Page 2 of 5 CHINA'S DOLLAR MILLSTONE, Part 4 Gold, manipulation and domination
By Henry C K Liu
to about 30,000 in 1999. In 2008, the ruble exchange rate is about 25.5 to the
dollar. Russia's inflation rate in 2008 is around 3.2%.
Following World War II, the Soviet government implemented a redenomination of
the currency to reduce the amount of money in circulation. This only affected
paper money. Old rubles were revalued at one tenth of their face value. The
1961 redenomination was a repeat of the 1947 reform, with the same terms
applying. The Soviet ruble of 1961 was formally equal to 0.987412 gram of gold,
but, similar to the US, the exchange for gold was not available to the general
public. Following the breakup of the Soviet Union in 1991, the ruble remained
the currency of the Russian Federation. A new set of banknotes was issued in
the name of
Bank of Russia in 1993. During the period of high inflation of the early 1990s,
the ruble was significantly devalued.
Soviets and the Marshall Plan
The Marshall Plan was more than an aid program to help Europe recover from war
damage. It sought to restructure Western European economies away from their
prewar socialist direction and launch them on a path towards US-style market
capitalism based on a new monetary regime of a gold-backed dollar and to keep
budding European social democracy from mutating into populist communism through
elections.
The strategic geopolitical purpose was to integrate Western Europe firmly into
postwar Pax Americana of free-market fundamentalism and a regional military
alliance in the form of North Atlantic Treaty Organization (NATO) based on
collective security, having rejected the lesson of the role of interlinked
alliances in igniting World War I. The Marshall Plan was the linchpin of US
strategy to neutralize a perceived rising Soviet threat. It helped to trigger
the Cold War.
The Soviet leadership responded to post-Roosevelt US policy based on Soviet
experience with the West before, during and after World War ll. This experience
led Moscow to a policy that was not simply fuelled by a conditional reflex of
anti-Americanism, which during the Roosevelt era had been kept in deep
abeyance.
The Munich Pact of 1938 followed Franco-British rejection of two successive
Soviet offers (in 1934 and 1937) to form an alliance against Germany in Europe
and Japan in Asia, thus pushing the USSR to enter the Soviet-German
Non-aggression Pact of August 23, 1939, less than a year after Munich. From the
Soviet perspective, Munich was a Western scheme to turn Nazi aggression
eastward and use German fascism to counter Soviet communism. The Soviet-German
Non-aggression Pact was an attempt to turn the table back against capitalism by
freeing up fascism against it.
Munich convinced the USSR that the Western powers were pursuing a policy of
selective appeasement only toward German eastward expansion and were not
interested in joining the Soviet Union in an anti-fascist alliance promoted
through a popular front. In addition, there was concern about the possibility
that Britain and France would stay neutral in a war initiated by Germany
against the USSR, hoping that the two warring Eastern powers would wear each
other out and put an end to both the Bolshevik Soviet Union and Nazi Germany.
In this sense, Munich was less a strategy of appeasement to secure peace than a
Western capitalist democracy strategy of directing war eastward between fascism
and communism. (See Beyond
Munich: Geostrategy and betrayal, Asia Times Online, April 28, 2007.)
By late 1941, and with the USSR under attack from Germany, Western powers had
not yet opened a second front (and would not do so until June 1944), Moscow had
reasons to seek a separate peace with Germany. Churchill and Roosevelt were
fully aware of this possibility.
After taking over as prime minister in the spring of 1940, Churchill refused to
pledge that Britain would cease hostilities against Germany in the event of an
internal coup to topple the Third Reich. This policy is known in British
diplomacy as "absolute silence". Yet Churchill was flabbergasted, and later
claimed that he had not been consulted, when after Roosevelt and Churchill met
at Casablanca in January 1943 the idealistic US president emerged from the
meeting to tell the world that the US and Britain would accept nothing short of
unconditional surrender from Germany. Roosevelt needed to do this because he
was aware that the US public did not want to go to war to save old Europe, only
to save the world from tyranny.
Churchill later claimed that he had not been consulted but had to go along for
the sake of the Atlantic Alliance. Churchill had in the back of his mind the
use of Germans to resist postwar communist incursion into Europe, and was
interested in preserving the Wehrmacht for that purpose. He knew that no
Wehrmacht officer would support a coup against Hitler only to have his country
invaded, occupied, and humiliated by the Allies that included a communist
power. For the German military, better to stand by Nazi Germany, even if it
meant following Hitler's madness toward total destruction, than to commit such
dishonorable high treason.
But Roosevelt, driven by US public opinion, left Churchill no room to maneuver.
Unlike Churchill, Roosevelt saw the possibility and merit of peaceful
co-existence between capitalist and communist nations and did not look forward
with relish to the need or value of a Cold War.
Coming when it did in January 1943, the same month the German 6th Army was
defeated at Stalingrad, the Roosevelt unconditional surrender proclamation
prompted Ulrich von Hassel, who had used his international contacts to arrange
secret meetings with British and American officials, and had hoped that a
successful coup would translate into an honorable peace treaty with Britain and
the US, to conclude that the unconditional surrender proclamation had bailed
out Hitler from domestic opposition over his military disaster at Stalingrad.
Risks of a separate peace
Roosevelt's unconditional surrender demand had its own logic. For Roosevelt, it
was vital not to give Stalin any incentive that would tempt him to strike a
separate deal with Germany that would lead to a separate peace. In World War I,
generals Paul Von Hindenberg and Erich Ludendorff had pulled off such a
separate peace with new Soviet Russia in early 1918, but it came too late to
allow them to move their forces westward to smash the Anglo-French lines before
US forces arrived.
It was very likely that the Allies might never have won World War II if Stalin,
having regained the 1939 Soviet border, suddenly backed out of the war to allow
German forces on the Eastern Front to be diverted towards the West. Moreover,
the United States was eager to get the Soviet Union to declare war on Japan to
reduce projected heavy US casualties since the Manhattan Project to develop the
atomic bomb was still years away from completion in 1942 and success had not
been guaranteed.
On June 5, 1947, Secretary of State George C Marshall spoke at Harvard
University and outlined the Marshall Plan. Europe, still devastated by the war,
had just survived one of the harshest winters on record. The nations of Europe
had nothing to sell for hard currency with which to buy food and fuel, and the
postwar social democratic governments in most countries were unwilling and
unable to adopt the draconian proposals for recovery advocated by old-line
classical market economists. Something had to be done, both for humanitarian
reasons and also to stop the potential spread of communism in Western Europe.
The US offered for European relief up to $20 billion ($200 billion in 2008
dollars, or 10% of its GDP which would come to $1.4 trillion in 2008), but only
if the European nations could get together and draw up a plan to act as a
single cooperative economic unit. Marshall also offered aid to the Soviet Union
and its allies in Eastern Europe, but Stalin denounced the program as a trick
to spread market capitalism in the Soviet Union and refused to participate.
Ironically, Soviet rejection made passage of the Marshall Plan through congress
possible. In 1947, anticommunism in the US was much stronger than
anti-Americanism in the Soviet Union.
While Europe was devastated by war, the US was blessed with record-breaking
wheat harvests in 1944 and 1945. Its defense industry had produced for the war
196,000 aircraft, with 96,356 in 1944 alone, and more than 40 billion bullets.
In 1943 alone, the US produced 19 million tons of merchant ships, up from
prewar production of 600,000 tons. Gross national product (GNP) doubled from
less than $100 billion in 1940 to more than $200 billion in 1945. Corporate
profits also doubled from about $6 billion in 1940 to $12 billion four years
later.
By 1944, the US was able to spend on war more than its entire national income
in all previous time in peace. More than $50 billion of lend-lease goods were
sent to allies, mostly to Britain and to a lesser amount to the USSR. US
national income tripled to $198 billion by the end of the war from $72 billion
in 1939.
Unlike the rest of the war-torn world, the US had never had it so good, which
left the national psyche with greatly reduced phobia against war. For the US
public, war meant prosperity and inspiring entertainment as portrayed in
Hollywood war movies. Operationally, both world wars were limited wars, for the
US fought only on foreign land. The positive socio-economic impacts from these
two conflicts left the US with a cavalier mentality for future limited wars,
first Korea, then Vietnam, then Kosovo, then Iraq, then Afghanistan, then Iraq
again and possible Iran before long.
In one stroke, World War ll swept away the blight of economic depression that
had afflicted the US for 12 stagnant years before the Japanese attack on Pearl
Harbor. Roosevelt's lowest unemployment rate during the New Deal years was
still over 14%. In 1945, the unemployment rate was close to 1%, even with a
much larger labor force, adding 30% more workers to the total workforce of 64
million, including 3 million housewives.
Regional economic disparity was moderated. The depressed south received a
disproportionate volume of defense contracts, including nearly $6 billion of
federally financed industrial facilities. Wartime federal spending gave birth
to the "Sun Belt" of new high-tech manufacturing, ironically a region that
would in time form the electoral base for ideological assault on government
intrusion in the economy.
The National Bureau of Economic Research showed that whereas in 1929 the
richest 1% received 16% of the national income, in 1948 they received only 8%.
World War II had a significant effect on the equalization of income and wealth
in the US, but economic democracy did not last long. In 2007, the richest 1% in
the US received 22% of the national income. The top marginal income tax rate in
1947 was 86.45% while the top rate in 2008 is 35%. The highest rate was 94% in
1944-45. Any way you cut it, the rich in the US have been favored by the
government since soon after World War ll ended. Economic democracy receded soon
after the war to defend democracy ended.
World War II amplified to unprecedented proportions the intrusive role of the
federal government in US society in the process of defending freedom abroad.
After the war, the Federal Bureau of Investigation (FBI) turned from a federal
agency against organized crime to one that routinely violated the civil rights
of large number of citizens in its mission to protect freedom. Ideological
witch hunts were conducted in all levels of society, reaching even to the
highest level of government, culminating in General Marshall being accused of
being a communist sympathizer.
World War ll also turned the US into a superpower at the expense of European
powers, allies and enemies alike. The nation that had entered the war to
protect the weak and the poor of the world abandoned the purpose of the "good
war" after the death of Franklin D Roosevelt, its great populist leader, and
turned its support towards preserving post-war Western colonialism in the name
of anticommunism.
Harry S Truman, an insecure leader who became president by default, allowed
himself to be manipulated by Winston Churchill not only to see communism as an
evil ideology but also as an opportunity to exploit anticommunism to collect
the geopolitical dividends of victory. It nurtured US "exceptionism" in foreign
policy and gave the young nation a messianic mission of enlarging democracy and
Christian values around the world, to distant lands whose names most US leaders
could not pronounce properly and most US citizens had never heard of in their
daily lives.
The postwar US began to view itself as God's new chosen nation and marveled at
its own holy perfection. It transformed itself into
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