Sep 14, 2009

International Financial Crisis and End of the Dollar Hegemony: United States versus ALBA


By: Jutta Schmitt

The truth now is: “He who prints the money makes the rules”-- at least for the time being. (...) The goals are (...): compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.          -  Ron Paul


In November last year, at the third extraordinary Summit of Heads of State and Government of the Bolivarian Alternative for the Peoples of Our America (ALBA) - Peoples' Trade Agreement (TCP), the presidents came together with the intention to confront the crisis of the global capitalist system. Considering the volatility of the international financial system, the untenable situation of the capitalist model with its destructive logic, and the absence of proposals and categorical measures by the big global power centers in order to confront the crisis, the presidents of the ALBA member States shared the opinion that the international financial system cannot simply be re-founded but has to be replaced by a different one, based on solidarity, stability, ecological sustainability and social justice. The Heads of State concurred with each other in that the countries of our region, if their response to the crisis intends to be efficient, definitely have to break lose and protect themselves from the grip of transnational capital so as to be able to take a different direction that does not make them dependent on the eroded international economic and financial system, nor on the US dollar hegemony, artificially maintained and literally imposed by force. To this effect, they agreed on creating a Latin American monetary zone that would, in its first phase, comprise the ALBA member States and it was further detailed that the monetary zone would count with a Chamber for the Compensation of Payments and a Stabilization and Reserve Fund, financed by the contributions of its member States. What concerns the economic policies of the future Latin American monetary and economic zone, the Heads of State agreed on the implementation of an expansive policy of demand stimulation, Keynesian in nature, promoting investments to further the development of complementary economic activities. (1)
                                                                                                                                                                  Furthermore, the presidents agreed that the Latin American monetary zone would issue its own currency, the 'Unified System of Regional Compensation' or Sucre, in order to gain independence from the international financial markets and to break with the eternal dependency on the US Dollar as the main currency for trade and financial transactions, prevalent up to now in the trade relations between our Latin American countries.(2) The financial operations with the new currency are expected to begin next year, and there is trust that the ALBA member States can count on this instrument from the very 1st of January 2010 on.(3) Therewith, an extremely important step will be taken on the road to the necessary dismantlement of the present international economic and financial system which remains characterized by the hegemony of the US Dollar, enabling the United States to import goods and services from all over the world in exchange of a printed piece of green paper which is practically worthless.  
The fact that the dollar today has no other real value than the value of the paper its printed on, makes the continuity of its world hegemony a matter of life and death for the United States of America. In a condensed overview of the history of the rise and fall of the US dollar, it is pertinent to remind the reader that after the Second World War the North American economy was the most powerful and solid of the entire world. It had enormous capacities of exportation and credit, which allowed it to finance the reconstruction of Western Europe through the famous Marshall Plan, in view of fostering a future European market to absorb US exports and investments, as well as containing the possible influence of the Soviet Union in Western Europe. The US Dollar transformed itself into the world's unchallenged, leading reserve currency, within the framework of the Bretton Woods international monetary system under the gold-exchange-standard. The Dollar figured as the anchor or reserve currency, convertible in gold, and fixed exchange rates were established between the different international currencies.

However, the growing trade deficit of the United States, combined with an inflationary monetary policy, especially during the Vietnam War, lead to the collapse of the Dollar's convertibility in gold, which ended with its unilateral suspension by the Nixon administration in 1973. Therewith, the original Bretton Woods system had collapsed and the dollar suffered a sensitive decline as international reserve currency, although it did not really get challenged by other currencies at that moment, given the absence of a sufficiently strong competitor who could have occupied this position. The breakdown of the Bretton Woods system lead to the devaluation of the dollar and thus caused a decrease of revenues from oil for the OPEC countries, as oil was priced in dollars only. This fact, in addition to the 1973 Jom Kippur war in the Middle East, lead to the rise of oil prices and the oil crisis of 1973/74, which, in turn, generated the phenomenon known as the 'recycling of petro-dollars' that ended up in strengthening once more the position of the US dollar. In the absence of an alternative international reserve currency or the existence of a petro-currency basket, the dollar got 'anchored' to oil in a kind of 'oil-standard', which enabled it to perpetuate itself, in spite of the enormous and growing balance of payments deficit of the US, as the primary international reserve currency and the only petro-currency, practically until our days. This panorama only had begun to change with the rise, at the beginning of the new millennium, of a strongly competing international reserve currency, the euro, and the displacement of the world economic center from North America to Europe and Asia. Today, with the collapse of the international financial system and the generalized capitalist crisis, the panorama looks troubling for the US dollar.
Until now, two main factors have helped sustain the privileged position of the dollar in the world: Firstly, the capital flows towards the United States as a result of the re-investment, in the United States, of the commercial surpluses obtained by nations and investors through their trade with the US. Secondly, the exclusive pricing, on a world wide scale, of oil transactions in US dollars, being this factor of vital importance to the United States for guaranteeing the perpetuation of their currency as the leading and indispensable international reserve currency. This allows the US to continue to encumber itself with debts denominated in their own currency, for which the US holds the exclusive printing monopoly. This means that the Federal Reserve has printed and continues to print dollars in the quantity and at the time it deems necessary, practically without restrictions, apart from the capacity and will of others to absorb them on a global scale, and the inflationary pressure generated by this on the domestic as well as international level. As if this were not enough, the immense capital flows towards the United States from abroad not only have financed its trade and balance of payments deficits, but, and perversely so, also the costs of its military spending which are the highest of the planet. This is how, on the one hand and given the astronomical costs of its military spending, US military supremacy would come down like a house of cards if the dollar would lose its role as the world's leading reserve and petro-currency; and on the other hand, it is the same US military supremacy by virtue of which the United States have been able to defend, in a 'preemptive' manner, their currency and its privileged position in the world on which the whole deficit-existence of the United States of America has comfortably rested until now.
In the words of US congressman, Ron Paul:
            "Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar.  As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become." (4)
The price that a part of the world had to pay so that this perverse system would maintain itself intact, has expressed itself in pressures, coercion, threats, aggression wars, military coups and destabilizing operations, especially in the cases of those countries which, in one way or the other, have tried to establish another kind of financial framework which could have led, eventually, to the demise of the dollar hegemony. Remember the case of Iraq with the decision of Saddam Hussein, in November of the year 2000, to shift Iraq's international reserves from the dollar to the euro and to price the sale of Iraqi oil in euros; situation which was immediately reverted by the North American invaders once Iraq had been attacked and occupied in 2003. There is the case of the continuous threats against the Islamic Republic of Iran, a country which in the year 2002 began to shift a big part of its international currency reserves from dollars to euros and which launched the project of an Iranian Oil Bourse to be set up on the island of Kish, which would price the sale of Iranian oil in euros and other currencies with exception of the dollar. The project was postponed various times for unknown reasons until the Iranian Oil Bourse finally opened its operations in February last year.(5) And then, there is the notorious case of our Bolivarian Republic of Venezuela, victim of a military coup in the year 2002 and since then, of continuous destabilization operations which point to an eventual direct military intervention by the US Armed Forces, from Colombian territory; not only because of the appetite the government of the United States has for the natural and energy resources of Venezuela and the region, but also because president Hugo Chávez has pronounced himself in the past in favour of the pricing of Venezuelan oil in euros and other currencies, and also has traded certain amounts of Venezuelan oil for its respective equivalent in goods and services with other countries of the region, thus avoiding the use of the US dollar in inter-regional trade transactions. Russia and China, which holds the world's largest dollar reserves, have long considered that the dollar does not fulfill a meaningful role as the leading reserve currency and have proposed, at the last summit of the G-8 in July this year, that a new, supra-national unitary currency be implemented world-wide, based on a mixture of regional reserve currencies and considered to be indispensable to overcome the abysmal crisis of the international financial system.

The price that ultimately had to be payed for the artificial maintenance of the dollar hegemony on a global scale, has been the very collapse of the international financial system, payed, as always and naturally, by the workers of this world, who do not only see the future of the present generation of workers compromised, but that of many generations to come. Even the United Nations seem to have woken up, given that the recently published annual report of the United Nations Conference for Trade and Development (UNCTAD) of the year 2009, suggests the replacement of the US dollar by a new, leading world currency. (6) And while a chorus of ever stronger voices is beginning to be heard, claiming for a new international financial order, our ALBA member countries, confident in their own strength, will and potentiality, are taking the first concrete steps in order to not only detach themselves from the dollar hegemony but to establish the parameters of a new kind of mutually beneficial and complementary trade relations. It is in this context that we can better understand why Latin America, at this moment and apart from its natural and energy resources being coveted by the global power centers, adopts special importance for the United States. A regional alliance like ALBA, with its own currency for trade and financial transactions, constitutes doubtlessly another nail in the coffin of dollar hegemony. This is at least one of the reasons for which, in the near future, the government of the United States will be pointing its guns against us, from Colombian territory.


(2) ibidem.
(4) Hon. Ron Paul of Texas Before the U.S. House of Representatives, February 15, 2006;
(5) Oil Bourse Opens in Kish;


Sep 4, 2009

Preparing the ground for military aggression against Venezuela and Latin America: The Big Lie Strategy in operation

                                                                                                                    Preparing the ground for military aggression 
against Venezuela and Latin America:
The Big Lie Strategy in operation

By Jutta Schmitt

All men can see these tactics whereby I conquer,
but what none can see is the strategy out of which victory is evolved.

                                                                Sun Tzu

It is surprising and dismaying that the world’s only superpower does

not have a unified political-military strategy and a multidimensional 
inter-agency organizational structure to confront Chavez’s challenge. 
It is time to make substantive changes to deal better with irregular 
contemporary conflict.
                                                                Max G. Manwaring

In a previous article  we showed the relation that exists between the US Defense Department's most recent war doctrines and the 'Theory of the New Wars', an ideological construction originating from the realm of European academia developed at the beginning of the new millennium, which is nothing else but the 'moral' justification of the aggression wars and countless interferences all over the world of the European and North American ruling classes, in pursuit of their respective geo-strategic interests and global expansion. All the military doctrines, security strategies and political ideologies emanating from the global power centers have a common denominator: they are fully inscribed in the justification and defense of an economic, political and social order that is unsustainable and unjustifiable and the continuance of which, over time, has turned into a human security and survival problem on a planetary scale: capitalism. In order to justify the unjustifiable, we see the recycling and massive dissemination of myths that are profoundly rooted in the minds of millions of people who have been victims, since centuries, of mind control which adopts the most variegated forms. The main message that has been transmitted through these myths, especially in the past two decades, is to equate capitalism with the highest possible degree of human civilization, rejecting any search for an alternative as 'obsolete', 'anachronistic' and 'pre-modern'.   

Who wants to break away from the established parameters and dares to take different ways than those prescribed by capitalist globalization has to confront an avalanche of obstacles, threats, covert and overt interventions as well as campaigns of defamation and ridicule. Any country or group of countries that does not stick to the rules and interferes with the interests of the global power centers, will be subjected to destabilization operations and is then declared a 'failed State' or 'crisis region' that merits military invasion in the name of the 'security' of the 'international democratic community' (the West).

Given this background it is troublesome to see how an encirclement is closing down on Venezuela and also on the countries that constitute the Bolivarian Alliance for the Peoples of Our America (ALBA), a proposal for Latin American integration which does not respond to the interests of big international capital. We are witnessing at this moment how the first step of an escalation is being executed that may well lead to an eventual military confrontation between the US-Colombian armed forces and those of the Bolivarian Republic of Venezuela, as well as other countries of our region. It is sufficient to take a look at the strategic locations of the seven North American military bases that will be set up shortly on Colombian territory and at the full spectrum of marine, air force, army and special forces components which will operate from there, so as to realize that the projection of US military force from Colombia exceeds by far the supposed 'war against drugs' and clearly points towards control and vigilance of the whole of South America. Given that Colombia shamefully and literally is transforming itself into a US aircraft carrier for operations in Latin America, within short notice we will directly share boundaries with a nation the governments of which we can qualify, without hesitation, as the most interventionist and criminal of the world. (In the words of George H.W. Bush: If the North American people knew what we have done, they would string us up from the lamp posts.) The reasons for the deployment of US military forces on Colombian territory constitute  a kind of layered rings of lies. The 'official' reason, the 'war against drugs', makes for the necessary background from which the destabilization operations against Venezuela and the ALBA countries will be staged, whereas the unofficial reason is expressed in the US military's 'strategic studies', in itself a set of clever distorsions to justify the one and only REAL reason: the open military defense of North American interests and of the continuity of the rules of the game of globalization in the region.  

In one of these strategic studies concerning US security and defense matters in Latin America, entitled: 'Latin America's New Security Reality: Irregular Assymetric Conflict and Hugo Chávez'(1), Max G. Manwaring, professor for Military Strategy at the U.S. Army War College, presents president Chávez of Venezuela as an individual 'possessed' by Simon Bolívar's dream, pushing forward an agenda of open confrontation with the objective to conquer revolutionary power in the whole region, reason for which he is considered to be a national security threat to North America. The writing, published in August 2007, is a follow-up and deepening of an earlier study by the same author from the year 2005, entitled: Venezuela’s Hugo Chavez, Bolivarian Socialism, and Asymmetric Warfare, made public in Venezuela at the time by Eva Golinger.(2) The reading is sobering and gives us an idea of what will expect us if we do not prepare a timely response that goes beyond some mere declarations of protest on paper.

In his second writing about the alleged threat posed by Chávez, Manwaring, in line with the Theory of the New Wars and as if he wanted to discard from the beginning any doubts about the peaceful and defensive character of the United States of America, introduces his study with the categorical assertion that "war no longer exists".(3) Precising this assertion and citing the British military strategist General Rupert Smith from his writing: 'The Utility of Force: The Art of War in the Modern World', the author tells us that war as a confrontation between Nation States conceived of as a massive military event which decides over international disputes, has disappeared from the scene and has been replaced by 'wars among peoples' that involve a kind of combatants who are not necessarily soldiers or armies. (4)

Going into the detailed description of what he calls the 'hard facts' of this 'new paradigm of war', Manwaring points out that today's' combatants, rather than armies, tend to be "small groups of armed soldiers who are not necessarily uniformed, not necessarily all male but also female, and not necessarily all adults but also children."(5) Implicit in this statement  lies a kind of 'technical-tactical' justification for the indiscriminate assassination of civilians as effectively has happened in the first two aggression wars of the 21st Century, undertaken by the government of the United States of America against Afghanistan and Iraq, in which civilians have been and continue to be massacred indiscriminately, with total impunity and on a large scale in a manner that is reminiscent of an expedition of collective punishment. The second 'hard fact' of this new paradigm according to Manwaring/Smith postulates that these small groups of combatants "tend to be interspersed among ordinary people and have no permanent locations and no identity to differentiate them clearly from the rest of a given civil population". (6) Implicit in this second 'hard fact' lies the technical-tactical justification of the deliberate and indiscriminate bombing of civilian infrastructure like schools, hospitals, water reservoirs, electricity plants, and even centers of religious gatherings and densely populated poor quarters, as has effectively happened in the same aggression wars we just mentioned.

In addition, the author points out that contemporary conflict is being conducted on four interrelated levels, in a hierarchic top-down structure from the political, strategic, operational to the tactical level, what seems at first sight no different from the classical definition of war by Von Clausewitz according to which war is the continuation of politics by other means. However, and according to Manwaring/Smith, "contemporary conflict is now lengthy and evolves through two or three or more noncoercive organizational stages before serious coercion and confrontation come into play", being the military operations "only one of the many instruments of power employed by the combatants" (7). To "evolve through two or three or more noncoercive organizational stages" before entering direct confrontation could be translated, in the language of the now extinct international law, as a crime against peace, as is the planning, preparation and carrying out of an aggression war, such as the government of the United States has waged against Afghanistan and Iraq under the pretext of the 'war against terrorism', bidding farewell to international law and laying down the de-facto basis for the club-law or "New Wars" of the 21st Century. Certainly and in our latitudes, the recent coup in Honduras, followed by the agreement of the Colombian and North American governments on facilitating the use of seven military bases for the US on Colombian territory, in addition to the uncountable acts of open provocation against the governments of Bolivia, Ecuador and Venezuela in the past months and years, give the impression that we are witnessing "two or three or more noncoercive organizational stages" before the government of the United States, in alliance with the Colombian ruling class and other ruling elites in the region that may offer themselves for the purpose, passes on to direct military confrontation with one or more of our Latin American countries.  

Then, Manwaring proceeds to point out the 'transnational character' of modern conflict in which combatants hide in border regions and other countries' territories from where they stage their operations (which turns out to be quite a convenient 'hard fact' if, from one of the global power centers like the United States or Europe, one plays the card of destabilization and intervention of a nation or region). The author concludes the review of the essential elements of the new paradigm of war with the observation that the major military and nonmilitary battles in modern conflict take place among the people and if reported, become media events that may or may not reflect the reality on the ground. Here, of course, one cannot but think of the dictatorship of the international media that works hand in hand with the US military-industrial complex and sells us information that serves their strategical objectives. Finally, the author emphasizes that all means employed in this kind of conflict are "intended to capture the imaginations of the people and the will of their leaders, thereby winning a trial of moral (not military) strength" and that "the struggle is total, in that it gives the winner absolute power to control or replace an entire existing government or other symbol of power". (8) Apart from the concept and practice of 'regime change' pushed forward by the government of the United States where it deems it necessary, and its battle to "win hearts and minds", what comes to mind here is the concept and practice of the 'de-territorialization' of war, which, according to the Theory of the New Wars and its postulate of 'military humanism', bestows on the 'civilized nations' (United States and Europe) not only the self-proclaimed 'right', but even the obligation to intervene in conflict zones 'for the sake of their populations' and 'in the name of human rights', concept that goes hand in hand with that of a 'limited sovereignty' and of 'military export of stability'.  

After enumerating the 'hard facts' we just mentioned and commented, as essential characteristics of the new paradigm of war according to a writing of British general Rupert Smith, Manwaring, in a sudden and grotesque twist, ascribes these to president Hugo Chávez as if he were the intellectual author of this paradigm, besides other doctrines of war:

    "These are the principal characteristics of what President Hugo Chavez of Venezuela now calls “4th Generation War” (4GW), “Asymmetric War,” “Guerra de todo el pueblo (“War of all the People,” “People’s War,” or “War Among Peoples”). President Chavez asserts that this type of conflict has virtually unlimited possibilities for a “Super Insurgency” against the United States in the 21st century. It appears that Chavez’s revolutionary (Bolivarian) ideas are developing and maturing, and that he and Venezuela, at a minimum, are developing the conceptual and physical capabilities to challenge the status quo in the Americas. This challenge is straightforward and is being translated into a constant, subtle, ambiguous struggle for power that is beginning to insinuate itself into political life in much of the Western Hemisphere." (9)
This maneuver clearly reveals the political-ideological, strategic-military background of the matrix of public opinion generated on a global scale with the complicity of the dictatorship of the international media, to justify an eventual aggression war against the Bolivarian Republic of Venezuela, matrix that has already been successfully tested in the case of Afghanistan and Iraq: To present the country or government who will be attacked as the aggressor, according to an old technique called Big Lie Strategy, a term coined by Adolf Hitler in his autobiography, "Mein Kampf" (1925). The term refers to a lie of such proportions that nobody ever would suspect that anyone could be so imprudent as to distort the truth in such an infamous manner:

    "[...]in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying." (10)

Considering the countless assaults against other governments and peoples of this world by the governments of the United States in the past and present, it is troublesome when a North American military strategist from the Strategic Studies Institute of the US Army War College asserts that president Chávez is "encouraging his Venezuelan and other followers to pursue a confrontational, populist, and nationalistic agenda" by means of implementing a "totalitarian democracy" (in reference to the direct, participatory and protagonist democracy or 'government of, by and for the people' as proposed by Lincoln), and accuses Chávez of wanting to destroy North American hegemony by means of conducting an irregular Fourth-Generation War “Super Insurgency”. (11) Such an assertion announces bad things to come.     

We don't want to conclude our observations without mentioning some other pieces of lie and propaganda like that of Ray Walser, Heritage Foundation's political analyst for Latin America (12) who, in his "Four concerns about Venezuelan president Hugo Chávez", holds that the latter, first, provides material assistance and sanctuary to the FARC, second, allows individuals operating for Hezbollah to work under Venezuelan diplomatic cover, third, hinders anti-drug efforts in the region and fourth, denies democratic opportunity to the opposition and opposes democratic government,(13), lies that Walser recycles in his articles. Not to mention the notorious Otto Reich, who recently shot his ammunition from the pages of the Foreign Policy Magazine, in a master piece of distortion and bellicose propaganda, entitled: 'Chávez’s Covert War: Obama needs to call Venezuela’s president what he is: a terrorist and a drug-trafficker', and in which Reich details what the title promises: infamous falsehoods. In this piece of provocation, Reich portrays president Chávez as a coward who only points his guns at his own, defenseless citizens and who does not have the guts to fight openly in the international arena:

    "Chávez has only ever pointed his guns at defenseless Venezuelan civilians. Bullies like him do not forewarn their intended victims. He does not fight openly, preferring to intervene covertly -- either directly or through his regional "anti-imperialist" alliance, the Bolivarian Alternative for the Americas (ALBA), a collection of the highest-decibel, lowest performing leaders in the region, from countries including Cuba, Bolivia, Nicaragua, Ecuador, and, until June, Honduras." (14)

This is what best illustrates the objective of this co-ordinated avalanche of propaganda and provocation that has been flowing from the pens of military strategists, political analysts, ex State officials, columnists and journalists, all inscribed in the Big Lie Strategy. It therefore is imperative for us to study, know and debate this kind of propaganda,  its historical precedents, its current context, the mental configuration of its promoters and its effects on the population in order to counter it effectively.  


(1) Max G. Manwaring, Latin America's New Security Reality: Irregular Assymetric Conflict and Hugo Chávez, August 2007;
(2) Eva Golinger, El ejército de los Estados Unidos prepara doctrina para guerra asimétrica con Venezuela,
(3) Manwaring op.cit. , pág. 1
(4) ibidem
(5) ibidem
(6) ibidem
(7) ibidem , pág. 2
(8) ibidem
(9) ibidem, pág. 3
(10) Adolf Hitler, Mein Kampf, chapter 10, cited in:
(11) Manwaring, op. cit., pág. 3
(12) Washington's biggest and most influential think tank and sponsor of the notorious Project for a New American Century.
(13) Ray Walser, Four Concerns about Venezuelan president Hugo Chávez, Heritage in Focus, video-clip, 21st of July, 2008,
(14) Otto Reich, Chávez’s Covert War: Obama needs to call Venezuela’s president what he is: a terrorist and a drug-trafficker.