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Central Asia, which are increasingly accessible to it by pipeline (the worrisome to Brussels and Washington: to sell oil for gold (the gold United States must rely on tankers). dinar). If and when this happens, the full wrath of America will The development of this Eurasian challenge comes at a bad time descend upon the Arab Middle East—and that's why it hasn't for Washington, which is in no position to offer the kinds of trade happened yet. concessions it did in earlier decades in order to maintain the G-7 The other likely trigger would be a collapse of the US economy consensus. America's only remaining strong suit is raw military from within, resulting from a bursting of the mortgage bubble. The power, and thus it has two options: to decline gracefully from its recent US economic "recovery" arose almost entirely from low position as sole superpower, or to use its military to enforce global mortgage rates (set ultimately by the Fed), which allowed families dominance. to refinance their homes, cash out some of their equity and use the Engdahl suggests that the neo-conservatives gained influence in money for immediate consumption. With oil prices soaring, the Fed Washington because a majority in the US power establishment finds will eventually have to raise interest rates steeply in order to contain their views useful to advance a new aggressive US role in the world. inflation. But this may cause millions of home owners to default on Rather than work out areas of agreement with European partners, their currently low-interest, adjustable-rate mortgages. In that event, Washington increasingly sees Euroland as the major strategic threat —_ property values would plummet, and with them would go the stock- to American hegemony, especially the "Old Europe" of Germany market and the economy as a whole. and France. Just as Britain in decline after 1870 resorted to increas- If the Fed's real owners are confident in the present Washington ingly desperate imperial wars in South Africa and elsewhere, so the leadership, they will do everything in their power to delay the United States is using its military might to try to advance what itno _ inevitable until after the election (and this is what they seem to be longer can by economic means. Here the dollar is the Achilles heel. doing). If they think it is time for a regime change, we may see the To understand why the dollar is America's Achilles heel, a great unravelling begin even before November. metaphor is useful. Imagine being able to write checks [cheques] In either case, the response of US political leaders may be merely and then convince the people you give to seek foreign scapegoats. As Stan them to not to cash them. Perhaps Goff writes in his recent essay, they find the checks themselves com- "Persian Peril" (see the website forting to hold onto; or maybe you America's only remaining strong http://www.fromthewilderness.com), it have a friend who agrees to sell gro- ae or: appears as if Iran is currently being set ceries or gasoline for your checks only, suit is raw military power, and thus was the next domino in the neo-cons’ and then happily stockpiles and recir- it has two options: to decline crusade for democracy in the Middle culates them. In either case, you may A a East. With Iranian and Russian coop- be tempted to write checks for much gracefully from its position as sole erative energy agreements blooming, a more than you have in your bank superpower, or to use its military US attack on Iran could be the trigger account. As long as the checks them- to enforce global dominance. for another all-out conflict on the scale selves are regarded as valuable and are not cashed, you get a free ride. of the World Wars of the 20th century. On the other hand, it is possible that But if people stop finding your the disastrous outcome of the Iraq checks comforting to hold onto, or if invasion has sunk deeply enough into your friend starts selling groceries for other people's checks or for the awareness of Washington elites that further similar adventures gold or silver, then the game is up. It will be revealed that your (however desperately sought by the neo-cons) will be headed off by account is overdrawn and you will be in trouble. cooler minds. The metaphor is not perfect. In fact, every nation in the world is attempting to write checks beyond its means. But the US has man- How Can We Respond? aged to do by far a better job of it than any other nation. The checks There is no solution to any of this—in that there is nothing we can we are not talking about are not just hoarded paper dollars (though do to make the problems go away. Their origins go far back in time there are billions of these stuffed in mattresses around the world) but —_and are intertwined with the history of money itself, though money dollar-denominated investments and securities, including T-bills, per se is not at the heart of the matter. Access to resources is, as stocks and mortgages. Currently the US is running a $700 billion ever, the ultimate determiner of human destiny, but money has per year trade deficit—this on top of trillions in government debt become a tool universally used by humans to gain and hold access and trillions more in consumer debt. No other nation in the world to resources and as such it introduces its own set of possibilities and comes remotely close to this level of bad-check writing, on either a perils. total or a per-capita basis. While there is no solution, there must be responses, and some are If a run on the US dollar were to occur, then the only financial better than others. The relocalisation of economies (moving produc- solution would be to create even more dollars (presumably through ers and consumers closer together) and currencies are good places to government borrowing), which of course wouldn't actually solve the __ start. oo problem and would in the long run make matters worse. The cur- rency would become almost worthless, and in the process real About the Author: , - , ; : wealth (land, factories and natural resources) would be confiscated Richard Heinberg is the author of six books including The Party's Over: Oil, and d ° . di . . . War and the Fate of Industrial Societies (New Society, 2003; reviewed in and turned over to cre itors. .. . NEXUS 10/01), and Powerdown: Options and Actions for a Post-Carbon What could cause this to happen? A decision by OPEC to sell oil World (New Society, 2004). He is a journalist and lecturer, an educator and openly for euros could be a trigger. Some oil is already quietly editor, and also a core faculty member of New College of California where he being sold for euros, and several countries including Iran and Saudi _teaches a program on "Culture, Ecology and Sustainable Community". His abia ha . sci bili alui “yo gainct a hac monthly MuseLetter, now in its 13th year of publication, was nominated in Arabia have floated the possibility of valuing oil against a basket of 4994 for an Alternative Press Award. His article in this issue, "The currencies (meaning, effectively, dollars and euros). The Arab Endangered US Dollar”, was first published in MuseLerter #149, August 2004. OPEC states have toyed with an idea that must be equally Visit the MuseLetter website at http://www.museletter.com. How Can We Respond? There is no solution to any of this—in that there is nothing we can do to make the problems go away. Their origins go far back in time and are intertwined with the history of money itself, though money per se is not at the heart of the matter. Access to resources is, as ever, the ultimate determiner of human destiny, but money has become a tool universally used by humans to gain and hold access to resources and as such it introduces its own set of possibilities and perils. While there is no solution, there must be responses, and some are better than others. The relocalisation of economies (moving produc- ers and consumers closer together) and currencies are good places to Start. About the Author: Richard Heinberg is the author of six books including The Party's Over: Oil, War and the Fate of Industrial Societies (New Society, 2003; reviewed in NEXUS 10/01), and Powerdown: Options and Actions for a Post-Carbon World (New Society, 2004). He is a journalist and lecturer, an educator and editor, and also a core faculty member of New College of California where he teaches a program on "Culture, Ecology and Sustainable Community". His monthly MuseLetter, now in its 13th year of publication, was nominated in 1994 for an Alternative Press Award. His article in this issue, "The Endangered US Dollar", was first published in MuseLetter #149, August 2004. Visit the MuseLetter website at http://(www.museletter.com. NEXUS = 15 DECEMBER 2004 — JANUARY 2005 www.nexusmagazine.com