Bogdan Herzog: Take the petrol out the petrodollar, take the dollar out of the narcodollar

International Conference “Financial capitalism and its alternatives for the 21st century. Contributions to the 4th Economic Theory”

Chișinău, December 15 2017

I have recently read Prof. Dugin interview in The Economist magazine. This is a very interesting interview which makes it possible to express our worldview to a larger, non-Eurasianist audience. I distributed the material  myself to a number of people and it was praised even by persons who do not necessarily have the same perception of reality as we do. The professor comes across as a highly distinguished intellectual, a worthy opponent of liberalism and this can be appreciated by neutrals and even by enemies.

However, I take issue with a question asked by the interviewer and with prof. Dugin’s answer, where I would propose a different approach. The question asked was: “Why do you think that the other civilization, the Anglo-Saxon, is economically more successful than the Eurasian civilization?” and the answer was the following: “Precisely because the economy is, for you, destiny. For us, the spirit is destiny. If you put material value as the highest value, then you’re more successful in that “

Although I understand the philosophical and religious reasoning that lay behind the answer, including that you cannot serve two masters, God and Mammon, I would prefer a more direct and economically oriented approach to such a question. Surprisingly or not, Marx, at least in his early writings, had a similar approach to the issue as prof. Dugin.

As far as I am concerned, I would first like to notice the way the question is structured. It is an affirmation: “the West is better at developing economic systems” masquerading as a question. Answering the question by trying to give an explanation is a form of accepting the interviewer’s assumption. It was a trap. In my opinion the answered should have been the following: “The Anglo-Saxon civilization is not better at developing economic systems. Its present day prosperity is  due to the fact that it can print an unlimited amount of money out of thin air and that it has the military and political capacity to force others to accept it as a mean of payment”. It is stealing in disguise. Forcing others to give up their valuables for nothing is a form of stealing. This is the source of their prosperity, not only their obsession with material goods. In other words, the West is better at enforcing its point of view across the world, not at developing superior economic systems.

And they are very good at something else too, at portraying their own interest as being, somehow, in the general interest of mankind, of humanity at large. They are the masters of audacity! It is like a drug dealer, or a thief, asking a teacher, or a factory worker: “Why do you think that I am richer than you are?”. The answer can be a philosophical one “You are preoccupied with money”  but it can be also straightforward: “because you are a thief”.

This is aspect is important, it’s not something to be neglected. Since we are at war, at least in the field of ideas, do not let the enemy take the higher ground. Strategically we do not want to fight an uphill battle. We have the higher moral ground even in the world of Economics and the enemy and the public at large should be reminded of this. We are dealing with an empire built by audacious thieves, pirates and drug dealers, who always came in the name of generous ideas, such as “liberty” and “free trade”,  and left with their pockets full of money. These are the people who are lecturing us today!

So, my first message is: Do not let the enemy take the higher moral ground. I will back my affirmations later, with some lectures from history, more precisely from the Opium Wars.

But, we shall have a very short recapitulation of what the present economic system is made of, and of the paths to make it more just .

As I said before, the prosperity of the West is based on two factors: the printing of money and the capacity to force others to accept it. Since anybody, any nation, or even non-nations can issue money (in Hong Kong for instance the banknotes are printed by commercial banks) it is obvious that in this equation, the important factor is the ability to enforce its use. The present monetary system has a name, the petrodollar. This is not by chance. It comes from the fact that, in 1971, when the Americans ended the dollar convertibility to gold, they replaced it with the convertibility in raw materials, especially, but not exclusively, petroleum.  The military and political capacity of the Americans to force its way on the oil producers, and force them to sell their products in dollars, is the key of the system. The same rationale can be extended to all raw materials and to international trade in general. The presence of American troops in the Middle East ensures the dollar denomination of the oil trade, their presence in Europe assures a certain Euro to Dollar parity, and so on. I will not get into details, but I wanted to underline that, in the end, everything comes down to power. This power is not limited to the capacity to force a certain trade deal to a third nation, but also to secure transport routes and project security to a certain area.

In order to create a better, more just economic system, it is not sufficient to sign bilateral trade agreements denominated in other currencies. Corridors of transit and protection for countries willing to trade in other currencies will need to be ensured. Of course these are all well known realities. The Chinese OBOR initiative and the events in the Middle East give proof to the fact that these basic ideas have been understood and that steps are taken into the right direction. We need to take the petrol out of the petrodollar. This is the second message of the day.

Finally, I would like to draw your attention to a more hidden, opaque zone, which I consider important. There is a historic precedent for the petrodollar, as a fiduciary currency based on the projection of power. I am talking of the narco- (British) pound. At the beginning of the XIX century, the British registered considerable deficits in their trade with China. By the way, it is China, not the West as erroneously affirmed by the Economist reporter, who, except for 150 years, was the planet’s center of economic activity .

At the beginning of the XIX century, just as today, China was not interested in any products the British were able to offer in exchange and demanded that commercial debts should be settled through the payment of real money in the form of silver bullions. What was the solution discovered by the Brits in order to stop the “river” of silver outflow? They forced the Chinese to drug themselves and when they tried to oppose it, they declared war upon China. Twice. All in the name of free trade and peace of course. I would like to add that some of the major banks and trading companies of today have their roots in this infamous trade: HSBC, Jardine Matheson, Swire, etc. The same thing can be affirmed aboout many “noble” families. Who became lords, pairs, and knights of the British Empire. But we will not name names today.

Why is this relevant today? Because today, just like 200 years ago, the drug trade is in the hands of the same networks. The opium is produced in Afghanistan at record levels even by official UN statistics. The same with cocaine from Columbia, another protectorate. Why is this happening?

Some say that because the money generated by drugs is needed in order to finance clandestine operations, the so–called “black-ops”. Maybe, but for me this answer is insufficient. This kind of money is required by second-tier countries. The system that operated the CIA and the Pentagon already owns the money printing machine! It can send money anywhere it wants in unlimited amounts. It can create fictitious company and their accounts can be filled at will. So why do they need to control the drug market and how does this relate to the petrodollar?

The monetary system itself is being run just like a drug cartel. The American Fed is the equivalent of the producer, the national banks represent the distribution networks and the commercial banks represent the street dealers. A clearing system provides for the allocation of funds and profits. The end product, money, generates of course, its own addiction.

The money that comes from drugs has two characteristics: it is in large quantities and it is generated as cash. The problem for the  money syndicate is to ensure that this money gets re-integrated in the banking system, otherwise it could end-up in the wrong hands, who could ask for real assets in return. This could generate of course major imbalances and currency fluctuations. While in the banking system, the money  will get cleared and allocated, through the clearing house mechanism.

Do you remember when Pablo Escobar used to hide billions of dollars in cash in the Colombian jungle? It is my conviction that this is one of the major reasons why he has eliminated. It could not be for the elimination of the cocaine trade, which has skyrocketed since then. We need to take the narco out of the narcodollar. This is the third and last message for today. Why?

For the time being the system does not need the drug trade in order to finance the clandestine “black-ops”, but it needs to assure that this trade, like all trade, is denominated in its currency and that the cash money is coming back in the system.  Just as oil, energy, copper or zinc, heroin and cocaine have to be paid for in money generated from thin air, in dollars.

It is also important to have the capacity to target with drugs the population of rival states. From this point of view Afghanistan is ideally located at the border with the two major rivals of the system, China and Russia. At the same time, this country presents the opportunity that the distribution networks coming from it will pass through the Muslim countries of Central Asia, therefore ethnic based drug distribution networks can be developed creating premises for future inter-ethnic conflicts.

The annihilation of the drug producing centers is necessary not only for the good of the population. Its exit from the dollar system will create important currency imbalances.  The currency will exit the system and will not return anymore, adding pressure to the existing trade deficits. Secondary beneficiaries, in secondary tier countries will need to be financed directly and this will require the reallocation of resources.

It is an irony of the fate, or karmic justice maybe, that by taking the dollar out of the narco-dollar, Eurasia can return to the anglo-saxon world the poison gift it was given 200 years ago. We do not talk about encouraging drug consumption, the way the Anglo-Saxons did, because this would be an infamy, but, neutralizing this weapon, today still in the hands of the system, together with a competing agianst the petrodollar, will restart the “river of silver” that used to exit the West and enter Eurasia in the XVIII century. It would mean the return to real Economics.