------------------------- Via Workers World News Service Reprinted from the June 5, 2003 issue of Workers World newspaper -------------------------
TWO WEAPONS OF MASS DESTRUCITON: FALLING BOMBS & FALLING DOLLARS
By Bill Cecil
The Bush regime's panzers roared into Iraq on March 19. Two months and thousands of civilian deaths later, the other shoe dropped. On May 19 U.S. Treasury Secretary John Snow signaled that the U.S. would not act to stop the dollar's slide against the euro.
U.S. currency has dropped 26 percent against the euro since Bush's "axis of evil" speech in January 2002. The invasion of Iraq and the new dollar policy are directly related. The first made the second possible.
Both were driven by capitalist economic crisis. Both were acts of war.
Snow made his remarks in Deauville, France, where he had just attended a summit of the Group of 8--Britain, Canada, France, Germany, Italy, Japan, Russia and the U.S. Some thought the U.S. would use the meeting to mend relations damaged by the Iraq War.
Instead Snow declared economic war--a giant wrecking operation on the European Union, Japanese and Canadian economies. It was a move as perilous as any military adventure.
European stock prices plummeted after Snow's remarks. By the end of the week Berlin, Moscow and Paris blinked. They voted in the United Nations to recognize the U.S. "right" to occupy Iraq and sell its oil.
That capitulation won't satisfy Wash ington, however. Any more than Iraq could when it agreed to allow UN weapons inspections.
It won't change the economic factors driving the Bush agenda.
What Snow actually said was that the strength of the dollar depended on "investor confidence," not its rate of exchange. He implied that the U.S. would no longer buy dollars to keep the currency strong. It was a major shift. When Snow was nominated for the Treasury post in January, he said he wanted a strong dollar.
What changed in four months' time? It's simple. U.S. troops grabbed the world's second-largest oil reserves.
A cheaper dollar is in effect a wage cut for U.S. workers. It makes U.S. goods cheaper on the world market and imported items like autos more expensive here. It gives U.S. companies a bigger return on their overseas investments.
Even before Snow's press conference Business Week called the falling dollar "good news for much of Corporate America, especially multinational companies. ... The biggest reason for the immediate profit gains many are starting to see isn't rising exports or better protection from cheap imports but simply from translating earnings from more valuable currencies into dollars."
About 26 percent of U.S. corporate profits come from overseas operations. That figure is expected to rise.
But a cheaper dollar is fraught with risks for the U.S. ruling class. Soldiers can be ordered to advance, halt or retreat. Capital, on the other hand, has a life of its own. The fall of the dollar could change from an organized retreat into a rout. Why should people buy stocks and assets valued in dollars when the dollar is losing value?
"When you're the world's banker, you really need to maintain the world's confidence in you and your currency," Northern Trust senior economist Paul Kasriel told CNNMoney. "If you start telling creditors you're going to pay them back in currency that doesn't buy as much, they won't want to bank with you any more."
The U.S. has a $10 trillion economy--the largest in the world. It also has the largest trade deficit the world has ever seen. Last year the U.S. imported $435 billion worth of goods more than it sold overseas. This March alone the figure was $44 billion.
How has the economy been able to weather such a huge trade deficit without collapsing? In the 1980s and 1990s international investors poured money into U.S. assets. From 1995 to 2000 the U.S. took in about $500 billion a year in direct capital investment. That doesn't count trillions in stocks, bonds, treasury notes, real estate, hedge funds and bank accounts.
"Foreign investors now have claims on the United States amounting to about $8 trillion of its financial assets," the April 20 New York Times reported. They also "hold about two-fifths of the federal debt in private hands." To finance its deficit, the U.S. needs $1.5 billion in new outside investment every day. Talk about foreign aid!
A lot of that money comes from oil-producing countries in the Middle East and elsewhere. Their economies are bound to Wall Street because oil is traded in dollars. Saudi Arabia alone is estimated to have nearly $1 trillion invested in the U.S. That was last year. It's probably worth a lot less now. The fall in the dollar is, among other things, a giant rip- off of these international investors.
So why don't the Saudis and others take their money out? Why don't they sell oil for euros instead of dollars? Iraq got UN permission to do that in 2000. Iran, Libya and Venezuela have said they might do the same.
Iraq won't be selling oil for euros anytime soon. It's under U.S. occupation. Iran has moved up on the Bush regime's hit list. And should Saudi Arabia start pulling funds out of the U.S., it won't take long for Donald Rumsfeld to "discover" an "al-Qaeda"cell in the royal palace in Riyadh. The U.S. occupation of Iraq is a gun to its head. It not only puts a massive U.S. military force next door. It gives Corporate America power over the price of oil. That's a gun to the head of the world.
Many people, even in the anti-war movement, were baffled by the Bush regime's desperation to attack Iraq. They didn't believe the lies about al-Qaeda connections and weapons of mass destruction. But even greed for oil didn't seem to justify the risks involved.
The desperation of U.S. imperialism came from the falling rate of corporate profits. The conquest of Iraq, the threats against Iran and North Korea, the economic war against Europe all have one purpose: To destroy any avenues of economic life on this planet that don't lead to Wall Street.
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