The Dollar Devours the Euro – OpEd – Eurasia Review
It is now clear that the current escalation of the New Cold War was planned over a year ago, with serious strategy associated with the US plan to block Nord Stream 2 as part of its aim to prevent the Europe (“NATO”) to seek prosperity through mutual exchanges. trade and investment with China and Russia.
As announced by President Biden and US national security reports, China was seen as the major enemy. Despite China’s useful role in enabling American companies to drive down labor wage rates by deindustrializing the American economy in favor of Chinese industrialization, China’s growth has been recognized as posing terror ultimate goal: prosperity through socialism. Socialist industrialization has always been seen as the great enemy of annuitant economic system that has conquered most nations in the century since the end of World War I, and especially since the 1980s. The result today is a clash of economic systems – socialist industrialization versus neoliberal finance capitalism.
This makes the New Cold War against China an implicit opening act to what threatens to be an interminable Third World War. The US strategy is to sideline China’s most likely economic allies, particularly Russia, Central Asia, South Asia and East Asia. The question was where to start cutting and isolating.
Russia was seen as presenting the greatest opportunity to begin to isolate itself, both from China and from the NATO eurozone. A sequence of increasingly severe – and hopefully deadly – sanctions against Russia has been drawn up to prevent NATO from trading with it. All it took to trigger the geopolitical earthquake was a casus belli.
It worked out quite easily. The escalation of the New Cold War could have been unleashed in the Middle East – because of resistance to the US grab of Iraqi oil fields, or against Iran and the countries that help it survive economically, or in East Africa. Plans for coups, color revolutions, and regime change have been drawn up for all of these areas, and the African American military has been building up particularly rapidly over the past two years. But Ukraine has been in the grip of a US-backed civil war for eight years since the Maidan coup in 2014, and offered the chance for the biggest first victory in this confrontation against China, Russia and their allies.
Thus, the Russian-speaking regions of Donetsk and Luhansk were bombarded with increasing intensity, and while Russia still refrained from responding, plans were reportedly made for a major confrontation which would begin in late February – starting with a blitz attack on western Ukraine organized by US advisers and armed by NATO.
Russia’s preemptive defense of the two eastern Ukrainian provinces and its subsequent military destruction of the Ukrainian army, navy and air force over the past two months has been used as an excuse to begin imposing the designed sanctions program by the United States that we see unfolding today. Western Europe dutifully tracked all pork. Instead of buying gas, oil and food grains from Russia, it will buy them from the United States, along with rapidly increasing arms imports.
The foreseeable drop in the euro/dollar exchange rate
It is therefore necessary to examine how this is likely to affect the balance of payments of Western Europe and therefore the exchange rate of the euro against the dollar.
European trade and investment before the war to impose sanctions had promised increasing mutual prosperity between Germany, France and other NATO countries vis-à-vis Russia and China. Russia was providing abundant energy at a competitive price, and that energy needed to leapfrog with Nord Stream 2. Europe needed to earn the hard currency to pay for this rising import trade by exporting more industrial goods to Russia. Russia and capital. investment in the development of the Russian economy, for example. by German car manufacturers and financial investments. This bilateral trade and investment has now come to a halt – and will remain so for many, many years, given NATO’s confiscation of Russian foreign reserves held in euros and sterling, and European Russophobia stoked by the media of American propaganda.
In its place, NATO nations will buy US LNG – but they will have to spend billions of dollars to build sufficient port capacity, which could take until 2024. (Good luck until then.) energy will sharply increase the world price of gas. and oil. NATO countries will also increase their arms purchases from the US military-industrial complex. Near-panic buying will also increase the price of weapons. And food prices will also rise due to the desperate grain shortages resulting from the halt in imports from Russia and Ukraine on the one hand, and the shortage of ammoniated gas-based fertilizers.
These three trade dynamics will strengthen the dollar against the euro. The question is how will Europe balance its international payments with the United States? What does it have to export that the US economy will accept as its own protectionist interests gain influence, now that global free trade is rapidly dying?
The answer is, not much. What will Europe do then?
I could make a modest offer. Now that Europe has all but ceased to be a politically independent state, it is starting to look more like Panama and Liberia – “flag of convenience” offshore banking centers that aren’t true “states” because they don’t issue not their own currency, but use US dollars. Since the Eurozone was created with monetary handcuffs limiting its ability to create money to spend in the economy beyond the 3% of GDP limit, why not just throw in the financial towel and adopt the US dollar, such as Ecuador, Somalia and the Turks and Caicos Islands? This would give foreign investors security against currency depreciation in their growing trade with Europe and its export financing.
For Europe, the alternative is that the dollar cost of its foreign debt contracted to finance its growing trade deficit with the United States for oil, weapons and food will explode. The cost in euros will be all the higher as the currency falls against the dollar. Interest rates will rise, which will slow investment and make Europe even more dependent on imports. The euro zone will turn into an economic dead zone.
For the United States, it is dollar hegemony on steroids – at least vis-à-vis Europe. The mainland would become a somewhat larger version of Puerto Rico.
The dollar against the currencies of the countries of the South
The full-fledged version as the New Cold War morphs into the opening salvo of World War III unleashed by the “Ukrainian War” is expected to last at least a decade, possibly two, as the United States United extends the struggle between neoliberalism and socialism to encompass a global conflict. In addition to America’s economic conquest of Europe, its strategists seek to lock down countries in Africa, South America and Asia along lines similar to what has been planned for Europe.
Soaring energy and food prices will hit food and oil-deficit economies hard – as their dollar-denominated foreign debts to bondholders and banks come due and the dollar exchange rate increases against their own currency. Many countries in Africa and Latin America, especially North Africa, have to choose between going hungry, reducing their consumption of gasoline and electricity, or borrowing dollars to cover their dependence on electricity. screw of American trade.
There has been talk of the IMF issuing new SDRs to finance rising trade and payments deficits. But such credit always comes with conditions. The IMF has its own policy of sanctioning countries that do not obey American policy. The first demand of the United States will be that these countries boycott Russia, China and their emerging alliance of mutual trade and monetary aid. “Why should we give you SDRs or give you new dollar loans, if you’re just going to spend them in Russia, China and other countries that we’ve declared enemies,” US officials will ask.
At least that’s the plan. I wouldn’t be surprised to see an African country become the “next Ukraine”, with US proxy troops (there are still plenty of Wahhabi supporters and mercenaries) battling the armies and populations of countries seeking to feed on grain from Russian farms, and fueling their economies with oil or gas from Russian wells – not to mention participating in China’s Belt and Road initiative which was, after all, the trigger for America’s launch of its new war for neoliberal global hegemony.
The global economy is on fire and the United States has prepared for a military response and the militarization of its own oil and agricultural export trade, arms trade and demands for countries choose which side of the new Iron Curtain they wish to join.
But what about Europe? Greek trade unions are already demonstrating against the imposed sanctions. And in Hungary, Prime Minister Viktor Orban just won the election over what is fundamentally an anti-EU, anti-American worldview, starting with payment for Russian gas in roubles. How many more countries will break ranks – and how long will it take?
What’s in it for countries in the South that are in a hurry – not just as “collateral damage” to deep shortages and soaring energy and food prices, but as What is the very purpose of American strategy as it ushers in the great splitting of the world economy in two? India has previously told US diplomats that its economy is naturally linked to those of Russia and China.
From a US perspective, all that needs to be answered is, “What about the local politicians and client oligarchies we are rewarding for handing over their countries? »
This is what makes the impending World War III a veritable war of economic systems. Which side will countries choose: their own economic interests and social cohesion, or American diplomacy entrusted to their political leaders and American interference like the $5 billion that Assistant Secretary of State Victoria Nuland boasted that it invested neo-Nazi parties in Ukraine eight years ago to initiate the fighting that is breaking out in today’s war?
In the face of all this political interference and media propaganda, how long will it take for the rest of the world to realize there is a world war as it expands into WWIII? The real problem is that by the time it realizes what is happening, the global divide will have already allowed Russia, China and Eurasia to create a truly non-liberal new world order that does not need the NATO countries and which has lost confidence and hope in mutual economic gains with them. The military battlefield will be littered with economic corpses.