This appeared on RIA-Novosti today and
was written by Sam Barden. It is an interesting take on evolving
economic systems and has a bearing on the situation vis-a-vis Iran:
There is a war raging inside the US
State Department now, between those who back the Real (Energy)
Economy and those who back the Financial (Dollar) Economy. In the
course of my strategic advisory work at Wimpole International, I ran
headlong into this war. In the 20th century Dollar Economy, we use
currency created by banks as our unit of account, in this case the
USD. People make investment decisions “for profit” on the basis
of the least dollar cost per unit of production… this is the Dollar
Economy, which we take for granted. However, the emerging 21st
century Energy Economy is very different. When we use an absolute
unit of energy as the unit of account, or energy standard, we make a
very different value judgement based upon the least energy cost per
unit of production. In the Energy Economy, we naturally gravitate to
the most efficient use of energy.
We can also see the battle between
Dollar Economics and Energy Economics as Conflict Economics versus
Consensus Economics. Dollar Economics, by its very nature, is
adversarial because all currencies compete in price against the
national currency issued and controlled by the United States. As the
world’s reserve currency, the USD is also the world’s price
benchmark, backed up by the overwhelming power of the greatest
military might the world has ever seen. On the other hand, Energy
Economics is about consent, and the fact that a unit of energy is
neutral, objective, and independent of all nations. When we use an
energy unit as the basis for price, then, consumers immediately seek
energy savings, using new technology, new ways of working, and even
new ways of living. What we don’t value, we waste… whilst energy
producing-nations like Saudi Arabia waste energy on a cosmic scale,
countries like Denmark with minimal energy resources can be the most
ingenious in conserving it. Nevertheless, in truth, we’re all in
the same boat. In fact, producers and consumers have a common
interest in working together to make the most efficient use of the
crucial resource of energy. The problem is that the middlemen who own
and control the financial system and markets have a vested interest
in volatility… for them, price stability is death, and transparency
is the enemy of profit.
Those in the State Department who
favour the Financial Economy over the Real Economy are fighting a
losing battle. The cracks appearing in the US banking giant JP Morgan
Chase appear ominous for the US banking system. Indeed, whilst JP
Morgan Chase is too big to fail, it’s definitely not too big to
nationalise. As the black hole at the dark heart of J P Morgan
Chase’s balance sheet gets bigger, the Obama Administration may
have no choice but to nationalise the bank, and, then, slowly unwind
and sell off its constituent parts. As if J P Morgan Chase’s
fragility doesn’t put the global financial economy under enough
stress, Europe’s imploding day by day, with Greece leading the race
to the exit. Greek banks are already having serious liquidity
problems, and Spain is not far behind them. With a new French
government calling for less austerity not more, those who favour the
Financial Economy over the Real Economy have lost the battle, and are
about to lose the war.
This brings me to the sanctions on
Iran, which the pundits tell us are the last chance to avoid war. In
coming days, the 5 + 1 World Powers and Iran will assemble in Baghdad
to discuss the Iranian nuclear programme. At the heart of these
discussions are the physical and financial sanctions on Iran. The
financial sanction scheme has led to an intra-State Department war.
Whilst many believe that the US sanctions on Iran relate only to US
companies, meaning that US companies can’t do business with Iran,
actually, they go much further. For the Dollar Economists at the
State Department, who do the banks’ bidding and who favour the
Financial Economy over the Real Economy, it’s a simple calculation…
“You’re either with us or against us”. Therefore, India, Japan,
and South Korea have all recently come under physical sanction
pressure to reduce or altogether cease buying Iranian oil and if they
do not, then US financial institutions may cease to do business with
them. Unless foreign institutions cease to deal with Iran, the flow
of US dollar loans will cease, and US shareholders will pull out
their investment, collapsing their share price. This is… as any
Godfather would say… an offer they can’t refuse.
However, the cost of keeping the
Financial Economy alive is now so great, and income and wealth
inequality so pervasive, that the Real Economy has been suffocated.
The Arab Spring and street protests around the world… like Occupy
Wall Street… are the manifestations of this reality. Austerity has
become unbearable. So it is with sanctions. The effect of financial
sanctions on multinational companies operating in the Real-World
Economy have led to part of the State Department becoming an arm of
the banking system, effectively declaring war on another part of the
State Department, which is responsible for keeping the lights on.
This very secret war at the State Department is concluding, and there
can only be one winner. At the end of the day, the Fed can’t print
oil, and I believe we will see the pragmatic realists in the State
Department backing the global transition to an Energy Standard.
The 20th century State Department is
dead! Long live the 21st century State Department!
http://en.rian.ru/columnists/20120522/173609370.html
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