Chavez to Use Virtual Currency for Some Trade

By Christopher Toothaker
The Associated Press
Thursday, January 14, 2010

http://www.huffingtonpost.com/huff-wires/20100114/lt-venezuela-leftist-bloc/

Venezuela plans to start using a new virtual currency this week to facilitate trade with a bloc of allies in Latin America and the Caribbean that President Hugo Chavez has assembled to counter U.S. influence in the region.

Chavez has hailed the electronic currency -- dubbed the Sucre and valued at $1.25 -- as a unique means of helping Venezuela, Cuba and other allied countries reduce their dependence on the U.S. dollar for commerce.

The Sucre was officially launched by Venezuela's government with a law's publication in the Official Gazette on Wednesday. Sucre is a Spanish acronym for the Unified Regional Compensation System.

It is to be used between members of the Bolivarian Alternative for the Nations of Our America, or ALBA, a leftist bloc that also includes Cuba, Bolivia, Nicaragua, Ecuador, Dominica, Antigua and Barbuda, and St. Vincent and the Grenadines. Venezuela and Cuba started the group as a socialist-oriented trade alliance in 2004.

Analysts say the electronic trading mechanism won't significantly diminish the reliance of ALBA members on the U.S. dollar because commerce within the bloc is minimal.

The Sucre won't be printed or coined; instead, it will be used solely as a virtual currency to manage debts between governments.

Venezuela's finance minister, Ali Rodriguez, said Wednesday that Chavez's government plans to make its first transaction using the Sucre this week, when it purchases rice from Cuba. The state news agency reported that he called it a way "to break the dependence on the dollar" in trade.

Jose Guerra, an economist and former manager at Venezuela's Central Bank, said the Sucre "isn't going to have a major impact for the members of the ALBA" because the bulk of their trade is centered on trade with the United States and the European Union.

"Chavez says his allies will have a true alternative to the dollar, but it's impossible to substitute the dollar," Guerra said.

Guerra estimates that about 2 percent of the oil-producing country's exports are shipped to ALBA-member nations, and about 2.1 percent of its imports come from members of the trade bloc.

The United States remains Venezuela's No. 1 trade partner, with annual trade reaching more than $20 billion last year despite the often-rocky diplomatic relations between Caracas and Washington.

In comparison, Venezuela's trade with communist-led Cuba -- the South American nation's most active trade partner within the ALBA -- is roughly $3.6 billion, according to estimates by Jorge Pinon, an energy fellow at the University of Miami's Center for Hemispheric Policy.

Pinon said putting the Sucre into use is mostly a symbolic act.

"It's essentially an electronic price-transfer mechanism that really doesn't have any important economic impact," Pinon said. "The amount of trade between these countries using the Sucre will be limited. It's more political than anything else."

For further reading:
"Chavez’s Anti-Dollar Currency to Debut at $1.25", Bloomberg, January 14, 2010

Leftist Regimes Agree to New Currency

By Alex Newman
The New American
Tuesday, October 20, 2009

http://www.thenewamerican.com/index.php/world-mainmenu-26/south-america-mainmenu-37/2123-leftist-regimes-agree-to-new-currency

Adding to pressure mounting against the U.S. dollar, left-wing Latin American leaders gathered in Cochabamba, Bolivia, over the weekend for the seventh Bolivarian Alliance for the Peoples of Our Americas (ALBA) summit and agreed to create a new regional currency in a bid to stop using American Federal Reserve Notes, according to foreign news reports.

Initially the new fiat money will be used to settle foreign and commercial payments among member nations, with the goal of eventually creating a unified monetary system. “That this may be the start of creating a new currency that will serve between the countries, a currency at the Latin American level, and for this to succeed, it is necessary to bring about other conditions which we evidently do not yet have today,” said Bolivian Economy and Finance Minister Luis Acre, noting that it took the European Union 40 years to create a true monetary union.

The new “sucre” — short for Unified System of Regional Compensation in Spanish, but also named after South American independence leader Jose Antonio de Sucre who fought against colonial Spain with the more well-known Simon Bolivar — aims to challenge the hegemony of U.S. Federal Reserve Notes. It will go into effect in early 2010, though some Caribbean island members will reportedly remain in the Eastern Caribbean Currency Union rather than adopt the new sucre.

“It is an important step for the sovereignty of our people and in liberating ourselves from the dictatorship of the dollar, from the neo-liberal dictatorship and the dictatorship of the transnational [corporations],” said the self-declared socialist President of Venezuela, Hugo Chavez. He called the new currency a “revolution of paradigms.”

This most recent attack on the U.S. dollar’s global-reserve status comes on the heels of a report about a secret plot against the dollar involving Gulf Arab states, Russia, China, France, and Japan. According to the U.K.'s Independent, the Gulf countries are planning to create their own regional currency and stop pricing oil in dollars. The United Nations recently called for an end to the dollar’s position as well.

At the summit ALBA also agreed to implement further sanctions on Honduras because that country's government ousted its leftist President when he sought to unconstitutionally extend his term in office. It also called for the unconditional return of deposed President Manuel Zelaya while urging world nations to reject the results of a planned presidential election there. "No electoral process held under the coup-installed government, or the authorities that emerge from it, can be recognized by the international community," read a joint statement.

According to the final summit statement, leaders also condemned Colombia’s military base agreement with the United States, though they failed to adopt Chavez’s proposition to form a military alliance for defending against the “Yankee empire.” The organization also said it would consider the creation of state-owned multinational corporations to compete globally in mining, trade, energy, agriculture and other sectors.

The assembled leftist regimes called for a UN declaration of rights for “Mother Earth” against the capitalist system and the creation of an “International Tribunal for Climate Justice” to force America and Europe to hand over more money for having emitted carbon dioxide. They also agreed to bypass the World Bank’s International Center for Settlement of Investment Disputes by creating their own international arbitration court. The next ALBA meeting is scheduled for December and will be held in Cuba.

The organization, first proposed in 2001 and renamed this year from Bolivarian Alternative for the Peoples of Our America, consists of Venezuela, Cuba, Bolivia, Ecuador, Nicaragua, Honduras, Antigua and Barbuda, Dominica, and Saint Vincent. It seeks to promote regional and economic integration while providing an “alternative” to U.S.-led “free-trade” agreements.

Russian news reports noted that Russian National Security Council chief Nikolai Patrushev was present at the meeting. President Dmitry Medvedev also promised closer Russian cooperation with the organization. Delegations from several other countries including Haiti, the Dominican Republic, Guatemala, and more attended the summit as well.

“Let’s not kid ourselves. This is a subtle step to bring about a global fiat currency by the people who are planning to create a One World Government,” opined LewRockwell.com blogger David Kramer. “The ‘retaliation’ for the Sucre will be a push for the ‘Amero.’ (That’s the US/Canada/Mexico single fiat currency that has been in the planning stages for decades.) By gradually having fewer and fewer fiat currencies in the world, eventually our One World Government planners will claim that we might as well have a global fiat currency to really ‘facilitate’ global trade.”

The news about the new currency went virtually unnoticed by the American media, with only a half a sentence at the end of an Associated Press article even mentioning the agreement. Foreign press, however, gave widespread coverage to the sucre and its implications.

The ALBA agreement is yet another attack on the U.S. dollar, which combined with others represents a serious threat to American standing in the world. While the radical leftist regimes may account for only a small percentage of the global economy, international pressure on American Federal Reserve Notes and reckless monetary policy by the U.S. central bank may culminate in the perfect storm against the American economy, causing massive inflation and devaluation that will wreak havoc on the dollar’s purchasing power.

Of course, such a scenario will eventually require a “solution.” But the proposals currently being contemplated by “world leaders,” including the Amero or even a global fiat currency, would be a complete disaster for America and for human freedom. The constitutional and proper solution is to abolish the non-federal reserveless central bank and institute sound money. This will require a dedicated effort by a significant portion of Americans, but it must be accomplished or the consequences will be dire.

For further reading:
"End of the Dollar 'Dictatorship'? Hugo Chávez and Latin Leaders Hope to Bury the Greenback", Nikolas Kozloff, October 23, 2009
"Antigua-Barbuda government denies signing on to the SUCRE", Caribbean Net News, October 21, 2009

ALBA Member States Plan New Currency

Jesse's Café Américain
Sunday, October 18, 2009

http://jessescrossroadscafe.blogspot.com/2009/10/regional-currency-sucre-for-central-and.html

This is not the first time ALBA, Bolivarian Alliance for the Peoples of the Americas, has discussed plans for a regional currency, and the proposal does not yet seem to be concrete to us. The countries have agreed in principle to proceed, with the details to be worked out over the next year.

Nevertheless, it does start to chip away at Wall Street's usual answer to any dollar challenge, "Where else will they put their reserves, what else will they use for trade if not the US Dollar?" This has always seemed to be among the most arrogant, self-centered observations of an empire in recorded history. "Without us, who will tell them what to do, who will lead them, who will manage their money?" Were even the British at the turn of the 19th century that self-deluded, so blinded by the rationale of the white man's burden to manage other people's affairs?

Ecuador’s currency was called the sucre before it shifted to the US dollar nearly a decade ago. Jose Antonio de Sucre was an early 19th century South American Independence leader who fought alongside Simon Bolivar. Sucre is also the capital of Bolivia.

In this proposal, it is known as the Sistema Único de Compensación Regional (SUCRE), a new currency for intra-regional trade, to replace the US dollar in trade among several countries: Venezuela, Bolivia, Cuba, Ecuador, Nicaragua, Honduras, Dominica, Saint Vincent and Antigua and Barbuda.

Most of these countries have already withdrawn their participation with the World Bank, and it's Center for International Trade disputes, which had sought to arbitrate disagreements among the countries and several western energy firms.

This may be important because Venezuela is a major source of oil imports to the US market. Will Chavez start demanding payment for his oil in the SUCRE? Will the US begin to discover the nuclear threat from Venezuela? Or merely encourage its neighbors and internal groups to challenge its sovereignty?

The exact composition of the SUCRE has not yet been disclosed, if it has been decided. Until that happens, and a firm timeline is disclosed, this is merely a proposal that has been discussed before.

The proposed sucre does not affect any discussions (if any are still continuing) with regard to the amero, which as we understand it is a potential North American regional currency amongst Mexico, the US, and Canada. If we were Canadian, we would resist that proposal with all the resources at our disposal.

But make no mistake, there are alternatives to the dollar and they are being discussed around the world. A broader based alternative that would include China and Russia among others would have more 'teeth.' Some composition including gold and silver backing of some sort, if it is sufficiently revalued higher, would give any regional currency a greater international acceptability.

It made an impression, by the way, that this news story was first picked up here out of China, and not from any US mainstream news outlets.

And speaking of strategic moves, the US recently sought to obtain seven military bases in Colombia, strategically located in the midst of the ALBA countries.

For further reading:
"New ALBA Trading Currency Dawns at Bolivia Summit", Carin Zissis, October 16, 2009
"Pacha, a new currency of Latin American countries to replace dollar", Ecommerce Journal, October 16, 2009
"International Financial Crisis and End of the Dollar Hegemony: USA versus ALBA", Jutta Schmitt, September 19, 2009
"The Case for the Amero: The Economics and Politics of a North American Monetary Union", Herbert Grubel , Fraser Institute, 1999

International Financial Crisis and End of the Dollar Hegemony: USA versus ALBA

By Jutta Schmitt
Tuesday, September 15, 2009

The truth now is: "He who prints the money makes the rules"-- at least for the time being. (...) The goals are (...): compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses. -- Ron Paul

In November last year, at the third extraordinary Summit of Heads of State and Government of the Bolivarian Alternative for the Peoples of Our America (ALBA) -- Peoples' Trade Agreement (TCP), the presidents came together with the intention to confront the crisis of the global capitalist system.

Considering the volatility of the international financial system, the untenable situation of the capitalist model with its destructive logic, and the absence of proposals and categorical measures by the big global power centers in order to confront the crisis, the presidents of the ALBA member States shared the opinion that the international financial system cannot simply be re-founded but has to be replaced by a different one, based on solidarity, stability, ecological sustainability and social justice.

The Heads of State concurred with each other in that the countries of our region, if their response to the crisis intends to be efficient, definitely have to break lose and protect themselves from the grip of transnational capital so as to be able to take a different direction that does not make them dependent on the eroded international economic and financial system, nor on the US dollar hegemony, artificially maintained and literally imposed by force. To this effect, they agreed on creating a Latin American monetary zone that would, in its first phase, comprise the ALBA member States and it was further detailed that the monetary zone would count with a Chamber for the Compensation of Payments and a Stabilization and Reserve Fund, financed by the contributions of its member States.

What concerns the economic policies of the future Latin American monetary and economic zone, the Heads of State agreed on the implementation of an expansive policy of demand stimulation, Keynesian in nature, promoting investments to further the development of complementary economic activities. (1)

Furthermore, the presidents agreed that the Latin American monetary zone would issue its own currency, the 'Unified System of Regional Compensation' or Sucre, in order to gain independence from the international financial markets and to break with the eternal dependency on the US Dollar as the main currency for trade and financial transactions, prevalent up to now in the trade relations between our Latin American countries.(2)

The financial operations with the new currency are expected to begin next year, and there is trust that the ALBA member States can count on this instrument from the very 1st of January 2010 on.(3) Therewith, an extremely important step will be taken on the road to the necessary dismantlement of the present international economic and financial system which remains characterized by the hegemony of the US Dollar, enabling the United States to import goods and services from all over the world in exchange of a printed piece of green paper which is practically worthless.

The fact that the dollar today has no other real value than the value of the paper its printed on, makes the continuity of its world hegemony a matter of life and death for the United States of America.

In a condensed overview of the history of the rise and fall of the US dollar, it is pertinent to remind the reader that after the Second World War the North American economy was the most powerful and solid of the entire world. It had enormous capacities of exportation and credit, which allowed it to finance the reconstruction of Western Europe through the famous Marshall Plan, in view of fostering a future European market to absorb US exports and investments, as well as containing the possible influence of the Soviet Union in Western Europe.

The US Dollar transformed itself into the world's unchallenged, leading reserve currency, within the framework of the Bretton Woods international monetary system under the gold exchange standard.

The Dollar figured as the anchor or reserve currency, convertible in gold, and fixed exchange rates were established between the different international currencies.

However, the growing trade deficit of the United States, combined with an inflationary monetary policy, especially during the Vietnam War, lead to the collapse of the Dollar's convertibility in gold, which ended with its unilateral suspension by the Nixon administration in 1973. Therewith, the original Bretton Woods system had collapsed and the dollar suffered a sensitive decline as international reserve currency, although it did not really get challenged by other currencies at that moment, given the absence of a sufficiently strong competitor who could have occupied this position.

The breakdown of the Bretton Woods system lead to the devaluation of the dollar and thus caused a decrease of revenues from oil for the OPEC countries, as oil was priced in dollars only. This fact, in addition to the 1973 Jom Kippur war in the Middle East, lead to the rise of oil prices and the oil crisis of 1973/74, which, in turn, generated the phenomenon known as the 'recycling of petro-dollars' that ended up in strengthening once more the position of the US dollar.

In the absence of an alternative international reserve currency or the existence of a petro-currency basket, the dollar got 'anchored' to oil in a kind of 'oil-standard.' which enabled it to perpetuate itself, in spite of the enormous and growing balance of payments deficit of the US, as the primary international reserve currency and the only petro-currency, practically until our days. This panorama only had begun to change with the rise, at the beginning of the new millennium, of a strongly competing international reserve currency, the euro, and the displacement of the world economic center from North America to Europe and Asia.

Today, with the collapse of the international financial system and the generalized capitalist crisis, the panorama looks troubling for the US dollar.

Until now, two main factors have helped sustain the privileged position of the dollar in the world: Firstly, the capital flows towards the United States as a result of the re-investment, in the United States, of the commercial surpluses obtained by nations and investors through their trade with the US. Secondly, the exclusive pricing, on a world wide scale, of oil transactions in US dollars, being this factor of vital importance to the United States for guaranteeing the perpetuation of their currency as the leading and indispensable international reserve currency. This allows the US to continue to encumber itself with debts denominated in their own currency, for which the US holds the exclusive printing monopoly. This means that the Federal Reserve has printed and continues to print dollars in the quantity and at the time it deems necessary, practically without restrictions, apart from the capacity and will of others to absorb them on a global scale, and the inflationary pressure generated by this on the domestic as well as international level.

As if this were not enough, the immense capital flows towards the United States from abroad not only have financed its trade and balance of payments deficits, but, and perversely so, also the costs of its military spending which are the highest of the planet. This is how, on the one hand and given the astronomical costs of its military spending, US military supremacy would come down like a house of cards if the dollar would lose its role as the world's leading reserve and petro-currency; and on the other hand, it is the same US military supremacy by virtue of which the United States have been able to defend, in a 'preemptive' manner, their currency and its privileged position in the world on which the whole deficit-existence of the United States of America has comfortably rested until now.

In the words of US congressman, Ron Paul: "Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become." (4)

The price that a part of the world had to pay so that this perverse system would maintain itself intact, has expressed itself in pressures, coercion, threats, aggression wars, military coups and destabilizing operations, especially in the cases of those countries which, in one way or the other, have tried to establish another kind of financial framework which could have led, eventually, to the demise of the dollar hegemony.

Remember the case of Iraq with the decision of Saddam Hussein, in November of the year 2000, to shift Iraq's international reserves from the dollar to the euro and to price the sale of Iraqi oil in euros; a situation which was immediately reverted by the North American invaders once Iraq had been attacked and occupied in 2003.

There is the case of the continuous threats against the Islamic Republic of Iran, a country which in the year 2002 began to shift a big part of its international currency reserves from dollars to euros and which launched the project of an Iranian Oil Bourse to be set up on the island of Kish, which would price the sale of Iranian oil in euros and other currencies with exception of the dollar. The project was postponed various times for unknown reasons until the Iranian Oil Bourse finally opened its operations in February last year.(5)

And then, there is the notorious case of our Bolivarian Republic of Venezuela, victim of a military coup in the year 2002 and since then, of continuous destabilization operations which point to an eventual direct military intervention by the US Armed Forces, from Colombian territory; not only because of the appetite the government of the United States has for the natural and energy resources of Venezuela and the region, but also because President Hugo Chavez has pronounced himself in the past in favor of the pricing of Venezuelan oil in euros and other currencies, and also has traded certain amounts of Venezuelan oil for its respective equivalent in goods and services with other countries of the region, thus avoiding the use of the US dollar in inter-regional trade transactions.

Russia and China (which holds the world's largest dollar reserves), have long considered that the dollar does not fulfill a meaningful role as the leading reserve currency and have proposed, at the last summit of the G-8 in July this year, that a new, supra-national unitary currency be implemented worldwide, based on a mixture of regional reserve currencies and considered to be indispensable to overcome the abysmal crisis of the international financial system.

The price that ultimately had to be paid for the artificial maintenance of the dollar hegemony on a global scale, has been the very collapse of the international financial system, paid, as always and naturally, by the workers of this world, who do not only see the future of the present generation of workers compromised, but that of many generations to come.

Even the United Nations seem to have woken up, given that the recently published annual report of the United Nations Conference for Trade & Development (UNCTAD) 2009, suggests the replacement of the US dollar by a new, leading world currency. (6)

And while a chorus of ever stronger voices is beginning to be heard, claiming for a new international financial order, our ALBA member countries, confident in their own strength, will and potentiality, are taking the first concrete steps in order to not only detach themselves from the dollar hegemony but to establish the parameters of a new kind of mutually beneficial and complementary trade relations.

It is in this context that we can better understand why Latin America, at this moment and apart from its natural and energy resources being coveted by the global power centers, adopts special importance for the United States.

A regional alliance like ALBA, with its own currency for trade and financial transactions, constitutes doubtlessly another nail in the coffin of dollar hegemony.

This is at least one of the reasons for which, in the near future, the government of the United States will be pointing its guns against us, from Colombian territory.

Jutta Schmitt is University of Los Andes (ULA) senior lecturer in political sciences.

Notes
(1) http://www.alternativabolivariana.org/modules.php?name=News&file=article&sid=3730

(2) ibidem.

(3) http://www.alternativabolivariana.org/modules.php?name=News&file=article&sid=5107

(4) Hon. Ron Paul of Texas Before the U.S. House of Representatives, February 15, 2006; http://www.house.gov/paul/congrec/congrec2006/cr021506.htm

(5) Oil Bourse Opens in Kish; http://english.farsnews.com/newstext.php?nn=8611290655

(6) http://www.unctad.org/Templates/Webflyer.asp?intItemID=1397&docID=11867