get increasingly richer and the poor are abused and become enslaved. The fate of
the worker in the Third World, a fate that is threatening the worker in the
West, is but one symptom of the evils of the dominant oppressive economic system
that rules the world.
The Importer of Last Resort
The global system of out-of-control corporate-dominated capitalism that exists today is not a healthy system. It is a system not based on production, but rather on stealing, looting, plundering, and gambling. Back in the 1960s about 70% of dollars spent on trade were for actual products, real goods that were used by real people. However, as this article by EIR explains, by the late 1990s derivatives speculation had grown so high that only one half of one percent of dollars changing hands were spent on real goods. The other 99.5% was spent by financial speculators on bets on the worth of global commodities, or in currency speculation and the trade of money itself. For instance, in 1986 the value of the total global derivatives market was $1 trillion. By 1994 this market had grown to be worth $45 trillion, and then only five years later in 1999 the global gambling market jumped to the size of $300 trillion. That is what happens when nations are tricked into loosening all financial and currency controls over their economies. Instead of investing money on real productive projects the financiers and money merchants of the world prefer to make their money by betting on the economy, often against the economy, at the same time proclaiming how sound the system is while the foundational economic infrastructure of the world crumbles around them.
New York City is the very heart of the system and the powerful financiers associated with old firms such as JP Morgan and Chase Manhattan (now merged as JP Morgan Chase), Goldman Sachs, and Citigroup, manipulate the global economy in association with Alan Greenspan and the Federal Reserve, the IMF and World Bank, and the US Treasury Department. This top group then caters to the Corporate firms associated most especially with Wall Street, with the interests of the City of London, and also with the corporations of the Trilateral Commission club in Europe and Japan, all overseen according to joint agreement by the World Trade Organization.
The US Dollar is the currency that holds the system together, and the primacy of the dollar has allowed the United States to be the main outlet for the over-production of goods that the system is churning out. The result is the constant corporate demand that Americans buy more and more goods that are often paid for only through an ever-increasing individual mortgage or credit card debt. At the same time the trade deficit of the United States increases exponentially as well, which is a national debt that cannot continue forever, as author William Greider explains in his report on global capitalism, One World, Ready or Not,
This role cannot continue indefinitely and may soon come to an end. As America's economic dominance has steadily weakened, the nation takes on an increasing volume of foreign indebtedness through its large and persistent trade deficits -- the losses sustained every year by buying more goods from other economies than they are willing to buy from the United States. At the same time, the nation's broad capacity for mass consumption is being slowly eroded by declining wages and the loss of high-income employment, whether from technological reform or the migration of manufacturing sectors. Thus, the nation's economic resilience is weakening as its debt obligations accumulate.
A very rich nation can manage to do this for quite a long time. But not forever. Sooner or later, like any other kind of debtor, the United States will be tapped out -- no longer able to afford its role as buyer of last resort. As the enormous US trade debts accumulate, the dollar declines steadily in foreign-exchange value, reflecting the country's diminishing strength. At some point, the nations devalued purchasing power in global markets will, literally, price it out of buying so much from others. Like Britain's before it and for roughly the same reasons, American hegemony will be ended.
This reality may surface as a dramatic thunderclap or simply emerge from the slow, bleeding process that is already in progress. Either way, the moment of recognition promises crisis, not only for the United States, but also for the global economy at large. For Americans, the meaning is already been felt: a lower standard of living for most people, perhaps abruptly lowered if a sudden financial markdown of America's economic worth occurs. That by itself does not constitute a global crisis, given the luxurious and often wasteful nature of American consumption, and might even be therapeutic for Americans themselves in the long run. But it is sure to trigger a grave moment in US politics and a deep psychic wound to the national self-confidence.
The global economy is in a precarious position, and radical changes could occur if the status of the dollar is ever seriously threatened. The new Euro currency is one of these potential threats, and the petroleum basis of the dollar, meaning the fact that OPEC only accepts dollars for oil, is an achilles heel. As William Engdahl explains in his article sub-titled "Iraq and the hidden euro-dollar wars," it is just this Euro vs. Dollar competition that lies at the heart of the US conquest and occupation of Iraq. If OPEC ever agreed to accept anything other than US Dollars for oil, then the American economy, and indeed the global economy, would implode. This dam was breeched in November of 2000, when Saddam Hussein dropped the dollar, and began accepting only euros for his oil-for-food program that was being directed by the UN. The Anglo-American Globalist faction that is intent on keeping the present system propped up had to make an example out of Saddam Hussein, and eliminate any thought that other oil-producing nations might have of breaking from the petro-dollar standard.
Engdahl comments on the petro-dollar standard in his article, and on the result that has allowed the United States to became awash in cheap goods and the "importer of last resort,"
So long as almost 70% of world trade is done in dollars, the dollar is the currency which central banks accumulate as reserves. But central banks, whether China or Japan or Brazil or Russia, do not simply stack dollars in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the United States. Most countries around the world are forced to control trade deficits or face currency collapse. Not the United States. This is because of the dollar reserve currency role. And the underpinning of the reserve role is the petrodollar. Every nation needs to get dollars to import oil, some more than others. This means their trade targets dollar countries, above all the U.S.
Because oil is an essential commodity for every nation, the Petrodollar system, which exists to the present, demands the buildup of huge trade surpluses in order to accumulate dollar surpluses. This is the case for every country but one — the United States which controls the dollar and prints it at will or fiat. Because today the majority of all international trade is done in dollars, countries must go abroad to get the means of payment they cannot themselves issue. The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Everyone aims to maximize dollar surpluses from their export trade.
To keep this process going, the United States has agreed to be ‘importer of last resort’ because its entire monetary hegemony depends on this dollar recycling.
The central banks of Japan, China, South Korea, Russia and the rest all buy U.S. Treasury securities with their dollars. That in turn allows the United States to have a stable dollar, far lower interest rates, and run a $500 billion annual balance of payments deficit with the rest of the world. The Federal Reserve controls the dollar printing presses, and the world needs its dollars. It is as simple as that.
The bottom line is that the present global economy is in a precarious position, propped up only by debt, and by American imperialistic policies of pre-emptive war and conquest. Economic growth is falling, the Third World is degenerating into a situation bordering dark ages feudalism, while the super-rich do their best to acquire resources, cheap labor and profit while they still can, and institutions like the IMF bleed debtor nations dry and continue to reward the Third World leaders that follow their suicidal policies. At the same time the remaining consumers in the West continue to be burdened with increasing debt, while their paychecks keep getting smaller and smaller, and the public services provided by sovereign governments continue to be cut to lessen the tax burden on the rich, all in the name of fighting the bogus scapegoat of last resort: Big Government.
The global economic system is feeding off
of itself to survive. It is a snake eating its own tail for nutrition, and
sooner or later, the nutrition is sure to
run out. When it does, and when the present New World Order of
corporate-dominated capitalism is dismantled, the Anglo-American-Globalist
Establishment will have a false revolution ready made through which to create a
new system, a system completely opposite the current system of manic
free-profiteering, which will have much more in common with Stalinist Russia and
the totalitarian socialist regime that George Orwell warned us about in 1984.
Read on to discover how the prophecies of the Bible predicted both of these
wicked political/economic systems that would dominate the world at the end of
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