Adonis Diaries

Is US Empire on the decline trend?

Posted on: May 29, 2012

Is US Empire on the decline trend?

The US political and intellectual classes are engaged in the answering the critical question “Has the US Empire started its declining trend or is it just a mere temporary economic malaise?” Is the decline reminiscing of the British mechanism of declining power?

The politicians and scholars who depend on the Administration favors and benefits would like to strongly disagree. They claim that when the Soviet put in orbit in 1957 its first satellite, the same prophesies of US decline was raised. When Japan acceded to the second rank economic power in the 80’s, the same brouhaha spread in the country. When China exhibited its economical and manufacturing might, the same prophesies gained wings…

The politicians and scholars who depend on the Administration favors would like us to recall that 17 out of the best 20 universities are in the US, and that the US is still attracting the best minds around the world…

Fact is, everytime the US engaged in preemptive military wars, it left big chunks of feathers behind. The American Eagle is as bald in the head and in the rest of its body…

The only power that the US has and is ready for everything to maintain is the dominance of the US dollars in commercial transactions, particularly in oil import and export…

The US has demonstrated its weakness by deploying  military force at every small oil exporting/importing country that defies the strategy of dealing solely with US currency. The US is so aware of its declining supremacy that it is vehemently getting recourse to military might to reminding the world community that the power of the dollar is based on the military supremacy of the US…

Nalliah Thayabharan wrote in response to my post

“In 1973, the US President Nixon asked King Faisal of Saudi Arabia to accept only the US$ in payment for oil, and to buy US Treasury bonds, notes and bills with their excess profits.  America continued spending money and not pay back its loans…

In return, the USA pledged to protect Saudi Arabian oil fields from seizure by USSR and other nations including Iraq and Iran. (Nixon is the President who got away with Gold as the standard reference for money exchange rates and evaluations of wealth…)

The 1973 Arab-Israeli War upset this agreement and caused the Great Oil Embargo of 1974. By 1975, the Great Oil Embargo was over and all members of Organisation of Petroleum Exporting Countries (OPEC) accepted to sell their oil only in US$. Every nation was saving their surpluses in US$ since every country needed US$ to buy oil.

The OPEC oil sales supported the US$.  The petrodollar system was a brilliant political and economic move that created a growing international demand for both the US$ and US debt – all at the expense of OPEC.

Since only the Rothschild owned US Federal Reserve can print the US$, the US controlled the flow of oil. The US essentially owns the world’s oil for free because oil is denominated in US$ and the US$ is the only currency for trading in oil.

So long as almost three-quarter of world trade is done in US$, the US$ is the currency that States central banks accumulate as reserves. But central banks, whether China or Japan or Brazil or Russia, do not simply stack US$ in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the USA.

Most countries around the world are forced to control trade deficits or face currency collapse, but not the USA. This is because of the US$’s reserve currency role and the underpinning of the reserve role is the petrodollar. Every nation needs to get US$ to import oil, some more than others. This means their trade targets US$ countries.

The vast majority of the oil is traded on the New York Mercantile Exchange and the London International Petroleum Exchange and both oil exchanges are owned by the US corporations and transact oil trades in only in US$.

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 US$ surpluses. This is the case for every country but one — the privately owned US Federal Reserve which controls the US$ and prints it at will or fiat.

Because today the majority of all international trade is done in US$, countries must go abroad to get the means of payment they cannot themselves issue. The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Every country aims to maximize US$ surpluses from their export trade. Currently, over 13,000 billion of newly printed US$ is flooding into international commodity markets each year.

The petrodollar system nearly broke down during the US President Carter’s tenure, mainly due to double-digit inflation. But the US President Reagan removed all controls on oil and fuel prices and all restrictions on oil drilling to restore the stability of the US$. Oil flooded the market, prices fell, and petrodollars became more valuable. These were some of the most prosperous years that the US had,(and the worst years in south America with US initiated and perpetrated civil wars).  But the danger remained, because the US continued to spend more US$ than it earned.

The US President Reagan saw the future of the US depending on the massive international consumption of oil, and encouraged the Saudi Arabia to flood the market. This brought the price of oil down and increased the consumption –  a complete reversal of the 1973 oil embargo.

Increasing oil use boosted international demand for the US$ and the US economy soared, while the low price of oil brought the USSR economy to its knees, as they could not sell oil at a profit due to their high extraction cost. The USSR finally collapsed in 1991.

Petrodollar system created consistent international demand for US$ and upwards pressure on the US$’s value, regardless of economic conditions in the US. The high US$ allowed the US to buy imported goods at a massive discount, a kind of subsidy for the US consumers at the expense of the rest of the world. The high consumption of imports, however, hit the US manufacturing very hard.  The overvalued US$ was a major component of the bubble economy of the late 1990’s.

The reality is that the value of the US$ is determined by the fact that oil is sold in US$. If the denomination changes to another currency, such as the euro, many countries would sell US$ and cause the banks to shift their reserves, as they would no longer need US$ to buy oil. This would thus weaken the US$ relative to the euro.

The USA propagates war to protect its oil supplies, but even more importantly, to safeguard the strength of the US$. The fundamental underlying motive of the US in the Iraq war, even more than the control of the oil itself, is an attempt to preserve the US$ as the leading oil trading currency.

The fear of the consequences of a weaker US$, particularly higher oil prices is seen as underlying and explaining many aspects of the US foreign policy, including the Iraq and Libyan War.

The evidence so far definitively proves upon examination from the disclosed evidence of US government that all claims for current US wars were known to be lies as they were told to the public and not mistaken intelligence.

Until November 2002, no OPEC country dared violate the US$ price rule. So long as the US$ was the strongest currency, there was little reason to as well. But November 2002 was when France and other EU members finally convinced Iraq’s Saddam Hussein to defy the USA by selling Iraq’s oil-for-food, (not in US$, but only in Euros, the new currency of the European Union).

(Maybe the EU hastily tried to give credibility to the Euro on a worldwide scale, before it is well established in the internal European market. The fact is that the US got scared and quickly changed its policy from securing Afghanistan and into invading Iraq)

A few months before the US moved into Iraq to take down Saddam Hussein, Iraq had made the move to accept Euros instead of US$ for oil, and this became a threat to the global dominance of the US$ as the reserve currency, and its dominion as the petrodollar. The euros were on deposit in a special UN account of a French bank, BNP Paribas.

If this Iraq move to defy the US$ in favor of the euro were to spread, especially at a point the US$ was already weakening, it could create a panic selloff of US$ by foreign central banks and OPEC oil producers. In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela.

In April 2002, at the invitation of the EU, in Oviedo Spain, Iranian OPEC representative Javad Yarjani delivered a detailed analysis of how OPEC at some future point might sell its oil to the EU for euros not US$.

All indications are that the Iraq war was seized on as the easiest way to deliver a deadly pre-emptive warning to OPEC and others, not to flirt with abandoning the petrodollar system in favor of one based on the euro. The Iraq move was a declaration of war against the US$.

As soon as it was clear that the UK and the US had taken down Saddam Hussein’s regime, a great sigh of relief was heard in the Rothschild owned UK Banking cartels.

After considerable delay, Iran opened an oil bourse which does not accept US$. Many fear that the move will give added reason for the USA to overthrow the Iranian regime as a means to close the bourse and revert Iran’s oil transaction currency to US$. In 2006, Venezuela indicated support of Iran’s decision to offer global oil trade in euro.

Former Libyan leader Muammar Qaddafi made a similar bold move by initiating a movement to refuse the US$ and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Muammar Qaddafi suggested establishing a united African Union, with its 200 million people using this single currency. The initiative was viewed negatively by the USA and the EU. Even French president Nicolas Sarkozy called Libya a threat to the financial security of mankind. But Muammar Qaddafi continued his push for the creation of a united Africa.

A gold dinar for Africa revived the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad, as well as by some Islamist movements. The notion, which contravenes IMF rules and is designed to bypass them, had trouble getting started. But today Iran, China, Russia, and India are stocking more and more gold rather than US$.

If Muammar Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves, France, still the predominant economic power in most of its former Central African colonies, would be the chief loser. The plans to spark the Libya’s Benghazi rebellion were initiated by French intelligence services in November 2010.

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