| Legitimacy of Iraq War: US dollar verus the Euro  [+ favourites]
I was at a friend's place yesterday and we were discussing the election and the war over a few glasses of absinthe while eating Chinese food.
He brought up a point I had never heard of before. I did some research and it makes quite a bit of sense. I'll try to summarize my findings as best I can:
When you think of the Iraqi conflict, you either believe that Bush is just "crazy", or that we went there for legitimate purposes to free Iraqi people, or that we went there to protect ourselves from being attacked.
The problem with any of these points of views is that none of them adequately coincide with any event.
What I mean by that is that if you believe we went there to free Iraqis, there is no logical reason why we went there when we did. Iraqis have been suffering for years.
If you believe we went there to protect ourselves, there is no logical reson why we would have targeted Iraq because there are no ties between Iraq and terrorism.
If you believe we went there because Bush is a saddistic loon, well, that also would have been consistent before 9/11, so there is no reason why the war would have begun in 2003.
Although there may be other reasons why you support or oppose the war in Iraq, I have yet to encounter anyone in either view that provided me with a premise behind why it happened when it happened, with more of a premise than their opinion or assumptions.
So here's an interesting fact:
In November, 2000, Iraq began selling its oil in EUROs, becoming the first OPEC country to abandon its ties to the US dollar.
What significance does this hold?
In simple macroeconomics, we understand that a country's dollar value is determined by the level of demand that exists for that currency. For example... if a country prints too many dollar bills and opens them up to the public via grants, higher interest rates, or by feeding the economy by hiring local companies, it floods the market with more of its currency. As with anything in business, the more supply there is, the less demand there is, hence the value of the dollar goes down.
As the value of the dollar goes down, the governmental body that controlls a majority of the money, the interest rates, and the currency loses power, because the value of that money becomes less and less.
Well, on January 1st, 1999, 11 European countries joined together to form a joint currency called the EURO. Britain and Norway were two that were absent from this union of currency, and still trade using their own currencies.
These 11 countries were: AUSTRIA BELGIUM FINLAND FRANCE GERMANY GREECE IRELAND ITALY LUXEMBOURG NETHERLANDS PORTUGAL SPAIN .
The EURO is valued at approximately $1.30US as of today.
Back to oil.
Right now Saudi Arabia and Iraq are two of the largest oil producers on the planet. Prior to the 2000 change to EUROs by Iraq, most of the oil on the planet was purchased in US dollars, as 2/3rds of the commonly traded currency in the world is US dollars. This is called a "Reserve Currency".
It is widely known and accepted that the US has struck a deal with the Saudis which provides them with US support in the Middle East, in exchange for their continued support of the US dollar by selling their oil in only US dollars. Iraq also promoted the value of the US dollar by selling their oil in that currency, but decided to sell their oil in only EUROs in 2000.
What did that mean for the US dollar?
Well, what that means if you've been following me this far is that the demand for the US dollar would drop internationally, as many countries that obtained oil from Iraq would no longer convert their currency to US currency to obtain it. Instead, they would boost the demand for EUROs by purchasing EUROs.
This would benefit all the European countries utilizing the EURO, and affect the US dollar in a negative way. This is why it was countries like France, Germany and Russia that pressured Saddam Hussein into changing Iraq's trade currency.
Back to November 2000. So Iraq becomes the first large oil supplier in the world to begin trading in the EURO versus the US dollar. This, in itself, did not dramatically affect the value of the EURO or the US dollar. However, almost immediately following it other oil producing countries began toying with the possibility of following suit. Oil producing countries such as Iran, Libya, Venezuela, Russia, Indonesia, and Malaysia all began trading oil in EUROs, thereby pushing it to become the world's second "Reserve Currency".
The repercussions of such a domino effect would effectively reduce the value of the US dollar by 20 to 40 percent vs the EURO, likely making the EURO at least equal to the dollar as a "Reserve Currency".
Following 9/11 and the incomplete invasion of Afghanistan, the US quickly proceeded to invade Iraq, the only OPEC country in the world to defy the US dollar. Their coalition of forces included England and Norway, two of the main European countries that did not partake in joining with the EURO. Of the 11 countries that were trading using the EURO, only Italy, Portugal, Spain, and the Netherlands took part.
On the other side, France, Germany, Russia and China opposed the war, amongst others. France and Germany mainly because their currency was being threatened, and China and Russia because they also converted a substantial portion of their dollar reserves to EUROs.
The US gained a few things by invading and occupying Iraq. Firstly, they sent a message to any OPEC countries that attempted to switch to the EURO, thereby devaluating the US dollar. Secondly, they now controlled the world's second largest oil supply. Thirdly, they almost immediately began trading in, yes you guessed it, US dollars, thereby maintaining its demand. Fourthly, they now have a military presence in the center of the Middle East. Fifthly, they struck a blow against the EURO, the main competitor to the US dollar.
It is theorized that if the Iraq war did not take place, and more oil producing countries switched to the EURO, the US dollar would crash, thereby causing a literal catastrophe in the US economy.
This entire underlying purpose to the war in Iraq is not televised, nor is it well known amongst pro-war or anti-war enthusiasts, likely because it is the most honest and real perception of the events that have unfolded in the middle east in the last few years.
It is important to note that almost every country that had a strong interest in boosting the EURO opposed the war, and every country that had a strong interest in preserving the US dollar supported the war. Also important is the fact that the US abandoned the invasion of Afghanistan prematurely to focus on Iraq, certifying that Afghanistan was the foot in the door, but not the true purpose. It is also important to note that it was the European countries that pressured Saddam into dropping the US dollar in favour of EUROs. Finally, it is important to note that Iraq was the first country to drop the US dollar in favour of the EURO, only a year before the "War on Terrorism" began.
Interestingly enough, it is agreed upon by all parties involved that a "War on Terrorism" will never truly be finished, and that it is a very indefinite and lengthy process, as stated by the president himself. This does adequately permit the US government to protect the US dollar wherever it may be threatened, under the guise of terrorism for legitimacy and public support.
"Hating everyone protects me from elitism."
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) that might lend to those scales to tip where we never expected. 
