Globalization and terror : fomenting inflation to pay for war
Note:
The abrupt reversal and subsequent financial crash from July to
September made nonsense of the economic logic of this article.
Deflation overtook the stagflation that seemed to be taking
hold. But so
much uncertainty persists about the role of coordinated intervention
by governments, Central Banks and powerful private financial
institutions, the underlying argument remains valid : the US and its
allies, while squabbling about degrees of hegemony, still coordinate
closely to defend their colonialist inheritance of power and
privilege relative to the rest of the world; the US military machine
is subsidised by its allies. Following the crash the system is
consolidating so as to sustain itself in as cynical and determined a
way as possible
Western Bloc central banks and financial and
investment corporations
are locked into an inflationary dynamic in order to sustain their
system's militarist imperialism. The Bloc's
European and Pacific components offer supportive economic
collaboration. In exchange, the US serves as the Bloc's global
enforcer.
The US Treasury, Federal
Reserve and corporate financial houses work together boosting dollar
zone
money supply, devaluing the dollar.
Their partners take
compensatory
steps, intervening in G7 financial markets. They
seek to keep their currencies in some kind of
sustainable
relationship for purposes of mutual trade and finance equilibrium so as
to support US budget and current account deficits.
As the value of the dollar declines the oil price has to rise so
producers can maintain operating and marketing margins. A comparison of
the
US-Euro price trend with the oil price trend through 2006 and
2008 shows a surprisingly uniform
correlation between the two. Against the Euro the US$ fell from around
1.21 in January 2006 to around 1.45 in January 2008. The oil price fell
on a similar trend from around US$60 to just under US$100. On average,
for around every cent the dollar lost against the euro, the oil price
rose a little under US$2.
If one looks at the oil
price and US$-Euro figures through 2007 up to April 2008, one can see
that the trend is even more uniform and continues more
sharply. The US$ fell against
the Euro from around 1.35 in April 2007 to around 1.57 a year later.
During the same period the oil price rose from around US$63 to around
US$132. Roughly, an average increase of US$3 for every one
cent drop in the
value of the dollar.
The US Federal Reserve
and the US Treasury will carry on increasing the money supply,
devaluing the dollar. They do
so to fund US government
military spending, other components of the US budget deficit and to
prevent insolvent banks and financial corporations from going under.
The European Central Bank will continue to set its
money supply and accompanying policies to sustain recent trends in the
Euro's
relationship to the US dollar and bolster its own shaky corporate
financial markets.
If there really is a straightforward correlation between the US$-Euro
price and the oil price, then December 2008 will see the
dollar at around US$1.70 to US$1.75 against the Euro and the oil price
at around US$170 to US$180. A strike against Iran or a
successful provocation against Venezuela would certainly intensify that
30 month trend. There seems no obvious reason
for any significant
short-term reversal.
If speculation is a significant component of the
oil price why is the US$-Euro price trend so uniformly similar to the
oil price trend? The rising oil price tracks the dollar's
decline - not vice versa. Even if speculation is a factor, the price
will most
likely remain well over US$140-US$150 because the US budget and current
account deficits are not going to change much in the short term and may
well get worse. As inflation gathers pace over the
medium term, interest rates will
rise more or less sharply to counter the threat of
hyper-inflation.
That may signal the end of the current apparent
correlation between the oil price and the decline of the US dollar
against the Euro. Whatever way such a medium-term reversal - perhaps by
mid-2009 - pans out, one can be
absolutely certain the Western Bloc ancien regime will sustain its
militarism in support of corporate globalization. Both the US and the
European financial systems seem hostage now to inflationary processes
in response to the collapse of
their long stretched out credit and asset booms.
The European Central
Bank prattles on about fighting inflation the same way the US Treasury
waffles on about a strong dollar. In fact, it looks as
though the Western Bloc finance system is locked into an incestuous
fatal inflationary embrace. The US authorities are incapable of
dealing with the country's deficits by ending its wars and the
grotesque military spending levels they promote. US allies string
along, unwilling or unable to force a correction.
Since the US plutocrat elite cannot give up their wars, the likelihood
is they will savage domestic social security and associated programmes
to try and cap the budget deficit. Certainly, the
corporate
plutocrats will not pay. Whoever wins the US Presidency in November,
the wars, the
militarism, the in-your-face corporate welfare will continue.
If
they cannot continue boosting the money supply as before to
sustain credit and asset bubbles, they will attack the poor
and disadvantaged and shrink the middle classes winning
compliance by means of the "war
on
terror"
motif.
They will do that domestically and internationally. In Europe, people
will be told they cannot have their accustomed
pensions and social benefits any more. But funding will continue for
NATO
commitments, for troops and materiel in Afghanistan, for the UN
Israeli-protection forces in Lebanon,
for interventions under various pretexts In Africa. Money will
be found to
support any US intervention against Iran and Syria, against Hizbollah,
perhaps against Venezuela.
It may be possible for individuals like Bernanke and Paulson and their
mates in the US, Europe and Japan to avoid lurching at the controls of
their dollar-euro-yen-vomiting moneyness engines into some dank
deflationary slough of despond. It may also be possible they end up
knocking back unprecedently enormous swigs of neoliberal hemlock. The
impoverished majority will continue to be terrorised, starved and
deprived by hypocritical, sadistic Western Bloc
politicians, the corporate elites they front for and their regional
proxies and puppets.
Their corporate media will continue telling us how well intentioned all
those politicians are. But it seems clear from the suspiciously uniform
correlation between the US-Euro price and the oil price, those
politicians are deliberately fomenting the inflation that is destroying
the economies of vulnerable countries around the world. Why are they
doing that if not to maintain their ancien regime power and privilege
by means of military backed corporate globalization?
They and their
corporate media tell us we live in the best of all
possible worlds because no other world order is possible. All this
suffering
and moral debris and economic chaos we're sorting through... where
could it all have
come from? The anarchy of the "free market"?
Ever
since
Bretton Woods, G7 governments have worked together ever more closely
planning economic
strategy. They rig outcomes so as to protect and promote the interests
of their corporate elites. Their corporate propaganda media call this
the "free market". They are talking only to themselves.
toni writes for tortillaconsal.com