Debt, Dollar, Deflation (was Re: The Silent Opposition...)

jenyang x03002f at
Sun May 25 02:29:09 MDT 2003

Eli Stephens writes:\

> I'm no economist, for sure, but listening to a report on the weakening
> dollar the other day struck me that this is just one more case of the
> Bush administration robbing the poor to enrich the rich. Weaker dollar
> = good for exports = good for business profits, also = bad for imports =
> higher prices for consumers.
In his book "Super Imperialism: the origins and fundamentals of U.S. world
dominance" Michael Hudson shows how USA under Nixon, facing chronic
balance of payments and fiscal deficits due to costs of the Vietnam war
and the military presence in Europe and Japan, began to wield its new
status as debtor against its European and Japanese subordinates. After
freeing the US from the constraints imposed by the postwar condition of
gold convertibility, Nixon precipitated a number of devaluations of the
dollar against the curencies of the trade surplus countries (particularly
West Germany and Japan). One consequence of this was that the Europeans
and Japanese, through their central banks, were obliged to absorb the
excess dollars flowing out of the USA, or else to let the dollar fall
precipitously, disadvantaging their own export dependent economies.\

Prior to about 1968 foreign central banks were allowed to cash in the
dollars recieved as a result of running US deficits for gold, but rising
deficits and depleted gold stocks meant this convertibility could not be
maintained much beyond 1968. To make up for this loss of convertibility,
which reflected its deteriorating financial position, after about 1970 it
became the goal of USA policy to get the Europeans and Japanese to
recycle the excess dollars back into the USA by purchasing treasury bills
and government bonds. In this way, the USA found a way to finance its
federal deficit by running a trade deficits with its allies/clients in
Europe and Asia who thus financed its imperialist militarism and

It is useful to compare the USA by its creditors, with that of the third
world and former soviet regions over the last three decades. Here the
status of "debtor" is used by the USA (and the rest of the core) to impose
all sorts of conditions, structural adjustment, stabilisation etc which
amount to a virtual medieval seige of these regions, ravaging their
economies and societies to the ultimate benefit of Northern capital -- a
point made by Hudson in his book.\

To return to Eli Stephens' post, loosers from the latest US devaluations
will include Asia and Europe who will be forced to defend themselves by
absorbing more unpayable USA debt (in addition to watching the erosion of
the nominal value of their existing holdings) and third world producers
whose exports of raw materials and tropical products for northern markets
are denominated in depreciating USA dollars.\


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