THE EUROPEAN UNION
Europe for its part was eager to eliminate the dollar. Jacques Santer, former president of
the European Commission, called on Gulf Arab oil exporters to price their crude in the
euro rather than the US dollar as a means to stabilize the oil market. “It could be the
instrument to consolidate oil markets” and would be less affected by US foreign policy,
he told a Gulf-Euro conference in Dubai. (“Santer calls for oil to be priced in euros,” The
Irish Times October 8, 2000) The biggest issue here was whether Russia would phase out
the dollar in favor of the euro, as the Germans and others were proposing. In addition,
dumping the dollar was popular. Newspaper columnists and antiwar activists in countries
from Morocco to Indonesia shared the sentiments expressed in a Nigerian street protest
witnessed by a Wall Street Journal reporter during the run-up to the Iraq war: “Euro yes!
Dollar no!” (
http://journeyman.1hwy.com/J-Big_OneIIIb.html) US elites had long been
painfully aware of the colossal vulnerability represented by the world’s dollar overhang –
the masses of dollars held outside of the United States. Republican Senator Pete Dominici
of New Mexico commented on May 18, 1995: “What would happen if the Saudi
Arabians said they didn’t want to be paid [for oil] in dollars anymore, but wanted instead,
to be paid, say in yen. There would be inflation that would make the 15 to 20 percent
inflation in the early ‘80s look good.” (C-SPAN II, 18 May 1995)
The impact of a world move to dump the dollar can be deciphered from the following
commentary from an insider newsletter: “The US dollar is ‘over-owned.’ 77.7% of world
central bank reserves are in US dollars. That’s disproportionate to the US share of world
trade. There’ll now be some diversification, especially to the euro. Just as central banks
sold gold, they’ll now sell US dollars. A study revealed at a central bank confab at
Jackson Hole by Professors Obstfeld and Rogoff suggests the US dollar could drop 24%-
40% if foreigners move quickly to exchange dollars. Foreigners own a record 38% of US
Treasury market (44% excluding Federal Reserve holdings), 20% of US corporate bonds,
8% of US stocks. A change of sentiment, now suddenly in the air, could start a dollar
brushfire.” (The International Harry Schultz Letter, January 19, 2001)
If oil producers in general were to make the leap from the dollar to the euro, many central
banks would have to shift reserves into the European currency. The value of the dollar
might crash between 20 and 40%, as Clark’s article points out. The impact of this inside
the US might be hyperinflation of 1000% or more per year. As the expert cited by Clark
summed up: “One of the dirty little secrets of today’s international order is that the rest of
the globe could topple the United States from its hegemonic status whenever they so
choose, with a concerted abandonment of the dollar standard. This is America’s preeminent,
inescapable Achilles Heel for now and the foreseeable future. That such a
course hasn’t been pursued to date bears more relation to the fact that other Westernized,
highly developed nations haven’t any interest to undergo the great disruptions which
would follow – but it could assuredly take place in the event that the consensus view
coalesces of the United States as any sort of ‘rogue’ nation. In other words, if the dangers
of American global hegemony are ever perceived as a greater liability than the dangers of
toppling the international order. The Bush administration and the neo-conservative
movement have set out on a multiple-front course to ensure that this cannot take place, in
brief by a graduated assertion of military hegemony atop the existent economic
hegemony. The paradox I’ve illustrated with this one narrow scenario is that the quixotic
course itself may very well bring about the feared outcome that it means to pre-empt. We
shall see!” (
http://globalresearch.ca/articles/CLA302A.html)
The US economy was very sick indeed. Electrical infrastructure was at the breaking
point, with major blackouts every summer. The air transportation system was bankrupt.
Commuter and freight railroads were subject to constant breakdowns. The budget deficit
was rising towards $500 billion – or $750 billion, and the merchandise trade deficit was
rising towards $500 billion. The US public debt was headed towards $6.5 trillion, with
over $4 trillion in foreign debt. The military forces were comprised of ten hollow infantry
divisions – not an adequate force to conquer the world, except in a neocon fantasy.