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STEVEN S. ROACH IS CHIEF ECONOMIST FOR MORGAN STANLEY.  IN RECENT YEARS HE HAS PREDICTED A 90% CHANCE OF "ECONOMIC ARMAGEDDON" IN THE U.S.  HERE IS THE LATEST.
 
Petrodollar Warfare book by William R. Clark documents theme of America's Financial Reckoning Day PDF Print E-mail

PETRODOLLAR WARFARE BY W.R. CLARK IS A MAJOR EXPOSE OF U.S. FOREIGN POLICY DIRECTED TOWARD PROTECTING THE DOLLAR AS THE WORLD'S RESERVE CURRENCY. 

 

The following is from "petrodollar warfare" on www.answers.com.   See also U.S. Treasury Secretary Paul O'Neill's testimony on 60 Minutes that we attacked Iraq to protect the U.S. dollar on world markets.

 



The phrase petrodollar warfare refers to a controversial hypothesis that a hidden, driving force of United States foreign policy over recent decades has been the status of the United States dollar as the world's dominant reserve currency and as the currency in which oil is priced. The term was coined by William R. Clark, who has written a book with the same title.

Supporters of this hypothesis believe that the value of the U.S. dollar is determined by the fact that many key commodities (particularly oil and natural gas) are denominated in dollars. Supporters believe that if the denomination changes to another currency, such as the euro, many countries would sell dollars and cause the banks to shift their reserves because they would no longer need dollars to buy oil and gas. This would weaken the dollar relative to the euro (see supply and demand). The core of the hypothesis is that U.S. administrations are greatly motivated by fear of the consequences of a weaker dollar, particularly higher oil prices. This motivation is seen as underlying and explaining many aspects of U.S. foreign policy, including the ongoing Iraq War.

The phrase oil currency wars is sometimes used with the same meaning.

This view is controversial. At least one U.S. Representative, Republican Ron Paul of Texas, has made very strong statements advancing similar views, using the phrase “dollar hegemony” to describe U.S. policy and proposing related reforms.[1] Many editorialists and bloggers have supported the theory. But the petrodollar warfare hypothesis has also been described as a conspiracy theory. Opponents dispute virtually every economic claim underpinning the hypothesis, including the the theory's emphasis on the dollar denomination of commodities and the physical location of the major oil exchanges, the claim that the U.S. finances its current-account deficit by printing dollars, and so on. Opponents also sometimes point out that the Bush administration has repeatedly called for China to stop propping up the dollar by holding very large dollar reserves, a stance seemingly at odds with the administration's supposed overriding interest in maintaining a strong dollar.

Whether a falling dollar would actually hurt the American economy is disputed. A weaker dollar would lead to increased U.S. exports and decreased imports, which would decrease the U.S. trade deficit and benefit American manufacturers. On the other hand, imports would become more expensive for the U.S. across the board. Of particular concern is America's dependence on foreign oil. Economists generally agree that higher oil prices pose a risk of inflation, recession, or both.

Background

Since 1971, when the U.S. dollar ceased to be redeemable in gold, its value has not been explicitly linked to any commodity.

In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros. When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the U.S. dollar.

Iran planned to open an oil bourse denominated in euros. It was planned to open on March 20 2006, but the opening was postponed without future date set. Proponents of this theory fear that it will give added reason for the U.S. to topple the Iranian regime and close the bourse or revert its transaction currency to dollars.

 

Project Censored Award 2004

The topic of oil currency warfare under the title U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq won Project Censored award in 2004. The essay was written by the author of the book Petrodollar Warfare, William Clark.

M3 data reporting discontinued

From March 23, 2006 the United States Federal Reserve (the "Fed") stopped reporting the M3 money supply data of the U.S. dollar. The Fed offers this brief note:

Discontinuance of M3
On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.
Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks).
M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.

The M3 money supply has been reported since 1959. Since M3 data was the main figure informing about the amount of dollars that the Fed issued to markets, discontinuance of M3 data reporting created significant amount of controversy amongst financial elites.

Representative Ron Paul (R-TX) has introduced HR 4892 IH to mandate the Federal Reserve to continue to publish M3 on a weekly basis.

Full Press Issue: Source http://www.federalreserve.gov/Releases/h6/discm3.htm

See also

Further reading

  • Clark, William R.: Petrodollar Warfare : Oil, Iraq and the Future of the Dollar, New Society Publishers, 2005, ISBN 0-86571-514-9
  • Peter, Phillips (2003). The Top 25 Censored Stories: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq. New York: Seven Stories Press. 
  • Engdahl, F. William, A New American Century? Iraq and the hidden euro-dollar wars, Current Concerns, No 4, June 2003
  • Engdahl, F. William: A Century of War: Anglo-American oil politics and the New World Order, Pluto Press, 2004, ISBN 0-7453-2309 X

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