Monday, March 17, 2008

Dethroning the dollar: the most effective peace tactic

A Grand Global Bargain? Save the Economy, Dismantle the Empire by Michael Hudson
(As of the day of posting, there are a number of typos in the article that must be overlooked.)

The academic left often blathers about I-don't-know-what in prose like this:
We can clearly see that there is no bi-univocal correspondence between linear signifying links or archi-writing, depending on the author, and this multireferential, multi-dimensional machinic catalysis. The symmetry of scale, the transversality, the pathic non-discursive character of their expansion: all these dimensions remove us from the logic of the excluded middle and reinforce us in our dismissal of the ontological binarism we criticised previously.
Not much of a rallying cry, that. "Down with ontological binarism! Up with symmetry of scale, transversality and pathic non-discursivity!"

This excerpt was written by the late FĂ©lix Guattari, a philosopher and psychotherapist. Guattari's attacks on capitalism came from a psychoanalytic perspective, which is to say that it was grounded in the writings of an Austrian psychologist whose name is one letter off from "fraud", and whose theories emerged from his own subjective experiences and Greek mythology. Incidentally, they have almost all been disproven by modern psychologists who use experiments rather than ideation and fantasy to arrive at an understanding of the mind.

And Guattari is by no means alone; from the little I expose myself to popular theories in academia, it would seem that this type of horseshit* is more the rule than the exception. Writing like this may be effective in gaining tenure, disciples, the adoration of youthful men and women and easy access to the student body(ies) - not to say that this is at all a bad thing. But one would hope that a leftwing academic's writing would be at least as effective at spreading wealth more evenly in society than at spreading legs at one's office or off-campus apartment.

(*My apologies; "horseshit" is inapt. Horseshit can be used as both fuel and fertilizer, while the output of so much of left wing academia can be used neither to fuel or fertilize any effective movement for social progress.)

In fact, the restricted utility of so much left wing academic writing would not be a problem at all if this sort of postmodern/poststructural/ postcomprehensible babble were not written by the left wing intelligentsia. But given the role of leftist academics as the brains (obviously) of any left wing movement, they are desperately needed to provide guidance and devise tactics and strategies in the evolution of society away from modern capitalism towards a new, more equitable system. There will be no Latourist, Lyotardian, Baudrillardist, or Deleuzian revolutionary regimes that lead people into emancipation upon defeating the combined forces of capitalism. Their and their heirs' theories are useless - but worse than useless, they are distracting.

One of the most important issues academics are distracted from is the dollar's status as the world's key currency. Michael Hudson has written two books on the subject, and in this article provides a refresher and update on the dollar's status as the U.S. credit crisis intensifies. Essentially, if the dollar loses its status as the reserve currency of choice for central banks, and the default currency for commodity trading, the U.S. military empire will fall. What is desperately needed now is for left wing academics to publicize the benefits of dethroning the dollar, and working out plans that could be implemented by foreign central banks to divest from their dollar-denominated assets in the least painful manner possible.

First, Hudson describes the debt crisis the U.S. has - through its leaders - gotten itself into:

"The reality is that the existing level of debts cannot be paid. The problem is by no means confined to the bottom of the economic pyramid, but is concentrated at the top. The U.S. Government itself turns out to be the world's largest subprime debtor. Its $2.5 trillion debt to foreign central banks--and even larger private-sector debt to other foreigners--cannot be paid, given the nation's heavy military and trade deficits. Recognition of this political fact at the core of the international financial system has led foreign governments and investors to dump dollar-denominated bonds and stock. This has driven down the dollar's exchange rate, raising dollarized prices for oil and other raw materials.

What is ironic is that the larger the U.S. trade deficits and foreign military spending have grown, the more of these dollars are turned over to foreign central banks by foreign exporters and other recipients of U.S. funds. Central banks then find themselves with little to spend their money on, except to buy U.S. Treasury securities. They have bought so many that Americans have not had to bear the cost [of] the U.S. federal budget deficit by buying the bonds to finance it. Foreigners have bought [these] bonds. This means that, [in] effect, they have loaned the U.S. Government the dollars and foreign exchange to wage its war in the Near East--a war that most foreign voters do not support! To fund the U.S. payments deficit and federal budget deficit is to subsidize this war.

In the last few years, foreign governments have sought some alternative to buying U.S. Treasury bills. But when the Chinese sought to buy Union Oil assets, Congress vetoed the deal, accusing government ownership of leading down the road to serfdom. For China to buy into U.S. privatizations, it would have to believe that the U.S. Congress would let it raise road tolls and other infrastructure access fees by enough to compensate it for the dollar's decline. The more likely response would be new complaints against the Yellow Peril. So foreign governments are finding themselves stuck with dollars they cannot use to buy real U.S. assets, and also cannot buy [...] U.S. exports now that the country is de-industrializing. All they can do is lend money to the U.S. Government."

Later on, Hudson suggests one way to resolve the crisis facing the dollar:

"The only way to stop this hemorrhaging is to negotiate a debt writeoff, starting with the U.S. Treasury bonds held by foreign central banks. But what does the United States have to offer? To ask foreign governments to make an economic sacrifice of this magnitude cannot be negotiated without the U.S. Government negotiating a grand global bargain. Having little quid pro quo to offer, the most promising way to get foreign countries to voluntarily give up their financial claims on the U.S. economy must include the one thing America can offer--the military dimension.

There is only one way that I can see this being done. The United States would agree to dismantle all its overseas military bases (or at least, those outside of the Western Hemisphere). This would mean relinquishing its dream of imposing world hegemony by force of arms. This also would free it--and other countries--from the post-Cold-War arms race. It would help revive the 'real' economy's production and consumption by freeing revenue for spending on consumption and new direct investment. In the process it would free the United States from 'Pentagon capitalism,' that is, cost-plus production contracts that seemingly has led American industrial engineering to be incapable of cost-minimizing production methods, thereby losing what used to be its competitive technological advantage."

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