George W. Bush’s campaign of shock and awe is aimed at the entire world, not only at the cities of Iraq. But as he moves toward the title of Supreme Overlord of the Known Universe, Bush is standing on a shaky foundation.

That shaky foundation is the U.S. dollar.

In the past two decades, money from the entire world has poured into the United States – buying bonds, stocks, real estate, and whole corporations. A significant portion of U.S. government bonds, home mortgage bonds, and corporate bonds is now owned by foreign capitalists. Last year, an estimated three-quarters of developed countries’ savings were invested in the U.S.

The result is a “strong” dollar, which can buy more Mexican vegetables, Chinese clothes, and French wine – while other countries buy fewer U.S.-made products. This has contributed to the huge loss of U.S. manufacturing jobs – so much that AFL-CIO President John Sweeney, along with some manufacturing executives, has called for steps to lower the value of the dollar.

Most of the U.S. ruling class is happy with a strong dollar. It helps finance the continuing boom in housing, a significant portion of corporate investment, the growing federal deficit and the $400 billion/year trade deficit. The strong dollar makes it easier for the U.S. to spend tens of billions a year on military bases around the world, military aid to client states, bribes, etc. Foreign support of the dollar helps make it possible for Bush to invade and occupy Iraq.

For George W. Bush, the best scenario will soon see victorious U.S. troops marching through the rubble of Baghdad. Haliburton and other U.S. companies will be hard on their heels, clutching lucrative contracts to occupy, rebuild and profit from Iraqi oil. In the short run, the shock and awe of this spectacle might help keep the dollar strong. For the successful businessman or the corrupt government official in Europe, Japan or the global South, what safer place to stash your loot than Wall Street, the financial citadel of the world’s only superpower?

But there is a cloud on Bush’s horizon. All this money flowing into Wall Street means the U.S. is now in debt to the tune of $2.5 trillion, increasing at the rate of $500 billion per year. Attracting foreign capital has become a financial necessity to keep the system functioning – new money must keep flowing in, to make payments on the old debt, as well as to finance the new deficits.

Even economists at the pro-US World Bank and IMF are talking about “payback time” for the U.S. dollar, according to an article in The New York Times. The IMF warned that the U.S. trade deficit poses a “significant risk” to global financial stability.

In the long run, the people of the world, already furious at Bush’s war, will not take kindly to continued subsidy of U.S. imperialism. European capitalists, iced out of the Mid-East by Bush and under pressure from their own people, may be less ready to support the dollar. The costs of occupying Iraq, and waging endless wars against endless enemies, will mount, and the U.S. foreign debt will get larger. And, “you can’t sustain an empire from a debtor’s weakening position – sooner or later the creditors pull the plug,” writes William Greider in The Nation, echoing the analysis of other progressive economists.

A standard capitalist cure for the falling dollar is to cut the real incomes of U.S. workers. The cost of balancing the dollar deficit in this way would be a deep recession and double-digit unemployment. This is what happened during the dollar crises of the 1970s, brought on in part by the costs of the Vietnam war.

The first moral: “If you want peace, work for justice.” By resisting attempts to solve economic problems on the backs of the people, we can deny Bush the economic power to wage aggressive war around the world on behalf of corporate interests.

The second moral: “If you want justice, work for peace.” To lower the deficit and protect our economic future from the effects of a new dollar crisis, we must end the war, and bring the troops home – from Iraq, from Central Asia, from Colombia. And, we must end the pro-corporate trade and economic policies that these troops enforce, at the cost of millions of jobs in the U.S.

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Art Perlo
Art Perlo

Art Perlo lived in New Haven, Conn., where he was active in labor and community struggles. He did research and writing on economic issues in Connecticut, including work with the Coalition to End Child Poverty in Connecticut which helped pave the way for the movement for progressive tax reform in the state. He wrote on national economic issues for the People's World and was a member of the CPUSA Economic Commission.