Economic Crisis (The Voice Mag)

Western Economic Crisis: Why the Dollar Bubble is about to Burst

Saturday, 17 May 2008

Steve Masterson

The Voice (issue 264 - 11th May) ran an article beginning, "Iran has really gone and done it now. No, they haven't sent

their first nuclear sub in to the Persian Gulf. They are about to launch something much more deadly -- next week the Iran

Bourse will open to trade oil, not in dollars but in euros." This apparently insignificant event has consequences far greater

for the US people, indeed all for us all, than is imaginable.

Currently almost all oil buying and selling is in US-dollars through exchanges in London and New York. It is not

accidental they are both US-owned.

The Wall Street crash in 1929 sparked off global depression andWorld War II. During that war the US supplied provisions

and munitions to all its allies, refusing currency and demanding gold payments in exchange.

By 1945, 80% of the world's gold was sitting in US vaults. The dollar became the one undisputed global reserve currency

-- it was treated world-wide as `safer than gold'. The Bretton Woods agreement was established.

The US took full advantage over the next decades and printed dollars like there was no tomorrow. The US exported

many mountains of dollars, paying for ever-increasing amounts of commodities, tax cuts for the rich, many wars abroad,

mercenaries, spies and politicians the world over. You see, this did not affect inflation at home! The US got it all for free!

Well, maybe for a forest or two.

Over subsequent decades the world's vaults bulged at the seams andmore and more vaults were built, just for US

dollars. Each year, theUS spends many more dollars abroad that at home. Analysts pretty much agree that outside the

US, of the savings, or reserves, of all other countries, in gold and all currencies -- that a massive 66% of this total wealth

is in US dollars!

In 1971 several countries simultaeously tried to sell a small portion of their dollars to the US for gold. Krassimir Petrov,

(Ph. D. in Economics at Ohio University) recently wrote, "The US Government defaulted on its payment on August 15,

1971. While popular spin told the story of `severing the link between the dollar and gold', in reality the denial to pay back

in gold was an act of bankruptcy by the US Government." (1) The 1945 Bretton Woods agreement was unilaterally

smashed.

The dollar and US economy were on a precipice resembling Germany in 1929. The US now had to find a way for the rest

of the world to believe and have faith in the paper dollar. The solution was in oil, in the petrodollar. The US viciously

bullied first Saudi Arabia and then OPEC to sell oil for dollars only -- it worked, the dollar was saved. Now countries had

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to keep dollars to buy much needed oil. And the US could buy oil all over the world, free of charge. What a Houdini for

the US! Oil replaced gold as the new foundation to stop the paper dollar sinking.

Since 1971, the US printed even more mountains of dollars to spend abroad. The trade defecit grew and grew. The US

sucked-in much of the world's products for next to nothing. More vaults were built.

Expert, CÐ"Ñ-ilÐ"­nn

Nunan, wrote in 2003, "The dollar is the de facto world reserve currency: the US currency accounts for

approximately two thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and

half of all world exports are denominated in dollars. In addition, all IMF loans are denominated in dollars." (2)

Dr Bulent Gukay of Keele University recently wrote, "This system of the US dollar acting as global reserve currency in oil

trade keeps the demand for the dollar `artificially' high. This enables the US to carry out printing dollars at the price of

next to nothing to fund increased military spending and consumer spending on imports. There is no theoretical limit to the

amount of dollars that can be printed. As long as the US has no serious challengers, and the other states have

confidence in the US dollar, the system functions." (3)

Until recently, the US-dollar has been safe. However, since 1990 western Europe has been busy growing, swallowing up

central and eastern Europe. French and German bosses were jealous of the US ablility to buy goods and people the

world over for nothing. They wanted a slice of the free cake too. Further, they now had the power and established the

euro in late 1999 against massive US-inspired opposition across Europe, especially from Britain - paid for in dollars of

course. But the euro succeeded.

Only months after the euro-launch, Saddam's Iraq announced it was switching from selling oil in dollars only, to euros

only -- breaking the OPEC agreement. Iran, Russia, Venezuela, Libya, all began talking openly of switching too -- were

the floodgates about to