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Obama Torn Between Two Evils of Exorbitant Privilege And Eminent Domain

Politics / US Politics Aug 02, 2011 - 06:53 AM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleEXORBITANT PRIVILEGE
Using this codeword term, yesteryear, Imperial Powers bandied this subtle threat around and between themselves when things got tense. It basically threatens retaliation against an Imperial Power using borrowed and printed, invented or stolen money to grab control of local, regional or even global economic activity by inundating its rivals' zones of influence with its worthless money.

 In a July 31st press conference that was kept off the headlines in financial tabloids like Murdoch's WSJ,  the IMF's new boss Christine Lagarde delivered a targeted elite warning to Mr Barack Obama. Since she is advised by Chinese nominees from the IMF's board of governors, the warning could be real. Time will tell.

The codewords she used: Exorbitant Privilege.

Lagarde, in her July 31 IMF press conference on the US debt crisis cited another French politician, from way back in 1965: president Charles de Gaulle. He accused the USA of using Exorbitant Privilage to undermine all other world moneys by printing dollars it could not honour, that is  keep on exchanging, on demand from any holder of dollars, 1 ounce of metallic gold for 35 US dollars.

The USA, the real winner of World War 2, with all of its Europeans rivals on the floor, Japan occupied and Soviet Russia strong in weapons but not in money, had everything to itself. When the USA set up the 1944 Bretton Woods conference and founded the IMF and World Bank it could make the proud boast that the US dollar would always be exchanged for metallic gold, because it was "as good as gold". From 1948 it set $35 as the exact equivalent of 1 ounce of gold "for all time".

By 1965, 17 years later, this was difficult. The cracks had started to show in the US attempt to extend its Exorbitant Privilege almost worldwide..

De Gaulle accused the USA of being unable to honour its gold pledge. He accused the USA of forcing all other nations into using the US dollar for their international trade, and even for their own internal domestic economic activity through US and its allied British control of USD and GBP based banking systems. De Gaulle said the USA was inundating the world with worthless dollars to prop up its own inefficient and wasteful economy. That was in 1965. From then on, France demanded metallic gold from the USA, in return for dollars, on a regular basis.

As we know, you need around $ 1630 to buy an ounce of gold today, and $ 2000 is possible in a dangerously near future. Exorbitant Privilege, Obama-style, is one basic element of the US debt crisis, the USA's internal domestic economy crisis, and its negative effect on the global economy.

Olde worlde Exorbitant Privilege concerned 17th, 18th and 19th century European, Russian, Turkish, Persian, Japanese and other Imperial players, with the USA coming late but strong to the party. This may be comforting for Obama in leisure moments reflecting on Old Glory, but he should also check what happened in the past. On a regular basis, local and wider international wars were waged to defend, or extend the Exorbitant Privilege of imperial players. In all cases, often rapidly, the Imperial power attempting to extend its Exorbitant Privilege was the loser.

Obama can also check up on the related doctrine: Eminent Domain. This other olde tyme keyword  also hides a not-so-subtle elite threat of war. In all previous history, the Imperial power that wants Exorbitant Privilege will always use physical military force, at one time or some stage, to ensure it has physical control of countries and regions where it intends to chase the money of rivals and make its money the only one that circulates.

Turf wars for Eminent Domain were in fact the background for French president Charles de Gaulle's accusation in 1965. He burned with hostility towards the USA because, first, the USA had done nothing to prevent the Vietnamese beating the French Army and chasing France out of Vietnam - in 1954. As we know, the USA immediately took on this losers colonial war and made it their own US war "as homely as apple pie". Exactly like the French colonialists defending France's eminent domain, the USA was beaten and chased out by Vietnamese Communist freedom fighters, in 1975.

Secondly, de Gaulle accused the USA of doing nothing to prevent France from being beaten and chased out of Algeria, in 1963. The French power elite, in its paranoid fantasy, imagined the USA had been giving weapons to Algeria's Islamic and Marxist freedom fighters, and planned to take over Algeria, with its growing oil production, to extend the USA's eminent domain and exorbitant privilege. The French colonial war killed at least 500 000 Algerians, but this was chickenfeed compared with either French or US imperial killing in Vietnam.. France lost its colonial Eminent Domain twice over, in only 9 years.

Mr Obama basically has no eminent domain at all: Afghanistan is a disaster with a sure and certain Zero Peace Dividend, and everybody knows it. To be sure, maybe for old times sake Obama accepts to run a losing colonial war in Afghanistan, with now reconciled French allies at the killing party. The downsized colonial-type "adventure" in Libya, also with French and British allies, is another farce.

The only rationale for these adventures is Eminent Domain, and just like Obama's Exorbitant Privilege, it is wearing mighty thin.

In case he forgot, we can remind him what happened. President George W. Bush grew the US debt by seven trillion dollars in eight years, powerfully aided by his insane colonial wars in Afghanistan and Iraq. President Obama has added four trillion dollars of debt in a little more than two years in office. US jobless numbers continue to rise, remorselessly.

Obama has failed.

Simply because of the atavistic imperial urge for exorbitant privilege, Obama has done nothing to restrict and limit the US dollar's exposure to pure trading sentiment-driven plunges in its value. We can argue that he has dramatically intensified this, and is holding a pistol to the head of all persons needing money for the daily lives, everywhere. Unless the USA can continue to borrow, and pay its debts in ever-depreciating dollars, and only in dollars, the global economy will be imploded.

The USA of today has no choice at all but to borrow from the world's few net creditor countries. These include China, India, Russia, Brazil, Argentina, Germany, Holland, the Arab petrostates and handful of other states. For the moment - but their patience is wearing might thin, Mr Obama - they are not interested in your failed urge for Eminent Domain. The real and urgent problem, for them and everybody else in the world, is your failed  Exorbitant Privilege.

Mr Obama cannot "go up one level" and use Imperial war to solve the problem, like so many others tried in similar circumstances in the past - and failed. China, India and Russia could each take out the USA overnight, and anytime using intercontinental ballistic missiles targeting dozens of US civil nuclear power reactors in a single massive strike. Yes Mr Obama, we do have Mutually Assured Destruction - so go and do something about your economy and finances, fast.

Obama cannot talk down to these creditors. He is the debtor and they are the creditors. They have the cash and Happy Changey has nothing at all but his innocent smile.

This explains the "coded message" from the Chinese advisors to Christine Lagarde, July 31.

Changes needed will start through international cooperation of the USA with its creditor nation partners to start reducing the massive danger of exorbitant privilege for the US dollar. Many solutions in fact exist, but the intial and basic barrier is US arrogance. Obama likes to play humble but businesslike, so here is his big chance - but if he cannot rise to the occasion he must resign.

Wake up, Mr Obama.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2011 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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