Dollar Hegemony in the Empire of the Damned

Global Research
Colin Todhunter

Many commentators and economists wonder if the US is able to turn its ailing economy around. The reality is that it is bankrupt. However, as long as the dollar remains the world currency, the US can continue to pay its bills by simply printing more money. But once the world no longer accepts the dollar as world reserve currency, the US will no longer be able to continue to pay its way or to fund its wars by relying on what would then be a relatively valueless paper currency.

And the US realises this. Today, more than 60 per cent of all foreign currency reserves in the world are in US dollars, and the US will attempt to prevent countries moving off the dollar by any means possible. It seems compelled to do this simply because its economic infrastructure seems too weak and US corporate cartels will do anything to prevent policies that eat into their profits or serve to curtail political influence. They serve their own interests, not any notional ‘national interest’.

Pail Graig Roberts, former Assistant Secretary of the US Treasury, notes that much of the most productive part of the US economy has been moved offshore in order to increase corporate profits. By doing so, the US has lost critical supply chains, industrial infrastructure, and the knowledge of skilled workers. According to Roberts, the US could bring its corporations back to America by taxing their profits abroad and could also resort to protective tariffs, but such moves would be contrary to the material interests of the ruling oligarchy of private interests, which hold so much sway over US politics.

So, with no solution to the crisis in site, the US is compelled to expand its predatory capitalism into foreign markets such as India and to wage imperialist wars to maintain global allegiance to the dollar and US hegemony. And this is exactly what we are seeing today as the US strategy for global supremacy is played out.

Over the past two decades, the US has extended its influence throughout Eastern Europe, many of the former Soviet states in central Asia and, among other places, in the former Yugoslavia, Libya, Iraq, Yemen, Afghanistan, Syria and Pakistan. But with each passing year and each new conflict, the US has been drawing closer and closer to direct confrontation with Russia and China, particularly as it enters their backyards in Asia and as China continues to emerge as a serious global power.

Both countries are holding firm over Syria. Syria plays host to Russia’s only naval base outside of the former USSR, and Russia and China know that if the US and its proxies topple the Assad government, Tehran becomes a much easier proposition. Ideally, the US would like to install compliant regimes in Moscow and Beijing and exploiting political and ethnic divisions in the border regions of Russia and China would be that much easier if Iran fell to US interests.

A global US strategy is already in force to undermine China’s growth and influence, part of which was the main reason for setting up AFRICOM: US Africa Command with responsibility for military operations and relations across Africa. But China is not without influence, and its actions are serving to weaken the hegemony of the US dollar, thereby striking at a key nerve of US power.

China has been implementing bilateral trade agreements with a number of countries, whereby trade is no longer conducted in dollars, but in local currencies. Over the past few years,China and other emerging powers such as Russia have been making agreements to move away from the US dollar in international trade. The BRICS (Brazil, Russia, India, China,South Africa) also plan to start using their own currencies when trading with each other. Russia and China have been using their own national currencies when trading with eachother for more than a year.

A report from Africa’s largest bank, Standard Bank, recently stated:

“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”

Under Saddam, Iraq was not using the dollar as the base currency for oil transactions, neither is Iran right now. Even Libya’s Muammar Gadhaffi was talking about using a gold backed dinar as the reserve currency for parts of Africa. Look what happened to Libya and Iraq as a result.

In 2000, Iraq converted all its oil transactions to euros. When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the dollar. Little surprise then that we are currently watching the US attempt to remove the Iranian regime via sanctions, destabilization, intimidation and the threat of all out war.

In the meantime, though, Iran is looking east to China, Pakistan and central Asia in order to counteract the effects of US sanctions and develop its economy and boost trade. In order to sustain its empire, US aggression is effectively pushing the world into different camps and a new cold war that could well turn into a nuclear conflict given that Russia, China and Pakistan all have nuclear weapons.

The US economy appears to be in terminal decline. The only way to prop it up is by lop-sided trade agreements or by waging war to secure additional markets and resources and to ensure the dollar remains the world reserve currency. Humankind is currently facing a number of serious problems. But, arguably, an empire in decline armed to the teeth with both conventional and nuclear weapons and trapped in a cycle of endless war in what must surely be a futile attempt to stave off ruin is the most serious issue of all.

Originally from the northwest of England,  Colin Todhunter has spent many years in India. He has written extensively for the Deccan Herald (the Bangalore-based broadsheet), New Indian Express and Morning Star (Britain). His articles have also appeared in various other publications. His East by Northwest website is at http://colintodhunter.blogspot.com

America's Long-standing Campaign to Destabilize Russia

Global Research
Eric Draitser

The shootings and bombings in Ingushetia and Dagestan this week rekindled a long-standing, brutal campaign of violence and terrorism in Russia’s Caucasus region – one that has seen more than its share of terror stretching back to the Chechen “rebellion” of the 1990s. However, in examining the recent attacks, it becomes clear that there are political and geopolitical interests behind the scenes that are actively working to destabilize Russia, with violence as their most potent weapon. The attacks are not simply isolated terrorist actions, but rather, cynically orchestrated events carried out by well-connected criminal networks whose goal is to foment conflict and carry out the agenda of the US intelligence establishment in its subversion of Russia.

Terrorists, Propagandists and Handlers

The complex network of terrorist organizations that operate under the banners of “separatism” and “independence” for the Caucasus region, has been at the center of the destabilization of Russia for the last two decades. Within hours of the deadly attacks, the Kavkaz Center – an organization known to be the propaganda mouthpiece of terrorist leader Doku Umarov – released an article characterizing the attacks as heroic acts and referring to the dead as “Russian puppets.” Though this would seem to be not in keeping with the Center’s stated mission “to provide reporting of events... and assistance of journalistic work in the Caucasus,” this is, in fact, very much par for the course for an organization that is funded by the US State Department and Finland’s Foreign Ministry.

Kavkaz Center has a long track record of supporting and legitimizing terrorist actions throughout the region, rationalizing atrocities committed in the name of “resistance.” In fact, Kavkaz engages in perpetual upside-down logic, referring to Russians as “terrorists” and terrorists as “heroes.” This type of Goebbles-esque propaganda is the hallmark of Western imperialist projects; most recently in the conflict in Syria, in which the Syrian National Council, Western corporate media and the like refer to terrorism and subversion as “rebellion and freedom-fighting”. Additionally, it is essential to note that Emarat Kavkaz (Umarov’s terrorist organization translated as “Caucasus Emirate”) has been listed by the United Nations as an organization associated with Al-Qaida. Kavkaz Center has been described by Umarov himself as “the official information organ of the Emarat Kavkaz.” This, of course, supports the claims made repeatedly by Moscow of the connection between Chechen and other extremists in the region and Al Qaida, a claim which, until recently, Kavkaz Center continued to deny.

Despite the fact that organs such as Kavkaz Center operate in the service of terrorists who advocate the destruction of Russia, their activity alone is not altogether significant if seen in a vacuum. Rather, it is the association of these types of individuals and organizations with the US State Department and US intelligence that makes them particularly insidious. One such entity that bears scrutiny is the American Committee for Peace in the Caucasus (ACPC), previously known as the American Committee for Peace in Chechnya. As reported by Right Web at the Institute for Policy Studies, “The ACPC was founded in 1999 by Freedom House, a neoconservative organization that has worked closely with the U.S. government, receiving funds from the National Endowment for Democracy and other U.S. democratization initiatives.” This intimate relationship between the ACPC and the US State Department indicates not merely a confluence of interests, but rather a direct relationship wherein the former is an organ of the latter.

The paternalistic role of the US intelligence establishment in the ACPC is made all the more evident when one examines some of the more well known members of the ACPC including former National Security Advisor Zbigniew Brzezinski, former Pentagon advisor Richard Perle and other top neocons such as William Kristol, Elliott Abrams, Kenneth Adelman, and Robert Kagan – the last two being closely associated with the inner circle of the Romney campaign. What becomes apparent in even a cursory analysis of these figures is that, despite the preponderance of neoconservatives, the top members of the ACPC are pulled from both the liberal and conservative establishments. Therefore, one can see how the ACPC represents a bipartisan consensus within the US imperialist ruling class – a consensus of aggression against Russia. What should be even more concerning to political observers is that, given the very real possibility of a Romney victory in November, Russia may see a surge in separatism and violence supported overtly or covertly by the ACPC and a future Romney administration.

The ACPC has taken the lead in championing the cause of separatism and terrorism directed toward Russia, both tacitly and overtly. After having championed the cause of former Chechen Foreign Minister Ilyas Akhmadov in his quest for asylum in the United States – subsequently granted along with a generous taxpayer-funded stipend – ACPC member Zbigniew Brzezinski went so far as to write the foreward to Akhmadov’s book The Chechen Struggle. The alliance between political figures such as Akhmadov and terrorist leaders in the region demonstrates conclusively the partnership between the various terror networks and the imperialist ruling class in the West. Moreover, it shows that, along with oligarchs such as Boris Berezovsky and Roman Abramovich, the US and UK are still the favorite safe havens for criminals fleeing Russian justice.

The Political Context

The Libor Scandal In Full Perspective

Global Research
Paul Craig Roberts

The article about the Libor scandal, coauthored with Nomi Prins, received much attention, with Internet repostings, foreign translation, and video interviews. To further clarify the situation, this article brings to the forefront implications that might not be obvious to those
without insider experience and knowledge.

The price of Treasury bonds is supported by the Federal Reserve’s large purchases. The Federal Reserve’s purchases are often misread as demand arising from a “flight to quality” due to concern about the EU sovereign debt problem and possible failure of the euro.
Another rationale used to explain the demand for Treasuries despite their negative yield is the “flight to safety.” A 2% yield on a Treasury bond is less of a negative interest rate than the yield of a few basis points on a bank CD, and the US government, unlike banks, can use
its central bank to print the money to pay off its debts.

It is possible that some investors purchase Treasuries for these reasons. However, the “safety” and “flight to quality” explanations could not exist if interest rates were rising or were expected to rise. The Federal Reserve prevents the rise in interest rates and decline in bond prices, which normally result from continually issuing new debt in enormous quantities at negative interest rates, by announcing that it has a low interest rate policy and will purchase bonds to keep bond prices high. Without this Fed policy, there could be no flight to safety or quality.

It is the prospect of ever lower interest rates that causes investors to purchase bonds that do not pay a real rate of interest. Bond purchasers make up for the negative interest rate by the rise in price in the bonds caused by the next round of low interest rates. As the Federal Reserve and the banks drive down the interest rate, the issued bonds rise in value, and their purchasers enjoy capital gains.

As the Federal Reserve and the Bank of England are themselves fixing interest rates at historic lows in order to mask the insolvency of their respective banking systems, they naturally do not object that the banks themselves contribute to the success of this policy by fixing the LIbor rate and by selling massive amounts of interest rate swaps, a way of shorting interest rates and driving them down or preventing them from rising.

The lower is Libor, the higher is the price or evaluations of floating-rate debt instruments, such as CDOs, and thus the stronger the banks’ balance sheets appear.

Does this mean that the US and UK financial systems can only be kept afloat by fraud that harms purchasers of interest rate swaps, which include municipalities advised by sellers of interest rate swaps, and those with saving accounts?

The answer is yes, but the Libor scandal is only a small part of the interest rate rigging scandal. The Federal Reserve itself has been rigging interest rates. How else could debt issued in profusion be bearing negative interest rates?

As villainous as they might be, Barclays bank chief executive Bob Diamond, Jamie Dimon of JP Morgan, and Lloyd Blankfein of Goldman Sachs are not the main villains. The main villains are former Treasury Secretary and Goldman Sachs chairman Robert Rubin, who pushed Congress for the repeal of the Glass-Steagall Act, and the sponsors of the Gramm-Leach-Bliley bill, which repealed the Glass-Steagall Act. Glass-Steagall was put in place in 1933 in order to prevent the kind of financial excesses that produced the current ongoing financial crisis.

President Clinton’s Treasury Secretary, Robert Rubin, presented the removal of all constraints on financial chicanery as “financial modernization.” Taking restraints off of banks was part of the hubristic response to “the end of history.” Capitalism had won the struggle with socialism and communism. Vindicated capitalism no longer needed its concessions to social welfare and regulation that capitalism used in order to compete with socialism.

The constraints on capitalism could now be thrown off, because markets were self-regulating as Federal Reserve chairman Alan Greenspan, among many, declared. It was financial deregulation–the repeal of Glass-Steagall, the removal of limits on debt leverage, the absence of regulation of OTC derivatives, the removal of limits on speculative positions in future markets–that caused the ongoing financial crisis. No doubt but that JP Morgan, Goldman Sachs and others were after maximum profits by hook or crook, but their opportunity came from the neoconservative triumphalism of “democratic capitalism’s” historical victory over alternative socio-politico-economic systems.

BRICS Rails at Financial Status Quo

Dmitry Medvedev

Moscow Times

President Dmitry Medvedev and other BRICS leaders called for sweeping reforms of international financial mechanisms, hinted at displacing the U.S. dollar as the world's major trade currency and condemned the NATO bombing of Libya at a summit of leading emerging economies in China on Thursday, but there were few actions to match the words.

Speaking at the summit of Brazil, Russia, India, China and South Africa in Sanya, China, Medvedev said he and his Chinese counterpart Hu Jintao had "agreed to intensify work on the eastern and western gas supply routes before the end of the year" during a bilateral meeting earlier in the day.

"We are talking about this year, I mean the basic conditions for approval. Naturally, the deliveries will begin later," he told reporters, adding that, although each side would push its own business interests in price negotiations, positions had generally moved closer.

China is a growing foreign policy priority for Russia. It is the world's biggest energy consumer and became Russia's main trading partner last year.

Medvedev promised during a visit to Beijing in September to supply China with all the gas it needs for economic development.

In 2009, China extended a $25 billion preferential-rate loan to Rosneft and Transneft in exchange for a 20-year oil supply contract.

Medvedev will go on an extended visit to China, following the BRICS meeting, with an appearance at China's Boao Forum and a visit to Hong Kong on Saturday.

Although the BRICS forum had criticized the world's reliance on the U.S. dollar, Medvedev played down speculation that the five countries might adopt the Chinese yuan as a trade currency.

"Of course, the Chinese economy is huge, and in this sense the role of the yuan is growing, but we haven't made any special decisions regarding the yuan, nor are they being discussed," he told reporters.
Earlier Thursday, the five countries signed a memorandum on cooperation among their national financial development institutions that paves the way for the countries to grant one another loans in their national currencies.

Vladimir Dmitriyev, head of Vneshekonombank, told Interfax that the document marked "the first practical step toward using national currencies in economic cooperation between these countries."
China Development Bank was the first institution to take advantage of the new measures, saying it was ready to extend 10 billion yuan in loans to Brazil, Russia, India and South Africa.

The loans are expected to focus on large oil and natural gas projects. China Development Bank chief Chen Yuan cited deepening cooperation with Brazil's Petro Bas when asked for specifics, Reuters reported.

No specific deals relating to Russian companies have emerged so far.

Medvedev also held bilateral meetings with Hu, Brazilian President Dilma Rousseff, Indian Prime Minister Manmohan Singh and South African President Jacob Zuma during the meeting.

Thursday's was the first summit since South Africa joined the club of emerging economies, prompting Medvedev to make a flat joke.

"I don't know who came up with the BRIC abbreviation … but we've come up with a different acronym, and it has already become quite popular."

"After the accession of South Africa, the Russian abbreviation BRYuKI emerged," Medvedev told reporters in Sanya, China. Bryuki means "pants" in Russian.

It may have been a weak joke, but he was right to say the group has changed.

BRIC — Brazil, Russia, India and China — was born as an acronym thought up by Goldman Sachs economist Jim O'Neill as shorthand for the world's leading emerging markets.

But it has become a club for countries — including now South Africa — with a common interest in turning their growing economic strength into political clout on the world stage.

All five are currently members of the UN Security Council.

In this spirit, the five issued a joint statement calling for an overhaul of the international financial system and reform of the International Monetary Fund, criticizing dependence on traditional reserve currencies like the U.S. dollar and condemning NATO-led air strikes against Libya.

"This is not a format where countries decide things; it is much more about showing the emergence of new structures as opposed to old organizations," said Fyodor Lukyanov, editor-in-chief of Russia in Global Affairs.

Nonetheless, there are differences in the group.

In the March 17 Security Council vote authorizing military action in Libya, Brazil, Russia, India and China abstained. South Africa voted in favor, along with other African Union countries.