• Spelling out the "draining the swamps" theory

It seems to me that since the inception of its post-war ascendency, the US has never had less influence in the world nor less political will to project power.

Keza, at last some common ground.

I agree in principle with your last post.

I do have some quibbles:

1. If it is so weak why are you such a vociferous supporter of its military adventures in Iraq, Lebanon (by proxy) Somalia(I presume) and soon Iran? Why do you support its slaughter of the innocents in the ME and elsewhere.
2. It might not be a mighty power but it is armed to the teeth and has the bomb
3. As long a all the important global trade is carried out in US dollar it is top dog. (This fact alone keeps the US afloat)
4. If you were opposed to Johnstons visit in the late 60"s why would you berate the people of auatralia for not getting out in their 1000's to support a Bush visit, after all is he not the new beacon of democracy and light?

More soon.

Have to go.

Dalek.

Keza,

I guess my major objection to LSP is your support for imperial war as a tool for the liberation of the people of the globe.

It's all very well to quote a 19th century Engel for his support for the US imperial war against Mexico on the grounds that the victims of this war were "lazy Mexicans" but it is another to support the continuation of this process.

Even on the most banal and pragmatic grounds the "war on terror" as it is being waged in Iraq is to be opposed as it is clearly failing, was always destined to fail because you cannot march foreign troops into another country and then proceed to wantonly kill maim and humiliate the people and then expect them to welcome you into their homes.  You may really get off on this but I don't, clearly those romantic pictures of Peshemerger women fighters you publish are as far as your horizon goes.

When the US or its proxy nukes Iran, will you stand and cheer wildly?

If it is so weak why are you such a vociferous supporter of its military adventures in Iraq, Lebanon (by proxy) Somalia(I presume) and soon Iran? Why do you support its slaughter of the innocents in the ME and elsewhere.

It might not be a mighty power but it is armed to the teeth and has the bomb

As long a all the important global trade is carried out in US dollar it is top dog. (This fact alone keeps the US afloat)

If you were opposed to Johnstons visit in the late 60"s why would you berate the people of auatralia for not getting out in their 1000's to support a Bush visit, after all is he not the new beacon of democracy and light?

Even on the most banal and pragmatic grounds the "war on terror" as it is being waged in Iraq is to be opposed as it is clearly failing, was always destined to fail because you cannot march foreign troops into another country and then proceed to wantonly kill maim and humiliate the people and then expect them to welcome you into their homes.

Its all about commodity trading. for example the oil trade is carried out almost exclusively in US dollars, this means that everytime a barrel of oil (for example) changes hands the US gets a percentage. Virtually  all primary commodities are traded in US dollars (oil steel copper etc etc). In effect the entire world pays "tribute' to the US every time a primary commodity changes hands. Also many consumer and most military goods are traded in dollars. The cash flow is huge.

One of Saddams big "mistakes" was to try to "liberate" Iraqi oil from the dollar trade. some have argued that that was the real reason the US invaded Iraq. I think it was a tad more complex than that.

I will dig some material up and post it.

Until the US dollar loses its status as the currency for commodity trade the US is No1. Capish?

David,

This might help understand the importance of dollar "Hegemony". This guy is game; I wonder if he is not now staring insanely at the wall in Gitmo with all his fingernails spread all over the place.

US dollar hegemony has got to go
By Henry C K Liu

There is an economics-textbook myth that foreign-exchange rates are determined by supply and demand based on market fundamentals. Economics tends to dismiss socio-political factors that shape market fundamentals that affect supply and demand.

The current international finance architecture is based on the US dollar as the dominant reserve currency, which now accounts for 68 percent of global currency reserves, up from 51 percent a decade ago. Yet in 2000, the US share of global exports (US$781.1 billon out of a world total of $6.2 trillion) was only 12.3 percent and its share of global imports ($1.257 trillion out of a world total of $6.65 trillion) was 18.9 percent. World merchandise exports per capita amounted to $1,094 in 2000, while 30 percent of the world's population lived on less than $1 a day, about one-third of per capita export value.

Ever since 1971, when US president Richard Nixon took the dollar off the gold standard (at $35 per ounce) that had been agreed to at the Bretton Woods Conference at the end of World War II, the dollar has been a global monetary instrument that the United States, and only the United States, can produce by fiat. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record US current-account deficits and the status of the US as the leading debtor nation. The US national debt as of April 4 was $6.021 trillion against a gross domestic product (GDP) of $9 trillion.

World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies. To prevent speculative and manipulative attacks on their currencies, the world's central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold more dollar reserves, making it stronger. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973.

By definition, dollar reserves must be invested in US assets, creating a capital-accounts surplus for the US economy. Even after a year of sharp correction, US stock valuation is still at a 25-year high and trading at a 56 percent premium compared with emerging markets.

The Quantity Theory of Money is clearly at work. US assets are not growing at a pace on par with the growth of the quantity of dollars. US companies still respresent 56 percent of global market capitalization despite recent retrenchment in which entire sectors suffered some 80 percent a fall in value. The cumulative return of the Dow Jones Industrial Average (DJIA) from 1990 through 2001 was 281 percent, while the Morgan Stanley Capital International (MSCI) developed-country index posted a return of only 12.4 percent even without counting Japan. The MSCI emerging-market index posted a mere 7.7 percent return. The US capital-account surplus in turn finances the US trade deficit. Moreover, any asset, regardless of location, that is denominated in dollars is a US asset in essence. When oil is denominated in dollars through US state action and the dollar is a fiat currency, the US essentially owns the world's oil for free. And the more the US prints greenbacks, the higher the price of US assets will rise. Thus a strong-dollar policy gives the US a double win.

Historically, the processes of globalization has always been the result of state action, as opposed to the mere surrender of state sovereignty to market forces. Currency monopoly of course is the most fundamental trade restraint by one single government. Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments.

A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods.

In 1795, when the Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in America, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.

A strong-dollar policy is in the US national interest because it keeps US inflation low through low-cost imports and it makes US assets expensive for foreign investors. This arrangement, which Federal Reserve Board chairman Alan Greenspan proudly calls US financial hegemony in congressional testimony, has kept the US economy booming in the face of recurrent financial crises in the rest of the world. It has distorted globalization into a "race to the bottom" process of exploiting the lowest labor costs and the highest environmental abuse worldwide to produce items and produce for export to US markets in a quest for the almighty dollar, which has not been backed by gold since 1971, nor by economic fundamentals for more than a decade. The adverse effect of this type of globalization on the developing economies are obvious. It robs them of the meager fruits of their exports and keeps their domestic economies starved for capital, as all surplus dollars must be reinvested in US treasuries to prevent the collapse of their own domestic currencies.

The adverse effect of this type of globalization on the US economy is also becoming clear. In order to act as consumer of last resort for the whole world, the US economy has been pushed into a debt bubble that thrives on conspicuous consumption and fraudulent accounting. The unsustainable and irrational rise of US equity prices, unsupported by revenue or profit, had merely been a devaluation of the dollar. Ironically, the current fall in US equity prices reflects a trend to an even stronger dollar, as it can buy more deflated shares.

The world economy, through technological progress and non-regulated markets, has entered a stage of overcapacity in which the management of aggregate demand is the obvious solution. Yet we have a situation in which the people producing the goods cannot afford to buy them and the people receiving the profit from goods production cannot consume more of these goods. The size of the US market, large as it is, is insufficient to absorb the continuous growth of the world's new productive power. For the world economy to grow, the whole population of the world needs to be allowed to participate with its fair share of consumption. Yet economic and monetary policy makers continue to view full employment and rising fair wages as the direct cause of inflation, which is deemed a threat to sound money.

The Keynesian starting point is that full employment is the basis of good economics. It is through full employment at fair wages that all other economic inefficiencies can best be handled, through an accommodating monetary policy. Say's Law (supply creates its own demand) turns this principle upside down with its bias toward supply/production. Monetarists in support of Say's Law thus develop a phobia against inflation, claiming unemployment to be a necessary tool for fighting inflation and that in the long run, sound money produces the highest possible employment level. They call that level a "natural" rate of unemployment, the technical term being NAIRU (non-accelerating inflation rate of unemployment).

It is hard to see how sound money can ever lead to full employment when unemployment is necessary to maintain sound money. Within limits and within reason, unemployment hurts people and inflation hurts money. And if money exists to serve people, then the choice becomes obvious. Without global full employment, the theory of comparative advantage in world trade is merely Say's Law internationalized.

No single economy can profit for long at the expense of the rest of an interdependent world. There is an urgent need to restructure the global finance architecture to return to exchange rates based on purchasing-power parity, and to reorient the world trading system toward true comparative advantage based on global full employment with rising wages and living standards. The key starting point is to focus on the hegemony of the dollar.

To save the world from the path of impending disaster, we must:

Extract from: US dollar hegemony has got to go
By Henry C K Liu

The current international finance architecture is based on the US dollar as the dominant reserve currency, which now accounts for 68 percent of global currency reserves, up from 51 percent a decade ago. Yet in 2000, the US share of global exports (US$781.1 billon out of a world total of $6.2 trillion) was only 12.3 percent and its share of global imports ($1.257 trillion out of a world total of $6.65 trillion) was 18.9 percent. World merchandise exports per capita amounted to $1,094 in 2000, while 30 percent of the world's population lived on less than $1 a day, about one-third of per capita export value.

Now that's imperialism guys:

The US is now the world's biggest debtor nation and financial markets are completely unbalanced pointing to an inevitable enormous crisis.

Being hugely in debt does not make the US No 1. Capiche?

Being hugely in debt guaranteees you no1  imperial spot. Owe the bank $100 and its your problem, owe the bank  a trillion dollars and its the banks problem. Basic economics really.

Only the US status as No1 imperial power allows it to be No 1 global debtor.

This is imperial economics 101. You guys really should get a grip on the basics.

Now if the US is all about bringing freedom and democracy to the middle east by the tactic of Inperial war and plunder surely by this logic it should now invade Iran?

Point is; will LSP support this new expansion of the war? Including of course the use of nuclear weapons to bring freedom and democracy?

Of course, the only way Bush can bring this mad plan to a conclusion will be to shut down the congress and the senate. Will you support this too?

Now if the US is all about bringing freedom and democracy to the middle east by the tactic of Inperial war and plunder surely by this logic it should now invade Iran?

Point is; will LSP support this new expansion of the war? Including of course the use of nuclear weapons to bring freedom and democracy?

Of course, the only way Bush can bring this mad plan to a conclusion will be to shut down the congress and the senate. Will you support this too?

We are in heated agreement about this: Iran is generating a very strong internal democracy movement. As I said in an earlier post you might not like some of the details but it is growing every day and it will have particular Iranian (Persian) characteristics. I think I have a good understanding of what is going on there.

The one thing that will put it back is an attack by your neocon mates, determined to bring "democracy" to the "islamofascist swamps" of the middle east. This will force the revolutionary young to rally around the increasingly unpopular leadership. In fact the leadership,have a vested interest in being Bushes worst enemy.

The US is in a desperate position in  Iraq, despite the best wishes of most Iraqis, the democracy experiment has foundered and has been essentially taken over by Shiite extremists.

In my view there was never any other outcome possible, although I did not anticipate the level of nihlistic violence that would ensue. The shiites always had the numbers and the guys in Sadre city were always going to call the shots. All the US can do in Iraq is kill a lot more Iraqis, and make the situation even worse, killing is all the US army knows, that's what it is for.

The reason (in my view) that the democracy experiment in Iraq was bound to fail is that there was no internal basis for it. (there is a massive internal base for democracy in Iran - by contrast). There was no internal base for democracy in Iraq because of the fascist repression by Saddam. As part of he set up institutions such as the Baath party that ruthlessly supressed all opposition. The only "democratic" forces were a bunch of corrupt expats who called themselves democrats.

On the other hand the Iranian people are struggling every day to establish democracy in Iran and they are gradually succeeding. Soon they will overthrow the old regime but they have to be careful, tha moment they do your neocon mates will move in and try to impose their expat "democrats" upon the country.

If you think that the US is too weak to attack Iran, think of the Gulf of tonkin incident, or the sinking of the Victory by the Israelis in the Gulf of Arabia. I do not think Bush is mad, I use the term as a way aof saying that I think the plan is mad.

The US neocons (In particular Kagan , who authored the "Surge") have two options quit and go home, or set the entire ME on fire.

To quit would be the biggest set back for US imperialism of all time (probably the end of it). They will not quit.

If this means suspending the constitutrion and establishing a state of emergency in the US they will do it.

Wait and see. 

Reply to David Mc

dalek:

"The war is costing the Americans billions so it is not very successful as a plunder exercise.

I doubt that the US has the military capacity to successfully invade Iran. Even if it could, it would not be a good idea if it actually weakens rather than strengthens the democratic forces there".

No mate it is costing the US people (remember them?) billions. The billions are going into the pockets of the US multinational corporations (remember them?).

Yes a US invasion of Iran will badly weaken the democratic forces there, as if your neocon mates give a shit. They have no option or they lose the empire.

David, see here where the money gets spent. http://www.commondreams.org/headlines06/0415-07.htm

The Iraqis have no proper roads, elctricity, gas or water after 4 years of occupation.

The unemployment rate is 60% or more. The money that was allocated has been plundered by Iraqis and Americans alike.  The place is a total shambles.

"I don't know how the resources spent on Iraq would otherwise have been allocated,
but it seems to me that spending them on the Iraqi revolution can be seen as a a good investment and a redistribution from rich to poor."

You surely cannot believe the above, it's a joke right?

Dalek