The US Invaded Iraq Because It Wouldn't Have Survived Otherwise

While the US invasion of Iraq about a decade ago was based on public-facing lies about nonexistent weapons arsenals, the underlying reasons for the invasion were much more dire. Iraq had found the US’ Achilles Heel, and would bankrupt the US if not stopped.

When the United States President “Not-a-Crook” Nixon unilaterally declared that the United States would not pay back its loans on August 15, 1971, it sent shockwaves through the financial world. Normally, this would have been a declaration of bankruptcy. Instead, the world seemed to accept Nixon’s statement that the rest of the world could trade their unfulfilled financial claims on the US between them as they pleased, and maybe hope to recover some of it.

This set off the greatest experiment in global economics ever conducted. Some claim that our economy is based on centuries-old principles dating back to the 1600s; that’s factually wrong. The principles under which the global economy operates are merely 40 years old – half of a human lifetime – and there are increasing signs of ponzification, which, if bursting, would be a bubble-burst the likes of which has never been seen.

Before this so-called Nixon Shock, the US Dollar was based on gold. Every U.S. Dollar was an IOU issued by the United States, redeemable for one-thirty-fifth of an ounce of gold at any time.

Regrettably, the war devastated the US Economy. The Vietnam war, that is. As a result, the US did the predictable and stupid thing and just started printing more money to finance the war. Before the war, coverage for the gold-for-dollar debt had been reasonable, but some countries – France, in particular – saw where things were heading. Charles de Gaulle insisted on having the French USD reserves redeemed for gold, as had been promised. This exchange also took place, causing the back-end gold coverage for the dollar to drop from about 50% to about 20%, past the economic breaking point.

Seeing that the US couldn’t possibly pay back its issued IOUs as promised, Nixon decided to… not do that, and just cancelled their validity unilaterally, as has already been stated. This had a number of effects: first, it caused currencies to start floating against each other, rather than all being tied to the dollar which was in turn tied to gold. Second, it allowed the US to start printing dollars like there was no tomorrow, and encouraging other countries to buy as much as they could, to just stockpile US Dollars.

This also happened, and is known as currency reserves. The USD, being the world’s dominant currency, holds two immense advantages of being held in currency reserves: first, each dollar bought and stockpiled in a non-US country is one dollar that gave the US citizens (or government) that purchasing power against other nations for free. (If I print money for fun that you buy with your money, I can use your money to buy your shiny things.) The second is the status of being the world’s international trade currency, meaning that if I want to buy something from you in China, I need to first buy US Dollars with my money, and then exchange those US Dollars for your goods that I want.

These two mechanisms create an external demand for the US Dollar that props up the United States’ grotesque overconsumption and feeds its ridiculously oversized military. (How grotesque is the overconsumption, you ask? The US federal deficit is 50%. For every two dollars the US Government spends, one of them needs to be borrowed from somewhere.) This deficit is absorbed by countries that stockpile an increasing number of US Dollars in their currency reserves, predominantly in east Asia. This group of countries has been derogatorily called ODIC, Organization of Dollar-Importing Countries.

We observe here, that if another currency should begin to threaten the dominance of the USD in key international trade, the currency reserves would be rebalanced to reflect that fact. It would not merely cause less US overconsumption to be absorbed – rebalancing currency reserves would mean that countries started selling USD instead of just not buying, replacing a portion of their USD holdings with something else. Seeing how precarious the US financial situation is, this could well set off a selloff avalanche that would re-balance the USD down to a fraction of today’s value. In economic terms, this is called a “correction”. (I’ve written a previous piece on this that’s easy to read.) Such an avalanche would be the definite end of the United States as a superpower and largely mirror the collapse of the Soviet Union, which was similarly overextended. It would also bring a lot of suffering to the already-overexploited middle and lower economic classes in the US.

So, back to Iraq and the United States invasion. What could Iraq possibly have done from the other side of the planet that warranted a global campaign of lies to build political support for a military invasion that still kills people, one decade later? Why was it rational for the US Administration to spend one trillion or so dollars – more accurately described as “a shitload of money” – on going to war with a small country on the other side of the planet, one that had nothing at all to do with the September 11 attacks? On observing the facts on the table, it was perfectly rational to do so, all the deaths and suffering notwithstanding. It was likely a matter of life and death for the US as a nation:

Iraq had suddenly started selling its oil for Euros instead of for US Dollars.

The United States invaded three years later, which was about the necessary time to build public global opinion (based on false pretexts, also technically known as “lies”, about weapons stockpiles) for a full-scale ground invasion. It also had considerable help from the lack of nuance following the September 11 attacks in 2001 in pushing aggression against a country that was unrelated to those attacks.

Predictably, after the invasion was over, one of the very first actions taken by the interim US-led administration was to revert to selling oil in US Dollars instead, closing the circle and ending the imminent threat to the United States’ existence as a superpower.

Obviously, it could be asked why I’m bringing this up now. I’ll be following up with articles related to this topic – but it has to do with bitcoin, the yuan, Iran and its similar position, and the overall global financial crisis bubble. Hint: Iran is already selling oil in yuan and is moving ahead with a Euro-based stock exchange in Tehran.

Telegraph: “Iran Presses Ahead With Dollar Attack”

Prudent Investor: “Iranian Oil Bourse Could Kill The US Dollar”

And again, the US beats the drums of war. Very predictable.

Rick Falkvinge

Rick is the founder of the first Pirate Party and a low-altitude motorcycle pilot. He lives on Alexanderplatz in Berlin, Germany, roasts his own coffee, and as of right now (2019-2020) is taking a little break.


  1. name

    My theory on the 3rd world war. What will get this ball rolling and what domino will make what domino fall?

    If you look at all the tension in the middle east right now and factor in Russia being somewhat supportive of Syria and Syrias tensions with Turkey and then right next to this cluster fuck we got the always scary melting pot that is Israel and Palestine, not much of a push is needed to get that ball rolling. And should we look at history with what happened last time that ball got rolling? How stable is Egypt right now? how much kinship does the radical Islamic world feel with each other? Israel is considered a link to USA with all the hate boiling for radical Islam vs America. So how many countries will jump to defend against / attack Israel? And how many of them will make USA go all in defending Israel? And as you mentioned Iran… if Iran joins the fight with Israel, and considering the already tension between Iran and USA. That would be a WW3 now wouldent it?

    If we are looking at this as a third world war we have to start looking at all the alliances that are not engaged at the moment. What will NATO’s reaction be? does America equal most of Europe going in for example? And is China gonna sit peacefully in all of this being the nation in somewhat similar situation to USA in the 2nd world war being a major power but with no actual reason to engage.

    And India. They certainly have had there issues with the Islamic world.

    All in all there’s certainly allot of tension and and a single catalytic event similar to the shots in Sarajevo could in my humble opinion start something big, bad and ugly.


    1. Stan

      Please note that the Iranian Oil Bourse opened for trading on February 2008 – four years later and still no war – doesn’t that refute your theory? After all, it took the US about a week to launch an attack on Iraq after it threatened to switch to the Euro…

      1. Rick Falkvinge

        It took three years, actually, not one week. Iraq switched to trading in Euro in 2000, and the US invaded in 2003. The Tehran oil bourse _enables_ trading in euros, but doesn’t actually force anybody to do it as of yet.

      2. Scary Devil Monastery

        There was a better case to be made against Iraq. Saddam Hussein was universally loathed and despised by just about every last one of his neighbors. Mounting an attack against him was simply a case of drumming up public support at home for the military action.

        Iran? Iran actually has relatively good connections with most of it’s neighbors, most notably the rest of OPEC. There are a few very good reasons as to why US tanks aren’t already rolling over the Iranian border.

        1) An assault on Iran needs the goahead of not only the US citizenry but of Saudi Arabia, Kuwait and the United Arab Emirates. Iran can sink the dollar if left alone for too long, but if OPEC turns off the tap the US has the choice of annexing the entire middle east or suffer a meltdown to the point where you’d think they were re-enacting “Fallout 2” on a national scale.

        2) The assault on Iraq and it’s unavoidable quagmire in Afghanistan is tying up all the resources the US has and then some. Even if China would be willing to pay another 2 billion dollars a week in loans for yet another war with no end in sight, The US can not afford to even pay the interests of the existing loans today. In short the US military cupboard is bare and the economy is critically overextended as is.

        3) The US public is sick and tired of foreign wars while watching the internal economy go straight into the crapper. Whatever party chooses to embark on another campaign of the Iraq kind ensures the next two white house incumbents will be of the opposing party. The fiscal analysts can shout themselves hoarse over the situation but the political will to actually start a war without all bases covered is close to nil. That takes time to accomplish.

        Now, I’m pretty sure Iran is aware of all of this. Ahmadinejad knows he needs to ensure the US won’t attack. Unfortunately, The Iraq ploy – letting the inspectors comb the country looking for WMD’s – proved naíve. Even after the inspectors had come up with negative results, the war still became a fact.

        Thus every politician in Iran now knows the only way to keep the US outside of their borders is to make like North Korea and get WMD’s of their own.
        This of course is the other side of the equation. The US has, intentionally or not, proven that the only way to prevent a full-scale invasion is the possession of WMD’s.

        1. ExpL

          There is an interesting comparison between the things said in the bible (book of Revelations) about “Babylon The Great” and the whole history of “United States of America” and its acts.

          People, try to make a research, no matter if you’re atheist
          or a religious person, it’s interesting.
          This is 1 link that can help out, there is something said about
          the dollar and oil too:

          The Ten Kingdoms Hate The Whore: The whore represents Mystery Babylon, that controls merchandizing and the sale of goods within the global economy. The Ten Kingdoms are hateful of Mystery Babylon, and work together to destroy it. In the process they also bring about a global economic collapse. The Beast that ascends from the bottomless pit gains control of an eighth empire in the later days before the arrival of the Kingdom of God, which then becomes the Beast Empire. The Ten Kingdoms give their power and strength to this Beast Empire while at the same time working to destroy the Great Whore, Mystery Babylon. Why if the Ten Kingdoms hate the whore do they at the same time give their power and strength to the Beast Empire?

          The Ten Kingdoms now exist within eight major nations of the Middle East. Most of these Ten Kingdoms give their power and strength to the United States by virtue of oil, and the fact that oil is traded only in U.S. Dollars, making the U.S. Dollar the world’s reserve currency, which gives the United States it’s power as a global empire. At the same time, the war on terrorism, the military occupation of Iraq, the economic sanctions against Iran, and the U.S alliance with Israel, are causing great animosity amongst the people within the Ten Kingdoms, and causing great hatred of the United States, and the financial empire over which it rules = Wall Street Banks & the U.S. Corporate Ruling Structure. This is the cause of a rising insurgency within the Middle East Nations that seek to destroy the United States, and it’s global empire, and in so doing are also bringing about the demise of the global economic system over which it presides.

    2. Andy

      It’s hard to say how unstable some of those nations or their leadership are, although none can compare to the USA as dangerous rogue states go.
      Let’s not forget this example repeated itself last year after Muammar Gaddafi insisted that Libyan oil be bought in the Gold Dinar to strengthen the African economy. Since then the USA has been repeatedly trying to stoke major wars in Africa, to try and gain some new control over the region and put those rowdy slaves back in their place while competing with Chinese economic interests. Thank Wikileaks that we even know about the USA’s secret campaign of terrorism in Yemen.

      The USA has already begun a cyber war against Iran, hypocritically telling their citizens that they need to bring in more freedom-restricting legislation to ‘prevent cyber-crime’ whilst comitting some of the grandest international cyber crime against Iran.

    3. samaritan

      I doubt it. Even the US government isn’t that stupid to go against
      The war in Yugoslavia started years before a shot was fired, watch The Weight of Chains, full documentary on YouTube. Unfortunately, Russia was at the time under the great “democrat” Yeltsin so they sat and watched.
      Then the US intervened, and brought Al Qaeda “soldiers” to fight with the Muslim separatists, and Germany supplied the Croatian paramilitary with weapons.

  2. yzfr1

    Interesting read. I think you mean that the Iraq decision to change to euros came on a Monday in 2000, not 1990 🙂

    1. Rick Falkvinge

      Ooops! Thanks, fixing that right away…

      1. Ville Hautakangas

        The Iraqi currency switch only applied to the “oil for food program”, which was the only legal way for Iraq to sell oil to the West (due to trade sanctions).

        Saddam Hussein probably hoped to add pressure to get the embargoes lifted, so he could sell the oil in “normal” market, for US dollars, like his neighbors.

  3. Tobias

    Excellent article Rick. Really looking forward to see more related articles..
    Do you need a translator into German for this article? I’d be more than happy.

    One question:
    “I’ve been told – but cannot verify at this time – that the Iraqi decision to switch its oil denomination to Euros came on a Monday (in 1990)” In 1990? The euro didn’t exist back then.

    1. Rick Falkvinge

      You’re right, I meant the year 2000, and the article has been updated. I even verified that the underlying (linked) story was dated in 2000 when writing.

      For some reason, my mind seems to have decided that 1990 was one decade ago, not two decades. Very odd. This takes the strangest expressions (like the mistype here).

      I’ll contact you in mail about translations – thanks for the offer, most welcome!


      1. Caleb Lanik

        I’ve been doing that myself a lot. It also doesn’t help to realize that the 80’s was thirty years ago. It makes me feel older than I’d like to.

  4. taro85

    A very interesting article Mr. Falkvinge!

    I don’t quite see the connection between the dollar and Iraqs oil. Surely many states sell resources for Euros. What was so special about the Iraq and what was so special about the oil?



    1. Caleb Lanik

      Actually, no. At this point, the entire world oil economy is based in USD. Several nations have threatened to switch to the Euro in hte last decade or so, but as of yet, none have, usually because the US threatens military action.

      It is important the US economy is in very fragile. Between Nixon Shock and the repeal of Glass-Steagle during the Clinton years, a very few people have done immensely well for themselves at the cost of the bedrock of the American economy. The best metaphor is probably a Jenga tower. One can pull out pieces from the middle, and grow the tower higher in the short term, but eventually, a passing butterfly can knock the tower over.

      1. Marklar

        Correct – sometimes referred to as the petrodollar.

        + great analogy.

  5. Mustafa

    Great article, I am a fan of your writing and since Tobias brought it up, I will be more than very happy to participate in translating articles to arabic, am currently in Sweden if that matter by any chance..

    1. Tobias

      It’s not just the Iraqi oil. It’s ALL oil. All oil reserves of the world are traded in dollars – and dollars only. As Rick explained so eloquently that’s the major reason that the US is able to have such a huge trade deficit and still no “debt problem” like some European states allegedly have.
      You are right there are other big markets. I remember in Ricks article about solving the Euro crisis there was a discussion about how big the global weopons market really is compared to for example the food market. But nevertheless oil is a huge market and if you the rest of the world is forced to trade oil in your currency you will keep the demand for your currency artificially high.

      1. Tobias

        sorry – supposed to be the answer to taro85;)

        1. Mustafa

          nvm, I guess we’ll both read it anyway 😛

    2. Rick Falkvinge

      Hi Mustafa,

      thanks for the kind words and the offer to translate! I don’t have an Arabic version of the site at the moment (I’ve been dreading all the right-to-left problems that come with it), but if you translate and publish somewhere else, I’d happily link in your translation from the article.

      (It would look like above with the Catalan translation.)

      If you’re interested in seeing the entire site in Arabic with your choice of articles translated, let me know – that’s a bit more work, but probably doable. It’s already been translated to several other non-Latin languages, although all of them have been left-to-right so far.


  6. horace

    out of curiosity, is there anything that has happened in the world, involving the USA, that has been done other than for the benefit of the USA whilst being detrimental to the rest of the world in one way or another? i cant think of anything. as far as i am aware, the USA always, without fail, fucks up anything and everything that it touches. even the financial crisis of 4 years ago, that is still going on now, was caused in the USA, affected every country in the world, (some to a greater degree than others) but it’s the ordinary citizens that are suffering, no one else!

    1. Googla

      USA hasn’t done too bad with Japan Germany and a lot of other countries including some really suffering countries in the third world. So don’t believe the biased anti USA news. Even though USA has done a lot of bad things USA is not the devil. Fact is that USA has done a lot more good than bad around the world.

  7. steelneck

    If it was only about Irak alone, it would not be a problem for the US. At the time Irak produced around 5% of the world oil exports, but it was about to spread and Washington had to send strongest signals possible.

    Russia, China, Iran, Venezuela and some more had also started to send similar signals. BTW, Norway do sell oil in euros, but even the slightest mucking around with them, with such a good, friendly and peaceful reputation (has any country a better reputation today?), and also a NATO member neighbour with Russia, would send irrevocable shockwaves around the world that would hurt the US a lot more than norwegian oil sold in euros.

  8. RayJoha

    So. I seem to understand some of this. Just enough to be scared. Is this common knowledge? Why isn`t there more MSM coverage of this? Is this more than a theory of yours? As you can see, your article raises more questions than answers. Frustrating actually! Can`t wait for the next chapter, as long as it doesn`t entail an imminent war with Iran.

    1. steelneck

      MSM sell news, not decade old common knowledge (common among people with an understanding of geopolitics). But even if this was fresh news, they would probably air it. MSM is way to “politically correct” and if we talk about the tabloids, they do not cover things like this, at all. They sell better reporting about some royalty spilling coffee on their shirt at some official or party. Now think about that, what does that fact say about ordinary people who buy that kind of news and why has society become that way? My old great-grandma told me that this was the case before both WW, media reporting just comfortable things like sports, accidents and such.

      If you want learn more, search for writings by the author F.W Engdahl, he is a german who has written about geopolitics since the seventies. On the net most of is in english.

    2. Scary Devil Monastery

      It is fairly common knowledge – or rather, I should say, to underscore Steelneck’s comments, it’s knowledge which isn’t hidden.

      Indeed, if you want to boil it down to bare basics, the Iraq war was nothing more than an extension of common realpolitik as it’s been practised by every industrial nation since the 18th century. Unfortunately if you read up on national politics and history you will find that there has been no significant change in how nations act against one another since the days of the British Empire.

  9. SH9999

    And this is why the EU and the Euro must survive the crisis.

    1. Scary Devil Monastery

      There’s just no way. Sorry.

      Currently the Euro as handled by every member state makes even the US dollar seem a pillar of respectability. Indeed, we europeans have managed to put the euro in the same place as the current dollar without even trying after less than two decades of having it in circulation.

      Added to that, the EU is showing itself to be even more rapacious than the US, running roughshod over it’s citizenry in a way which the US took 50 presidents to accomplish. The EU as we look at it now can not survive another twenty years.

  10. Danielvr

    Related to this, there are also stories that Iraq was printing massive amounts of fake US dollar bills.
    However, I don’t believe that this undermining of the US dollar is the only angle from which the Iraq war should be explained. If I recall correctly, Iraq was the largest non-OPEC oil producer and it made a habit of undercutting OPEC’s prices. Additionally, several major oil pipelines to Europe and Israel cross its territory.

    1. Scary Devil Monastery

      I’m actually thinking that Iraq’s non-OPEC status is the one thing which made a US invasion at all feasible in such a short time.

      OPEC is, according to the member states themselves, an organization meant to ensure that every oil producing country in the middle east abides to a gentleman’s agreement of not undercutting one another.

      When said member states aren’t busy backstabbing one another, however, OPEC fulfills it’s real purpose. Which is to guarantee that any act of aggression against one of the members by a western nation means they all turn off the tap. That action in itself would be more damaging for the US than the loss of Washington, New york, Chicago and Los Angeles due to a WMD attack.

      “I against my brother, my brother and I against our cousin. My brother, my cousin and I against the outsider” .

  11. TTime

    Im looking forward to the follow up on this article

    Will Rick mention Libya?

    RT: Gaddafi gold-for-oil, dollar-doom plans behind Libya ‘mission’?

    Will Rick talk about the most aggressive advocate for a military attack on Iran – Israel?

    Iran Is Already Under Attack

    Perhaps mention AIPAC:s influence on US politics?

    Michele Bachmann falsely claims Iran has threthened to use something they claim not to have.

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  13. Stan

    Sorry, this sounds pretty stupid to me. What you are saying is that any country that decides to switch to another currency in international trade can automatically trigger a war. How does that make sense? And what happens if several countries do that at the same time? Will the US attack everybody? The US military is severely overextended as is, and it capabilities are very limited.
    And why switch to the Euro, which is backed by an enormous bureaucracy, German industriousness and about ten countries that are knee-deep in debt?
    It would make more sense to switch to the Yuan.

    1. Scary Devil Monastery

      The stupidity is in any country big and significant enough which ties it’s currency up in a scheme delivering short-term results but which allows any reallocation in trade to another currency to sink it’s economy.

      You may depressingly enough find that “War” is the default response by countries so affected. I would recommend that you read up on the english Opium-Silver-Tea trade during the british empire, and how Great Britain decided to go to war with China when that trade was threatened. Foreign policy and national politics have not changed significantly since.

      You are, however, correct in your estimate regarding the US overextension. The Iraq war proved costly in a way in which they had not anticipated. And attacking Iran will also be a direct attack on OPEC which means it can easily involve the entire middle east.

      Saddam – and for that matter, Iran – were pretty cunning in starting a trade in euro. To the european nations, you see, such a switch is hugely beneficial. Saddam was probably hoping this fact would deter EU countries from backing the US in the second invasion.

      In this he was correct. Count how many european nations joined the second “coalition of the willing”. The only notable was the UK – which has no interest in the euro’s success.

  14. Antony Goddard (@d4maths)

    Rick writes a thought provoking item. I am not sure that I agree with this 100%, but Rick is on the right track. When we get astronomical numbers such as trillions of dollars mere humans living on a few dollars a day must great conceptual leaps to understand world economics.
    Personally I think we need to link economics and information theory into a single science. It is necessary to think of probability distributions rather than mere numbers. We know from various financial crashes that people are always getting the numbers wrong. A ‘futures market’ is an attempt to solve these problems by herd behaviour, just as a slime mould may be capable of solving transportation problems, but in the end we need a better analytic approach to economics.
    Problems with the US Budget deficit remain. A certain country is about to go over to cowrey shells, or carpets, or turquois nick-knacks as its currency, because of oil sanctions. Is it going to be necessary for the US to invade, or bomb that country for its own economic survival ? Even the dollar has a value Now or _Now_ or even _later_.
    A recent survey of parliamentarians in UK showed that about 40% failed a simple maths problem dealing with probabilities.

  15. Peter Duck

    Makes me think that Facebook has mimiced it’s behavior from that. First use the head start to make the rest of the World dependent. Slowly increase surveillance of individual behaviour while selling it as increased freedom while it becomes the de facto standard. Push foreign powers in the old media to accept that status as a de facto standard (like forcing the Swedish evening paper Aftonbladet users to be logged in for surveillance in America before even being allowed to comment on news back home in Sweden). Act as an Information War US military branch to overthrown Arabian countries run by old men/families that have been in power so long that they might come up with ideas of being able to side with someone else when the monetary crash plays out.

  16. trenchcoat artbag

    “the rest of the world could trade their debt to the US between them”

    Minor oversight in phrasing there. It’s not debt *to* the US, but *from* the US or just “US debt” or whatever.

    1. Rick Falkvinge

      Thanks – good catch. Rephrased to “unfullfilled claims on the US”.


  17. Iraqi

    i think Iraq war was easier for american to start cause all neighbor countries hated saddam, so was kind of personal revenge, for president Bush (father) cause he did not make second term cause of Saddam desert storm war, & pushed by neighbor countries .
    in top of that iraqis hated Saddam & they suffered allot from his regime .
    the embargo & economic sanctions made Iraq poor nation laid on ocean of oil & people have no interest of life anymore except praying for god & become religious people cause the can’t do anything , all the business (import & export ) was controlled by Saddam regime.

    1. Pling

      Yes, Iraq was an easy target, they have internal conflicts and other problems, while Iran is a different story, I’m not surprised they didn’t dare to invade it, they tried to create a false flag when they sent their ships near Iran, they wanted to be attacked and that would have been the perfect excuse to start an invasion, “we were innocent, they attacked to us first”. As everybody knows, Iran didn’t response to their provocations, I should add made embargos is an indirect declaration of war, when EU obeyed to USA, they were helping to that cause, for example, just like when USA made embargos against Japan in the WWII and pushed Japan in other ways.

      Now, even if his son (G. W. Bush) wanted a revenge, that would be the last motivation to go to war, it’s clear that USA always goes to war for reasons of economy, it’s not a surprise they’re still sending troops under the government of Obama and printing more and more dollars.

      BTW, nobody thinks is weird and ironic that a country like USA, which is self-centered, always wants to save the rest of the world? But they obviously don’t interfere when they have nothing to gain in a conflict or simply, they appear in a convenient moment, e.g. Yugoslavian wars.

  18. GP

    I agree that oil played a role in the USA starting the war with Iraq.

    Yet, I have a tough time agreeing with your main reasoning.
    For a couple of reasons:

    Since the Euro was introduced in 2001, many countries altered their reserve policies already. Even China, the biggest purchaser of American IOUs, did.

    The Economist just published an article about how a strong currency is not a main political goal anymore. Just the opposite, a weaker currency is seen as a competitive edge in the global market. Thus, f.e. the Swiss weakened their currency and put a cap on its value, to support its exports.

    Other OPEC countries have been and are are selling oil in other currencies, like Venezuela and Libya.

    Last but not least, the USA are importing the vast majority of its oil from Canada. Something like 10% of US oil imports are coming from other nations.

    IMHO, oil played a role as the USA was securing cheap access to Iraq fields for its oil industry. It was a business decision, a subsidy for Exxon et al.

    1. Anon

      From a productive standpoint, a weak currency is an advantage, that is why China is artificially keeping its currency low. But politically, the American public expects to maintain its consumption level. Even if a devaluation could eliminate America’s unemployment, if it resulted in Americans being unable to consume tons of cheap chinese manufacture, or forced them to save in oil, packaging or any other consume goods the end result politically would be devastating. The party in charge would not be able to win an election in decades.
      OTOH, the examples of Venezuela and Libya if anything reinforce the article: Gaddafi was killed by US backed rebels, and the US did back the Venezuela coup. A military intervention is only prevented by the possible outrage of Latin America, specifically the counterweight of Brazil in the zone.
      Finally, the article does not point to the amount of oil used by the US, but rather to the use of dollars in the exchange of oil everywhere. The fact that the US imports Canadian oil is thus irrelevant.

  19. Anon

    Spot on.

  20. Anonymous

    After seeing the Iranian rial crisis, the Farsi translation of the third party Bitcoin client MultiBit was given top priority and as a result the first Persian release Persians will occur in a few days.

  21. mijj

    the $ is currently(ish) worth 1.24 mm diameter ball of gold (room temp).

  22. yrral86

    For more details and actual references:

  23. Ano Nymous

    It’s good that someone dares to write this stuff on an at least somewhat well known place. I had no idea about what you just wrote before I read it.

    Just watch out for CIA snipers… Actually, I don’t think you have to worry. To make you “disappear” would only make things worse, as not even MSM in Sweden could possibly shut up about something like that, even if they are very skilled in the art of shutting up about important things…

  24. Datavetaren

    Why Bitcoin rules.

    I’ve been interesting in global economy since the global crunch back in 2008. It is shocking to see how a big country with such a huge trade balance deficit can continue operate as if nothing has happened:

    The very least is that it is utterly unfair that Greece gets bitch-slapped whereas U.S. can go on and mowing lawn. U.S. also blames China of manipulate their currency in order to make exported products cheaper, but of course conveniently forgets how much they manipulate their own currency.

    I claim that any fiscal policy, no matter what country, is about manipulating their own currency. This has to stop. The fiscal policy of all countries in the world should be banned. There should be only one currency that cannot be manipulated, for which politicians and so called “independent” central banks, should not be able to manipulate. Therefore, Bitcoin is the only sane currency. The game of competition among all countries will begin and the rules are fixed. Well, most likely countries with a lot of power will come up with new dirty tricks, but at least the trading currency will be locked.

  25. reader

    i have read this theory and i think it is common conspiracy theory – it makes sense but it is probably not true. USA financial system is very complicated, since it is the most advanced financial market in the world (you might be Rick interested in shadow banking, it has actually created bubbles –, and risk about inflation brought from outside (because of potential depreciation, if USD leaves its reserve currency status) is because of the size of economy and level of self-sufficency low.

    1. Scary Devil Monastery

      It’s different from a classical conspiracy theory because there is actually a well documented smoking gun, and a video tape of the proceedings.

      Indeed, the entire situation has been so well documented by financial analysts that by now anyone trying to disprove Rick’s summary will have a tough time doing so. The US economy is indeed complicated, and the shadow banking you mention does pose a double-edged sword of increased growth/buffer against foreign influence while at the same time being a potent force multiplier of the disaster which occurs when the assets underlying that second-tier financial system come in doubt.

      If the US dollar takes a hit due to foreign nations shifting their focus on currency reserves to another currency than the USD, then the shadow banking system will amplify that hit. Not only will the dollar value crash, it means an instant and severe undercut of the value underlying the inverted pyramid built by shadow banking.

      So what then happens is that the US gets hit by both barrels – a crash like that of 2009 concomitantly with a collapse of the USD.

      The first result will be obvious and unavoidable – no bailout packages possible and the collapse of, amongst other things, the 401(k)’s – the private pension funds most in use – of the average american. A total stop on loans, followed directly by a critical liquidity failure of every major US company – since all US companies keep as little cash on hand as possible and actually rely on short-term loans for everything from materials purchase to wages.

      You may study exactly why the US government had to become a 51% owner of GM a mere few weeks after the banks stopped lending money or see GM go bankrupt within that period.

      As many have commented on this thread already, the US economy is extremely complex – and that makes it more vulnerable, not less. The more complex a system is, the less stable it becomes.

      1. reader

        thank you for interesting post

  26. Anonymous

    A major factual fuckup:
    -50% Balance/Revenue = -33% Balance/Expenditure, so for every 3 dollars federal government spends there’s 1 borrowed.

  27. Anon.

    When the relative value of money is not based upon the physical gold reserves a goverment has in its possesion; then, the relative value of money is no longer based upon the physical.

    If money is no longer a finite currency of exchange based upon the physical, it becomes an infinite metaphysical exchange of anti-physical-debt which is traded in place of the physical.

    A goverment that trades the physical something for the meta-physical nothing is based upon credit, credit is debt!

    Goverment supported upon debt is not goverment, for it does not stand upon its own physical resources…

    A goverment can never pay off physical debt with currency based upon the imaginary…

    A goverment which does not govern the physical becomes a proxy for one that does…

    A proxy is one governed by another, those whom accept another in place of their own become physical slaves.

    The physical slave is governed by a meta-physical proxy of an equally physical master…

    Enslavement is balances upon nothing but ones own meta-physical proxy…

    Meta-physical does not exist in the physical world of the real, therfore it is false; if it is false, why should you let the false thought constructs of one be used to enslave another?

    The truth will set you free…

    1. Datavetaren

      The story of gold reserves is rather interesting as it defines the history of the modern banking industry. Initially every penny was backed with some amount of gold, and the London Goldsmiths were the most trustworthy in storing the gold (which represented the true value). The London goldsmiths issued banknotes as a receipt and instrument of proof for owning a certain amount of all the gold they were storing (these banknotes later became ordinary money instruments). So far so good. However, the goldsmiths issued far more banknotes than they had gold. This would have normally have been an act of fraud. Now days, everybody accepts this Ponzi scheme as part of our everyday life. All the banks should die! Hopefully, Bitcoin will rescue us from this global financial meltdown Ponzi scheme.

      1. 6.941

        I’d much rather see us move to “currencies” backed in terms of particular combinations of securities, since they are both more ubiquitous and closer to objectively valuable than, say, precious metals. Let institutions such as central banks (or possibly indices, though that may lead to recursion problems) manage the holdings that constitute the reserve. For the consumer, not much has changed functionally, just that what costed a thousand USD before now costs, say, a hundred S&P500.

      2. sfantu

        We need legal tender law to burn . And equal responsibility for the creditor as the credited.
        You’ve credited accept the fact that you might not get payed back.
        That’s it.

    2. Steve B

      Once we have established the institution of state, it has to borrow money. Why? It has employees that need to be paid. But if taxes are calculated and paid annually, how can the state’s employees survive? Should they borrow money themselves, saying “the state will pay us in a year”?

      The state borrows money and promises to pay the debt when it collects the taxes. There has never been any other way. The current form of currency is a mere stage in the process of development of this relation, where states strive to find ways to borrow as much as possible as smoothly as possible – from its businessmen, private bankers, its own central bank, or even foreign subjects.

      A responsible state borrows only as much as it can get from the taxes. An irresponsible one finds ways to borrow too much, until people find out. The ways of how to cheat on this differ throughout history, but as long as we have states, new ways to cheat its debtors will keep turning out. Pegging currency will NOT help. States with metal currency standards have gone bust so many times it is pointless to even begin counting them. The reasons were almost exclusively fiscal irresponsibility and political incompetence, not the form of currency. Sometimes, pegging the currency has even contributed to the meltdown (see Thailand or Argentina for modern examples).

  28. unblocktheplanet

    Okay, I’m not a true believer of any stripe, a conspiracy theorist. But I certainly have been following the end of the Mayan calendar, the Winter Solstice, December 21 at 11:11 UTC (set your alarms accordingly).

    And I have been watching the TV series Continuum. (Yes, download it!) From the ground here, it sure looks like the corporados are calling the shots and taking over the show everywhere. (I thought it was the military…)

    The US election matters not a whit, the dice are cast. All Yanks can do for democracy is vote for somebody somewhat less bad, even if he’s a WAR CRIMINAL.

    Regardless of the Mayans, folks, it is the end of days. I keep trying to wake people up but, honestly, it just ain’t happening.

    1. Ren

      Nah, the world is not going to end, that calendar never predicted an apocalypses, it’s the end of a cycle, if something like “US empire collapsed” would happen, that will clearly create a new world and it will the beginning of a new era.

      BTW, what will be December 21 for you,
      it won’t be the same time where I am, then sorry, we can get synchronized.

  29. […] Excerpted from Rick Falkvinge: […]

  30. Cosmodrome

    Wow. This is the first off-the-record theory about the Iraq war and its backgrounds that sounds perfectly reasonable. This would even -at least partially- excuse – or better say “explain” why western political leaders followed, even though their lies abut the true reasons were obvious.
    An ugly story with no clear line between good and evil makes a lot more sense to me than just a corrupt elite going berserk for no real reason.

  31. Jeremiah

    You have a remarkably poor understanding of both history and economics.

  32. Steve B

    I do believe you are really missing the point with the seventies’ crises. The Vietnam war is only a small part of the problem, the much more important one being the oil shocks and the following supply-side crises, which has been at the time poorly understood in macroeconomics and spawned a decade of headless wallowing in non-solutions. Moreover, “Gold standard”, or any kind of currency pegging, is extremely inefficient in handling any kind of crises, or indeed whenever a state’s economy is stretched, as has been proven time and again and as is happening (and will keep on happening) even now in PIIGS.

    You should also note that NEVER since the dawn of the industrial era was the golden standard real. It was always an illusion, maintained by agreements between banks who moved gold between each other to keep it up. It was even more of an illusion in the Bretton Wood era. Yes, much higher proportion of the issued currency’s value was backed by gold, but that was simply because maintaining the illusion of “safe” and “stable” currency required it at the time. It is not needed now. Fiscal irresponsibility has never been limited to systems without currency pegging. All it takes is one generation of dumb decision-making. Sometimes a round of elections is enough.

    But I do agree that the US debt is ridiculously high, and there is absolutely no end in sight.

    Regarding the second Gulf war, I would recommend looking into the ideological background of Donald Rumsfeld and corporate and political connections of Dick Cheney, Condi and the rest of the inner circle. New political and military doctrine needed to be tested and friendly private contractors had to be fed. Knowing the people behind the decisions can throw much more light on this conflict than any big conspiracy theory. You make it sound like a big economic question was in play, yet you forget that this gang never, ever listened to a single competent economist.

    Moreover, there is not enough economic (let alone military) power behind the Euro for it to be any real threat to the dollar, and there never was. There is no unified economy (which is painfully obvious today), and no unified decision-making. It is effective as a secondary world reserve currency of a somewhat higher order than the Swiss Frank, but no more. The whole “trade oil for Euros” move was merely a gesture of Hussein, one with which he had hoped to get more out of the Oil-for-food program, as well as gain some new friends.

    It will be the Chinese renminbi, which will eventually replace the dollar – unless the Chinese will be content with simply buying up the US and continuing to print dollars for the sake of convenience.

    Boy, was I long-winded. Apologies, and cheers for writing an article on a topic which should be discussed. Several topics, in fact.

  33. Francis

    just a question. if the real issue was economic, Iraq’s selling oil for euros and threatening to destabilize the dollar, wouldn’t the US have first tried to get Iraq to change its policy? Wouldn;t Iraq have compromised on that ratber than go to the mat and risk its destruction? I think there were other forces at work although I don;t know what they were

  34. […] currency. Rick Falkvinge has a lot to say about the impact of the dollar’s dominance in his blog, but the basic idea is that commodities such as oil are traded in dollars and any attempt to change […]

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  36. roger erickson

    While you are spot on (no pun intended) about the implications of the Saudi/US deal on petro-dollar contracting (creates a huge demand for $US) … that is completely irrelevant to whether the currency chosen is fiat or commodity based.

    After all, the Brits maintained the same practices for centuries, while going on, off, back on & back off various forms of commidity/fiat currencies.

    Rick, it would help if you reviewed the history of the gold-std/fiat currency evolution, including the 1920s-1930s, the Breton Woods conf of 1944, & the end of the last [inter-gov only] convertibility practice in 1973 (announced 1971, effective 1973). Until then …

    FAIL! Pirate Party founder seriously misunderstands currency operations.
    He’s negligent on gold std history too.

  37. Anonymous

    […] Well because like Iraq, Iran has decided to sell oil for currencys other than the US dollar. The US Invaded Iraq Because It Wouldn't Have Survived Otherwise – Falkvinge on Infopolicy And that can bring down the whole empire. Otherwise the trillions being put aside for this new […]

  38. […] et, plus important encore, alimente son armée qui applique à son tour ce mécanisme (voir en Irak, Libye, Iran, etc.). C’est un cycle de domination économique imposé par la […]

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