Making Sense of "Operation Iraqi Freedom"

[TexasBushwhacker]

A young friend of mine, Myshele Goldberg, opted to go to grad school in the UK, and for her economics class, decided to explore the economic reasons that the war in Iraq was not only beneficial, but NECESSARY. She connected some dots and added some that I certainly hadn't considered, and I think she makes a good case. Here's a link to her summary article, and an excerpt:

http://madmyshele.com/activism/

Click on "writings"

"In 1971, Nixon removed the dollar from the gold standard and allowed its exchange rate to “float” in relation to other currencies. “Instead of gold, currencies would be anchored by interest rates.” Shortly after, OPEC agreed to sell oil exclusively for dollars, and thus began the process Henry Kissinger called “recycling petrodollars.”

The petrodollar system works in this way: all oil is priced in dollars through markets in New York and London. In order to get dollars, countries must provide exports to the United States. We have no great need for foreign currencies, so we can run a trade deficit (exporting far less than we import). “Because oil is an essential commodity for every nation, buildup huge trade surpluses in order to accumulate dollar surpluses.” The result is that “almost 70% of world trade is done in dollars.” This role as reserve currency keeps the dollar at an artificially high value. In addition to stockpiling dollars in their own central banks, most countries invest in U.S. Treasury Bonds and Wall Street stocks, or keep their dollars in American banks because the interest rates are more favorable, due to the dollar’s strength.

When a country or a company buys oil, their dollars are transferred to the supplier, who also has accounts and investments in America. The banks (or the U.S. government) would have to pay interest on both producers’ and consumers’ accounts, but that they lend the money out to collect even more interest on loans. This is the basis for much of the third-world debt problem. Developing countries borrow dollars for oil to build industrial infrastructure, and must repay those loans by providing cheap exports to the U.S. In this way, “hundreds of billions of dollars are recycled between OPEC, the London and New York banks and back to Third World borrowing countries.”

The neo-conservative think tank Project for a New American Century accuses OPEC of “collusion against a vital U.S. interest,” but fails to recognize that nearly every dollar spent on OPEC oil is immediately recycled back into the U.S. economy."

[BlueEyedSon]

1. Pretty old news actually.

At the time of the runup to the invasion, I was convinced that the real motives were Peak oil and Petrodollar Hegemony (I didn't figure that out myself, it was from reading the foreign press and other web resources).

[Turbineguy]

2. Your young friend

has it correct.

The U.S has had a conflicted relationship with the Euro, on the one hand a unifying force in Europe, on the other, a competitive reserve currency.

I have always thought that Saddam's move to the Euro was set up to take effect based on the outcome of the 2000 US election: Bush=Euro, Gore=Dollar. That's why the November date. He knew Bush was going to come after him no matter what, it was best to accumulate some Euros. Remember, he took a nice fat commission on all oil sales.

While it was good for the US Dollar that the EU was bogged down in regulating the shape of bananas, eventually a unified currency of 800 million people becomes competitive.

Bush has shifted this further by increasing US debt while at the same time the US trade deficit climbs (OK the trade deficit is not all Bush's fault).

[dummy-du1]

3. Link broken?

The "writings" link seems to be broken, here's the direct link to the text:

http://madmyshele.com/activism/writings/pages/oil_war/1.htm