Republican congressman speaks out

A Republican congressman speaks out and it is interesting. Texas congressman Ron Paul speaking in a 'special order' on the floor of congress warns the American people of the economic mess that we are in and the truth of how and why we got here.

THE END OF DOLLAR HEGEMONY

The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar and soaks up the huge number of new dollars generated each year. Last year alone, M3 increased by over $700 billion. The artificial demand for our dollar, along with our military might, places us in the unique position to rule the world without productive work or savings and without limits on consumer spending or deficits. The problem is it cannot last.

Price inflation is raising its ugly head, and the NASDAQ bubble, generated by easy money, has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and Federal spending is out of sight, with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world's rejection of the dollar. It is bound to come and create conditions worse than 1979-1980, which required 21 percent interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.

Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF will surely do everything conceivable to soak up the dollars in hope of restoring stability. Eventually, they will fail.

Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as the preeminent currency. Any attack on this relationship will be forcefully challenged, as it already has been.

In November, 2000, Saddam Hussein demanded euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first Cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we could get rid of Saddam Hussein though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O'Neill.

It is now common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11 or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat-out misrepresentations of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling his oil in euros, yet many believe this was the reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory in Iraq, all Iraqi oil sales were carried out in dollars. The euro was immediately abandoned.

In 2001, Venezuela's ambassador to Russia spoke of Venezuela's switching to the euro for all their oil sales. Within a year, there was a coup attempt against Chavez, reportedly with assistance from our CIA.

After these attempts to nudge the euro toward replacing the dollar as the world's reserve currency were met with resistance, the sharp fall of the dollar against the euro was reversed. These events may well have played a significant role in maintaining dollar dominance.

It has become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported. Now a new attempt is being made against the petrodollar system. Iran, another member of the ``Axis of Evil,'' has announced her plans to initiate an oil bourse in March of this year. Guess what? The oil sales will be priced in euros, not dollars.

Snip

The dollar's importance is obvious, but this does not diminish the influence of the distinct plans laid out years ago by the neoconservatives to remake the Middle East. Israel's influence as well as that of the Christian Zionists likewise played a role in prosecuting this war. Protecting our oil supplies has influenced our Middle East policy for decades.

But the truth is that paying the bills for this aggressive intervention is impossible the old-fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That is not so today. Now more than ever, the dollar hegemony, its dominance as the world's reserve currency, is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for one way or another. Dollar hegemony provides the vehicle to do just that.

I will post more of this speech if there is interest or To read this speech in full go to http://thomas.loc.gov/ and search on Ron Paul, February 15 2006, THE END OF DOLLAR HEGEMONY