War and Economics II

How Economic Policy Influences War

As noted in Part I, Hue 1968 – War and Economics, Bowden gives a historical overview of Vietnam and its geopolitical role. Ho Chi Minh initially made positive overtures toward the U.S. at the end of WWII, but the U.S. supported the French colonialists. After the defeat of the French in 1954, the Geneva Accords temporarily partitioned Vietnam at the seventeenth parallel and called for an election in 1956 to reunite the country. It became apparent that Ho’s government had overwhelming support and would win. South Vietnam’s president, Ngo Dinh Diem, reneged on the election. The U.S. was not a party to the Geneva Accords and backed Diem in the newest front of the cold war.

In his 1978 book The Way the World Works, Jude Wanniski was unique in viewing the Vietnam War from an economic perspective. U.S. Keynesian economic advisors inflicted a policy of devaluation and tax increases that destroyed South Vietnam’s economy and lost the hearts and minds of the people long before our escalating military campaign would make it complete.  Until the U.S. forced a series of ruinous economic policies on Diem, he was clearly in the lead of winning over the people with capitalism in the south versus Ho’s communism in the north. When a political system impoverishes its people through errant economic policy within corrupt, crony capitalism, the fatal siren lure of socialism seems like a viable alternative. Wanniski describes the ruinous economic policies inflicted on Diem by U.S economic advisors.

We told the government of Ngo Dinh Diem we would withdraw military and economic aid unless they did what we told them to do. We told them to raise taxes on the rich and use the revenue to win the minds and hearts of the people with social giveaway programs. The tax rates were so high that the rich left the country with what capital they could assemble and went to Paris. As the urban economy fell apart, revenues collapsed. This occurred in January 1962. Six months later the U.S. economic team returned and told the government that it had to devalue the currency, the piastre. The consequent inflation wiped out what was left. That destroyed the urban economy. The rural economy was destroyed by “land reform” plans we shoved down the government’s throat. Big farms were broken up into little farms, the owners given government bonds that soon became worthless. The peasants who took over the little farms could not earn enough to pay for them. In a few years, the only land that remained loyal to the government was land that had not been “reformed.” When capitalism is destroyed, the people turn to socialism.


President Kennedy explicitly withdrew support from Diem, which meant to the Saigon military that American aid would be ended unless Diem were removed. The generals paid this price by assassinating Diem on November 1, 1963.

Kennedy was assassinated three weeks later.

The policy of tax increases and devaluation inflicted on Diem, which was the beginning of South Vietnam’s downfall, is the same economic poison that the IMF has been inflicting on emerging countries since the collapse of Bretton Woods and stable money. These economically impoverished countries become fertile ground for the next proxy war. This pretty much explains the African continent.  

The allied powers created the IMF after WWII. Its mission was to help member nations keep their currencies fixed to the dollar, which in turn was fixed to gold at $35/oz. Searching for a reason to continue to exist after the end of Bretton Woods, the IMF found its raison d’être inflicting economic poison on third world countries and the planet’s poorest people for the financial benefit of multinational banks and favored corporations of the military-industrial complex. 

Within the context of the Cold War, one can make the argument that the Vietnam War succeeded in blocking the expansion of communism—though at tremendous cost to the American psyche. Had we honored the 1954 Geneva Accords and left Vietnam alone, it is unlikely our relationship with Vietnam would be any different than it is today. Vietnam is a popular U.S. tourist destination with a growing economy that like other communist countries is commensurate with the level of capitalist reform. We will never know the extent of death and destruction that Ho Chi Minh’s communism, if left unfettered in 1956, may have inflicted on the Vietnamese people, but there is no doubt about the scars left by decades of war under American guidance and participation. Without our involvement in Vietnam, we may have spared Cambodia from the murderous reign of the Khmer Rouge who gained power from U.S. destabilization.

The larger lesson of Vietnam is that U.S. politicians seemed to have learned nothing from it. We continue to inflict the same economic poison on vulnerable countries through funding and support of the IMF and target U.S. military might on out of favor regimes without formal declarations of war. Successive presidents and congressional leaders from both parties have presided over perpetual war. Quagmires exist in Afghanistan, Iraq, and throughout the Middle East.  As if this is not enough, we are ginning up a new cold war with China and Russia.

The Mideast wars equally have roots in disastrous economic policy. With the termination of the Bretton Woods international gold standard, the dollar floated and immediately devalued. The first sign of inflation in any country is a rise in the price of gold in that country’s currency. Gold rose from $35/oz in 1971 to $850/oz by 1980. A rise in the price of all commodities soon follows a rise in the price of gold. During Bretton Woods, the price of oil remained stable at around $2.90 a barrel from 1946 to 1971. With dollar devaluation, the price of oil began rising in tandem. Conventional wisdom describes the 1973 oil shock as the result of an embargo led by OPEC. In reality, it was the natural result of dollar devaluation after abandoning the stable monetary reference of gold. If the U.S. were still on Bretton Woods today at $35 per ounce of gold, the price of oil would still be around $2.90 a barrel. This is impossible for most people to comprehend because demand-side Keynesianism monopolizes institutional economics at every educational level and does not recognize a monetary standard of reference. Only by understanding gold as the monetary standard of reference can one achieve clarity of economic events. 

Dollar devaluation resulted in the U.S. exporting its wealth to oil-producing nations with the Mideast at the epicenter. We enriched the Mideast Shiekdoms and their standards of living while our own stagnated or declined. Dollar devaluation and exportation of wealth to Mideast oil-producing countries were great business for favored U.S. corporations who received infrastructure bids to modernize the oil-rich countries. With continual dollar devaluation since 1971, the Middle East, with its vast oil reserves became the wealthiest real estate on the planet. The concurrent deal at the onset of dollar devaluation was that Mideast oil would be traded in dollars. The petrodollar was born, and the U.S. dollar cemented itself as the world’s reserve currency. 

By exporting our wealth to the MidEast through dollar devaluation, we funded the rise of our Islamic enemies. In return, we budget massive military expenditures to protect ourselves from enemies that we funded. It’s a double whammy. Enrich our enemies at our economic expense and fight perpetual wars while draining our blood and treasury with no end in sight.  The economics of war is the lifeblood of the deep state.  Synonymous with the military-industrial complex or the establishment, the deep state is a shadowy network of people inside and outside the government—formerly dismissed as a conspiracy theory—that is now openly tied to the unraveling attempt to negate Trump’s election.

The electorate has been turning out successive presidential and congressional leaders from both parties looking for responsible leaders to end the wars.  There is no difference in political parties when it comes to supporting the establishment’s desire for perpetual war. The electorate selected Trump for president as the candidate most likely to extricate the U.S. from war. Trump campaigned on ending Mideast wars and distinguished himself from other candidates in both parties with this issue. With the collapse of the Mueller investigation and its inability to substantiate Russian collusion, the deep state continues to expose itself as the establishment agents responsible for perpetual war. The apparent deep state coup attempt to remove Trump under the guise of Russian collusion is slowly moving toward some level of clarity and possible justice.

Democrat presidential candidate Tulsi Gabbard is another candidate challenging the establishment.  The establishment is apoplectic over her primary campaign promise to extricate the U.S. from its useless wars.  It is instructive to observe the dishonesty and outright venom on display by the MSM toward her candidacy.

Regardless of party affiliation, any politician who challenges the military-industrial complex will incur the wrath of the agents of the MIC and its corporate media toadies.  Similarly, Judy Shelton, Trump’s Federal Reserve Board nominee who favors a return to stable money, threatens the war machine. With stable money, the U.S. cannot hide the real cost of war through dollar devaluation. Stable money forces politicians to choose between justifying and funding useless wars or domestic priorities. Shelton’s confirmation should be a slam dunk—she has already been confirmed by the Senate for her current role as U.S. executive director for the European Bank for Reconstruction—but her advocation of a return to stable money is threat enough to rally the forces of chaos and attempt to squash her confirmation. 

Economics and war are intertwined. It was economics, not ideology, that collapsed communism. A centrally planned economic and political system cannot compete with a free market and free people. We continue on the same destructive economic path today with economic sanctions and tariff threats applied to countries when stable money and the free flow of capital and trade are the foundation for international cooperation and growth. We are repeating the economic mistakes that lost the support of the Vietnamese people and is now propelling us toward new, dangerous international conflict.

Hue 1968 – War and Economics

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