Will the U.S. Support Israel or Fiat Dollars?

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Two days from now, (September 20^th), Palestine is expected to ask the UN Security Council to recognize it as a legitimate “state”.  If such recognition is granted, it will mark a significant political defeat for Israel.  The only obstacle to Palestinian recognition by the UN, is a veto by the United States.

If the US vetoes the Palestinian request for recognition, it will delight Israel, but infuriate the Muslim world.  That’s not news.  US support for Israel has infuriated Muslims for over half a century.

But this time, there may be a new consideration:  If the US gov-co vetoes the Palestinian request for recognition as a nation-state, the resultant Muslim fury could cause a serious decline (or even collapse) in the value of the fiat dollar.

If so, the gov-co’s decision on whether to veto Palestinian statehood is a mutually-exclusive choice between: 1) supporting Israel; and 2) supporting the fiat dollar.

We can’t do both.  If we support Israel, the value of the fiat dollar may be hugely diminished.  If we support the fiat dollar, the security of Israel may be hugely diminished.

If gov-co is forced to choose between supporting Israel and supporting the fiat dollar, what choice will it make?

• To understand this dilemma, you need to consider a little monetary history:

As I’ve previously reported, I began to understand the political significance of the fiat monetary system in the 1990s while publishing a magazine (the AntiShyster) that dealt with legal reform issues.  I observed that government’s reaction to most “crimes” was largely optional.  If people conspired to kill the president or blow up the Twin Towers at the NY Trade Center, the gov-co might try to stop them—or it might not.  (Sometimes, the gov-co might even help such criminals.)   But if Americans threatened our fiat monetary system, the gov-co would react brutally every single time.

I inferred from the government’s persistently virulent defense of the monetary system that fiat dollars are the “heart of darkness” for our entire governmental system.  Gov-co will defend fiat dollars to the death.

•  In the decade after A.D. 2000, I realized that gov-co’s defense of the fiat dollar was not limited to domestic threats, but extended internationally—as seen in the invasions of Iraq and Libya.

The cause for the A.D. 2003 invasion of Iraq can be traced back to: A.D. 1933 when gov-co removed gold from domestic circulation in the USA; A.D. 1968, when silver was removed from domestic circulation; and A.D. 1971, when President Nixon stopped redeeming foreign-held dollars for gold—giving America a pure fiat (intrinsically worthless) currency.

The fiat dollar’s value should’ve plummeted in the 1970s and caused an American economic depression.  However, the fiat dollar remained relatively strong because, in A.D. 1971, President Nixon negotiated a fantastic agreement with Saudi Arabia:  the US would guarantee the security of Saudi Arabia; in return, the Saudi’s would guarantee to sell their crude oil only for US fiat dollars.  Shortly after, OPEC followed the Saudi lead and also agreed to sell their crude oil only for fiat dollars.

Thereafter, any nation that wanted to buy crude oil on the international market had to have fiat dollars to do so.  The net result was a global demand for fiat dollars which, although no longer directly backed by American gold or silver, were implicitly backed by the world’s crude oil.

Insofar as most of OPEC oil production (and all of Saudi oil production) emanated from Muslim countries, it’s fair to say that since A.D. 1971, the much-maligned Muslim governments have been the principle supporters of the fiat dollar. Without Saudi and OPEC support for the fiat dollar, the US would probably have crashed into a economic depression (or returned to a gold-backed currency) between 30 and 40 years ago.

Thus, when Iraqi president Saddam Hussein started selling Iraqi crude for euros in A.D. 2000, he threatened the fiat dollar’s value as the world’s only currency able to purchase crude oil.  Once the fiat dollar lost its status as the world’s only “petro-currency,” its value would plummet and the US economy would probably slide towards depression.  If the US economy collapsed, the global economy and even hopes for a New World Order and global government might also collapse.

To protect the fiat dollar, Saddam had to be stopped.

In A.D. 2003, under the pretext of seeking to destroy “weapons of mass destruction,” we invaded Iraq and hanged Saddam—but our military became bogged down in Iraq.  Seeing we were unable to invade any other country that dared sell their crude oil for currencies other than dollars, other countries began to sell their crude for currencies other than dollars.  Result?  Since A.D. 2000, the value of the fiat dollar has fallen 60%; the US and global economies have suffered recession or perhaps depression; and the forces for globalism and the New World Order have become desperate.

My point is that we invaded Iraq in A.D. 2003 to protect the fiat dollar.

•  More recently, Libya’s Colonel Khadafy decided to implement a pan-African currency backed 100% by gold.   He reasoned that if the continent of Africa adopted a gold-backed currency, the investors of the world would flock to Africa and Africans would enjoy an economic renaissance.

This year, under the pretext of an humanitarian impulse to protect the Libyan people from military abuse by Col. Khadafy, NATO invaded Libya.

I can’t prove it, but I have no doubt that the real reason for NATO’s support for the Libyan rebellion was to stop Khadafy from implementing a gold-backed currency and thereby threatening the “legitimacy” of fiat currencies (the dollar, euro, yen, etc.) around the world.

Without fiat currency, there’s no big government.

Without fiat currency, there’s no New World Order.

•  The US gov-co’s relationship to Israel also implicates the fate of the fiat dollar.

First, note that September has been a bad month for Israel.  According to the NYTimes (“Beyond Cairo, Israel Sensing a Wider Siege”):

“Turkey expelled the Israeli ambassador a week ago over Israel’s refusal to apologize for a deadly raid last year on a Turkish ship bound for Gaza in which eight Turks and one American of Turkish descent were killed. The storming of the embassy in Cairo on Saturday was precipitated by the killing of three Egyptian soldiers along the border by Israeli military forces pursuing terrorism suspects.”

Fascinating.  The fate of the Middle East and perhaps the world is turning on the deaths of a mere twelve individuals—and a “refusal to apologize”.  A dozen deaths threaten world peace.  This is evidence of an astonishing level of international instability that might’ve been inconceivable just 20—even 10—years ago.  It’s also evidence that the governments of the world are increasingly unable to control or even anticipate events.

•   Describing the September seizure of the Israeli embassy in Cairo, Front Page Magazine wrote “Israeli-Egyptian Peace: The Beginning of the End”:

“Five thousand Egyptian protesters . . . made their way to the nearby Israeli embassy ‘armed with clubs, hammers, axes and explosives.’ Over the next few hours they hammered down a concrete wall surrounding the embassy, overran the building, smashed windows, set fires, spray-painted anti-Israeli graffiti, looted the embassy’s archive, and tore down and burned the Israeli flag.

“Egypt’s military rulers claimed they intended to prosecute those behind the attack on the embassy, and began making arrests. Still, skepticism is warranted.

“With Egypt’s economy in a tailspin since the “Arab spring” began, tourism collapsing and chaos reigning, Cairo is desperate to sustain its generous  [$2 billion annual] U.S. financial—and military—aid.”

 

It’s apparent that the US has “bought” the previous Egyptian-Israeli peace with annual $2 billion contributions to Egypt.  The post-Arab-Spring collapse of the Egyptian economy has infuriated impoverished Egyptians and caused them to take out their frustrations on someone, anyone (the Jews), who could be blamed.  It’s virtually certain that the Obama administration threatened to cut off some or all of the $2 billion foreign aid if Egypt didn’t stop the attacks on the Israel embassy.  Given that most of that $2 billion goes to support Egypt’s military rather than her people, we can reasonably ask how much longer that “bribe” can keep the starving Egyptians under control.

Chaos is coming to Egypt.

•  The Jerusalem Post warned “Turkey Sending 3 Warships to Eastern Mediterranean”:

“Turkey is planning to send three warships to the Eastern Mediterranean to defend against Israeli vessels if necessary and ensure freedom of navigation for Turkish ships . . . .  The Turkish ships will provide protection for ships bringing humanitarian aid to the Gaza Strip and confront Israeli warships outside of Israel’s territorial waters . . . .  Turkish Prime Minister Recep Tayyip Erdogan said: ‘The attack that took place [last year] in international waters did not comply with any international law. In fact, it was grounds for war. However, befitting Turkey’s greatness, we decided to act with patience.’”

•  In “Israel is Paying for Gaza War with Turkey and Egypt Crises,” the Israeli publication Haaretz explained the current Israeli conflicts:

“During Hanukkah 2008, Israel attacked Gaza in Operation Cast Lead. Now it is eating the bitter fruit of that operation, which was the turning point in the attitude of the world and the region toward Israel and its belligerent and violent policies.

“During that fateful Hanukkah, the Israel Defense Forces attacked Gaza and its defenseless population. Israelis did not see that war on their televisions as people saw it in Istanbul and Cairo. Here, they hid from us most of the horrific pictures that were broadcast elsewhere in the world—including, of course, Istanbul and Cairo. At the time, Israeli news only counted the numbers of the (many) Palestinian dead and the numbers of the (few) Israelis, and therefore the operation was seen as a colossal military, diplomatic and even moral success.

“But it was a resounding failure. What is happening now in Egypt and Turkey must be added to the balance of Operation Cast Lead.  The only two countries that ever accepted Israel in the region, Turkey and Egypt, are burning their relations with Israel. The first was via a government decision, the second that of an angry mob.”

Note the implicit impact of media (TV) on the effects of the Israeli attack on Gaza:  Although the Israeli government and mainstream media prevented Israelis from seeing graphic depictions of the war, thanks to the internet and global electronic communications, much of the rest of the world witnessed the war.  While Israelis remained blissfully ignorant of what their government had done, the rest of the world saw atrocities and were infuriated.  That fury spilled over into Turkey cutting ties to Israel, Egyptians seizing the Israeli embassy, and growing world sympathy for the creation of a Palestinian state.

Palestinian statehood is anathema to Israel.  If Palestine becomes a recognized “state,” Israel’s ability to govern Palestinians will be eliminated; Palestinians’ ability to attack Israel will be increased.  Other than thermonuclear war, Palestinian statehood may be Israel’s greatest fear.

Israel is therefore begging its one remaining “ally”—the US—to veto the Palestinian’s September 20^th request to the UN Security Council to be recognized as a “state”.

•  All of which brings me, finally, back to why the US gov-co may have to choose on September 20^th between supporting Israel and supporting the fiat dollar.

Remember my earlier point—that, since A.D. 1971, by agreeing to sell their crude oil for only fiat dollars, the Muslim oil-producing nations became the principle supporters for the fiat dollar?

What happens if the Muslim oil-producing nations—still furious over Israel’s A.D. 2008 attack on Gaza—declare that if the US vetoes Palestinian statehood, the Muslims will start or increase their selling of crude oil for currencies other than fiat dollars?

If the fiat dollar is further decoupled from its former status as the world’s only “petro-dollar,” the fiat dollar’s value will necessarily fall.  That fall would precipitate significant inflation, perhaps hyper-inflation, and possible economic collapse.

If the US vetoes Palestinian statehood, will the Muslim oil-producers renege on their former agreement to sell crude for only fiat dollars?

Maybe.

According to Australia’s Brisbane Times (“Saudi official warns American veto of Palestinian state will ‘end special relationship’ and make the US ‘toxic’ in the Arab world”):

“A former head of Saudi Arabian intelligence and ex-ambassador to Washington, Turki al-Faisal, has warned that an American veto of Palestinian membership of the United Nations would end the ‘’special relationship’’ between the two countries, and make the US ‘toxic’ in the Arab world.”

The US is already “toxic” in the Arab world, so that threat is largely meaningless.

However, the “special relationship” between the US and Saudi Arabia is code for the A.D. 1971 agreement whereby the US guaranteed Saudi security and the Saudi’s guaranteed to sell their crude for only fiat dollars.

If the Saudi’s renege on that agreement, the OPEC nations that still sell crude for only fiat dollars will follow suit, and the fiat dollar’s apparent value will fall dramatically.

The Saudi’s might be bluffing, but they’re nevertheless implicitly threatening to renege on their agreement to support fiat dollars.  Therefore, the US seems faced with a choice to support Israel (by vetoing Palestinian recognition as a state), or to support the fiat dollar (and the savings and pensions of American people) by supporting Palestinian statehood.

Interesting dilemma, hmm?

But there’s another factor in this equation:  Our gov-co wants inflation to wipe out much of the current national debt. If inflation caused the fiat dollar to lose 50% of its current purchasing power, the existing national debt would be effectively reduced by 50%.  (If we owed $14 trillion, we’d still repay $14 trillion, but they’d only have about $7 trillion in purchasing power.  By means of inflation, the gov-co can rob its creditors.)

Therefore, gov-co has a powerful interest in inflating the fiat dollar.

But gov-co also has a powerful interest in not being blamed for inflating the fiat dollar.

So, if circumstances could be contrived so that some “patsy” (say, Saudi Arabia) could be blamed for inflating the dollar, our gov-co might be secretly delighted.

The current issue over Palestinian statehood provides circumstances whereby the US could simultaneously support Israel (by vetoing Palestinian statehood) and perhaps cause the Saudi’s to not only withdraw their support for the fiat dollar but also to be blamed for resultant inflation.

Figuratively speaking, the US is currently facing a Saudi highwayman who’s effectively demanding “Your money or your Jews!”

Like Jack Benny, the US is hesitating, considering the situation and answering “I’m thinking; I’m thinking!”

I’m betting that the US will choose support Israel, veto Palestinian statehood, call the Saudi bluff, and risk inflating the fiat dollar.

But even if our gov-co’s choice does not cause significant inflation, the fact remains that that choice is there:  support Israel or support the fiat dollar.

The mere existence of that choice should constitute a sobering reality for Israel because, sooner or later, the US will almost certainly choose to support the fiat dollar and sacrifice Israel.

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