Altes Elliott-Wellen-Forum - Prawda zu Dollar, Gold, Wirtschaft, Irak

Prawda zu Dollar, Gold, Wirtschaft, Irak

verfasst von - Elli -, 15.03.2003, 19:05

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17:17 2003-03-14

<center>Dollar
to Step Down Ahead of Saddam</center>

Numerous leaks of information and analysis of activities of the US authority
are a sufficient basis to forecast further development of the US economic
policy. This estimate is extremely important as it will further determine
future situation in the world in many respects.

After “cleansing” in George W. Bush’s economy team caused, as the
American press reports, by the reluctance of Paul O’Neil and Larry Lindsey
“to pay attention to demands of the US economic elite”, it became evident
that top-priority principle of American economy authority is to preserve the
Wall Street investment banks. From the point of view of these banks,
step-by-step, which means slow, dollar devaluation is the key danger. If it
happens, it is highly likely that holders of futures contracts may prefer
other currencies to dollar, which in its turn will seriously imperil position
of the investment banks as monopoly operators on the market and the whole of
US system for control over the world economy based on these markets.

High oil price that exceeds the traditional “war premium” is an indirect
indication of initiation of this process. To all appearances, the problem is
that sellers have already implicitly placed the dollar devaluation into the
oil price; it means that sellers rely not upon dollar but upon some more
stable values in their calculations. Is it possible to avoid further dollar
devaluation? The latest statistics on the rate of the foreign trade balance
(13% in November and 10% in December 2002, at the time when dollar was on the
decline) and Federal Reserve Chairman Alen Greenspan’s report on a
catastrophic condition of the budget delivered in the US Congress (he said
that the process must be carried out as soon as possible) demonstrate it is
impossible to avoid the scenario. This is the only way to prevent financial
markets from giving up the dollar. At that, on results of this devaluation the
US authorities plan to demonstrate the whole of the world that dollar won’t
drop any further!

Alen [sic] Greenspan partially gave an answer to the question what can be done
with the economic situation in his report in December. Arguments on “the
gold standard” show that dollar may
be once again made dependent upon gold, like in the time of
Bretton-Woods. However, a serious problem arises in this connection. The gold
supply in the world, especially in the USA is not enough to make dollar
dependent upon gold effectively. Even grave devaluation carried out
simultaneously with increase in gold price won’t solve the problem. In this
situation, the USA has two mechanisms that would guarantee a necessary result.

The first mechanism is a confiscation
reform, similar to that one carried out by Franklin Roosevelt
in the 1930s. Fixation of dollar to gold will allow the US Government to make
private individuals exchange gold they own for dollars at a fixed rate
determined especially for this purpose.

Another mechanism is a currency
reform. Cash dollars held by US residents will be accepted on territories
controlled by America without any limits, but non-residents may have problems
in this situation. It is highly likely that bank transfers to US resident
banks and exchange of dollar notes may be restricted for non-residents. This
may be explained by the necessity to hold a special check-up in the network of
the “anti-terrorist campaign.” This operation (and new, so-called “pink
dollars” are already printed) will not only cut off a considerable part of
cash dollars but will also give the USA a powerful instrument of influence
upon all countries of the world.



However, this is not enough. It is also important to prevent processes that
objectively may bring dollar down after it is made dependent on gold. US’s
monetary authorities think that there is only one thing menacing this scenario;
it is collapse of the market of mortgages on real property. And this market is
tense enough now. And with an interval of just few days, Alen Greenspan says
realty prices will reduce, and then chairman of the Federal Reserve System
department in St.Louis William Poole delivers a panic speech saying that the
market may collapse within the nearest days. Such conduct of the top officials
can be explained one way only: they think that the market must be brought down
before the described scenario starts, which by the way will give a formal
reason for dollar devaluation.

There is hardly an alternative to the
sad scenario: inevitable dollar collapse will seriously compromise it in the
world, and the only way to rehabilitate it is to make dollar dependent upon
gold.

But the USA is experiencing one more problem - decline of the economy which
may bring the above mentioned scenario to nothing. It’s interesting to
mention in this situation that opinion and positions of the US authority
don’t completely mirror the actual economic processes.

From the point of view of the US leadership, the USA is at the stage of a
protracted recession. Monetary methods of economic stimulation (reduction of
the rate) brought no results, and something more must be done. The policy
carried out by Ronald Reagan in the mid-1980s was picked out as an example. In
fact, Greenspan’s criticism of Bush’s budgetary policy is connected with
Reagan’s experience. The matter is that at that period economy was
stimulated from budgetary finance, which further resulted in a sudden rise of
the public debt, extremely high profitability of government bonds (it reached
17% per year), as a result, the Federal Reserve System rate was very high. In
the end, dollar seriously reduced by 40%.

But in the middle of the 1980s there was no alternative to dollar, and the
fact of the Soviet Union’s existence made other western countries support
American economy actively. New advisors to George W. Bush (unlike his previous
ones) evidently think that dollar devaluation will provide a considerable
supply for further increase of the US public debt; they think that America’s
victory in the Iraqi war will make old and prospective allies behave in a
decent manner. This is the basic difference from the situation the country
experience in the 1980s.

As we’ve mentioned, usage of Reagan’s economic model will inevitably
entail dollar devaluation. According to the above mentioned reasons,
it is impossible to delay dollar devaluation any longer, and
it would be quite natural to unite macroeconomic dollar collapse resulting in
normalization of the balance of payment and the foreign trade balance and
devaluation connected with a sudden deficit of the budget. So, the events may
develop in accordance with the following scenario: first,
a war begins in Iraq with an aggressive PR backing; then, budgetary spending
will be increased not less aggressively, and finally, early in autumn (and
probably even earlier) dollar devaluation may be carried out and the US
currency will be made dependent upon gold. The scheme wonderfully correlates
with the already announced terms of the “pink dollars” introduction.

Why is the plan criticized at all? First of all, it is obvious that gold
reserve will be quite enough. Second, realization of the plan is possible if
everything goes OK in Iraq, which is open to question by the way. Third, it is
not ruled out that many countries, most of all those influential with
considerable dollar reserves, will strongly object to the plan. These are
China, Japan, France and Germany. It is not for sure that these countries will
object at all, it is just an assumption; however, Bush’s team stakes on
assurance and aggressiveness.

And here finally comes the last argument which is probably not quite
understood (and probably not understood at all) in Washington. All particular
variants of the above mentioned economic policy have been certainly verified
on the US economic models employed by different expert and scientific
institutions of America. To all appearances, obtained results are
contradictory which may cause conflicts in the ruling elite. But the models
have one thing in common: they are all macroeconomic and based upon the
invariance of the sectoral structure of the US economy. It is a natural
condition, as the past years in the USA were marked with total dictate of
liberal monetary principles in the economy.

But models based on the input-output balance are highly likely to bring quite
a different result. Russian economists have already mentioned several times
that structural disproportions in the US economy will entail immediate
consequences as soon as rates on the US financial markets go up, and this is
to happen for sure if the policy declared by George W. Bush is realized. At
present, under conditions of a negative rate (and consequently, very low bank
interest) branches of new economy may prolong and refinance their debts. When
the rates increase, the process of structural defects improving will go on a
large scale. As it was mentioned, the share of such nonviable enterprises and
companies makes up about 20% GDP, and they will disappear right at the period
when dollar dependent upon gold will, as the Bush administration plans, become
stabilized.

After this large-scale collapse dollar devaluation will be not the only
problem to be solved; it will also cause breakup of the international futures
markets and entail more problems. And there are no guarantees that the Bush
administration is ready for these very consequences of its policy.

The above mentioned situation looks very pessimistic, but this is almost a
sure result of the actions already committed by the US administration, this is
obvious from leaks of information and reports delivered by representatives of
the Bush administration.

Mikhail Khazin

Translated by Maria Gousseva

Read the original in Russian: http://economics.pravda.ru/economics/2003/7/21/64/8336_.html

Related links:

PRAVDA.Ru Why
the world hates America

PRAVDA.Ru Titanics
of US economy are sinking

U.S.
Plans for Postwar Iraq Include Food, Economy

Economy,
War Not Separable

War
in Iraq and the economy

Americas
Poor: War Wounded

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gesamter Thread:

Prawda zu Dollar, Gold, Wirtschaft, Irak - - Elli -, 15.03.2003, 19:05
- Re:Sinclair glaubt sog. den Zeitpunkt zu wissen, wann das passiert: Mitte 2004 - kingsolomon, 15.03.2003, 19:20