The Vietnam option is taken

potential of the Third World for U.S. industrial exports. More sensible for the nation perhaps, but not for the power of certain infl uential New York banks.

If a given national economy produces the same volume of saleable goods under the same technological basis over a period of, say, ten years, and prints double the volume of its domestic currency for that same volume of goods as at the beginning of the decade, the ‘consumer’ notes the effect as a signifi cant price infl ation. He pays two dollars in 1960 for a loaf of bread which cost him only one dollar in 1950. But when this effect was spread around the entire world economy by virtue of the dominant position of the U.S. dollar, the infl ated reality could be masked for a bit longer. The results, however, were every bit as destructive.

In his first days in office, under guidance from his advisers, President Lyndon Baines Johnson, a small-town Texas politician with little knowledge of international politics, let alone monetary policy, reversed the earlier decision of John Kennedy. President Johnson was led to believe that a full-scale military war in southeast Asia would solve many problems of the stagnant U.S. economy and show the world that America was still resolute.

THE VIETNAM OPTION IS TAKEN

Volumes have been written since the tragic Vietnam war about the reasons and causes for it. But, on one level, it was clear that a signifi cant faction of the American defense industry and New York fi nance had encouraged the decision of Washington to go to war, despite its absurd military justifi cation and a divisive domestic reaction, because the military buildup offered their interests a politically saleable excuse to revive a massive diversion of U.S. industry into the production of defense goods. More and more during the 1960s, the heart of the U.S. economy was being transformed into a kind of military economy, in which the cold war against communist danger was used to justify tens of billions of dollars of spending. The military spending became the backup for the global economic interests of the New York fi nancial and oil interests, another echo of nineteenth-century British Empire, dressed in the garb of twentieth-century anticommunism.

The Vietnam war strategy was deliberately designed by Defense Secretary Robert McNamara, National Security Adviser McGeorge Bundy, with Pentagon planners and key advisers around Lyndon Johnson, to be a ‘no-win war’ from the onset, in order to ensure a

prolonged buildup of this defense component of the economy. The American voter, Washington reasoned, would accept large costs for a new war against an alleged ‘godless encroachment of communism’ in Vietnam, despite the gaping U.S. budget defi cits, if this produced local jobs in defense plants.

Under the Bretton Woods rules, by infl ating the dollar through huge spending defi cits at home, Washington, in effect, could force Europe and other trading partners to ‘swallow’ this U.S. war cost in the form of cheapened dollars. So long as the United States refused to devalue the dollar against gold to refl ect the deterioration of U.S. economic performance since 1944, Europe had to pay the cost by accepting dollars at the same ratio as it had some 20 years before.

To fi nance the enormous defi cits of his Great Society program and the Vietnam buildup during the 1960s, Johnson, fearful of losing votes if he raised taxes, simply printed dollars, by selling more U.S. Treasury bonds to fi nance the defi cits. In the early 1960s, the U.S. federal budget defi cit averaged approximately $3 billion annually. It hit an alarming $9 billion in 1967 as the war costs soared, and by 1968 it reached a staggering $25 billion.

The European central banks began to accumulate large dollar accounts during this period, which they used as offi cial reserves, the so-called Eurodollar accumulation abroad. Ironically, Washington in 1961 had requested that U.S. allies in Europe and Japan, the Group of Ten countries, should ease the drain on U.S. gold reserves by retaining their growing U.S. dollar reserves instead of redeeming the dollars for U.S. gold, as mandated under Bretton Woods.

The European central banks earned interest on these dollars by investing in U.S. government treasury bonds. The net effect was that the European central banks thereby ‘fi nanced’ the huge U.S. defi cits of the 1960s Vietnam debacle. American futurist Herman Kahn reportedly exclaimed to a friend, when told how this defi cit fi nancing operated, ‘We’ve pulled off the biggest ripoff in history! We’ve run rings around the British Empire.’ But it was not so obvious who was running rings around whom at this time. The City of London was preparing a comeback with expatriate American dollars, as we shall soon see.

Obviously the economic status of European economies such as Germany and France was different in 1964 from what it had been in 1944, when Bretton Woods was drafted. But U.S. policy circles refused to listen to European protestations, especially those from de Gaulle’s France, because they reasoned that a devaluation of the

dollar would cut the power of the ‘omnipotent’ New York banks in the world capital markets. Washington had imitated the disastrous example of England from the period before the 1914 war.

Earlier, when New York bankers fi rst began to funnel large funds out of the United States to speculate in western Europe or Latin America, President Kennedy attempted to spark a renewed American technological optimism and encourage greater investment in new technologies by announcing the Apollo moon-shot program and the creation of NASA. A signifi cant majority in America in 1962 still believed that the country should ‘produce its way out’ of the crisis.

But on November 22, 1963, John F. Kennedy was assassinated in Dallas, Texas. New Orleans Judge Jim Garrison, at the time involved in investigating leads to the assassination in his capacity as New Orleans district attorney, years later continued to insist that the murder had been carried out by the CIA, with the aid of select organized crime fi gures, including Carlos Marcello. Kennedy had among other things been on the verge of pulling out from Vietnam, after talks with the former general Douglas A. MacArthur days before his murder, a policy shift confi rmed by his close friend and adviser Arthur Schlesinger.

The reasons for the assassination of John F. Kennedy have been a subject of much speculation. But what is clear is that the young president was moving on a variety of strategic fronts to establish his own mold for US policy, in a direction which, in issue after issue, began to run at odds with the powerful fi nancial and political interests controlling the liberal East Coast establishment.

In May 1961, more than two years before his fateful motorcade tour along Dealy Plaza in Dallas, Kennedy went to Paris and met with Gen. de Gaulle. In his book Memoirs of Hope, de Gaulle gives a telling personal assessment of the American president. Kennedy had presented de Gaulle with the American argument for backing the dictatorship of Ngo Dinh Diem in South Vietnam and for installing an American expeditionary corps under cover of economic aid to the southeast Asian country. Kennedy had argued to de Gaulle that this was essential to build a bulwark against Soviet expansion in Indochina. ‘But instead of giving him the approval he wanted, I told the President that he was taking the wrong road,’ de Gaulle writes.

‘You will fi nd,’ de Gaulle told Kennedy, ‘that intervention in this area will be an endless entanglement.’ De Gaulle went on to elaborate his reasons. ‘Kennedy listened to me.’ De Gaulle concludes his impressions: ‘Kennedy left Paris. I had been dealing with a man whose age, and whose justifi able ambition inspired immense hopes.