Notes Book

Bombing for Dollars

I just read an excellent article from the UN Observer and International Report:

War in Iraq: Something to Die For - Helping the U.S. Go Head-to-Head with Europe over World Economic Dominance, by Geoffrey Heard

I find this article fascinating and quite credible. It made a lot of things that had been puzzling me seem clear. How long this clarity will last remains to be seen, but right now I am finding this scenario to be a good working hypothesis.

It seems that the USA power elite is not concerned that Saddam is a bloody tyrant, that he has weapons of mass destruction, or that he has an offensive mustache. What really ticked them off was when Saddam started selling his oil for euros.

Currently all oil except Iraqi oil is sold for dollars, which validates the dollar as the world's medium of exchange. If a lot of people start selling oil for euros, or anything else besides dollars, it will probably cause a run on the dollar, devastating the economy of the USA, and possibly the whole world. This wouldn't be possible if the dollar were backed by something besides a worldwide illusion. It seems we are ready to blame anyone but ourselves for the hole we have dug ourselves into. If there was ever a paper tiger, it is the US dollar.

The invasion and take over of Iraq would make America's position as the dominant economic power in the world all but impregnable

It seems probable that some statists in the US government may believe this, but their faith in what violence will accomplish has turned out to be less than justified on many previous occasions. The war in Vietnam was supposed to stop communism, but Vietnam fell to the communists. The invasion of Panama and Plan Columbia were supposed to stop the flow of drugs. Gulf War One was supposed to topple Saddam, etc. They also tend to underestimate the forces of free-market economics. I often wonder why they call themselves capitalists.

Every fiat currency the world has ever seen has crashed. I don't think the dollar will be any exception, or the euro, for that matter. But it may be that the war in Iraq will hasten the fall of the dollar, rather than propping it up.

The war is likely to go badly, I have always thought the Iraqi people would fight, but now I am seeing that there may be even more problems. The Russians now have a perfect opportunity to do to us what we did to them in Afghanistan—provide covert support to the local resistance to an invading force. But they can do it in Iraq as well as Afghanistan. And they might well get help from the French, the Germans, the Chinese, and a substantial proportion of the world's 1.5 billion Moslems. And we have a much longer supply line than the Russians did. This help need not stop when the war is “won”. If the war is likely to go badly, the resulting “peace” is likely to go worse.

Imagine you are the manager of a bank. You are the only bank in town, and have been for some time. Then someone opens up another bank. In order to stop the competition, you bomb the other bank, and kill the competing manager. Can you then expect people to want to do business with you?

Even if we manage to occupy Iraq and force them to sell oil for dollars, there are a lot of dollars out there that are not bound up in the oil trade. We have no way to force the holders of that cash to keep on holding it. Or, if some other major oil exporting country decides to sell oil for euros, and we invade them, we will see our negatives skyrocketing above the intolerable levels we have now. Our Government is making promises that we will rebuild Iraq once the war is over, and try to repair our damaged international image. These pronouncements sound alarmingly like the empty, morning-after promises of an alcoholic wife beater. We will reform, but we're not going to do it right now. Give me a break!

But we have the strongest military in the world right. Who cares whether we are popular or not. We can do what we want, right?

Wrong. As the saying goes, military amateurs discuss strategy and tactics, but professionals discuss logistics. And logistics is based on economics. If we don't have the money to buy all the transportation, supplies, and access required by logistics, then we no longer have a strong military. It doesn't matter how advanced our weaponry is if we can't get it to where we want to use it. Also, if we don't have a strong economy to support research, our weapons will soon become obsolete. The more authoritarian our society becomes, the more our economy and the general creativity of our society will suffer, and the quality of the weapons we can produce will decline. Perhaps we can hold the world hostage to our “superior” military strength for a while, but not for the long term. We seem to be in thrall of one of the most shortsighted administrations our country has ever seen. Their willingness to trade short-term gain for long-term pain is breathtaking.

Constantly bragging about being the world's only superpower is like stepping into a bar full of lumberjacks and bikers and claiming to be the toughest and meanest man in town. Even if it's true, it's not likely to remain true for long.

We have a choice here. We can go the route of Hitler; try to take on the whole world, and end up getting invaded and wrecked. Or we can follow the excellent example provided by Comrade Gorbachev, and gently divest ourselves of the encumbrance of empire and get on with having a life.