Ch 5) War: Currency Security
We hear about the ‘geo-political’ agenda of America’s rush for Iraqi oil as the ‘real reason’ to Saddam Hussein’s overthrow. It appears that America has less access now then before the Iraq war. Back than, Saddam would have sold as much oil as we wanted - at bargain basement prices. Iraqi oil is now divvied up between many other countries besides the US. How much did we ‘win’ (even before counting cost to treasury and men)? ‘Conspiracy’ has it that oil was more a secondary reason. Currency Security, they say, was a larger motive then oil.
The Petro-Dollar
Saddam was breaking the cardinal rule of the international banking system by trading oil in non-dollar denomination. The status of America’s dollar as the currency of trade is founded upon its role in buying and selling oil. The American economy rest upon this petrol dollar system. Everything else is a supplement to that. The Iraq War may have been about disciplining Saddam for breaking this oil agreement. Dollar based oil trades automatically plugged America into a whole sub-set of profits – currency profits.
Gaddafi Gold Coin
The same might be said of Libya’s Omar Gaddafi. Gaddafi created a greater urgency by offering to introduce actual gold coins as the common currency for Africa. His gold coins would have sucked the life air out of the US dollar - overnight. This would have also taken out many of the other paper currencies of the world too. These currencies use the US dollar as the basis of their own value and medium of exchange. Destroying the dollar would have destroyed much of the banking and global economy. Hence, the immediate and international rush to remove Gaddafi - quickly.
Monetary Policy Meaningless w/out Military
To put this more bluntly, monetary policy of any kind would have meant nothing with Gaddafi’s gold coins in circulation. The best of American monetary policies would have collapse against this gold coin. Such is the vulnerability of America’s so called prosperity, economy and entrepreneurs.
Guessing how true any of this may prove to be is second to a far more important point.
Military Behind Economic Prosperity
The first point is that much of our ‘economic prosperity’ has been decided in large part through sheer military force whether it be in currency enforcement, commodity grabs or some other geo-political manipulations. Much of those magical powers celebrated of the American entrepreneur are only possible because of the battlefield work of the US military. We owe the US military far more then our freedom. They are the unspoken bedrock of America’s economic power. We have the economic room to build upon our ‘genius’ because of the host of economic advantages gained through America’s geo-political military power.
Defense of ‘American Way’
This power is often found at the end of a missile. This would be true for the raw materials of Afghanistan, to the oil or discipline of Saddam Hussein, to the squelching of gold based currencies from Gaddafi – among many such power plays. The sheer size of our US military has served as its own deterrent and influence. In general, ‘foreign policy’ plays a much larger role then most Americans realize. We are not ‘playing cop’ to the world, but rather, we really are ‘defending’ the ‘American way of life.’ Without that defense, the Life of the American Way would die – quickly. Yes, we have ‘more than gotten our moneys worth’ from our military budgets. We would not have most of our economy without it.
Military Losing Power
This brings us to the second and larger point: This military apparatus is losing its effectiveness abroad. The old colonial model for extracting goods and resources from other countries served the West well for a few hundred years. These ‘colonies’ are now ‘developing countries.’ They have developed to the point where they can fend off our bribe and black mail. This has never happened before. Brazil, India, Venezuela and a host of others are rebuffing the rules of the old colonial lords with access to cheap natural resources.
Real Story behind Commodity Inflation
This is the ‘real’ story behind our commodities rising costs. These countries are beginning to consume these commodities themselves for the first time - like never before. At the same time, they are demanding us to pay more for those commodities while denying us access to an ever growing list of them. This is creating a double spike in both demand and price as they raise prices and begin consuming them too. Our old military power allowed us access to these resources for just pennies on the dollar. We use to bully them into these low giveaway prices. We are losing these price advantages as each of these countries become more economically independent from the West. They will only continue to push back with ever greater cost and dwindling access. We present the BRIC countries below as a pressing example of the point. Our prosperity is slipping in exact proportion to the lost of these old colonial tools. Trillions in foreign resources are slipping further out of reach leaving us to pay ever more for less. And it’s happening at an accelerated rate. We need to find a new model over the military one we have used for so long. We provide that alternative below under Editors Notes.
Party Count
The irony here is that Democrats are undermining their support of ‘big business’ in the name of backing workers, environmentalist and the others that make up their constituency. Meanwhile, Republicans support ‘big business’ with tax breaks and deregulation, but are opposed to supporting them with gov’t initiatives in the name of free markets. Both sides get a pass and fail on this one depending upon which step of the process they have supported or opposed in this spectrum of business development against foreign aggression. The country has been at war with itself as their ideologies have demanded. Left and right, rich and poor, business and worker, religious and liberal. We are a nation divided by the host of growing designations, many of which are contrived while the common cause between them is ignored. Meanwhile, the rest of the world is working in partnership with their domestic industries at the expense of ours. We respond by simply blaming each other for what is actually outside forces closing in upon us. These things have little to do with worker wages or CEO earnings. Hopefully, our work can help to break the stalemate of this political civil war so that we may regroup as a country to fight the true battles arrayed against us from abroad. We face a hostile world now geared to beating America on the commercial battlefield.
Republicans do get 4 stars in their call of support to the military.
Editor’s Note
Biting Hand that Feeds You
There is an irony in this. We have a gamut of critics from Conservatives complaining about the cost of ‘foreign policy’ while ‘liberals’ criticize military budgets or the morality of foreign intervention. On either side of these two parties is the American conspiracy buff with their ever prying ‘expose’ behind US actions. These critics often fail to see they are biting the hand that feeds them (and us) as a country. Our prosperity is based upon the international subsidies of commodities (among others) won by the ‘conspiracies’ these critics complain about. Afghanistan, Iraq, Gaddafi: each new conspiracy is simply one more testament behind the extraordinary efforts to protect the country from economic collapse. The more fantastic the conspiracy,’ the more they validate that we are ‘only as good’ as our guns and missiles. (These conspiracies are a ‘backhanded’ justification of our military budgets and actions.) Few countries have complained so bitterly about the source of their own prosperity. American’s are quite unique in this way. Quite striking.
Replacement: Self-Sustainability
Conspiracy firebrands of every elk can take solace that all such ‘injustices’ are beginning to find their demise as developing countries step into their own might. What do all these ‘experts’ now propose as the country’s replacement model? Raghu-nomics suggest a a rather simple solution: Self sustainability. We have the resources, technology and manpower for it. Self sustainability is the new ‘military’ budget. Self-sustainability will play the same role to our survival and prosperity as our military has done over this last half Century. It was our military advantage that allowed us our access to cheap resources. Many will fail to recognize the urgency of our dwindling access and so we present another example below to demonstrate the point.
BRIC War
We pointed to the currency issues with Saddam and Gaddafi. This was to show the gravity of today’s developments. We now have the BRIC countries beginning to replace the US dollar with their own currency. (BRIC: Brazil, Russia, India, China) We have countries joining from the anti American states like Iran and Venezuela to others enjoying new found access like we see of India. This will lead to dozens of nations gradually divesting trillions of US dollars from their foreign exchange reserves as they replace them with currencies from China, Russia and others. The US and Europe no longer have the military might or economic levers to keep BRIC from challenging our currency domination. Our currency continues to slip along side the Middle East monopoly break-up of the oil cartel that supported the US petro-dollar system. Technology is allowing more countries greater access to oil like we see of S American. Alternative energy is replacing a growing number of energy sectors like we see of Brazils ethanol production. Once combined, the US has less power to force these new energy players into using the US dollar like we use to do. The days of military actions like we saw of Iraq and Libya are shrinking. These wars bought us time for a few years, but they may prove to be one of the last military actions to successfully extend this era of America’s petro-dollar based power. We need a new model. And quickly. We offer that below.
US Encircled
This brings us back to the Feds. There is very little the feds could do by way of monetary policy that can offset this rebellion by the BRIC countries. Our monetary policy is almost incidental to what happens in this coming currency war. The unique geo-political and all old military advantage of just a decade and sustained us for so long is receding - fast. I use Saddam and Gaddafi to show the lengths to which the USA could go to defend its ‘interest.’ I then present the BRIC countries as an example to how helpless we are becoming to defend ourselves from these latest rounds of attack to the US dollar system. I point to these examples to show the closing window of America’s military and financial powers. We are being encircled by a growing threat to our global access. BRIC is just one of hundreds of examples.
Scope of Replacement
The backbone for much of our monetary system has been built upon this military might. Recognizing the full scope of this military role will allow us to better measure how much needs to be done to replace its economic role. Seeing how fast this power is shrinking will give us the time frame we have left to find its replacement.
Military Budgets for Private Sector
Raghu-nomics suggest a simple plan: We have to jump start our private sector. We have to move our social economic infrastructure much further ahead of the rest of the worlds as we use to be. We need to gain the kinds of social economic development advantages that we see of our US military. Our military budget, for example, equals as much as the next top 10 countries military budgets - combined. This is the kind of re-investment we need to make to our private sector.
Community: Boot Camp for Crusade
This needs to cover the commercial sector as well as communal development. Community is home to our foot soldiers in this global economic battle against China and others. Americans need to be as well equipped with training and vocational tools as today’s American soldier is for battle. It’s a national security issue rather then a social economic one. The global economy is replacing military might with market domination. We need a market based task force to win on this global battlefront as we did in the last century in war. Community is that boot camp training ground for this crusade. Community needs to have the resources we have our military training camps.
Socialism vs. Foreign Policy
This may sound like a ‘red flag’ to conservatives opposed to ‘Socialism.’ This changes once they realize we are facing a foreign act of economic aggression. It means that this is not an economic issue, but a foreign policy one. The federal gov’t is supposed to lead against foreign aggression. That is as true of economic aggression as a military one. This leaves us with something looking much like a socialist model. Yes, gov’t would be backing their domestic players of industries and community. However, this would be no different then any other military operation. It’s the same gov’t would do for any frontline division going into battle. That battle is now an economic one rather then one of armed combat. This foreign policy approach should be revamping our economic one. Doing so will allow a new meeting ground for Democrats and Republicans to finally stand as one nation in common cause. This is covered in more detail in several articles.
$30 Trillion in Recycled
And for one additional step to replacing our old military petro-dollar system. We introduce the ‘Circular Economy.’ The Circular Economy was introduced to the world in Davos 2013 as a ‘new’ industry. It is quite possibly the single biggest event of the decade for it is the term that finally bridges the environmental movement’s call for self sustainability along side the capitalist finding the next gold mind of natural resources. As these resources become ever more scarce and expensive, it has finally lead us to the obvious answer. THE ANSWER: mine the goods we are already consuming. For example, they found a $630 billion in economic activity by recycling just 15% of our products from just 45% of our manufactured goods. (This is a funny way of saying that recycling 7% of all manufactured goods would provide $630 billion in goods and economic activity.) If we could recycle 80% of all our products, we would be looking at $4 trillion in resources. This $4 trillion is just on the first cycle. Doing so twice means $8 trillion. These are the projections for Europe along. Adding the USA, Asia and then the rest of the world gives us another $20 to $30 trillion that can be mined through recycling. It turns out that the worlds greatest mining deposits happen to be the modern consumer. Their junk is our greatest resource. How amazing. Welcome to the 21st Century. The eco-recycling movement has just gone ‘Circular Economy.’ These are the kinds of areas where the US can find it’s replacement to the petro-dollar system.
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