Re # 3: [casi] Unfree stuff happens to free Iraqis!

["AS-ILAS" <AS-ILAS@DELETETHISgmx.de>]

Dear Bob,

# 2b : The economic aspect - Eastern style

Best

Andreas
-----------------

http://www.larouchepub.com/other/2003/3016glazyev.html

This article appears in the April 25, 2003 issue of Executive Intelligence
Review.

Russia's Glazyev: To Stop War, Create New Monetary System

by Rachel Douglas

As the war in Iraq unfolded with shocking destruction of that country,
Russian political figure and economist Sergei Glazyev took to the air waves
with a bold appeal to nations opposing the invasion: Act now, to create a
new monetary system. Glazyev's initiative is potentially of decisive
importance for the Russian domestic political scene, as well as for shaping
Russia's international policy in the wake of the Iraq war.

A corresponding member of the Russian Academy of Sciences and member of the
State Duma (parliament), Glazyev has a decade-long record of opposition to
the destructive policies of the existing international financial
institutions and the private interests behind them. His 1998 book on the
implementation of liberal economics in Russia is titled Genocide. It was
Glazyev, who in June 2001 invited Lyndon LaRouche as the keynote witness at
special State Duma hearings on the topic of protecting national economies
under conditions of global economic breakdown. On several occasions, Glazyev
has been summoned, together with a group of senior members of the Academy of
Sciences, to brief President Vladimir Putin on ways in which Russian
economic policy could be changed in the national interest.

Last year, Glazyev surprised the Russian political establishment by running
a strong third, in the election for Krasnoyarsk governor, where he
campaigned on a program to restore economic sovereignty and industrial
growth in Russia. Glazyev continues to receive major attention from the
Russian media, as the Communist Party—on whose slate he runs, although he is
not a member—is polling 31% in surveys of popular support, as against 21%
for United Russia ("Yedro"), the so-called "party of power." Parliamentary
elections are coming up in December.

One of Glazyev's several media interviews during the Iraq war occurred on
April 2 on Russian TV Channel 3. Glazyev rejected the notion, widely
believed in Russia, that "cheap oil" was the goal of the Anglo-American
attack on Iraq. Rather, he said, the fundamental issue is the crisis of the
global financial system: In Glazyev's terms, "the war is being waged in
order to preserve the dollar's role as world reserve currency."

Asked if Russia should dump the dollar, Glazyev replied that Russia's gold
and currency reserves, albeit substantial and growing, "are insufficient to
shake the unjust architecture of the world financial system." There are,
however, steps to take. He proposed that Russia "meet Europe half way," by
shifting from the dollar into euros and rubles; Russia's trade with Europe,
at least, need not be denominated in dollars. Also, Russia could agree with
other Commonwealth of Independent States (CIS) members, and with China and
India, to denominate their trade in national currencies, instead of the
dollar. If the ruble were used, he pointed out, the "revenue from cash
issues" could translate into the equivalent of over $20 billion, which could
be used to finance the real economy in Russia.

Glazyev's most dramatic statement in the interview echoed the Schiller
Institute's Bad Schwalbach Declaration, issued March 23. He said that
countries using the dollar today are, in effect, financing the war against
Iraq. "Therefore, if we want to stop the war, we should simply call on the
countries that oppose this aggression, to agree to have their central banks
jointly pose the question of shifting to a new world monetary system." This
would not mean "burying the dollar," Glazyev elaborated, but undoing the
U.S. actions of August 1971, which "terminated the dollar's convertibility
into gold and began to impose [it] on the entire world by force."

Sergei Glazyev made available to EIR for publication here, a longer
elaboration of his analysis, valuable not only for the proposals it
contains, but also as a window on how the latest U.S. actions are viewed in
leading Russian patriotic circles.


----------------------------------------------------------------------------
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DOCUMENTATION

Economic Significance Of the U.S. Aggression
Here are translated excerpts from Dr. Glazyev's article. Some subheads have
been added.

One widespread explanation for the U.S. attack on Iraq is that it is an
attempt to lower oil prices, which would seem to pose a threat to U.S.
economic prosperity. This analysis does not stand up to criticism. The
United States could have controlled the supply of Iraqi oil to the world
market without any military action, by using United Nations sanctions
procedures. They could have relaxed sanctions at any time, or even ended all
restrictions on the export of Iraqi oil, in order to bring world oil prices
down. But far from everyone in the United States wants lower oil prices.
Very influential circles, including the petroleum industry-linked Bush
family and the entire [Republican] party in power today, are rather
interested in high oil prices.

There is a belief that high oil prices undercut economic growth in the
developed oil-consuming countries, due to raising the costs and reducing the
profitability of production. Moreover, the inevitable rise of fuel prices
raises the cost of living. This is the case, but only if oil prices exceed a
certain sensitivity threshold for the oil-consuming sectors. The scientific
term for this level is "marginal cost of consumption." Above it, consumers
of oil begin to experience losses and have to scale back production, pulling
the economy into depression.

The marginal cost of consumption of any resource is defined by the
technologies that dominate the sectors consuming that resource. On average,
the marginal cost of consumption of oil is calculated at $40@ndbarrel for
the technological development phase prevailing in developed nations today.
If oil prices rise above that level, the economy is unable to adapt, within
the limits of today's technological development phase; losses begin to
surpass revenues, and production shuts down....

But even had the Americans' intention been to block oil prices from rising
above the marginal level, that would not explain their resort to military
aggression. After all, the [Organization of Petroleum Exporting Countries]
OPEC member countries had repeatedly stated their readiness to return prices
to a stable level of around $25@ndbarrel....

The United States had many means available to influence oil prices using
political or economic pressure on producer nations. Russian oil
industrialists, in particular, had declared their readiness to enter into a
separate agreement with the United States, outside of OPEC. The U.S.
leadership did not make use of such instruments of pressure, but, quite the
contrary, by their actions provoked an uncontrolled rise of oil prices.

First, OPEC's signals of readiness to restrain oil prices to a level
acceptable for consumers went unanswered. Second, pro-American politicians
destabilized the situation in Venezuela, which consequently practically
stopped supplying oil to the world market....

Third, the attack on Iraq was preceded by a lengthy period of heating up
international tensions, which provoked a sense of panic on oil markets....
Fourth, when seeking support from the Congress for this military adventure,
the President of the United States said that one of his goals was to reduce
the U.S. economy's dependence on imported oil, which completely contradicts
the notion of a war for cheap imported oil.

Fifth, countries that suffer far more from high oil prices than the U.S.A.
or Great Britain do, declined to join the Anglo-American coalition....

To 'Shock and Awe' the World
Thus, the notion of a war for cheap oil is unsupported. Furthermore, careful
analysis shows that U.S. actions achieved a rise in oil prices, rather than
a reduction. Such were the economic consequences of the American aggression.
Skeptics might reply that this is only in the short term, whereas in the
long run prices will supposedly stabilize. To that I can answer with the
well-known dictum, "In the long run we all shall die." It was none other
than the United States that provoked the jump in oil prices, by escalating
international tension.

What is the United States after, with this aggression? If not lower oil
prices, then perhaps the goal really is to get rid of Saddam? But then we
would have to admit that America is being run by crazy people, since to
sacrifice hundreds of one's own soldiers and thousands of innocent Arabs for
the sake of killing one man, and spend tens of billions of dollars on it, is
clinical insanity.

Unfortunately, we don't know who planned this incomprehensible war with the
strange code-name of "shock and awe." It is possible that the purpose was to
shock the entire world community, making America's rivals quake. For the
U.S. leaders are building a new Roman Empire, in which they imagine
themselves to be the patricians, while everybody else is either plebeians
(their coalition allies) or barbarians (those opposed). By unleashing this
aggression, in violation of all the standards of international law, against
the United Nations and even NATO, the U.S. leadership let it be known that
anybody who acts against or impedes their interests will be subject to
physical annihilation. The world should accept the fact that the Americans
can do anything they want, while the rivals of U.S. capital should put their
tail between their legs and relinquish whatever markets the Yankees are
interested in. Otherwise, American corporate interests will be defended with
an armed stick, which can strike at any time, in any part of the globe.

This is, of course, a weighty reason. But it is not the main one. After all,
the U.S.A. had already demonstrated its ability to flout international law
many times over. Their secret services, without any scruples, have carried
out assassination attempts and even killed politicians for whom they had no
use, and organized military coups in other countries. They had many
opportunities to do the same thing in Iraq. Why rile the whole world, when
the same goal could be accomplished, using third parties and taking no
responsibility? ...

Serious undertakings are not done this way. Either the current American
leaders are crazed, half-educated followers of the raving Brzezinski, or
there are other, more weighty reasons. I don't think the U.S. establishment
is so stupid as to embark upon adventures that are known in advance to be
losing and expensive propositions....

A War for the Printing Press
With this war, the U.S.A. is trying to address the critical problem of
maintaining its monopoly as issuer of the global currency, which the U.S.
dollar is today. Since 1971, when the American government ceased exchanging
dollars for gold, they have forced the whole world to use their national
currency as the world currency. This has multiplied their power many times
over, since they have been able to appropriate revenue from cash issues on a
world scale. More dollars are issued for circulation abroad, than for
internal use. Since the dollar supply is 80% created against U.S. government
bonds, this means that anybody using the dollar is effectively financing the
U.S. budget free of charge. Therefore the Americans can wage expensive wars
and terrorize the whole world; and everybody who holds or uses the dollar is
paying for these "services."

The Americans are currently in a very difficult situation. Thirty years of
printing dollars without restraint have created a global financial pyramid.
Only 4% of the dollars in circulation are backed by U.S. gold and currency
reserves. The currency's stability is entirely dependent upon the demand for
dollars. Suffice it for someone to initiate the large-scale dumping of
dollars, and an avalanche-style collapse of the dollar-based world financial
and monetary system could begin, bringing with it the end of American
economic dominance. It would immediately become evident that the United
States owes the rest of the world over $30 trillion, including around $5
trillion owed by the U.S. Federal government directly. Under such a
scenario, the inevitable bankruptcy of the U.S.A. would also create a
difficult situation for all countries holding their reserves in dollars.

Having drawn the whole world into servicing the dollar-denominated financial
pyramid, the United States cannot stop this process. Because they must
constantly generate demand for the dollar in order to support it, they push
others to endlessly refinance their old loans and take out new ones. As the
financial pyramid expands, it becomes more and more difficult to do this,
since in order for the dollar to be stable, the demand for dollars must grow
more rapidly than ... U.S. indebtedness.

With the world economy's entry into a structural depression, caused by the
shift in technological development phases, the situation becomes even more
severe, due to the contraction of demand for credit. Declining profits, as
the growth possibilities of traditional types of production are exhausted,
lead to crises on the financial markets. Losses on the U.S. stock market
during the past four years exceeded $7 trillion, with similar processes
under way in Europe and Japan. The volume of foot-loose dollars is growing
worldwide, and they could descend on the U.S. market at any moment.

The jump in oil prices, which are denominated in dollars, temporarily tied
up part of the surplus dollars. Signaling a structural change in the
economy, it should lead to expanded demand for credits on the part of
industry, which needs to assimilate new technologies and reduce its
consumption of energy. The process of creating a new technological
development phase will mean a growing demand for credits for new types of
manufactures. But this takes time. Until a structural transformation of the
world economy picks up steam and new centers of rapid economic growth
emerge, they have to provide every possible incentive to increase the demand
for dollars and block attempts at any large-scale dumping of dollars. That
is why it suits the Americans to escalate international tension! ...

Under the pretext of a crusade against international terrorism, the U.S.A.
froze large dollar assets, belonging to Arab organizations and individuals.
Building up its geopolitical influence on the wave of escalated
international tension, the U.S.A. blocked the initiative by Asian countries
to create a new international monetary fund, using their national
currencies.

Finally, with the war in Iraq ratcheting international tension up another
notch, the U.S.A. obtained yet another instrument with which to block
attempts to dump the dollar—freezing the accounts of whole nations. Also,
military spending is denominated in dollars, which promotes demand for this
currency.

Thus, U.S. actions are quite logical: In order to avert their own
bankruptcy, the weight of the global dollar pyramid they have constructed
forces them to provoke ever new upward spirals of international tension....
They have defined their interests as worldwide. And they will defend them in
every corner of the globe, declaring any country that attempts to escape
from the American financial pyramid and the dollar domain to be criminal and
terrorist.

Of course, such a course of events is not in the interest of Russia, nor any
other country that would be independent. All the more so, insofar as the
scale of the unsupported dollar pyramid is such that it becomes more
expensive by the year to maintain it. And there is no guarantee that it
won't collapse one fine day, whereupon everybody who uses dollars will lose
a substantial portion of their savings....

How to Stop the War
1) If the world community wants to rein in the aggressor and protect itself
from the consequences of an endless fanning of international tension through
the unleashing of local wars provoked by the U.S.A., it should abandon the
use of the dollar as a world currency. It will suffice for the central banks
of interested countries to reach agreement.

If critical mass is reached in the dumping of dollars (for which even a few
major nations, or even just all the Arab countries, would be enough), the
American financial system will inevitably crash. The dollar will be
devalued, dollars will be dumped worldwide, ultimately leading to the
bankruptcy of the U.S.A. and making it impossible to continue the war in
Iraq, or to dictate to other countries.

The cost will be losses for all holders of dollars, and the destabilization
of the entire international financial system. The world community will have
to institute a fundamentally new international financial and monetary system
on an emergency basis, based on national currencies in proportion to the
weight of each country in world economic turnover. Otherwise, they could
introduce a new world currency, supported by international financial
institutions and with restrictions, precluding its use for the special
interests of one country or any group of countries. Russia could become a
leader and organizer of the process of creating a new international
financial and monetary architecture.

2) In any event, Russia should free itself from dollar dependency, sharply
decreasing the share of dollars in its currency reserves. Russia should stop
linking its own cash issues to the growth of foreign currency reserves,
rather guiding monetary policy by the productive sector's demand for money.
It should create mechanisms for financing investment in new technologies. It
should reach agreement with the European Union, the CIS and China, on using
national currencies in foreign economic accounting, and seek external
convertibility of the ruble.

3) We shall not forget that the American President, while motivating the
need for armed aggression, surprised many by citing the need to reduce U.S.
dependency on imported oil and shift to new fuels, including hydrogen as a
fuel....

In the next year or two we have a unique chance to make an economic leap to
a trajectory of rapid and stable economic growth on the basis of advanced
technologies. In order to take advantage of these possibilities, we must
restore and utilize in a literate fashion the state monopoly on the money
supply, while returning to the state the right to manage rental income [from
natural resources exploitation] and direct it into development, creating
favorable conditions for a rapid growth of the next technological
development phase. Then Russia will become a center of attraction for
capital from all over the world, while ceasing to trade its national wealth
just in order to keep its pants pulled up. Russia will restore the full
range of functions to its national currency, making the ruble a full-fledged
international currency, after which it will be possible to remove
restrictions on capital flows without experiencing losses. Russia will
preserve its independence and regain a worthy place among world leaders....

One would like to believe that reason will triumph, and the Russian
President will finally make a choice in favor of the national interest,
replacing today's incompetent government with real professionals. They would
be capable of accomplishing an economic miracle for the country as a whole,
not just for a few families vested with power.








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