Blood money?

<a href=icteesside.icnetwork.co.uk>This has already happened . . . in Iraq in 2000 Mar 23 2003 By Sunday Sun

The US has gone to war to stop it going bust, according to a startling theory about the conflict in Iraq.

Economist William Clark sees the true battle for world domination as being between the American dollar and the euro.

At present, the dollar is the currency used for the buying and selling of the vast oil reserves in the world.

This ensures massive demand for the currency.

A long-standing agreement between most oil-producing nations ensures that much of this cash also has to be spent on US products or invested in its stock market.

The mind-boggling amount of money this involves maintains the US's position as the richest nation in the world.

If the dollar's status as the oil currency was removed, the American economy would go into a tailspin last seen in 1930s Germany where wheelbarrows full of cash were needed to buy a loaf of bread.

For the fuse to be lit, it needed one of the major oil-producing nations to switch to trading in the euro.

This has already happened . . . in Iraq in 2000.

Now more nations are seriously considering their position as a result.

The two other nations George W Bush named, along with Iraq, as belonging to an axis of evil are at the centre of the potential US crisis.

Iran, also a major oil producer, is one of the countries considering whether to switch to the euro.

And North Korea, while not an oil producer, previously used the dollar to trade in as its own currency is worthless on the world market.

It recently switched to euros.

Meanwhile Venezuela, the world's fourth-largest oil producer and the victim of a recent attempted coup backed by the American CIA, is also interested in changing.

Mr Clark said: "The Europeans created the euro to compete with the dollar as an alternative international reserve currency.

"Obviously the EU would like oil priced in euros as well.

"The euro is a significant new factor and appears to be a primary threat to US economic hegemony."

He quoted a former US government official as claiming: "The real reason the Bush administration wants a puppet government in Iraq is so it will revert back to the dollar standard and stay that way.

"Saddam sealed his fate when he decided to switch to the euro in late 2000, and later converted his $10 billion reserve fund at the UN to euros.

"At that point, another manufactured Gulf War became inevitable under Bush II."

The current agreement was drawn up in 1971 between America and OPEC, which represents most oil-producing nations.

It means that every country wanting to buy oil needs to keep substantial reserves of US dollars in their national banks.

This US stranglehold over the world economy is known as "dollar hegemony".

It maintains a stable currency rate in America and provides banks with the confidence to allow America to run up £4 trillion in debts.

However, if the euro took over as the world's oil and reserve currency, this confidence could soon disappear.

The US economy would shrink by up to 40 per cent, or even collapse altogether . . . and the EU would become the globe's top economic power.

Worryingly for the US, Russia and China - both oil producers outside of OPEC and so not bound by the agreement - have already converted some of their cash reserves to euros.

Therefore, according to Mr Clark, Iraq is the whipping boy to show the rest of the world, especially OPEC countries, what will happen if they too back the euro and not the dollar.

In his essay, The Real Reasons for the Upcoming War With Iraq, Mr Clark said: "If OPEC switches to the euro, the oil-consuming nations would have to flush dollars out of their reserve funds and replace these with euros.

"The dollar would crash anywhere from 20pc to 40pc in value and the consequences would be massive inflation.

"You'd have foreign funds streaming out of US stock markets and dollar-denominated assets and the current account deficit would become unserviceable.

"The ultimate result would be the US and EU switching roles in the global economy."

This theory could also explain France, China, Russia and Germany's determination to avoid war. After all, the EU has made no secret that it wants the euro to become the world's reserve currency.

In May 2004 the EU expands from 15 to 25 countries giving it a total population of 450m, compared with the US population of around 250m.

So the EU will have a greater capacity to consume oil.

And its annual wealth - measured as its Gross Domestic Product - will be £6.13 trillion a year, coming close to the US's £6.45 trillion . . . with dollar hegemony.

If the swap from dollar to euro occurred, it would allow China to emerge as a world power in its own right and Russia's strength would also be enhanced.

But what of Britain? What does it get out of supporting the US dollar hegemony?

Although a member of the EU, Britain hasn't yet joined the euro club.

It would be disastrous for Britain if the euro became the world's reserve currency of choice before the UK decides to enter the currency.

The euro would steadily gain value and the UK would be left facing entry at unfavourable exchange rates.

Since losing its empire, Britain has cast itself as honest broker between Europe and the US.

If the US lost its super-power status Britain's "special relationship" would count for less and less in world affairs . . . and its influence could only decline further.