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Friday, March 10, 2006

Smokey Briggs

Sage Views

By Smokey Briggs

Why we will go
to war with Iran

If I were in Vegas I would bet $1,000 on Iran getting tickled with a U.S.-made bayonet in the next few months.


The same reason all wars are fought - profit - or maybe the protection of profit in this particular case.

Ever since we went into Iraq I have scratched my square head wondering at the profit motive.

The propaganda about WMDs, and then democracy for the dumb heathens, was pretty hollow stuff - but at the same time I could not figure out how our government was counting the money to show a profit from beating up Iraq.

I think I figured it out.

The answer bodes ill for Iran.

To understand why, you have to take a quick trip in time. I’ll try to be brief.

Until 1934 the U.S. had a gold standard - meaning you could take your paper money, go to the bank, and get gold or silver in return.

The paper money was “backed” by gold.

The problem however, was that the Federal Reserve system had printed too many paper dollars - more than the government had in gold.

Free markets being free markets, people began to realize this and began to lose faith in paper money. People started redeeming their dollars for gold.

That put the federal government in a bind.

To ease the bind, the federal government went back on its promise to redeem paper money for gold - thus ending the gold standard. It also outlawed the private ownership of gold and confiscated all it could (which helped fill government coffers with real money while it handed out paper money in return).

Sounds like robbery to me, but I’m just a dumb newspaper guy.

Removing the gold standard allowed the government to print money whenever it needed it - much easier than taxing or restraining unaffordable spending habits.

Inflation took hold - inflation simply being the effect of each dollar bill being worth less as more and more dollars are printed. Like any other “thing,” dollars get cheaper when supply is greater than demand - just like sausage, shoes and televisions.

Without gold backing, those dollars, our dollars today for that matter, are just paper anyway. So it was a double whammy - first the things are worthless without gold backing and the government started running the printing press at top speed.

World War II bailed us out of that bind like only winning a world war can do.

After World War II America was in the catbird’s seat of the world financial market. Our manufacturing capabilities had not been destroyed and we had a lot of the world’s gold in our vault.

In 1944 the Breton Woods agreement solidified the dollar as the world’s number one currency, replacing the British pound. (Breton Woods is worth reading about and easily found on the web, but too detailed for this column).

While it was illegal for citizens to own gold, the federal government agreed to allow foreign banks holding U. S. paper money to convert it into gold at the rate of $35 / ounce.

This worked great for America as we kept the printing presses rolling and the world accepted the paper money as “good as gold.”

Well, it worked until the late 60s when foreign nations and banks began to demand gold in return for greenbacks that constantly lost value - since we were printing more and more money without adding more and more gold to the vault.

In 1971 President Nixon stopped honoring our pledge to redeem greenbacks for gold. In essence we declared bankruptcy.

The U.S. dollar was headed for the toilette.

But, a lot of really big banks and nations around the world were holding a lot of their wealth in soon to be worthless U.S. greenbacks and these folks did not want to be instantly poor.

Influence was brought to bear on the problem.

A new system was put into place in 1973 when an agreement was struck with OPEC to sell oil only for U.S. paper dollars.

The effect was to “back” our paper money with Middle Eastern oil and keep America, and a lot of rich folks, from taking a trip to the poorhouse.

In return, the U.S. agreed to protect the oil-rich nations of the Middle East from outsiders and their own people - despite the fact that these nations were often run by tyrannical despots that kept the people in line at gunpoint.

(Gee, maybe all those camel-riding Arabs hate us because we supported the guys like the Shah of Iran and Saddam Hussein who made their lives miserable. That makes more sense than them hating us because we are rich and happy).

Anyway, in 1973, the dollar in essence became “backed” by oil. After 1973 U.S. dollars were convertible to some amount of oil at all times, giving them a real value other paper money cannot claim - and giving the U.S. dollar artificial strength compared to other nations’ paper money.

So, the United States managed to continue its scam of printing money worth no more than the paper it is printed on, but trading it for items of real worth like raw materials and manufactured goods.

It is good work if you can get it.

There is a problem though. The whole scam is based on oil only being traded in U.S. dollars. If somebody started trading oil for yen, or rubles, or pesos, the dollar would lose its status as a currency actually backed by something of value.

That would be bad - for us. v The dollar would become true Monopoly money - just paper with pretty pictures.

In 2000 Iraq started doing the unthinkable - it started selling its oil for Euro dollars instead of U.S. dollars.

At Bush’s first cabinet meeting, as reported by then Treasury Secretary Paul O’Neill, the major topic was how to get rid of Sadam Hussein - though there was no evidence that Hussein posed a threat.

That was nine months before 9/11.

Then a few years after oil starts trading for Euro dollars we invade - with now obviously trumped up charges of weapons of mass destruction.

One of our first acts, once in control of Iraq, was to start Iraq back to selling oil for U.S. dollars.

Under this historical spotlight our invasion makes sense - now I understand where the profit is.

In 2001 Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all oil sales.

Within a year there was a coup attempt against Chavez.

Go figure.

This month Iran will open up its own oil exchange, setting itself up as a hub for oil transactions in the region.

And, it reportedly plans to accept other currencies for oil, especially Euro dollars.

Iran announced its intention to open the exchange in 2004 and rumors about accepting other currencies began flying in 2005.

Hmmm, when did Bush and company start whining about Iran’s nuclear “program?”

If you read around on the Internet you will find a bunch of folks who say that an Iranian Oil Exchange selling oil for Euros would do far more damage to the U.S. economy than any nuclear attack.

And, it makes sense. The strength of our dollar is based on a magician’s house of cards. Iran’s plan to sell oil for Euros could well topple that house of cards with disastrous results for those who count their riches in greenbacks - and who happen to control the most powerful military force on the earth. Think they will use it rather than go to the poor house?

I do. The bottom line is at stake.

I think I’ll call my bookie and put another $50 on the war.

Editor’s Note: This column borrows liberally from “The End of Dollar Hegemony” by Rep. Ron Paul of Texas and numerous historical and economic texts.

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