01/06/16 – Seamusin Reilly – The Scott Horton Show

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All right, y'all, welcome back.
I'm Scott Horton.
It's my show, The Scott Horton Show.
Next up, it's Shay Machine Riley.
He's got a blog at Liberty.me called Convergent Interests.
And this one is also running at the Ron Paul Institute website.
It's called Dollar Dominance, Deconstructing the Myths and Untangling the Web.
Very interesting piece.
Welcome back to the show.
How are you doing?
Hey, Scott.
How's it going?
It's going real good.
Very interesting piece.
In fact, I guess maybe we'll get back to this later on in the interview, but the same sort of ideas were discussed a little bit yesterday with Brad Hoff on the show in the context of the new Hillary emails, which reveal the French worry that if Libya created a new gold-backed dollar, dinar, for Africa, that that would supplant the French franc that circulates as a dominant currency in the francophone countries in Africa, as they call them.
And how that was a big part of why the French were determined to have their war on Gaddafi back in 2011.
So I think, well, that just gets everybody on the same page as far as these kinds of issues or thinking about these kinds of issues and the role of demand for dollars in various wars.
And so maybe we can get back to the Libya war and that discussion later on in the interview.
But this is, of course, a big subject of discussion among anti-war activists and has been, and among libertarians, really, for a long time, is the role of the petrodollar, or the role of oil in propping up the dollar.
As you say at the beginning of this article here, it's kind of a mystery why the world doesn't reject our paper dollars at this point.
They keep taking them, no matter how many trillions our government prints.
And so people think, well, it's because we had this deal with the Saudis that they will buy or that they will denominate all their oil sales in dollars.
Is that right?
Well, I mean, it's certainly correct that that's a misconception that's shared.
That's pretty pervasive, actually, amongst, well, I would say amongst laymen, but even some wonks have to question the idea whether or not it's true.
And that's really what compelled me to write the piece.
Well, it's good.
You go back in history to the end of Bretton Woods, too, and Nixon closing the gold window.
And I think that's pretty much a popular form of this story is that, well, when Nixon took us off the gold standard, he sent Kissinger over to Arabia to make a deal and put us on, ultimately, an oil standard.
Right.
And that's the big misconception right there.
And it's really, it's not just factually incorrect, but it's also, it belies a certain misunderstanding of how the politics works and how the dollar works.
So when we came off the gold standard, everybody came off the gold standard with us.
And there was no fear, no real fear of the currency being rejected by anybody.
You don't need to protect a currency, a currency's value, if you're not inflating the currency.
And the way that we check that, the way that it's been done historically, is that in order to inflate our currency, we need to use debt instruments.
And so the government can't just print the money, it has to finance it.
And what the petrodollar agreements actually served to do was to finance the ongoing deficits after the closing of the gold window.
It wasn't necessarily to protect the vulnerable position.
And that's really, that's the big problem, is that when you have these sort of mythologies, they redirect us from the truth.
The myth, it gives the impression that the US needs to protect the dollar somehow, and it directs focus away from the truth about what US foreign policy is all about.
And it also lends credibility to the view that we're all run by central bankers, and it shifts responsibility for massive amounts of monetary expansion to some bankers and away from the people who are actually responsible.
Meaning the Congress.
Bingo.
Okay, but now, so if what you're saying is that it's important that the Saudis denominate their oil sales in dollars because then they just spend those dollars buying US debt, or I guess you're saying it doesn't matter what they denominate it in as long as they keep buying US debt.
But isn't that ultimately the same thing, propping up the dollar by buying the debt?
Creating that artificial demand for it?
It was until we figured out a new way to finance the debt.
You see, the global financial system didn't exist in 1971 the way it exists today.
The G7 didn't even meet for the first time until 1975.
And they started the close coordination, which is essentially the way that we manage the currency.
They started that in the late 70s and into the 80s.
And now the petrodollar is pretty irrelevant.
We don't have any need to keep our interest rates low by coming up with ways to ensure that our debt can be financed because if we need to, the central banks in other countries or in the EU or anyone entrenched in the system with close coordination with the Fed is going to prop it up.
So I don't know if that makes sense, but basically what happens is when there's a problem with interest rates, we need interest rates to be lower.
Central banks from around the world get together at these forums, and it's all open.
The coordination is all disclosed.
There's no question about whether or not central banks are helping each other out, protecting each other's currencies.
And sometimes they do some under-the-table dealing, but it's never really so far out of reach that a little bit of Internet searching can help you find it.
But the way that countries protect their currencies, the way that the U.S. protects its currencies, is just by swapping reserves and using those reserves as a foundation to inflate.
All right, now, so, jeez, I guess I really don't know that much about this, but it said that Saddam Hussein was determined to switch from dollars to euros.
Is that completely beside the motivation for war?
Well, I don't think that it's a really big factor, and really the reason that I don't is because the evidence supports so strongly that there were other considerations.
It is true that he was going to start accepting euros for his oil, but really it doesn't seem like that was ever a threat to the dollar.
And so if it did play a role in policymakers' decisions to invade Iraq, then it was really more because the act was an act of impunity against the empire.
It was never a question of, well, if he comes off the dollar, then all these other countries are going to come off the dollar, and then all the bad things are going to happen.
Yeah, the spending on the war was a lot more of a problem than something like that.
But, yeah, as you said, symbolically, for someone who used to be a cooperative little sock puppet dictator to be talking back and standing up, and especially after years of this, that kind of thing, it becomes intolerable just from an imperial point of view, never mind dollars.
Right, right.
Yeah, well, there you go.
Saddam and his big mouth.
And I seem to remember his beret and clean-shaven chin and military fatigues instead of a beard and robes and a suicide belt.
Yeah.
I might be remembering that wrong.
Let me think back.
It's been a while.
All right, anyway, so let's see.
We're almost at the break here.
So when we get back, then – well, actually, right now, I'm going to ask you to make sure and go to antiwar.com and look at Brad Hoff's article real quick.
I've already read it.
And then I'm going to ask you about Libya and Iran and some of this other stuff on the other side of this break.
It's Shane Machine Riley writing at convergentinterests.liberty.me and also today at the Ron Paul Institute for Peace and Prosperity website.
We'll be right back after this.
Oh, dollar dominance, the article is called.
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All right, kids, welcome back to the show.
I'm Scott Horton.
It's my show, Scott Horton Show.
I'm talking with Shay Machine Riley.
He's got a blog at Liberty.me called Convergent Interests.
It's ConvergentInterests.
Liberty.me.
And this one is also running today at the Ron Paul Institute for Peace and Prosperity.
It's called Dollar Dominance, Deconstructing the Myths and Untangling the Web.
And so now, before we get to the Libya thing, I wanted to mention to you just previous history in talking about this.
Robert Higgs, I can't really claim to have understood exactly what he said because he's too smart for me.
Robert Higgs basically disagreed with this whole Petrodollars, propping up the Petrodollars behind the war thesis all along as well, which I would say tends to lend credence to your point of view.
I don't know if y'all's arguments exactly coincide, but I bet they do in quite a way.
I think I do remember him saying that whatever demand for the dollar exists because of a deal with the Saudis to buy oil with it is negligible.
It probably isn't even a percentage point of anything for counting for anything.
So that was way back.
And then I also wanted to mention this interesting story of a guy's name.
Man, I remembered it last week when I was thinking about this.
It was Chris something or other who was a Brit who had proposed the idea of an Iranian oil bourse where they would basically open up their own market instead of selling their oil on the London market.
And people were saying, oh, man, look, this is one of the reasons that they want to bomb Iran so bad is because they want to try to undermine the American hegemony or whatever.
And it was a Brit who came up with it, and I interviewed the guy.
And he was like, oh, jeez, people think that?
Well, I think he was concerned that maybe his own government thought that.
And he said, I just thought it was an interesting idea.
I wasn't trying to undermine anybody's empire or anything, guys, I swear.
And it shouldn't anyway.
People need things to be really simple and really clear to them.
And it's really easy to say these three things happened in order.
And so it must be that this is why it happened.
And that's just so short-sighted and naive.
And it belies a misunderstanding of the way the whole global financial system works.
And it's dangerous because now we focus on that and we take our eyes off the ball.
And it's really self-refuting in the first place, isn't it, that you would have a Bush cabinet meeting where they sit around saying, jeez, guys, what are we going to do to prop up the dollar?
These guys are magic.
They're the kings of the universe, and they can do anything with their will and their guns.
And they know that.
And that's all that counts to them.
Well, I mean, and that's true, except it only goes so far.
And I talk a little bit about in the piece what the real threat to U.S. hegemony is.
And it's not the petrodollar or countries selling oil for things other than dollars.
It's actually countries starting to peel off diplomatically in terms of foreign policy.
Because, you know, and the Libya war is a great example of how this all works.
You know, the U.S. foreign policy is very, very, very much a part of a greater Western foreign policy, which includes the EU, which includes Japan, really the countries of the G7, the largest economies in the world.
And when a foreign policy decision is made, you'll notice that the countries in the G7 really never fall out of line with what's going on.
They always support the same side.
And that's true economically, too, through the Bretton Woods institutions.
And so the real challenge is going to be to the Bretton Woods institutions, although they're not going to lose any of their power anytime soon because they just have too much of the global economy.
But the IMF and the World Bank, namely.
And you see the influence that the IMF and the World Bank, the European economies, have over U.S. foreign policy, and it's blatant.
It's not even a question.
So, you know, I feel like when you have to make things up or claim that the reason that foreign policy decisions are made is because of this idea that doesn't even seem to be relevant and seems like it would be such a massive cover-up that it couldn't work, it just doesn't hold any water, especially when you have things in front of your eyes that show you how it works.
So you're saying in Libya, obviously the major interest here was just in what the French wanted to do, and they were asking us to come along with them, and so they said yes?
Exactly, yeah.
I mean, there are other considerations, too.
There's lots of—obviously we know that the State Department was involved in that decision, very highly involved in that decision.
We know that there are other interests.
And that's really the goal, right?
It's too complex to pin any one decision that's made on one special interest.
You have to take it in altogether.
But yes, Radhoff's excellent article that describes what the particular dollar interests in Libya were, namely the French dollar interests, is one of the factors of consideration that caused us to want to enter the war.
And so that's—would you call it a Petro-Franc, or how does that work, this French franc?
Even though they're on the euro, they have a French government currency that is still the currency for what they call Francophone Africa.
Yeah, and I mean, at the end of the day, it's really just the empire exhibiting its influence, right?
So do the French really have to worry about that so much?
In this regard, it actually is a little bit more simple than that, in that you've got to figure when these politicians go into a room, there's not a lot said.
They have some things on their mind and they talk about it, and if a question comes up about the impunity of a nation regarding the way that they're supposed to be governed by the IMF and the World Bank and the G7 and NATO and, you know, the U.S., then that's probably the biggest factor when these decision-makers decide what to do, right?
Is, well, if this person's not doing what we want, well, then we need to get rid of them.
Because we have that power, we just wave our magic wand and it happens.
And they have the money to back it up because, again, they control so much of the global economy.
And no matter what the consequences are, great, we can attack those consequences too.
Well, yeah, there's that.
But it's certainly not—I don't think that anyone in these situations are thinking, oh, well, we've got to protect this because it's all going to fall apart sometime soon.
You know, if we don't do something now, then the petrodollar or the Franco petrodollar or whatever is going to be a problem.
Now, if you look at what's happening in the BRICS countries, that's a lot— that's a much bigger factor as far as what, you know, the U.S. government and the G7, the West, in quotes, should be worried about.
Well, and I wonder about that because their economies have their own problems big time, right?
Well, they do have their own problems, and that's why—I don't know if you noticed the stock market.
It didn't go down—or it plummeted today.
It didn't go down at the end of the year, but pretty much starting at the beginning of the year, reflecting on the Chinese economy, which is in the middle of a collapse right now, the Dow is down, I think, what, maybe something like 9%, 8%, 9% on the week.
And, you know, what's going to happen is— see, China, they have our reserves that they've inflated their currencies on.
So it's not like they're in a position to sell off anytime soon.
But what they are doing is that they're trying to build a new network, a new financial network of competing countries that's going to give those countries a little bit more autonomy in the way that they deal on the global market.
But it's not—there is no real threat to the dollar's position as it stands, because, like I said, if China decided to sell all their dollars today, then they've got, I think, 3 trillion right now in dollar reserves.
They've inflated their entire economy on those reserves.
They're in the same rickety financial system that we all are in.
And probably much worse.
I mean, you think a government control the economy here in the United States and the amount of influence they have, it's nothing compared to the Politburo there in China.
Now, compared to how it was under Mao, forget about it.
But that's—you know, Mao is the argument ad absurdum.
What they have is, you know, if we have distortions in our real estate markets, then we have to come up with a whole new term for what they have.
And they are sitting on gigantic bubbles, you know, unheard of bubbles just waiting to collapse.
That's very, very true.
But the one thing that China has going for them is that they have a productive sector.
And so the reorganization, the restructuring of their economy is going to involve a lot of Chinese workers being able to afford the goods that they're making for America because their currency is going to rise essentially.
It is going to be a massive restructuring.
There's going to be a lot of displacement.
But what the result is going to be, the Chinese workers can afford the goods that they're making.
And it's the U.S. that's going to have to go through the restructuring to develop a productive sector again.
All right.
Well, we got to go.
Thanks very much for coming on the show.
Appreciate it.
Yep.
All right, so that's Shane Machine Riley.
He's writing at Liberty.me.
And it's convergentinterests.liberty.me, dollar dominance, deconstructing the myths and entangling the web.
And it's also at the Ron Paul Institute site.
We'll be right back with Greg Archetta right after this.
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