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OfflineGazzBut
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Euro VS Dollar
    #1986313 - 10/07/03 09:34 AM (13 years, 5 months ago)

Just found this on FreeRepublic.com a oonservative message board. Any of you right wingers who actually believed any of the WMD/human rights bullshit may want to take a good long look at this.

link

The Shadow War: Euro vs. Dollar
The Hindu ^ | April 22, 2003 | N.S. RAJARAM


Posted on 09/18/2003 1:07 AM PDT by KMAJ2


Behind the war in Iraq is a struggle for economic dominance between America and Europe. A clash of civilisations is nowhere in sight.

SOME INDIAN thinkers are interpreting the U.S.-led attack on Iraq as part of the "clash of civilisations" between the "Christian" West and the Islamic world. Such facile academic theories can mislead both the public and policy makers into thinking that the world is simpler than it really is, leading to policy decisions that can have unforeseen consequences. To see this, one has only to visit another popular theory 40 years ago called the "domino effect." It held that one country becoming communist would inevitably lead to its neighbours also becoming communist. Belief in this theory led to U.S. entanglement in Vietnam the wounds of which have still not healed. One may see the clash of civilisations as the academic theory that is playing today the same role as the domino effect theory did in the Cold War era. They both offer attractive but unsound simplifications.

The ground situation today, especially after the U.S.-led attack on Iraq, gives scant support to the clash of civilisations thesis. The assumption, generally unstated, is that it is part of a conflict between the Christian' West and the Islamic world. This belief appears to be particularly strong in India and the Islamic world. It is based on the fundamental misconception that religion (Christianity) plays the same role in the West as Hinduism and Islam play in the East. The reality is that the West, Europe in particular, sees itself not as Christian but secular humanistic. Unlike Indians ? both Hindus and Muslims ? many of who are prepared to lay down their lives to defend their religion, it would be hard to find a handful of Europeans prepared to do so in the defence of Christianity or the Church. In accepting Huntington's clash of civilisations thesis, Indians and other Asiatics have essentially projected their own religiosity on to the people and countries of the West. Interestingly, Westerners, Americans in particular, are making the opposite mistake by applying secular humanistic measures in interpreting the deeply religious East. The fact that their contact is limited to the Westernised urban elite, which they take to be representative of the country as a whole, has only reinforced their misperceptions.

The clash of civilisations thesis also fails to explain the split within the Anglo-European block, with France and Germany opposing the U.S. policy almost as fiercely as Iraqi soldiers opposing American soldiers. Some analysts have recognised that there is an economic dimension to the U.S. invasion of Iraq, which sits on oil reserves second only to Saudi Arabia's. This may be valid but it is only part of the picture: there is a deeper economic struggle that the United States is waging to preserve its economic supremacy in the world. This now has taken the form of an unseen war between the Euro and the Dollar for which Iraq has become the military beachhead. It has enormous consequences for the future of the world order.

Oil and dollar

In a recent article titled "It's not about oil or Iraq; it's about the U.S. and Europe going head-to-head on world economic dominance," the Australian economist and columnist Geoffrey Heard wrote: "Why is George Bush so hell bent on war with Iraq? Why does his administration reject every positive Iraqi move? It all makes sense when you consider the economic implications for the USA of not going to war with Iraq. The war in Iraq is actually the U.S. and Europe going head to head on economic leadership of the world."

Heard then goes on to explain how Iraq has become the unwitting battleground ? "beachhead" in Heard's terminology ? in this economic war following Iraq's decision to switch from dollar to euro in its oil sales. In his words: "It is about the currency used to trade oil and consequently, who will dominate the world economically, in the foreseeable future ? the USA or the European Union. ...Iraq is a European Union beachhead in that confrontation. America had a monopoly on the oil trade, with the U.S. dollar being the fiat currency, but Iraq broke ranks in 1999, started to trade oil in the EU's euros, and profited. If America invades Iraq and takes over, it will hurl the EU and its euro back into the sea and make America's position as the dominant economic power in the world all but impregnable. America's allies in the invasion, Britain and Australia, are betting America will win and that they will get some trickle-down benefits for jumping on to the U.S. bandwagon." This has now come home to roost, but it calls for some appreciation of the history leading up to it.

Throughout history, some commodity or other has served as the de facto medium in world trade. Although specie' (gold and silver) has been widely exchanged as currency, the command of world trade and economy has depended on a more widely traded product. In the past, grain has been one such commodity, which made Lenin say: "Grain is the currency of currencies." This had allowed countries with food surpluses like the United States, France and Canada to exert great influence on countries with food shortages until the Green Revolution changed the equation. Well into the 18th century, cotton textiles occupied a comparable position; it was cotton that was largely responsible for the prosperity of pre-colonial India. With the advent of the Industrial Revolution, Britain ensured that the Indian cotton industry was destroyed to make room for its own machine-produced textiles. Today, despite the talk of globalisation and post-information society, the commodity of exchange is oil. The world can run without computers but not without oil.

While oil serves as the commodity of exchange, a couple of historical developments ensured the dollar's dominance of the international oil trade. First, the agreement between President Franklin Roosevelt and King Ibn Saud of Saudi Arabia allowed the U.S. dollar to be used in oil trade; and the second, the Bretton Woods Conference established the dollar as the world standard virtually replacing gold. This allowed the U.S. to run huge deficits in both domestic expenditure and international trade. While the U.S. printed dollars to meet its fiscal obligations, countries of the world accepted dollar payments for their goods because of the dollar's value as the currency of choice for oil purchases. As a result, even while the U.S. kept losing its industrial pre-eminence, it managed to retain its economic dominance as the producer of the currency of oil trade. Further, the demand for dollars as the de facto oil currency allowed the U.S. to commit enormous resources (by absorbing deficits) to defence production making it the mightiest military power in history.

Euro's challenge

As long as the dollar remains the dominant currency, especially in oil trade, it is difficult to see how the U.S. can be dislodged from its position as the world's dominant economic power. A small crack appeared in 1999 when Iraq, at France's persuasion, agreed to accept payment for its oil in euro. At first this seemed unwise as the euro was selling well below the dollar. But now with the euro at a premium Iraq reaped a huge profit. This made other oil producers take note of Iraq's success. As Geoffery Heard noted: "Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including America's bete noire, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market." It is probably not accidental that the U.S. put pressure on Iran by naming it a member of the "axis of evil," and tried also to destabilise the democratically elected Venezuelan government with the help of business interests friendly to America.

The U.S. seems belatedly to have sensed the potential threat posed by the euro. Heard observed: "The greenback's (dollar's) grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the U.S.'s economy and its dominance of world trade." This probably overstates the case, but the recent decline in the value of the dollar indicates that the threat is real. It is worth noting that the U.S. is the most indebted country in the world with domestic and international debt approaching 3.4 trillion dollars or $12,000 for each man, woman and child in America. A long term weakening of the dollar due to its slipping hold on the world oil trade can have serious consequences for American prosperity and also its capacity to finance its military expenditure through deficit financing. That is to say, the euro threatens America's economic power as well as its military power.

This may help explain why the U.S. abruptly shifted its attention from the war in Afghanistan to a major war in Iraq. Its goals, in Heard's words, are to "safeguard the American economy by returning Iraq to trading oil in U.S. dollars, so the greenback is once again the exclusive oil currency. (Also) send a very clear message to any other oil producers just what will happen to them if they do not stay in the dollar circle. ...Place the second largest reserves of oil in the world under direct American control. Provide a secular, subject state where the U.S. can maintain a huge force... to dominate the Middle East and its vital oil." The war in Iraq may be a war for oil, but at a deeper level it is a war for the defence of the continued control of the world oil economy through the dollar.

No clash of civilisations

The war in Iraq is primarily a war for economic power like any number of such wars ? and in the same region ? fought in the colonial times. The principal participants are also familiar, being all members of the Western civilisation if such a thing exists any more. Its horrors may arouse sectarian passions in the Islamic world, but this does not make this economic war into a civilisational war. Seeing this as a conflict between civilisations serves only to obfuscate the real issue and may lead to harmful policies. Fifty years ago, against the advice of military leaders like Field Marshal Cariappa, Nehru and Krishna Menon neglected the defence of the Northeast under the belief that China would never attack a fellow Socialist country like India for which the country paid a heavy price in 1962. To avoid repeating such mistakes Indian thinkers should formulate models and policies based on ground realities and local conditions and not accept untested theories and ideas borrowed from abroad. Even so great a leader as Mahatma Gandhi failed when he tried to make the Khilafat (restoration the Turkish Sultan) a central issue in the 1921 Non-violent Non-cooperation Movement. It led to the disastrous Moplah Rebellion and went on to sow the seeds of the Partition. The lesson we must draw is that there are no intellectual shortcuts and no substitute for independent thinking in policy formulation.

N.S. RAJARAM



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TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; Government; News/Current Events; Politics/Elections
KEYWORDS: DOLLAR; ECONOMY; EURO; EUROPE; FRANCE; GERMANY; IRAQ; OIL; UNITEDSTATES; WAR
--------------------------------------------------------------------------------

The story above is what you will not find told in the mainstream press.

France, Germany, Russia and China would never have gone along with the War in Iraq. No matter how long we gave the inspectors in Iraq to find WMDs, it was all a delaying tactic hoping world and US opinion would become so anti-war we could not attack. Why ? This plumbs the depths of geopolitical reality and a global economic powerplay by France and Germany (and the European Union).

In 1999, France had negotiated with Saddam to make the euro the currency for trading in Iraq oil, replacing the US dollar, with Bill Clinton's blessing under the guise of the UN Oil for Food Program. This was the overriding reason for their opposition, even more then the multi-billion dollar (euro) oil deals they made with Saddam . The US dollar has been the currency for oil since 1973, since the gold standard was dropped, so all countries seeking to buy oil had to acquire US dollars to purchase oil. For France and Germany to go along with the war would mean to lose the euro deal with Saddam. Iran was considering switching to the euro.

The impact on the US economy, were the euro to become the currency of oil, replacing the dollar, would have been devastating and brought the United States to it's knees. The dollar would have crashed and the rest of the US economy with it.

The democrats alligning themselves with these European anti-American countries would devastate this country if they had held sway in this debate. Their opposition was all about a geopolitical power grab and nothing more. They had no concern for the Iraqi people, for defeating terrorism or for enforcing the UN resolutions. For France, Germany, Russia and China it was all about diminishing the power of the United States and raising Europe, and the European Union, up as a new super power to rival or surpass the United States.

That is exactly what their opposition was all about, and the democrats and the left in this country were willing to sell this country down the river in the interest of regaining political power, because those in power on the left knew full well of this economic devastation that was looming if French and German positions had held sway.

Was that part of the motivation of Bush and the republicans ? I have no doubt it was, and thank God, he was looking out for the people of this country and their way of life and protecting our lifestyle. People the socialist left would gladly sell this country out to gain political power, because of his blind support for his ideology.

I don't expect posters from other countries to support maintaining our countries economy, I am sure they would like nothing better then to see the US brought to it's knees economically and weakened.

It is time those in the US who are arguing against the Iraq War to open their eyes and understand exactly what they are supporting, the economic destruction of their country.

That is why it is so vital we win the peace in Iraq and cannot withdraw until that is achieved. It is also why we cannot cede control of the democratization, reconstruction and rebuilding of Iraq to the UN. It is also why France and Germany have maintained their inflexible stance demanding UN control, in hopes of regaining what they lost. Russia and China are slowly acquiescing in a manner to save face for their failed opposition. Russia has taken a much more concilliatory stance in UN negotiations for a new resolution compared to France and Germany.

Geopolitics is a very complex, yet simple, underlying factor in everything that happens within the global picture. That the democrats have played, and are still playing, so fast and loose with the economic future of this country for political gain leaves me with no trust in them to lead, protect and safeguard this country and our way of life. The left likes to rant about the condition our economy is in now, if they were in power, the Great Depression would look like a minor dip.






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OfflineEchoVortex
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Re: Euro VS Dollar [Re: GazzBut]
    #1986481 - 10/07/03 12:03 PM (13 years, 5 months ago)

Very, very interesting post. The original Indian article basically hits the nail right on the head: it's all about money and geopolitics. Neither the governments of the coalition nor the European opposition really give a rat's ass about the Iraqi people, or ever did.

But what's even more interesting is that this was picked up by a conservative site, whose "commentator" basically comes on to tell people that, yeah, it IS actually all about economic dominance, and if you don't support killing innocent people to maintain that economic dominance you're a traitor who is selling your country down the river! There is the TRUE conservative mindset rearing its ugly head, shorn of all of this bullshit about WMD and "liberating" the Iraqi people.



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OfflineBaby_Hitler
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Re: Euro VS Dollar [Re: EchoVortex]
    #1986932 - 10/07/03 03:40 PM (13 years, 5 months ago)

If people start thinking like that, then what's the point? "America" would already be dead.


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OfflineAzmodeus
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Re: Euro VS Dollar [Re: Baby_Hitler]
    #1987307 - 10/07/03 05:45 PM (13 years, 5 months ago)

I'd think it dead already, its just starting to decay now in the hot sun.  Euro is ahead of american dollar now anyway! :smile: :laugh: :grin:


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Offlinewingnutx
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Re: Euro VS Dollar [Re: Azmodeus]
    #1987323 - 10/07/03 05:49 PM (13 years, 5 months ago)

the two will trade places on a regular basis for as long as they exist. currency fluctuates.


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OfflineAzmodeus
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Re: Euro VS Dollar [Re: wingnutx]
    #1987353 - 10/07/03 05:59 PM (13 years, 5 months ago)

except america is mired in a sandpit, while europe prospers. And your work in iraq has only begun....


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Offlinewingnutx
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Re: Euro VS Dollar [Re: Azmodeus]
    #1987384 - 10/07/03 06:08 PM (13 years, 5 months ago)

Uh, you might want to read up a little more on the European economies.


http://www.economist.com/countries/France/ is a good place to start.



At least France is trying some bush-style tax cuts to help itself out a little:

http://www.guardian.co.uk/eu/story/0,7369,1035631,00.html



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Offlinewingnutx
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Re: Euro VS Dollar [Re: Azmodeus]
    #1987397 - 10/07/03 06:12 PM (13 years, 5 months ago)

France faces formal warning to respect euro pact
Yahoo News ^ | 10-07-03 | Yahoo

France faces formal warning to respect euro pact


LUXEMBOURG (AFP) - France was put on notice to remedy its public deficit, as the European Commission (news - web sites) prepares to declare the euro zone's second-biggest economy to be in breach of its EU treaty obligations.

French Finance Minister Francis Mer won a sympathetic hearing at monthly talks among the 12 nations sharing Europe's common currency late Monday, with Brussels striking a more conciliatory note on the deficit row.

But the EU's executive arm is nevertheless set Wednesday to rule that France has violated its obligation under the euro zone's Stability and Growth Pact to bring its public deficit below 3.0 percent of gross domestic product (GDP (news - web sites)).

As finance ministers from all 15 EU nations -- Britain, Denmark and Sweden are outside the euro zone -- gathered for talks on Tuesday, several countries welcomed pledges by Mer to reform the French economy.


Belgian Finance Minister Didier Reynders said the promises of structural reform, for instance in healthcare, were the "most convincing" part of Mer's presentation to the euro group meeting.

But, echoing other member states, Reynders said the Commission should still take a "strict line" with France over its deficit, which is on course to breach the stability pact ceiling for three years running next year.

Dutch Finance Minister Gerrit Zalm, one of Mer's fiercest critics, said France's duty under the Maastricht treaty, which set up the euro, "has not changed as far as I know".

"It's now up to the Commission to make a proposal and then we'll judge," added the Dutch minister, who has threatened legal action against Brussels if it fails to bring France to heel.

France missed an EU deadline on Friday to announce measures to get its deficit below the 3.0 percent limit, and now faces the next step in a drawn-out procedure that could ultimately lead to multi-billion-euro fines.

But France shows no sign of bending, having unveiled a tax-cutting budget for 2004 that projects its public deficit to stand next year at 3.6 percent of GDP, against a forecast 4.0 percent this year.

After the weekly meeting of the EU executive on Wednesday, Economic and Monetary Affairs Commissioner Pedro Solbes is expected to announce that France has indeed flouted the pact and will begin work on new recommendations to bring the country in line with the rules.


But Solbes backed off from a hardline stance by saying the economic situation had deteriorated since the EU ultimatum in June.

"In our recommendations in June we asked France to do certain things, but it's true that the economic perspectives for 2003 and 2004 are rather different from what they were in June," he told reporters after the euro group talks.

"I don't wish in any way to anticipate what the outcome will be but it's true that we have to take account of this aspect," the Spanish commissioner said.

France has also won support from Germany, the euro zone's biggest economy which is itself having trouble meeting the deficit target.

"There can't be (fiscal) consolidation without durable growth and vice versa," German Finance Minister Hans Eichel said after meeting Mer in the German city of Trier on Monday.

"But what is lacking at this time above all is growth," he said.

Germany's position will be pivotal when EU finance ministers, having analysed the European Commission's recommendations, next meet on November 4 to decide what action to take against France.


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OfflineGazzBut
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Re: Euro VS Dollar [Re: EchoVortex]
    #1987479 - 10/07/03 06:52 PM (13 years, 5 months ago)

Quote:

But what's even more interesting is that this was picked up by a conservative site, whose "commentator" basically comes on to tell people that, yeah, it IS actually all about economic dominance, and if you don't support killing innocent people to maintain that economic dominance you're a traitor who is selling your country down the river! There is the TRUE conservative mindset rearing its ugly head, shorn of all of this bullshit about WMD and "liberating" the Iraqi people.





I agree. The honesty is refreshing if somewhat disturbing!


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Offlinewingnutx
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Re: Euro VS Dollar [Re: GazzBut]
    #1987621 - 10/07/03 07:33 PM (13 years, 5 months ago)

Free Republic has more than it's share of Buchannon-style paleoconservatives who oppose the war in Iraq.


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OfflineBaby_Hitler
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Re: Euro VS Dollar [Re: wingnutx]
    #1987828 - 10/07/03 08:42 PM (13 years, 5 months ago)

WTF is a paleoconservative?


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InvisibleinfidelGOD
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Re: Euro VS Dollar [Re: GazzBut]
    #1988222 - 10/07/03 10:39 PM (13 years, 5 months ago)

what they're insinuating is total bullshit. The US economy would NOT have collapsed if we didn't attack Iraq. there's a little more to our economic dominance than the fact that Oil is traded with dollars. but at least now I know how these neocons think. I feel much better knowing that we killed for money and not for morals.



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OfflineBaby_Hitler
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Re: Euro VS Dollar [Re: infidelGOD]
    #1988262 - 10/07/03 10:49 PM (13 years, 5 months ago)

Follow the link, the people on that board didn't buy it either.


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OfflineEchoVortex
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Re: Euro VS Dollar [Re: infidelGOD]
    #1988511 - 10/07/03 11:54 PM (13 years, 5 months ago)

Quote:

infidelGOD said:
what they're insinuating is total bullshit. The US economy would NOT have collapsed if we didn't attack Iraq. there's a little more to our economic dominance than the fact that Oil is traded with dollars. but at least now I know how these neocons think. I feel much better knowing that we killed for money and not for morals.





Well, perhaps our DOMINANCE does have something to do with oil, but our PROSPERITY does not. One doesn't need to be "dominant" to be "prosperous." And it never seems to occur to those neocon goons that you don't necessarily have to dominate and kill people to be prosperous--but for some reason that's the path to prosperity they tend to choose.

If the US really wanted to ensure its long-term economic health it would be doing everything imaginable to lessen dependence on foreign oil (and I don't mean invading every country that sits on top of it): can you imagine the kind of progress that could be made if we spent 87 billion, or the 200 some billion this whole escapade has cost so far, on R&D for renewable energy sources? It boggles the imagination. It would not only have tremendous economic benefits but would be a boon to humanity in the best American tradition of inventiveness (Edison, the Wright Brothers, Claude Shannon, etc.). But of course, scientists working in their labs can't be broadcast live on CNN & Fox News, and so-called "nerds" and "brainiacs" are disliked by the boobs who make up most of Bush's constituency.



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OfflineSigno
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Re: Euro VS Dollar [Re: GazzBut]
    #1988542 - 10/08/03 12:05 AM (13 years, 5 months ago)

::Best Neo impression possible:: WHOA!


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Correlation is not causation!


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OfflineGazzBut
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Re: Euro VS Dollar [Re: infidelGOD]
    #1989169 - 10/08/03 04:48 AM (13 years, 5 months ago)

Quote:

what they're insinuating is total bullshit. The US economy would NOT have collapsed if we didn't attack Iraq. there's a little more to our economic dominance than the fact that Oil is traded with dollars. but at least now I know how these neocons think. I feel much better knowing that we killed for money and not for morals.




Wow! Way to blow the arguement out of the water... not. For starters the article doesnt say outright that the US would have collapsed if you hadnt attacked Iraq it is saying that if the Iraqi's had been allowed to continue trading their oil for euros and other countries such as Venezuela had followed their lead things could have potentially got very bad for the US.

You say there is more to US dominance than the fact that oil is traded in dollars and I would agree but I think you may be underestimating the importance of the dollar being the standard for oil trading. Besides as oil is not the only factor in US dominance it is not the only factor which could lead to a severe downturn in the US economy.

Link

THE YUAN, THE EURO, TAXES, AND GOLD

Question: what do the euro, the yuan, taxes, and gold have in common?

Answer: they all determine the future economic viability of the United States.

There are people in the market today who suggest that investors buy some hush-hush secret yuan-denominated assets to cash in on when the yuan is allowed to float, which will make it rise against he dollar - or so they predict. They say the yuan is "the strongest currency in the world today."

That may be so - or maybe not - but one thing is for sure: China will not allow its currency to suddenly soar 50% or more against the dollar. It will not happen, must not happen, at least as far as Chinese leaders are concerned.

Why?

It is true that China's currency is currently artificially and severely undervalued because of its low peg to the dollar (at probably 40% or more below its natural value), and that if the yuan were allowed to float, it would rapidly climb versus the dollar, and a bunch of money could be made in the process.

But remember that the Chinese economy is totally and utterly export-dependent. China's internal market is virtually nonexistent. The Chinese, as a general population (with the rich "communo-entrepreneurs" in the free economic zones excepted) are still poor. Many of the products produced in China are produced by Chinese laborers for foreign companies (especially US companies) and have no market in China.

If the dollar were to lose 40% or more of its value against the yuan, China's export-dependent economy would be finished in one fell swoop. No American would continue to buy Chinese products if they suddenly cost 40% or 50% more. The American companies that remain profitable by lowering their labor costs through the utilization of Chinese labor would have to fold up their Chinese operations and lose their investments over there. The Chinese boomtowns along the coast would go into rot and decay. The Chinese military no longer would have the wherewithal to pay for Russian submarines for its planned take-over of Taiwan.

The Europeans, on the other hand, do have an internal market - and a huge one at that. Sure, they are hurting just like the next guy when their exports get too expensive as the euro rises, but they can survive what for them will be a temporary downturn, however severe. The Chinese cannot.

The communist Chinese's goal is to annihilate the US. Of course, they would much rather do it through economic warfare than through military conquest.

How can they eliminate the US? By helping contribute to the downfall of the US dollar without killing their exports (some pain is acceptable, but not economic 'death'). How can they do that?

For the Chinese economy to survive in case of a loss of the American market, whatever export market China loses when Americans stop buying Chinese goods must be replaced somehow. The American market must be replaced with the European market. That means, the yuan will have to fall against the euro so China can unload its artificially cheap products on the Europeans instead.

How can they achieve this?

They can sell the 316 billion reserve dollars they racked up by running their trade surplus with the US - for euros.

When the Chinese sell dollars and buy euros, the euro will rise against the dollar. Because the Yuan is for the time being still pegged to the dollar, this will increase Chinese export competitiveness compared to Europe, which will allow them to shift their exports to the 'market of the future.' US bought and paid-for productive assets in China can then be nationalized (it's an emergency, you know) and thus acquired for nothing, and can then be used to produce goods to sell to the Europeans.

The Chinese can then repeat that neat little trick they did with the US and peg their currency to the euro instead, keeping its value competitively low against the euro, racking up future trade surpluses against the Europeans as well. They still have five years left under WTO rules until they must let the yuan float against other currencies.

Isn't that just too cool?

Meanwhile the US economy will begin to collapse of its own dead weight. The tapped out US consumer (the only thing that still holds up any semblance of economic health in the US) will quit spending as the re-fi boom stalls. As the economy worsens, people will lose jobs and the ability to pay their loans back, causing massive loan defaults and monetary base contraction.

These deflationary pressures will offset to some extent the inflationary effect of the inevitable deluge of US dollars returning home as China and other countries continue selling dollars for euros - but not by enough. All of this will decreease Americans' ability to spend and consume and buy imports.

The other Asian "tigers" will follow the Chinese example and shift their export focus to Europe as their American market falters.

So far, so good (or bad, rather). But will Europe be able to consume enough to make up for China's potential loss of the American market?

Well, that's not really the question. Why? Because it doesn't really matter whether they will consume "enough" or not. And why is that? Because, as the housing re-fi boom wanes and reverses, and Americans can no longer generate that additional spending cash, the "American consumer" will not be able to consume enough when "he" loses his jobs and income as the economy spirals lower without his spending-support. That means the US, the Asians' main current export market, will shrink and disappear - anyway.

That is the crux of the matter. "No money, no spendy." The only way to avoid that is to guarantee that the bond market will continue to grow forever - or at least for the next few years. Only then can the re-fi boom be continued. As Greenspan during his recent epiphany revealed, the Fed stands ready to buy US long-term treasuries to pump more money into the failing system, should deflation appear.

What does that mean? It means the US government will borrow more money from the Fed, for starters, raising its indebtedness (the federal deficit). Second, as other nations see the euro and yuan 'writing on the wall', they may decide to sell into this lucrative, Fed-induced rally in bond prices, forcing the Fed to print even more money to "buy" the debt paper in order to prevent yields and therefore long term rates (mortages) from rising - all to prolong the re-fi boom.

If these two factors ever coincide, the result will be hyper-inflation in the US. What will Greenspan do then? Sell the same treasuries he just got done buying with such fervor? Who will buy them? How will he reduce the money supply? How will he fight inflation? By raising rates and choking off any business investment whatsoever? By raising taxes in a weakened economy?

Europe, on the other hand, however badly its major economies may presently be hurting, will be able to consume far more than the US when the US enters its final downward spiral, and that's because the euro's continued buying power is virtually guaranteed, while the dollar's is highly in question.

Had enough of all this doom and gloom for America? Don't believe America will simply lie down and die an economic death?

Well, there is one chance. And that chance is - again- dependent on the American "consumer" in more ways than one.

Remember tax reform? Remember George W.'s tax cuts? Well, they were a drop in the bucket, I know, but the principle is of course correct: leave people and businesses with more cash to spend, and they will spend it. Or save it. Or invest it in infrastructure. And the economy will grow.

But now picture this:

There is currently - and has been for several years - a kind of 'information virus" spreading like wildfire through the internet as you read this. The American socialist/statist/elitist's biggest and dirtiest little secret - is no longer a secret. The proverbial 'cat' is out of the bag, and it is proliferating as if it had bunny-blood in its veins.

What is that dirtiest of all dirty secrets of the US goverment technocrats?

The US income tax.

No, no, it's not unconstitutional. It's also not 'voluntary,' either, nor is it invalid because the 16th amendment wasn't properly ratified, or whatever. But the uncomfortable and hard to believe - but relatively easy to prove - truth is that by law, i.e., by its own terms, the income tax is not imposed on the income of most ordinary Americans.

The truth is that the "income tax" is a perfectly legal, proper, and constitutional excise tax on income generated in international commercial activities. The truth is also that it was written and passed as such, and that it was from its inception not written to apply to the purely domestic income of most Americans.

Finally, the truth is that it was passed off to, and illegally enforced upon, Americans by outright deception - deception that can be traced and documented through ninety years of statutory and regulatory history. The truth is that Americans are not taxed on all of their US income, "no matter where it comes from" as most everyone believes today.

This truth is evidenced in the tax code and IRS regulations themselves - regulations that are as binding on the IRS (and even on all courts below the US supreme court) as they are on you. It was successfully buried for decades under increasing piles of legalese and regulatory gobbledigook, but now has been unearthed, and knowledge of this little truth is spreading - and spreading - and spreading.

The good news is that this truth is not spreading among the usual suspects of the effectively marginalized and de-fanged so-called "patriot" movement. Instead, the truth is spreading among regular folks like you and me, and your neighbors, business owners, a few celebrities, and even among some accountants, "and doctors and lawyers, and such."

The evidence that proves this to be true is far beyond the scope of this article, but it is laid out in meticulous, painstaking, logically undeniable detail at a neat little web site called www.taxableincome.net Taxable Income.

Now, just imagine you didn't have to pay taxes on your domestic US income any longer. I mean zero. None! And imagine no other American whose income is not derived from international trade or certain other foreign-related activities would have to, either. (Indulge me for a moment, here.)

Would that improve your personal balance sheet rather drastically? Sure would, would it not? Would it improve any US domestic business' balance sheet dramatically? You betcha. Would it cause people to save more, invest more, spend more, all at the same time? Probably. Would it eliminate the tremendous drag the entire record-keeping, income tax preparation, and filing requirement has on economic activity? It would. Would it keep the government's hot breath out of Americans' hair when the politicians suddenly have about a trillion or so less dollars to waste and buy votes with every year? You got it.

The point is, the fate of the American economy may ultimately come to depend on the rate of speed at which the news of the discovery of this dirtiest of little government secrets is spread, and its veracity is thoroughly studied, tested, and understood by all (eventually, that is. Come on, give people some credit, will you?)

The point is also that, without the power the US government derives from its ability to tax the incomes of ordinary Americans and American businesses, their power to manipulate the gold markets via the usual suspects of the Fed, the ESF, the gold banking cabal, and the commodities markets, will be severely limited to the point of non-existence.

Without the government's ability to "manage" the price of gold, the advantage of tying the dollar's success as a currency to a low gold price disappears, and so does the incentive to keep that silly, semi-official gold "price" under 31 USC Section 5117 on the books, which means that the US will then be free to value its gold stock at world market prices (as the Europeans now do).

And that means that gold can be freed to soar, supporting the value of the dollar instead of undermining it. Americans can earn, save, invest, and spend more, the euro will no longer be a deadly threat to the dollar, the US government will no longer be a threat to its citizens' liberty (too expensive), and the US can be freed to do what it does best: out-compete, out-invent, out-produce, out-trade, out-consume, out-save, and out-grow every other economy on this planet.

Utopian? Farfetched? Maybe. But truth has a way of eventually working its way through all the deceit, all the lies, all of the market-rigging, all of the legalese-writing, fact-distorting, mind-numbing, news-spinning, currency-inflating, and gold price-rigging that our rich and powerful are so overly happy to engage in.

Naturally, widespread discovery of this little truth will not be the magic pill that cures the US economic ill. Hard times are ahead, in any case. Might just as well have something positive to look forward to at the end of that long, dark tunnel. (And, by the way, that 'positive' is much easier to find if you have some gold with your name on it stashed away somewhere.)

But first, let's watch this current artificial stock-bubbling, and this economic-recovery-flat-lining mess unfold for a few more months. The current powers that be, and the mind-numbed masses, would have it so.

July 26, 2003

What do you do when all your investments are doing great, when you have a high-paying job or successful business, but the dollars you earn are dropping and dropping in value?
The euro continues to beat the tar out of the dollar (and your pocketbook) and there is no end in sight. How will this affect your money, your job/business, your retirement, and your kids' education?
Can you protect yourself from the fallout? YES!


--------------------
Always Smi2le


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OfflineEchoVortex
(hard) member
Registered: 02/06/02
Posts: 859
Last seen: 8 years, 6 months
Re: Euro VS Dollar [Re: GazzBut]
    #1989242 - 10/08/03 05:59 AM (13 years, 5 months ago)

Sorry Gazz, but economic prognostication is bad enough (and unreliable enough) when it's done by professional economists. When it's done by lunatic-fringe websites it enters into the realm of UFO sightings and the like. I started smelling trouble when he got into the "then A will happen, which will cause B, which will in turn bring about C, working in conjunction with D, to result in situation E" section. Such predictions never take into account that human beings react in response to changing conditions, and often react in unforseeable ways.

Edit: I should point out too that the editorial was on a website devoted to encouraging gold as an investment vehicle. It was pretty much a foregone conclusion that the writer would try to imagine a world-economic scenario in which gold would be the safest investment.


Edited by EchoVortex (10/08/03 06:04 AM)


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OfflineGazzBut
Refraction

Registered: 10/15/02
Posts: 4,770
Loc: London UK
Last seen: 1 month, 3 days
Re: Euro VS Dollar [Re: EchoVortex]
    #1989347 - 10/08/03 07:42 AM (13 years, 5 months ago)

Yeah it is a bit dodgy for sure! But I am looking into the situation with the chinese Yuan as I think there could be an element of truth in what is being said there.


--------------------
Always Smi2le


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InvisibleinfidelGOD
illusion

Registered: 04/18/02
Posts: 3,040
Loc: there
Re: Euro VS Dollar [Re: EchoVortex]
    #1989372 - 10/08/03 08:27 AM (13 years, 5 months ago)

Well, perhaps our DOMINANCE does have something to do with oil, but our PROSPERITY does not. One doesn't need to be "dominant" to be "prosperous."

I still don't see how invading Iraq will make us any more prosperous. maybe it makes some people (like Dick Cheney) very prosperous, but it actually hurt our economic recovery by adding to an already huge deficit. and the $87b is only for fiscal year 2004 (which started Oct.1), in addition to the billions already spent, the total cost will amount to hundreds of billions of dollars. and Iraq's oil industry is projected to produce only about $20b a year. I'm sure some people who pushed for this war were motivated by money, but in no way does it economically benefit America as a whole. we taxpayers will be paying for this for years.


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OfflineEchoVortex
(hard) member
Registered: 02/06/02
Posts: 859
Last seen: 8 years, 6 months
Re: Euro VS Dollar [Re: infidelGOD]
    #1989387 - 10/08/03 08:58 AM (13 years, 5 months ago)

I agree with you, I think the war will ultimately prove to be an economic disaster.

The rationale behind the idea that war will improve America's economy (a rationale that has yet to be proven) has to do with the fact that America will essentially be able to control the second largest reserves in the world and thereby influence the market (in terms of pricing, etc.) in ways that benefit the US. The actual sales figures don't matter because America will only receive a part of those profits anyway. However, if the US can use that oil to depress the price of crude the economic rewards could potentially be great. There was a thread about that a few months ago that I'll try to dig up. In any event, it still remains to be seen just how things will pan out. The short term economic effects, however, will undoubtedly be disastrous.


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