Why the Dollar Bubble is about to Burst?

Why the Dollar Bubble is about to Burst?
 

The Voice (issue 264 -) 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 n
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 and World
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 and
more and more vaults were built, just for US dollars. Each year, the
US 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 simultaneously 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.'  The 1945 Breton 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 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 deficit grew and grew. The US sucked-in much of the world's
products for next to nothing. More vaults were built.

Expert, C¨®il¨ªnn 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.'
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.'

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 ability 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 be
opened?

Then aero planes flew into the twin-towers in September 2001. Was this
another Houdini chance to save the US (petro) dollar and the biggest
financial/economic crash in history? War preparations began in the US
But first war-fever had to be created -- and truth was the first
casualty. Other oil producing countries watched-on. In 2000 Iraq began
selling oil in euros.
In 2002, Iraq changed all their petro-dollars in their vaults into
euros. A few months later, the US began their invasion of Iraq .

The whole world was watching: very few aware that the US was engaging
in the first oil currency, or petro-dollar war. After the invasion of
Iraq in March 2003, remember, the US secured oil areas first. Their
first sales in August were, of course, in dollars, again. The only
government building in Baghdad not bombed was the Oil Ministry! It
does not matter how many people are murdered -- for the US , the petro-
dollar must be saved as the only way to buy and sell oil - otherwise
the US economy will crash, and much more besides.

In early 2003, Hugo Chavez, President of Venezuela talked openly of
selling half of its oil in euros (the other half is bought by the
US ). On 12 April 2003 , the US-supported business leaders and some
generals in Venezuela kidnapped Chavez and attempted a coup. The
masses rose against this and the Army followed suit. The coup failed.
This was bad for the US .

In November 2000 the euro/dollar was at $0.82 dollars, its lowest
ever, and still diving, but when Iraq started selling oil in euros,
the euro dive was halted. In April 2002 senior OPEC reps talked about
trading in euros and the euro shot up. In June 2003 the US occupiers
of Iraq switched trading back to dollars and the euro fell against the
dollar again. In August 2003 Iran starts to sell oil in euros to some
European countries and the euro rises sharply. In the winter of 2003-4
Russian and OPEC politicians talked seriously of switching oil/gas
sales to the euro and the euro rose. In February 2004 OPEC met and
made no decision to turn to the euro -- and yes, the euro fell against
the dollar. In June 2004 Iran announced it would build an oil bourse
to rival London and New York , and again, the euro rose. The euro
stands at $1.27 and has been climbing of late.

But matters this month became far, far worse for the US dollar. On 5th
May Iran registered its own Oil Bourse, the IOB. Not only are they now
selling oil in euros from abroad -- they have established an actual
Oil Bourse, a global trading centre for all countries to buy and sell
their oil!

In Chavez's recent visit to London ; he talked openly about supporting
the Iranian Oil Bourse, and selling oil in euros. When asked in London
about the new arms embargo imposed by the US against Venezuela ,
Chavez prophetically dismissed the US as 'a paper tiger'.

Currently, almost all the world's oil is sold on either the NYMEX, New
York Mercantile Exchange, or the IPE, London's International Petroleum
Exchange.
Both are owned by US citizens and both sell and buy only in US
dollars. The success of the Iran Oil Bourse makes sense to Europe ,
which buys 70% of Iran 's oil. It makes sense for Russia , which sells
66% of its oil to Europe . But worse for the US , China and India have
already stated they are very interested in the new Iranian Oil Bourse.

If there is a tactical-nuclear strike on - deja-vu - `weapons of mass
destruction' in Iran , who would bet against a certain Oil Exchange
and more, being bombed too?

And worse for Bush. It makes sense for Europe , China , India and
Japan-- as well as all the other countries mentioned above -- to buy
and sell oil in Euro's. They will certainly have to stock-up on euros
now, and they will sell dollars to do so. The euro is far more stable
than the debt-ridden dollar. The IMF has recently highlighted US
economic difficulties and the trade deficit strangling the US-- there
is no way out.

The problem for so many countries now is how to get rid of their
vaults full of dollars, before it crashes? And the US has bullied so
many countries for so many decades around the world, that many will
see a chance to kick the bully back. The US cannot accept even 5% of
the world's dollars -- it would crash the US economy dragging much of
the world with it, especially Britain .

To survive, as the Scottish Socialist Voice article stated, 'the US ,
needs to generate a trade surplus to get out of this one. Problem is
it can't.'
This is spot on. To do that they must force US workers into near
slavery, to get paid less than Chinese or Indian workers. We all know
that this will not happen.

What will happen in the US ? Chaos for sure. Maybe a workers
revolution, but looking at the situation as it is now, it is more
likely to be a re-run of Germany post-1929, and some form of extreme-
right mass movement will emerge...

Does Europe and China/Asia have the economic independence and strength
to stop the whole world's economies collapsing with the US ? Their
vaults are full to the brim with dollars.

The US has to find a way to pay for its dollar-imperialist
exploitation of the world since 1945.. Somehow, eventually, it has to
account for every dollar in every vault in the world.

Bombing Iran could backfire tremendously. It would bring Iran openly
into the war in Iraq , behind the Shiite majority. The US cannot cope
even now with the much smaller Iraqi insurgency. Perhaps the US will
feed into the Sunni v Shiite conflict and turn it into a wider Middle-
East civil-war.
However, this is so dangerous for global oil supplies. Further, they
know that this would be temporary, as some country somewhere else,
will establish a euro-oil-exchange, perhaps in Brussels .

There is one `solution' -- scrap the dollar and print a whole new
currency for the US . This will destroy 66% of the rest of the world's
savings/reserves in one swoop. Imagine the implications? Such are the
desperate things now swimming around heads in the White House, Wall
Street and Pentagon.

Another is to do as Germany did, just before invading Poland in 1938.
The Nazis filmed a mock Polish Army attack on Germany , to win hearts
and minds at home. But again, this is a finger in the dam. So, how is
the US going to escape this time? The only global arena of total
superiority left is military. Who knows what horrors lie ahead. A new
world war is one tool by which the US could discipline its `allies'
into keeping the dollar in their vaults.

The task of socialists today is to explain to as many as possible,
especially our class, that the coming crisis belongs purely to
capitalism and (dollar) imperialism. Not people of other cultures, not
Islam, not the axis of evil or their so-called WMDs. Their system
alone is to blame.

The new Iranian Oil Bourse, the IOB, is situated in a new building on
the free-trade-zone island of Kish , in the Persian Gulf . It's
computers and software are all set to go. The IOB was supposed to be
up and running last March, but many pressures forced a postponement.
Where the pressure came from is obvious. It was internationally
registered on 5th May and supposed to open mid-May, but its opening
was put off, some saying the oil-mafia was involved, along with much
international pressure. ............ ......... ......

 

In  2007 Crude was trad ed around 60 usd. Everyone kn e w dollar was
getting weaker and weaker day by day. Th e n US with the help of their
two NYMEX & IPE exchange started rising the price of crude by Future
trading on crude( called speculation) . Today crude is around 140 usd.
It means whole world who were paying 60 usd,  are now paying 140 usd,
which  means demand of dollar  has gone upto 230% and dollar start ed
rising  again  .