WASHINGTON, April 29 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events and position statements released by various think tanks. This is the first of several wrap-ups for April 29. Contents: Saudis and the U.S. future in the Middle East; dinars and the weakening dollar.
The Reason Foundation
Why bother leaving Saudi Arabia? The false promise of Middle East disengagement
By Tim Cavanaugh
LOS ANGELES -- In a move that will please critics of craven American foreign policy, the U.S. Air Force is reportedly planning to shift its major operations center in the Middle East from Saudi Arabia to Qatar. This move will help the embattled Saudi family, according to U.S. officials who tell The New York Times that "a visible American troop presence weakens the Saudi royal family rather than strengthening it because it only fuels the militant elements inside the country."
But what about a nearly invisible American troop presence? By the standards of military installations, the American presence at Prince Sultan Air Base is almost certainly the least obtrusive and obnoxious in the world. The airmen stationed there are more or less confined to the base at all times; they are famously forbidden even to take pictures that would identify the area, for fear that this visual reminder of an infidel presence on Saudi soil would enflame locals; they are shamefully deferential to that barbaric kingdom's medieval strictures.
Nor is there any truth to the claim that the American military presence is offensive because it is close to the "holy" cities of Mecca and Medina; the USAF base is located a mountain range, a desert, and several hundred miles away from these cities. The only way to make the case that there is an American presence in the "holy" land is to acknowledge the territorial integrity of Saudi Arabia -- a point the zealots making these claims, who don't believe in the existence of nation states at all, do not acknowledge.
To believe that the U.S. presence in Saudi Arabia is a great religious offense, you'd have to be, well, you'd have to be an insane religious fanatic. And you'd have to be something more than naive to think that trading this presence for a forceful occupation of a mostly hostile country directly to the north amounts to a homecoming.
Nonetheless, one of the fondest hopes of the war in Iraq has been that it would finally allow us to break our ties with Saudi Arabia, and in the process remove the most visible cause of the fanatics' hatred of the United States. It's a tempting goal in these days when even the most reasonable commentators sound like freelancers for Herb Mallard's Sauduction Web site.
The most recent sample comes in the May issue of The Atlantic, an article called "The Fall of the House of Saud," by former CIA field officer Robert Baer. Few of Baer's claims will be surprising to Saudi watchers, but his case against the royal family is compelling -- all the more so because he does not pretend there are any solutions to the structural problems he identifies.
But who needed convincing? No decent person can fail to be sickened by the Saudis and our relations with them.
The question is whether we are today any closer to ending these relations than we have ever been. Click here for a host of reasons why we're not, and here for the reassuring news that "the controversial alliance between Washington and the Saudi royal family is stronger than often portrayed, and will survive the aftermath of the U.S. military ouster of the Iraqi government."
So if disassociating ourselves from the disgusting Saudis is not an immediate benefit of the Iraq war, what about the new batch of fanatics we have inherited -- whose fanaticism, if of a somewhat different shade, is at least more photogenic than that of the Saudis?
"Only a fool could observe this spectacle and believe that the future of Iraq will be serene," wrote tough-guy reporter Pete Hamill after witnessing clips of last week's bloody self-flagellation exercises in Karbala.
Spin-free pundit Bill O'Reilly went Hamill one better. "Where is the worldwide outcry against fundamentalist Islam?" O'Reilly burst out in reference to the same spectacle. "Why is this violent culture deemed an acceptable form of behavior?"
Moderate Muslims, he demands, must denounce this kind of behavior. As always, of course, O'Reilly is wrong: At least one major Shiite leader specifically denounced this form of head-cutting during the celebration of Ashura, and strongly urges his followers to give it up. That leader is Sayyed Hassan Nasrallah, the general secretary of Hezbollah in Lebanon. Would O'Reilly consider Nasrallah a moderate?
The leaders of the Bush administration have kept notably cooler heads in the presence of this sort of fanaticism. The beauty of Secretary of Defense Rumsfeld is that he harbors no illusions about a serene future, for Iraq or for the United States. He knows, even if he doesn't quite come out and say, that we're going to be in the Middle East forever.
There will be no disengaging -- not from the Saudis, not from the Iraqis, not from the Israelis, not from anybody. This futureless land, where hatred, violence and madness constitute the coin of the realm, is our new home.
That guy with the bloody head? He's your new neighbor. Your children's children will be dealing with him. Say marhaba.
(Tim Cavanauh is Reason magazine's Web editor.)
The Ludwig von Mises Institute
(The LVMI is a research and educational center devoted to classical liberalism -- often known as libertarianism -- and the Austrian School of economics. LVMI seeks a radical shift in the intellectual climate by promoting the market economy, private property, sound money and peaceful international relations, while opposing government intervention.)
Dollar or Dinar?
By William L. Anderson
AUBURN, Ala.-- In the election of 2000, John Ashcroft managed to lose his Missouri seat in the U.S. Senate by losing to a dead man. However, in the last few weeks, we have seen the U.S. dollar do one better, as it has lost ground to what was supposed to be a dead currency, the Iraqi dinar, better known as the Saddam dinar, which portrayed the face of the missing Iraqi president. In both cases, the loser was thought to be invulnerable only to be bitten by reality.
When the first wave of hostilities ceased in Iraq (we shall see if a second wave appears later as Iraqis tire of the U.S. occupation), U.S. authorities made sure that dollars -- lots of dollars -- followed in the wake of the armed forces. The plan seemed to make sense; with the government of Iraq imploding, it was believed that the dinar would disappear with it, to be replaced by dollars, and at first glance that is what looked to be happening.
As The Wall Street Journal tells its readers, when U.S. forces entered Baghdad April 9, the dinar traded at about 4,000 to a dollar. Whenever U.S. personnel paid for anything in Iraq, it was in dollars, not dinars.
However, the dollar's apparent rise has gone south, as the Saddam dinar two weeks later traded at 1,800 to the dollar. To put it another way, the dollar lost more than half of its value to what surely has to be one of the weakest currencies in the world. The dinar, like the regime that printed it, was supposed to fade into history. Instead, it roared back to the point that it was even preferred, on the margin, to the mighty dollar.
With Saddam's picture all over the dinar, the United States looked upon this turn of events as something of a humiliation. For all the U.S. government's weaponry, all its tactics and bombs, its ability to overthrow governments and install new ones, and seemingly direct the course of history through sheer firepower, there is one thing that the United States was not able to do: abolish the operation of the economic laws of supply and demand.
The central bank having been bombed, the supply of dinars was limited and fixed, even as dollars flooded into the country. That led to the stunning result that the dinar grew in value as the dollar fell, and all the firepower in the world couldn't stop it, at least it has not yet.
To suspicious minds, at least one of the reasons for the hostilities in Iraq was the fact that the U.S. dollar has become a second-fiddle currency to the euro, at least when it comes to oil-producing countries accepting payment for petroleum. A stronger U.S. military presence in the Middle East supposedly would put a stop to that nonsense. But unlike the mid- and late-1980s and 1990s, when the dollar was the de facto world currency, the dollar seems to have run out of steam.
American authorities, not surprisingly, have tried to put the best spin on this turn of events. Iraqis are patriotic, we hear, tending to gravitate toward national pride. Perhaps so, but it would seem that the reasons are deeper and more complex than just Iraqi patriotism. After all, if Iraqis truly believed that the dollar was the better deal for them, they would be more likely to swallow hard and accept the greenback. Devotion to a dead tyrant does not seem to be reason enough for people to risk their life savings.
The dinar rose because it still worked to facilitate exchange, and, without a central bank, it was suddenly protected from inflationary pressures. The dollar, meanwhile, was circulating in ever growing quantities, and the Federal Reserve always stands ready to print more.
And there's a larger issue too: the dollar's decline in Iraq is a microcosm of a larger but more troubling issue, one that the White House and the Federal Reserve System cannot spin away with its political happy talk or pretend does not exist. Both the U.S. economy and the dollar are in trouble, and their difficulties are intertwined with each other.
During the early 1980s, the U.S. economy was in its worst downturn since the end of World War II, yet the dollar was strong relative to other world currencies, many of which were mired in an inflationary morass, a holdover from the creepy decade of the 1970s. Although the U.S. government had begun to incur massive budget deficits, the dollar was still the favored world paper, as producers of oil and manufactured goods overseas were more than willing to take dollars as payment.
In return, dollars flowed back here to purchase U.S. securities to finance the deficits, build manufacturing plants, and Japanese investors even went on a real-estate buying binge in this country, purchasing landmarks such as the Rockefeller Center in New York City. Although the bottom dropped out of the real estate market in the early 1990s, foreigners holding U.S. dollars still had not had enough as money found its way into the stock market boom.
As we so well know, the party is over, and it has been over for a long time, except that few people here want to believe it, especially those who hold political power, at least for now. The dollar has been taking a beating for some time on overseas markets, and seen in that context, it is not surprising that Iraqis are making the same decisions that so many others have already made: dump your dollars.
It would be nice to say that this is a temporary problem, but the facts speak otherwise. For one, the United States is not such a great place to invest. Sure, there are the U.S. securities to finance what is going to be another round of massive budget deficits, although one wonders if there are enough people out there willing and able to purchase at least $400 to $500 billion of U.S. paper each year. After all, the Japanese "economic miracle" ended more than a decade ago and oil-producing states like Saudi Arabia have seen oil prices fall by more than 50 percent in real terms since the heady days of OPEC in the late 1970s and early 1980s.
Moreover, the prospect of profitable investing in something like manufacturing here is at its lowest point in many decades. Savvy investors from overseas take note of things like the tobacco "settlements," and the asbestos quagmire that has bankrupted numerous firms and seemingly has a healthier appetite than a Great White Shark.
From environmental regulations to the rigged civil court system, investors understand that the litigation explosion here presents a risk they would rather not undertake. Furthermore, we have seen assault after assault of governments at all levels upon private property rights, and no one wants to be played for a sucker if such actions are avoidable.
That is why places like China -- a supposed "communist" country -- have become hot property for investors. For all of its ideology, at least investors believe the Chinese government will be more likely to protect their property rights than the U.S. government. This is nothing less than a searing indictment against the legal climate in this country, and nothing currently demonstrates that change for the better is coming.
Ultimately, these things are -- for lack of a better term -- capitalized in the currency. Once upon a time, people overseas would have swallowed hard and bought dollars. Today, there is competition from the Euro, which goes in hand with the sad fact that the United States through thousands of self-inflicted wounds is losing its economic edge. The seller may be running out of suckers.
(William Anderson, an adjunct scholar of the Ludwig von Mises Institute, teaches economics at Frostburg State University.)