William Engdahl - A Century of War
Iran 1941-1954 - Mossadegh and the Shah
Britain, through its Anglo-Iranian Oil Company, retained a stranglehold on Iran throughout the first half of the 20[SUP]th[/SUP] century.
During the Second World War, Stalin’s Soviet Union assisted Britain to invade Iran. A month after British and Russian forces occupied Iran in August 1941, the Shah abdicated in favour of his son, Mohammed Reza Pahlevi, who was disposed to accommodate the Anglo-Russian occupation.
Tens of thousands of Iranians died of hunger while 100,000 Russian and 70,000 British and Indian troops were given priority in supplies.
General M. Norman Schwarzkopf (father of the commander of the US forces in the 1990–91 Desert Storm) trained Iranian national police force during a six-year period, until 1948.
Russia was granted an exclusive oil concession in the northern part of Iran bordering Azerbaijan, while Royal Dutch Shell got another concession. In the midst of selling Iran to the oil vultures, in December 1944 the Iranian leader, Dr. Mohammed Mossadegh, introduced a bill in the Iranian parliament which would prohibit oil negotiations with foreign countries.
The resolution passed, but it didn’t decide on the concession of the Anglo-Iranian Oil Company in southern Iran, from all the way back in 1901.
In 1947, the government of Iran suggested that the original concession must be changed according to the principles of justice and fairness, so that the Anglo-Iranian Oil Co. would increase the share paid to the government of Iran that was only 8%. Britain flatly refused to meet Iran even half way.
In April 1951, Mossadegh became prime minister and his nationalisation plan was finally approved by the Majlis on 28 April 1951. Britain promptly threatened retaliation and within days British naval forces arrived near Abadan. In September 1951, Britain declared full economic sanctions against Iran, including an embargo against Iranian oil shipments as well as a freeze of Iranian assets in British banks. The British embargo was joined by all the major Anglo-American oil companies. Prospective buyers of nationalised Iranian oil were warned that they would face legal action on the grounds that a compensation agreement had not yet been signed with Anglo-Iranian Oil Co.
Iran oil revenues, plummeted from $400 million in 1950 to less than $2 million between July 1951 and the fall of Mossadegh in August 1953. Britain brought the case be brought before the World Court for arbitration, but Mossadegh, himself a lawyer, argued his case successfully, and on 22 July 1952 the Court denied Britain jurisdiction.
In May 1953, US President Dwight Eisenhower, turned down Mossadegh’s request for economic aid, on advice of his secretary of state John Foster Dulles and CIA director Allen Dulles. On August 10, Allen Dulles met with the US ambassador to Tehran, Loy Henderson, and the Shah’s sister in Switzerland.
In 1953, after a five-year absence, Gen. Norman Schwarzkopf, Sr. arrived in Tehran to see “old friends”. He promised army generals he had earlier trained power after a successful coup against Mossadegh. Under code name Operation AJAX, the CIA with British SIS overthrew of Mohammed Mossadegh in August 1953.
The young Reza Shah Pahlevi returned to power, and economic sanctions were lifted.
In April 1954, the Anglo-American companies, joined by France’s state-owned CFP, started negotiations with the government of Iran to secure a 25-year agreement for exploitation of oil on 100,000 square miles of Iranian territory.
British Petroleum (previously named Anglo-Iranian Oil) was given 40% of the old d’Arcy concession; Royal Dutch Shell got 14%; the major US oil companies divided 40% of the oil between them; and France’s CFP got 6%.
Enrico Mattei - ENI
One European company expressed interest in purchasing oil from Mossadegh’s nationalized oil supply. It was Italy’s Ente Natzionale Idrocarburi (ENI) of Enrico Mattei that was founded in February 1953.
In 1955, Mattei successful negotiated a share of the oil of Egypt’s Sinai Peninsula with Egypt’s new leader, Gamal Abdel Nasser, which by 1961 had grown into a considerable 2.5 million tons per year of crude oil.
In August 1957, Mattei made a deal with the Shah - he offered an unprecedented 75% of total profits to the National Iranian Oil Company, with ENI (only) 25%. The new joint venture Société Irano-Italienne des Pétroles (SIRIP), got the 25-year exclusive right to explore and develop some 8,800 square miles of promising petroleum prospects in non-allocated regions in Iran.
By 1958, total proceeds from ENI’s Italian natural gas sales alone topped $75 million per year. Instead of spending precious Italian dollar reserves on imported oil and coal.
Between 1959 and 1961, gasoline prices in Italy dropped 25%, which significantly aided Italy’s post-war economic revival.
On 27 October 1962, under suspicious circumstances a private airplane crashed after taking off from Sicily en route to Milan killing Enrico Mattei, who was on his way to make deals with Iran, Egypt and the Soviet Union for oil supply.
He had already signed agreements with Morocco, Sudan, Tanzania, Ghana, India and Argentina. At the time of his death, Mattei had been preparing a trip to meet with the president John F. Kennedy, who was then pressing the US oil companies to reach an agreement with Mattei.
From Bretton Woods to 1968 - Gold fixed dollar
The US came out as the “world leader” from WW II.
A little known fact of the 1944 Bretton Woods deal was the creation of a gold exchange system. Under this system, each member country’s national currency was connected to the US dollar. The dollar rate was permanently fixed at $35 per ounce of gold.
From 1947 on, the Marshall plan was used by Western Europe to buy oil, supplied primarily by US oil companies, more than 10% of all Marshall aid. Between 1945 and 1948, they more than doubled the price of oil from $1.05 per barrel to $2.22 per barrel.
There were huge differences in the prices, at the time Greece paid $8.30 per ton for fuel oil, Britain paid only $3.95 per ton.
In late 1957, the US underwent the first deep post-war economic recession, which lasted into the mid 1960s.
While Europe was forced to pay excessively high interest rates to attract US dollars, as the dollar price was fixed, the US lowered its interest rates. Investors grabbed up “cheap” industrial companies in Western Europe, South America or Asia for higher profits abroad, as dollars flowed out of the US.
From 1957 to 1965, US annual net capital export into Western Europe mushroomed from less than $25 billion to more than $47 billion. Between 1962 and 1965, US corporations earned 12 to 14% on their investments in Western Europe.
JFK proposed a new bill to impose a tax of up to 15% on American capital invested abroad. When it finally passed in September 1964, they had made a seemingly innocent amendment, which exempted one country — British colony Canada! Montreal and Toronto thereby became the centres for an enormous loophole which ensured that the US dollar outflow continued, through London-controlled financial institutions.
Bank loans made by foreign branches of US banks to foreign residents were also exempt from the new US tax. So US banks quickly established branches in London and other major cities across the globe.
The City of London attracted the world’s financial flows with highest interest rates of any major industrial nation throughout the mid 1960s.
In 1961, the US, Britain, France, Germany, Italy, Holland, Belgium, Sweden, Canada and Japan agreed to pool reserves in a special fund, the gold pool, to be administered in London by the Bank of England. The US Federal Reserve contributed only half the costs of continuing to maintain the world price of gold at the artificially low $35 per ounce price of 1934.
Financial speculators by the second half of 1967 were selling pounds and buying dollars to buy commercial gold in all possible markets from Frankfurt to Pretoria, sparking a steep rise in the market price of gold, in contrast to the $35 per ounce official US dollar price.
It appeared that even 80 tons of sold gold on the London market wasn’t enough to keep the fixed dollar price of Bretton Woods intact. On 18 November 1967, Britain announced a 14% devaluation of the pound from $2.80 to $2.40, the first devaluation since 1949. Once the pound had been devalued, speculative pressures immediately turned to the US dollar. International holders of dollars went to the gold discount window at the New York Federal Reserve and demanded their rightful gold in exchange.
The market price of gold rose even further. By the end 1967, Washington’s gold stock had declined another $1 billion to only $12 billion.
In January 1967, French president De Gaulle’s principal economic adviser, Jacques Rueff, came to London to propose raising the official price of gold. The US and Britain refused to hear such arguments, which would have meant a de facto devaluation of their currencies. The US and British press, led by the London Economist, attacked the French policy.
On 31 January 1967, a new law came into effect in France which allowed unlimited convertibility for the French franc.
Then France withdrew from the Group of Ten gold pool. France immediately became the target of riots, first by leftist students in Strasbourg, soon followed by students all over France. In coordination with the political unrest, US and British investment houses started a panic run on the French franc, cashing in francs for gold, draining the French gold reserves by almost 30% by the end of 1968.
Within a year, De Gaulle was out of office and France wasn’t a threat anymore.
In April 1968, a special meeting of the Group of Ten was convened in Stockholm where US officials unveiled the new “paper gold” substitute plan through the IMF, the so-called Special Drawing Rights (SDRs).
The oil inflation of 1973 – creating the petrodollar
In 1969, the US economy was again in a recession. In 1970, US interest rates were sharply lowered. As a consequence, speculative “hot money” sought higher short-term profits in Europe and elsewhere. As interest rates continued to drop, these outflows reached huge dimensions, totalling $20 billion.
In May 1971, the US recorded its first monthly trade deficit, triggering a virtually international panic sell-off of the US dollar.
On 15 August 1971, President Nixon formally suspended dollar convertibility into gold, effectively putting the world fully onto a dollar standard with no backing. The US also formally devalued the dollar a mere 8% to $38 per fine ounce gold.
The real architects of the Nixon strategy were the influential City of London merchant banksters, including: Edmond de Rothschild, Sir Siegmund Warburg, and Jocelyn Hambro, who saw a “golden” opportunity in Nixon’s dissolution of the Bretton Woods gold standard.
In 1972, the massive capital outflows of dollars to Japan and Europe continued. In 12 February 1973, Nixon announced a second devaluation of the dollar, of another 10% to $42.22 per ounce (where it remains to this day).
Between February and March 1973, the value of the US dollar against the German Deutschmark dropped another 40%.
In May 1973, the Bilderberg Group met at Saltsjöbaden, Sweden, the secluded island resort of the Swedish Wallenberg banking family. At his meeting of 84 high ranking members of international crime, Walter Levy outlined a ‘scenario’ for a drastic increase in OPEC petroleum revenues. He projected an OPEC Middle East oil revenue rise.
See 2 excerpts from the confidential protocol of the 1973 meeting of the Bilderberg group in Sweden. There was discussion about the danger that “inadequate control of the financial resources of the oil producing countries could completely disorganize and undermine the world monetary system”.
The second excerpt speaks of “huge increases of imports from the Middle East. The cost of these imports would rise tremendously”.
The purpose was not to prevent the oil price shock, but plan it in a process that US Secretary of State Kissinger later called “recycling the petrodollar flows”. Since 1945, world oil had been priced in dollars. A sudden sharp increase in the price of oil, therefore meant an equal increase in world demand for US dollars to pay for that necessary oil.
Bilderberg policy used a global oil embargo, to create a 400% increase in world oil prices. On 6 October 1973, Egypt and Syria invaded Israel, igniting the Yom Kippur War.
The events surrounding the outbreak of the October War were secretly orchestrated by Washington and London, using the powerful secret diplomatic channels developed by Nixon’s national security adviser, Henry Kissinger. US intelligence reports, including intercepted communications from Arab officials confirming the build-up for war, were suppressed by Kissinger.
Washington didn’t permit Germany to remain neutral in the Middle East conflict, but hypocritical Britain clearly stated its neutrality, so avoided the Arab oil embargo.
On October 16, the Arab OPEC declared an embargo on all oil sales to the US and the Netherlands for its support for Israel and raised the oil price from $3.01 to $5.11 per barrel (+70%). Following a meeting in Teheran on 1 January 1974, a second price increase of more than 100% brought OPEC benchmark oil prices to $11.65. Henry Kissinger secretly put up to the Shah of Iran to arrange this.
President Nixon was kept busy with the “Watergate affair”, leaving Henry Kissinger as de facto president. When in 1974 the Nixon White House sent a senior official to the US Treasury in order to devise a strategy to force OPEC into lowering the oil price, he was bluntly turned away.
In August 1971, Nixon had established a secret accord with the Saudi Arabian Monetary Agency (SAMA) that was finalised in February 1975. Under the terms of the agreement, a sizeable part of the huge rise in Saudi oil revenue would be invested in financing the US government deficits.
In 1974, 70% of the additional OPEC oil revenue, $57 billion, at least 60% went directly to financial institutions in the US and Britain.
The most severe impact of the oil crisis in the US was felt in New York City. New York was forced to slash spending for roadways, bridges, hospitals and schools in order to service their bank debt, and to lay off tens of thousands of city workers.
Bankruptcies and unemployment across Europe rose to alarming levels. As Germany’s imported oil costs increased by 17 billion Deutschmarks in 1974. By June 1974 the oil crisis had resulted in the collapse of Germany’s Herstatt-Bank and a crisis in the Deutschmark as a result. It resulted in a million unemployed Germans.
In May 1974, Willy Brandt offered his resignation to Federal President Heinemann, who then appointed Helmut Schmidt as chancellor.
In 1973, India had a positive balance of trade. But in 1974, India had total foreign exchange reserves of $629 million which couldn’t pay for the annual oil import bill of 1,241 million.
In 1974, Sudan, Pakistan, the Philippines, Thailand and most countries in Africa and Latin America faced gaping deficits in their balance of payments.
In 1974, developing countries had a total trade deficit of $35 billion, 4 times as large as in 1973 (precisely in proportion to the oil price increase). In the early 1970s, the account deficit of all developing countries was (only) some $6 billion per year.
The major New York and London banks, and the Seven Sisters oil multinationals benefitted. In 1974, Exxon overtook General Motors as the largest US corporation in gross revenues. Her “sisters”, including Mobil, Texaco, Chevron and Gulf, were not far behind.
Chase Manhattan, Citibank, Manufacturers Hanover, Bank of America, Barclays, Lloyds, Midland Bank all enjoyed the windfall profits of the oil crisis.
In a strange twist, the American David Mulford became director and principal investment adviser of the SAMA, the largest OPEC oil producer.
Basically the post-war Bretton Woods gold exchange system was replaced by the highly unstable petroleum-based dollar exchange system, the “petrodollar standard”.
The year 1975 witnessed the first major decline in world trade since the end of the war in 1945, a drop of 6%.
While industrial countries had experienced a slow recovery from the initial oil shock, the developing economies deteriorated even further in 1975. In 1976, the account deficit of all developing countries rose to $42 billion. Private US and European banks were glad to lend to these countries.
Foreign debts of the developing countries expanded some five-fold, from $130 billion in 1973, before the first oil shock, to some $550 billion by 1981, and to over $612 billion by 1982, according to the IMF.
In August 1976, the 85 non-aligned “developing” states countries tried after the Colombo meeting to fight for “A fair and just economic development”. The UN was chosen as the arena where the “developing” countries explained their demands.
Share prices for US banks began to fall, especially those most involved in Eurodollar lending to the developing countries: Citicorp, Morgan Guaranty, Bankers Trust and Chase Manhattan. The Federal Reserve Bank was forced to intervene to support the falling dollar.
One by one, the advocates of Third World development were removed from the seats of domestic power. In February 1977, PM Indira Gandhi of India was forced into elections and was ousted by March. Sri Lanka paralyzed by a wave of strikes in early January 1977. By May 1977, Bandaranaike’s ruling Freedom Party was gone from power. In 1977, Bhutto was overthrown in a military coup led by General Zia ul-Haq. Before his death by hanging, Bhutto accused US Secretary of State Henry Kissinger of being behind his overthrow. On 14 February 1978, in Guyana, Frederick Willswas forced to resign.
Ayatollah Khomeini – Thatcher economics, the IMF in the 1980s
In 1975, the CFR, under the direction of New York attorney Cyrus Vance, drafted a series of policy blueprints for the 1980s. The CFR called “A degree of “controlled disintegration” in the world economy is a legitimate objective for the 1980’s”.
In 1978, the Shah’s government of Iran and British Petroleum were “negotiating” on the renewal of the 25-year oil extraction agreement. In October 1978, the talks had collapsed over the British “offer” that demanded exclusive rights to Iran’s future oil output.
In November 1978, President Carter named the Bilderberg group’s George Ball, a member of the Trilateral Commission, to head a special White House Iran task force under the National Security Council’s Zbigniew Brzezinski.
Robert Bowie from the CIA was one of the lead “case officers” in the new CIA-led coup against the Shah that they had placed into power in 1953. US security advisers to the Shah’s Savak secret police implemented a policy of ever more brutal repression, to maximize antipathy against the Shah. At the same time, the Carter administration began protesting abuses of “human rights” under the Shah.
The BBC’s Persian-language broadcasts, drummed up hysteria against the regime in exaggerated reporting of incidents of protest against the Shah and gave Ayatollah Khomeini a full propaganda platform inside Iran.
The Shah fled in January 1979, and by February Khomeini had been flown into Tehran to proclaim the establishment of his theocratic state.
Iran’s oil exports to the world were suddenly cut off, some 3 million barrels per day. Curiously, Saudi Arabian production in January 1979 also cut some 2 million barrels per day.
Unusually low reserves of oil held by the “Seven Sisters” oil multinationals contributed to the oil price shock, with prices for crude oil soaring from a level of some $14 per barrel in 1978 towards $40 per barrel for some grades of crude on the spot market. The ensuing energy crisis in the US was a major factor in bringing about Carter’s defeat in the presidential election a year later.
Despite the fact that an oil price of $40 per barrel represented a dramatic increase in dollar terms, the media hysteria over the “incompetent” Carter administration, led to a further weakening of the dollar.
Since early 1978, the dollar had already dropped more than 15% against the German mark and other major currencies. In September 1978, the dollar fell in a near panic collapse when it was reported that Saudi’s central bank SAMA had begun liquidating billions of dollars of US treasury bonds.
The oil price shocks in 1973 and 1979, which had raised the price of the world’s basic energy by 1,300% in 6 years, had understandably caused inflation.
British PM Margaret Thatcher, insisted that the 18% inflation in Britain had been caused by government deficit spending, carefully ignoring the 140% increase in the price of oil since the fall of Iran’s Shah. In June 1979, a month Thatcher had become PM, the UK’s chancellor of the exchequer, Sir Geoffrey Howe, began raising base rates for the banking system a staggering five percentage points, from 12% to 17%in only 12 weeks. The Bank of England simultaneously began to cut the money supply, to ensure that interest rates remained high.
Director of the Federal Reserve Paul Volcker followed Britain’s example to “fix” this inflation by cutting credit to banks, consumers and the economy. US interest rates on the Eurodollar market soared from 10% to 16% and 20% in a matter of weeks. Government spending was savagely cut in order to reduce “monetary inflation”.
In March 1980, President Carter had signed into law the “Depository Institutions Deregulation and Monetary Control Act” that empowered Volcker’s Federal Reserve to impose reserve requirements on banks, ensuring that his credit choke succeeded.
Businesses went bankrupt, families were unable to buy new homes, long-term investment in power plants, subways, railroads and other infrastructure came to a grinding a halt. Unemployment in Britain doubled, from 1.5 million to 3 million in Thatcher’s first 18 months as Prime Minister.
Inflation was indeed being “squeezed” as the world economy was plunged into the deepest depression since the 1930s – this was labelled the “Thatcher revolution”. And the dollar began an extraordinary 5-year ascent.
The international financial interests of the City of London and the powerful oil companies, chiefly Shell and British Petroleum, were the intended beneficiaries. British Petroleum and Royal Dutch Shell exploited the astronomical price of $36 or more per barrel for their North Sea oil.
Also exchange controls on the big City banks were removed, so that instead of capital being invested in rebuilding Britain’s rotten industry base, funds flowed out to real estate in Hong Kong or lucrative loans to Latin America
The radical monetarism of Thatcher and Volcker spread like a cancer. With interest rates of 17-20% any “normal” investment was simply not profitable.
Six months after Thatcher took office, Ronald Reagan was elected president of the US, with Vice President George H.W. Bush in control.
Reagan had been tutored while governor of California by the guru of monetarism, Milton Friedman. Reagan kept Milton Friedman as an unofficial adviser on economic policy. His administration was filled with disciples of Friedman’s radical monetarism, following the same radical measures earlier imposed by Friedman to destroy the economy of Chile under Pinochet’s military dictatorship.
As the average cost of their petroleum imports, rose some 140% in US dollars, developing countries this time around were faced with the situation that the dollar itself was also rising rapidly, because of both the high US interest rates and the higher oil price.
All Eurodollar loans to these countries were fixed at a specified premium over and above the given London Inter-Bank Offered Rate (LIBOR). This LIBOR rate was a “floating” rate, which rose from an average of 7% in early 1978 to almost 20% in early 1980.
The creditor banks, following a closed-door meeting in England’s Ditchley Park that fall, created a creditors’ cartel of leading banks, headed by the New York and London banks, later called the Institute for International Finance or the Ditchley Group. The private banks “socialised” their lending risks to the taxpaying public, but kept the profits for themselves.
This was an almost exact copy of what the New York bankers did after 1919 against Germany and the rest of Europe under the Dawes Plan.
Out of $270 billion loaned by Latin America between 1976 and 1981, only 8.4% actually arrived in the countries. In 1979, a net sum of $40 billion flowed from the “rich” North to the “poor” South. In 1983, this flow had reversed with $6 billion from the “developing” countries to the industrialised countries, since then the amount has risen steadily, to approximately $30 billion a year.
In August 1982, large Third World debtor nations refused to pay, but the IMF simply pressured them to sign “debt work-outs” with the leading private banks, often led by Citicorp or Chase Manhattan of New York. The IMF “medicine” was invariably the same: the victim debtor country was told to slash domestic imports to the bone, cut the national budget, quit state subsidies for food and other necessities, and devalue the national currency in order to make its exports “attractive”.
Between 1980 and 1986, a group of 109 debtor countries, paid to creditors in interest on foreign debts alone $326 billion; repayment of principal on the same debts totalled another $332 billion. They were paying $658 billion on what originally had been a debt of $430 billion and on top of that these 109 countries still owed the creditors $882 billion in 1986!
Total foreign debt of the developing countries, rose from just over $839 billion in 1982 to almost $1,300 billion by 1987. Virtually all this increase was due to the added burden of “refinancing” the unpayable old debt.
During the 1980s, the “developing“ nations transferred a total of $400 billion into the US alone. Capital flight from Third World countries into the “safe haven” of the US and other industrialised countries amounted to at least another $123 billion in the decade up to 1985. Large banks, like Citicorp, Chase Manhattan, Morgan Guaranty and Bank of America, were bringing in flight capital assets of some $100–120 billion. The annual return for the New York and London banks on their Latin American flight capital business, was 70% on average. The very same “developing” countries were forced into brutal domestic austerity to “stabilise” the currency.
These profits allowed the Reagan administration to finance the largest “peacetime” deficits in world history, while falsely claiming “the world’s longest peacetime recovery”. As exports to Latin America came to a grinding halt, there was a devastating loss of US jobs and exports.
President Ronald Reagan in August 1981 signed the largest tax reduction bill in post-war history. In the summer 1982, Paul Volcker decreased interest rate levels. This was followed by a speculative bonanza in real estate, stocks, oil wells in Texas or Colorado. As the Federal Reserve’s interest rates went lower, the fever grew hotter. “Cheap” debt was the new fashion. Within 5 years, the US transformed from the world’s largest creditor to becoming a debtor nation, for the first time since 1914.
While this turned young stock brokers into multimillionaires, the real living standard for “normal” Americans steadily decreased, while that of a minority rose as never before. Families went into record levels of debt for buying houses, cars, video recorders. Government went into debt to finance the huge loss of tax revenue and the expanded Reagan defence build-up.
By 1983, annual government deficits began to climb to an unheard-of level of $200 billion. The national debt expanded, along with the deficits, and paying Wall Street bond dealers and their clients record sums in interest income. Interest payments on the total debt by the U.S. government almost tripled in 6 years, from $52 billion in 1980, to more than $142 billion by 1986 (equal to one-fifth of all government revenue).
Money kept flowing in from Germany, from Britain, from Holland, from Japan, to take advantage of the high dollar and the speculative gains in real estate and stocks on the US markets.
Billions of dollars flowed out of the London-based Eurodollar banks to the accounts of developing country borrowers without a “lender of last resort” but the banks didn’t take any risk as the IMF enforced payment of the usurious debts through the most draconian austerity in history. The IMF was firmly controlled by the Anglo-American voting power.
Nationally controlled oil resources could have been the means for modernising Mexico.
In February 1982, the IMF dictated a series of Mexican peso devaluations to “spur exports”. By the first 30% devaluation, the private Mexican industry, which had borrowed dollars to finance investment, led by the once-powerful Alfa Group of Monterrey, was made bankrupt overnight.
In early 1982, the peso stood at 12 pesos for a dollar. By 1986, 862 Mexican pesos were needed to buy 1 dollar, and by 1989 the sum had climbed to 2,300 pesos. But Mexico’s total foreign debt, grew from some $82 billion to just under $100 billion by the end of 1985.
British and US multinationals set up child-labour sweatshops along the Mexican border with the US. These “maquiladores” employed Mexican children aged 14 or 15 for wages of 50 cents an hour, to produce goods for General Motors or Ford Motor Company or various US electrical companies. Of course the IMF agreed with this child labour!
The same process was repeated in Argentina, Brazil, Peru, Venezuela, most of black Africa, including Zambia, Zaire and Egypt, and large parts of Asia.
Until the 1980s, black Africa remained 90% dependent on raw materials export for financing its development. In the early 1980s, the world dollar price of these raw materials came tumbling down. By 1987, raw materials prices had fallen to the lowest levels since the Second World War, about the level of 1932 (when there was also a deep world economic depression).
In 1982, these African countries owed creditor banks in the US, Europe and Japan some $73 billion. By the end of the 1980s, through debt “rescheduling” and various IMF interventions, this had more than doubled, to $160 billion. This was about the sum these countries would have earned at a stable export price level.
The incredible high inflation rates during the early part of the 1980s, typically 12–17%, dictated the conditions of investment returns. A fast and huge gain was needed.
In 1985, the US economic situation threatened the future presidential ambitions of Vice President George H.W. Bush. This was reason for a “rescue” mission.
This time Saudi Arabia was used to run a “reverse oil shock” and flood the world oil market with “cheap” oil. The price of OPEC oil dropped from an average of nearly $26 to below $10 per barrel in only a couple of months in the spring of 1986. Wall Street economists proclaimed the final “victory”, while George Bush Sr. made a quiet trip to Riyadh in March 1986 to tell King Fahd that the oil price had gone down enough. Saudi Oil Minister Sheikh Zaki Yamani was fired for a scapegoat and oil prices stabilized at the “low” level of around $14–16 per barrel.
Speculation in real estate in the US continued at a record pace, while the stock market began a renewed climb to record highs. This 1986 oil-price collapse unleashed what was comparable to the 1927–29 phase in the US speculative bubble. Interest rates dropped even more dramatically, as money flowed in to make a “killing” on the New York stock markets.
A new financial perversion became fashionable on Wall Street, the ”leveraged buyout”. Boone Pickens with borrowed money - “junk bonds” - bought controlling stock in companies, like Union Oil of California, or Gulf Oil, that were many times more worth than he had. If he succeeded in taking over a huge company with “borrowed money”, his debt could be repaid, while making a handsome profit. If the company became bankrupt, his bonds were just “junk” paper.
During the last half of the 1980s, such actions consumed Wall Street and pushed the Dow upwards, driving corporations into the highest levels of debt since the 1930s depression. But this debt was not undertaken to invest in modern technology or new plant and equipment.
After President Reagan signed the new Garn–St. Germain Act into law, he enthusiastically told an audience of invited S&L bankers, “I think we’ve hit the jackpot”. The new law opened the doors of the S&Ls to financial abuses and speculative risks as never before. It also made S&L banks an ideal vehicle for “organised crime” to launder billions of dollars from the booming narcotics business.
Few noticed that it was the former firm of Reagan’s Treasury secretary Donald Regan, Merrill Lynch, whose Lugano office was implicated in laundering billions of dollars of heroin profits in the so-called “pizza connection”.
Life insurance companies, began to speculate in real estate during the 1980s. By 1989, insurance companies were holding an estimated $260 billion of real estate on their books, in 1980 this had been $100 billion. Then in late 1980, real estate collapsed, forcing failures of insurance companies for the first time in post-war history.
On 19 October 1987, the bubble burst. On that day the Dow Jones Index collapsed more than in any single day in history, by 508 points. Nakasone pressed the Bank of Japan and the Ministry of Finance to assist. Japanese interest rates fell lower, and lower, making US stocks, bonds and real estate appear “cheap” by comparison. Billions of dollars flowed out of Tokyo into the United States. During 1988, the dollar remained strong and Bush was able to secure his election as president. The plan of the new Bush administration was to direct pressures onto US allies for “burden sharing” of the huge US debt.
The Thornburgh Doctrine had stipulated that the FBI and Justice Department had authority to act on foreign territory. President Bush quickly showed himself to be a “tough guy”, by invading the tiny Panama, in his first year as President, December 1989.
From 1979, when Paul Volcker had begun his monetary shock, to 1988 the government recorded Americans below the poverty level went from 24 million to 32 million Americans (an increase of more than 30%). Costs of American health care, rose to the highest levels ever, and as a share of GNP, to double that of the UK.
In the 1980s, the vital public infrastructure of the US collapsed: highways cracked; bridges became structurally unsound and even collapsed; in areas like Pittsburgh, water systems became contaminated; hospitals in major cities fell into disrepair; housing stock for the less wealthy decayed dramatically.
Total private and public debt of the US in the 1980s went from $3,873 billion to $10 trillion by the end of the decade.
Thatcher’s eleven-year as PM of Britain was equally disastrous. Real estate speculation and the financial services of the City of London increased enormously, while Thatcher’s economic policy had severely restricted industrial investment, and modernisation of the nation’s deteriorating public infrastructure.
William Engdahl – A Century of War; Anglo-American Oil Politics and the New World Order (first published in 1992, but updated since): http://www.takeoverworld.info/pdf/Engdahl__Century_of_War_book.pdf
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Understandably there are important events missing from the book (with “only” 270 pages). I’ve also deleted lots of information, and even with these omissions this post is “too” long...
@goldenequity I’m afraid I haven’t watched the complete interview.
Following is a recent interview with William Engdahl (44:33): https://soundcloud.com/21wire/featured-f-william-engdahl-discusses-financial-warfare
