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Despite the apparent swift U.S. military success in Iraq, the U.S. dollar has yet to benefit as safe haven currency. This is an unexpected development, as many currency traders had expected the dollar to strengthen on the news of a U.S. win. Capital is flowing out of the dollar, largely into the Euro. Many are beginning to ask whether the objective situation of the U.S. economy is far worse than the stock market would suggest. The future of the dollar is far from a minor issue of interest only to banks or currency traders. It stands at the heart of Pax Americana, or as it is called, The American Century, the system of arrangements on which America’s role in the world rests.
Yet, even as the dollar is steadily dropping against the Euro after the end of fighting in Iraq, Washington appears to be deliberately worsening the dollar fall in public comments. What is taking place is a power game of the highest geopolitical significance, the most fateful perhaps, since the emergence of the United States in 1945 as the world’s leading economic power.
The coalition of interests which converged on war against Iraq as a strategic necessity for the United States, included not only the vocal and highly visible neo-conservative hawks around Defense Secretary Rumsfeld and his deputy, Paul Wolfowitz. It also included powerful permanent interests, on whose global role American economic influence depends, such as the influential energy sector around Halliburton, Exxon Mobil, ChevronTexaco and other giant multinationals. It also included the huge American defense industry interests around Boeing, Lockheed-Martin, Raytheon, Northrup-Grumman and others. The issue for these giant defense and energy conglomerates is not a few fat contracts from the Pentagon to rebuild Iraqi oil facilities and line the pockets of Dick Cheney or others. It is a game for the very continuance of American power in the coming decades of the new century. That is not to say that profits are made in the process, but it is purely a bypro-duct of the global strategic issue.
In this power game, least understood is the role of preserving the dollar as the world reserve currency, as a major driving factor contributing to Washington’s power calculus over Iraq in the past months. American domination in the world ultimately rests on two pillars — its overwhelming military superiority, especially on the seas; and its control of world economic flows through the role of the dollar as the world’s reserve currency. More and more it is clear that the Iraq war was more about preserving the second pillar – the dollar role – than the first, the military. In the dollar role, oil is a strategic factor.
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