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<div class="header reader-header reader-show-element" dir="ltr"> <font
size="-2"><a class="domain reader-domain"
href="https://www.counterpunch.org/2019/03/05/financial-imperialism-the-case-of-venezuela/">https://www.counterpunch.org/2019/03/05/financial-imperialism-the-case-of-venezuela/</a></font>
<h1 class="reader-title">Financial Imperialism: the Case of
Venezuela</h1>
<span class="post_author_intro">by</span> <span
class="post_author" itemprop="author"><a
href="https://www.counterpunch.org/author/jack-rasmus/"
rel="nofollow">Jack Rasmus</a> - March 5, 2019</span></div>
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<div itemprop="articleBody">Invasion of Venezuela by US and
its proxies is just around the corner! This past week
vice-president Pence flew to Colombia once again—for the
fifth time in recent weeks—to provide final instructions
to US local forces and proxy allies there for the next
step in the US regime change plan.
<p>Evidence that the ‘green light’ for regime change and
invasion is now flashing are supportive public statement
by former president, Barack Obama, and several high
level US Democratic party politicians and candidates,
directly attacking the Maduro regime. They are
signaling Democrat Party support for invasion and regime
change. Events will now accelerate—just in time perhaps
to coincide with the release of Mueller Report on Trump.</p>
<p>Behind the scenes it is clear, as it has been for
months, that US Neocons are once again back in charge of
US foreign policy, driving the US toward yet another war
and attempt at regime change of a foreign government.</p>
<p><strong>US Strategy in Brief</strong></p>
<p>The US Neocon-led strategy is increasingly clear:
establish a ‘beach-head’ on the Colombian-Venezuelan
(and Venezuelan-Brazilian) border under the guise of
providing humanitarian aid. Use the aid to get
Venezuelans on the border to welcome the US proxy forces
to cross over. Set up political and military structures
thereafter just inside the Venezuelan borders with
Colombia and Brazil, from which to launch further
similar efforts deeper into Venezuela. Repeat this
province by province, step by step, penetrating
Venezuela space until enough local units of the
Venezuelan military change sides and convince one or
more of the Venezuelan military hierarchy to join them.
Establish a dual state and government within and along
the border of the Venezuelan state this way. A breakaway
State and dual power within the country. Make it appear,
by manipulating the media, that the Venezuelan people
are rising up against the Maduro government, when in
fact it is US proxy forces invading and using
opportunist local politicians, military, and others in
the ‘conquered’ zones, as the media covers for their
invasion.</p>
<p>The main ideological justification being used for the
invasion and regime change is that the Maduro government
has grossly mismanaged the Venezuelan economy and driven
its people into poverty. With Democrats now joining
Trump and Republicans in support of invasion, the
liberal mainstream US media, as well as the rightwing
alternative media, are both pushing the same line, to
blunt US opposition to invasion and yet another war
before the final military assault is launched. Somehow
the democratic elections less than a year ago, which
returned the Maduro government to power, did not
represent the ‘will of the people’. Explanations how
they did not are thin and unconvincing, moreover. Nor is
any explanation given how US policies and actions have
played the central role in destroying Venezuela’s
currency and economy. And the financial measures used to
destabilize the economy are especially opaque.</p>
<p><strong>Financial Imperialism: The Case of Venezuela</strong></p>
<p>Venezuela today is a classic case how US imperialism in
the 21<sup>st</sup> century employs financial measures
to crush a state and country that dares to break away
from the US global economic empire and pursue an
independent course outside the US empire’s web of
entangling economic and financial relations.</p>
<p>Here’s how US ‘financial imperialism’ has worked, and
continues to work, with the intent of assisting regime
change in the case of Venezuela.</p>
<p>In a world where US Capitalism is the dominant hegemon
the US currency—the dollar—is the centerpiece of the US
global economic empire. The dollar serves as the global
trading currency as well as the global banking reserves
currency. More than 85% of all global trade (export and
import) is done in dollars. Certain commodities, like
global oil and oil futures contracts, are traded
virtually only in dollars. Recently more countries have
begun to peg their own currency to the dollar, allowing
it to move in tandem with the dollar. Some have even
eliminated their currency altogether and now use only
the US dollar as their domestic currency. Increasingly
as well, more countries are issuing their domestic bonds
in dollars (i.e. dollar denominated bonds). And their
central banks follow the US central bank, the Federal
Reserve’s, policy as it raises or lowers US interest
rates that in turn cause the US dollar to rise and fall.
They do so even if rising US interest rates mean rising
rates in their own economies that precipitate recessions
and mass unemployment. These are all examples of the
growing financial integration with the US Imperial State
and economy.</p>
<p>But even those economies that maintain their own
currency are at the mercy of the US dollar. Since the
dollar is the global trading and reserves currency,
whenever the dollar rises in value due to US monetary
policy changes, or US inflationary pressures, or just
changes in supply or demand for the dollar, the
currencies of other countries fall in value. As the
dollar rises in value, other currencies fall. That’s how
global exchange rates work in the 21<sup>st</sup> century
global US empire where the dollar is the
trading-reserves currency. Other currencies—the British
pound, Euro, and even less so the Japanese Yen or China
Yuan—are still largely insignificant as reserves or
trading currencies. And it appears very unlikely they
will soon replace the dollar—one of the key pillars of
the US empire.</p>
<p>The US has the power to engineer a collapse in a
country’s currency. A collapse in its currency means the
price of imported goods rises rapidly, especially those
goods it can only be obtained by imports—i.e. medicines,
critical food commodities, intermediate business goods
necessary for domestic manufacturing, etc. Accelerating
import inflation in turn leads to domestic businesses
cutting back production due to lack of affordable
resources, commodities, or parts. Mass layoffs follow
production cutbacks. Rising inflation brought on by
currency collapse is thus accompanied by rising
unemployment. Wage income and consumption in turn
collapse and thereafter the economy in general.</p>
<p>Widespread shortages of key imports, inflation, and
domestic production decline and unemployment brought on
by the shortages and inflation simultaneously lead to
social discontent and loss of support for the
government. Opposition groups and parties proclaim
these problems are due to the mismanagement of the
economy by the government, or corruption by its leaders,
or just socialist policies in general. But in fact the
economic crisis—i.e. shortages, inflation, production,
unemployment—is traceable directly to the root cause of
the collapse of the currency engineered by US
imperialist policies intent on crashing the economy as a
prelude to regime change and economic reintegration to
the US global economic empire.</p>
<p>There are many ways the US can, and does, cause a
collapse of a country’s currency. One set of measures
are designed to cause a severe shortage of dollars in
the target country’s economy.</p>
<p>A shortage of dollars drives up the value of the US
dollar in the target economy which, in turn, drives down
the value of the country’s own currency. The US has
been engineering a collapse of Venezuela’s currency, the
Bolivar, now for years—first by causing dollars in
Venezuela to flow out of the country and, secondly, by
measures preventing Venezuela from obtaining dollars
from abroad.</p>
<p>US policy over the last several years at least has been
to force US companies doing business in Venezuela to
repatriate their dollars back to the US or else divert
them elsewhere globally among subsidiaries. Or just to
leave Venezuela and take their dollars with them. US
policy has also been to publicize and promote wealthier
Venezuelans with dollars to take them out of the country
and invest them in Colombia, where the US has arranged
an online investment firm with the assistance of its
Colombian government ally. Rich Venezuelans have been
encouraged as well to send their money to Miami banks.
And to move there in large numbers, which they have,
taking their dollars with them or dumping their Bolivars
in exchange for dollars. The outflow of dollars from
Venezuela has raised the value of dollars that remain in
Venezuela on the black market there, thereby helping to
depress the value of the Bolivar in Venezuela even
further.</p>
<p>These measures pale, however, to US imperial efforts to
prevent Venezuela from obtaining dollars in global
markets in an effort to try to offset the outflow of
dollars from the economy.</p>
<p>For example, the US has taken action to prevent US and
global banks from lending dollars to Venezuela, or from
participating in underwriting and insuring Venezuelan
bond issues which would also raise dollars for Venezuela
if allowed. Bank loans and bond funding thus dry up,
depriving the government of alternative sources of
dollars. More dollar shortage; more Bolivar domestic
currency collapse—i.e. more expensive imports, more
inflation, more shortages, declining production, rising
unemployment….more discontent.</p>
<p>The main effort by which the US is attempting to
deprive Venezuela of dollars is to impose sanctions on
other countries that try to buy Venezuelan oil. Oil
sales are the number one source of the country’s dollar
acquisitions, since all oil trade is done in dollars and
Venezuela depends on 95% of all its government revenues
from selling its oil. The US imposes sanctions on would
be buyers and thus cuts off access to dollars, as it
simultaneously through other policies works to encourage
dollar flight out of Venezuela and cut off bank loans
and bond issuance by the country. And if the prior bonds
and loans were ‘dollar denominated’, then the lack of
dollars to pay the interest and principal coming due
leads directly to defaults and in turn to business
collapse and even more unemployment.</p>
<p>Venezuela has turned to selling its oil to China and
Russia and a few other countries. It has been forced to
resort to paying its interest and principal on past
loans from these governments with shipments of oil
instead of payments in dollars. As the US turns to
sanctions as an economic ‘weapon’ to enforce its will on
other countries, which it has been doing in recent
years, more countries are become aware of the tactic and
are taking countermeasures. They are dumping dollars (or
reducing their purchases of dollars in world markets)
and buying gold. China and Russia are leading this way,
while experimenting with non-currency dependent trade.</p>
<p>Another recent move by the US to deny Venezuela dollars
and collapse its currency has been to seize the
Venezuelan oil distribution company, CITGO in the US.
Its remittances back to Venezuela have been in dollars.
By seizing CITGO, the US deprives the country of yet
another source of dollars, with which Venezuela might
otherwise have been able to purchase imports of food,
medicines, and other economically critical goods. So
Venezuelans in this case are clearly forced to forego
these critical imports due to US policy—not due to
economic mismanagement by its government. Moreover,
adding insult to injury, the dollar funds from CITGO
seized by the US are being delivered to the Venezuelan
government’s opponents and its hand-picked ally of the
US, Guido. The opposition now gets to finance its
counter-revolution with the money formerly remitted to
Venezuela. The counter-revolution is financed at the
expense of critical goods and services that otherwise
might have been made available to the Venezuelan people.</p>
<p>Seizure of the CITGO asset is not the only such example
of dollar deprivation. Other assets in the form of
inventories, investments, cash in US banks, etc. are
also being impounded. And not just from the Venezuelan
government. Individual Venezuelan companies and
individual citizens have been having their assets in the
US impounded as well. And the US is increasing its
pressure on foreign governments to impound and seize
assets as well—of the government, businesses, and
citizens.</p>
<p>The impoundment and seizure has recently been extended
as well to Venezuelan gold stocks held offshore in other
countries, in direct violation of international law.
Recently the US company and mega bank, Citigroup, has
been forced to withhold Venezuelan gold in violation of
its contracts with the country. The Bank of England has
also been asked, and is complying, with the US demand to
freeze Venezuelan gold deposited in the UK. And
countries like Abu Dhabi, where gold is traded globally,
have been asked to stop trading in Venezuelan gold.
Gold is a substitute money for the US dollar. So
preventing gold access to Venezuela is like preventing
dollar access as well. With its gold, Venezuela could
more easily buy dollars, or trade for goods directly,
than with using Bolivars that are falling in value and
sellers are less likely to take as payment.</p>
<p>Countries with economies whose currency is seriously
declining in value are able to get a loan to stabilize
its currency from the International Monetary Fund, the
IMF. Recent examples are Argentina, Turkey, South
Africa, and even Pakistan. But the IMF is an institution
set up by the US in 1944. The US maintains with its
close European allies a majority vote on IMF decisions.
The IMF does nothing the US does not approve. Its
mission is to lend to countries in need of stabilizing
their currencies. The IMF, however, as an appendage of
the US global empire, has refused to lend Venezuela
anything to help stabilize its currency.</p>
<p>This is in contrast, for example, to the record loan of
more than $50 billion recently provided to Argentina
once that country put in its current business and
US-friendly Macri government. (The record IMF loan, by
the way, was so that Argentina could pay off debts owed
to US and other speculators in the early 2000s. So
Argentina saw little of that $50b. What the payoff did
enable, however, was for Macri and other Argentinian
bankers to go to New York to get new loans from US banks
once it repaid the speculators, from which Macri and
friends no doubt personally benefitted immensely).</p>
<p>As the Venezuelan currency collapses due to US arranged
dollar shortages, Venezuela must print even more
Bolivars to enable it to purchase what goods from abroad
it might still be able to buy. A collapsed currency
means the price of imported goods rises
proportionately. So more Bolivars are needed to buy the
goods that are continually rising in price. Printing
more Bolivars adds to the supply of Bolivars in the
economy which raises domestic price inflation even
further. But the excess printing is in response to the
currency collapse which is engineered by the dollar
shortage and the falling exchange rate in the first
place. The over supply of Bolivars is not due to
mismanagement; it is due to the shortage of dollars and
the desperate effort by the Venezuelan government to
somehow pay for inflating import goods.</p>
<p>The falling price of crude oil in 2017-18 added further
pressure on the Bolivar. The collapse of oil prices
globally appears unrelated to US policy. But it wasn’t.
The oil Venezuela has been able to continue to sell,
mostly to China or Russia, declined by 40% in price in
2018. The global oil deflation of 2018 thus generated
less oil revenue for the country and thus fewer dollars.</p>
<p>But that too was due indirectly to US policy and
economic conditions. The collapsing price of oil in
2018 is directly attributed to US shale oil producers
raising their output by more than a million barrels a
day, which increased the world oil supply and depressed
world oil prices. The US then attempted to manipulate
world oil output with Saudi Arabia but that exacerbated
the over-production and deflation problem still further.
Here’s how: The US attempted to impose sanctions on
Iranian oil in 2018. Saudi Arabia believed it would
capture the customers that Iran would lose, and
therefore it, Saudi Arabia, also raised its output of
crude as US shale producers raised theirs. But Iran was
able to continue to sell its oil, as US sanctions broke
down. The result of the US shale overproduction plus
Saudi overproduction was a 40% collapse in world oil
prices in 2018 that further deprived Venezuela of much
needed government revenue—apart from US sanctions on
Venezuela oil sales.</p>
<p>US monetary policy in 2018 further exacerbated the
currency crisis in Venezuela—as it did elsewhere in
Latin America and emerging markets in general. In
2017-18 the US central bank launched a policy of raising
interest rates. Since other world central banks respond
to the US central bank, world rates began to rise as
well. Rising US interest rates caused a rise in the US
dollar, and as the dollar rose in 2017-18 emerging
market currencies fell. They fell for Venezuela in part
due to this effect, as well as due to other causes
mentioned.</p>
<p>Falling currencies precipitate what is called ‘capital
flight’ out of the country. Less money capital means
less available for investment and thus lower production
output and more unemployment. So currency collapse
precipitates not only inflation but recession as well.
To prevent the capital fight, emerging market economies
raise their own domestic interest rates. This led to
recession, for example, throughout Latin America in
2017-18. Capital flight out of Venezuela has been
significant since 2016, as wealthy Venezuelans sent more
of their dollars out of the country to Miami, thus
exacerbating dollar shortages in Venezuela and further
driving down the value of the Bolivar left behind.</p>
<p>US sanctions on other countries, banks, and companies
offshore are designed not only to prevent Venezuela
access to dollars and money capital offshore. Sanctions
also target real goods trade, like oil and other key
commodities. But there’s another means by which the US
shuts down the flow of real goods into and from a
country, causing shortages of critical goods. It’s the
US controlled international payments exchange system,
called SWIFT. This is where US banks arrange the
exchange and transfer of payments for goods and services
by converting from one currency to the other and
transferring the funds from one bank to another across
countries. The US has been preventing Venezuela from
normally using the SWIFT system. So even if another
country is willing to buy Venezuela goods, including
oil, and exchange Bolivars for its own currency, it is
prevented from doing so by the US bank-controlled SWIFT
system.</p>
<p><strong>Summing Up</strong></p>
<p>Financial imperialism has been waged against Venezuela
for decades, but the attack on Venezuela employing
financial measures has recently intensified as the US
neocons and imperialists have accelerated their plans to
launch a more direct attack by political means,
including military, to force regime change in Venezuela.
At the center of the on-going, and now intensifying,
financial warfare against the country by the US are
measures designed to destroy Venezuela’s currency.
Imperialism is often thought of as military conquest and
colonialism. That’s 19<sup>th</sup> century British and
European imperialism. But the American Empire in the 21<sup>st</sup> century
does not need colonialism. It has a more efficient
system for forcing the integration of other economies
and for extracting value and wealth from the rest of the
world. The US empire is increasingly knitted together
in the 21<sup>st</sup> century by a deep web of
financial relationships that afford it multiple levers
of economic power it can pull if and when it desires.
And when those economic and financial levers prove
insufficient to overthrow domestic forces and
governments that remain intent on pursuing a more
independent path outside the Empire’s economic and
political relations, then the breakaway State is
attacked more directly once the economy is sufficiently
wrecked. Such is the case of Venezuela today. Financial
imperialism has paved the way for more direct political
and military action.</p>
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