Nehru, the father of petrodollar economic imperialism

Nehru and Indira not only betrayed India and ruined its economy, but enslaved the entire humanity to an economic imperialism to toil under a worthless currency

The monopoly of the United States dollar (US$, USD) in the oil economy, and thus the global trade, was firmly established at around the early- to mid-1970s when the Royal Saudi government (effectively a private firm with a “subsidiary” called the OPEC) agreed to price the oil only in USD. Interestingly, the USD was under enormous economic pressure and was facing a rout in the international currency markets at about the same time. So the decision by the Saudi-controlled OPEC was hardly for economically valid reasons but perhaps otherwise. (1)

With the British currency weakened and the Indian economy on a free run, there was hardly any alternative to challenge the American craftiness.

The Indian Rupee you did not know

Till the beginning of the 1970s, INR was the de facto currency used in the Persian Gulf and the Arabian Peninsula, in other words, the majority of the oil-rich Middle East. In fact, between 1959 and 1966 the Reserve Bank of India (RBI) printed special currency notes for circulation in these countries known as the Gulf Rupee.(2) However, by then the mismanagement of the Indian economy, already ravaged by the British loot for over two centuries before independence, has strained INR so badly that the currency was struggling to maintain its status and value, especially globally.

This is where the role of Nehru is crucial. Any sensible leader, such as the first Prime Minister of Singapore, will have changed their policy if it was not working. It was quite clear from early on that the socialist economic policy was largely failing and effectively weakening Indian economy and thus the INR was losing its sheen. Apart from economic weaknesses, the closed nature of a socialist economy means that a domestic currency of a such an economy is of little value to the global international trade. Thus, the INR got hit twice for the same causal problem, Nehru’s socialism.

In 1966, after the death of Nehru, the economic situation was so dire that the INR had to be devalued effectively putting the value of holdings of the Middle Eastern nations as well at risk. This left to a quick exodus of the Middle Eastern nations using the INR to adopt their own currencies, often tied to the USD or the Saudi Riyal (which was, in turn, and already linking up with the USD). This process had already started with the Saudis a decade or so before the devaluation, but had not gained ground across the board till the rupee had reached a full-blown crisis.

Due to the loss of colonies and the failing socialist policies at home, the British Pound Sterling was also quickly losing ground internationally. Thus, in spite of USD’s severe inherent weaknesses and a global lack of confidence on USD, the US achieved an international economic coup with the Saudi-controlled OPEC adopting USD as the sole currency of oil trade. With the British currency weakened and the Indian economy on a free run, there was hardly any alternative to challenge the American craftiness. It would be soothing to the conscience at least if this was due to an inherent strength of the USD, but it was not. As we saw above the USD itself was under enormous pressure.

If only Nehru had realised his blunder at least after 10 years of his economic mismanagement, the USD could have been possibly prevented from becoming a monopoly in the Middle Eastern oil trade and eventually ending up controlling the global trade as well

The Root of the Problem was Western Greed:

The reasons for the major western currencies to have lacked confidence at that time was the nature of the modern “fiat” currencies. Following the Great Depression of the early twentieth century, the western imperial nations using their economic hegemony gradually moved away from the gold standard. Gold-standard is the system where a unit of currency was related to a unit weight of gold. In this system, the central banks were obliged to hold gold reserves for the value of the currency they printed. This was gradually loosened and eventually completely abandoned pegging the value of the currency to the national wealth, such as the annual gross domestic product (GDP). Though this is fine in theory, in practice this has become a scam.

For example, the US has a total debt and liabilities (even using discounted cash flows) that is over 10.5 times the annual GDP of the country. (3) If we roughly equate the GDP to the annual income, and even assuming the extraordinary event of the US saving half of it and paying off the debt and liabilities, the current debt and liabilities (ignoring the interest, etc.) can be paid off only over a period of over 20 years.

Shockingly, the US is not saving anything but is borrowing and borrowing. More than conservatively speaking, every dollar held is “not” an asset but a paper receipt for over USD 10.5 of debt and liability. It is a Ponzi scheme par excellence.

Yet the world has little choice but to toe the line, as the fundamental fuel for running the economy is oil, which can be traded only in USD.

If only Nehru had realised his blunder at least after 10 years of his economic mismanagement, the USD could have been possibly prevented from becoming a monopoly in the Middle Eastern oil trade and eventually ending up controlling the global trade as well. It might have been a multi-polar world in the world’s currency market with currencies ranging from the Indian rupee to the Japanese Yen to the French Franc still being used for the oil trade. On the contrary, his daughter Indira Nehru continued Nehru’s ruinous stint of Indian economic policy. This enabled the USD usurping the oil trade and the global economy completely to become an unchallenged monopoly till date.

Are we supposed to believe that the same family in power for over two decades could have been unaware of what they were doing and it was all achieved by the US on its own?

Thus, Nehru and Indira not only betrayed India and ruined its economy, but enslaved the entire humanity to an economic imperialism to toil under a worthless currency. Now, who will bell the USD cat, which has grown to become a maneater and then to a Godzilla?

REFERENCES

1. Lightning R (MARCH 29, 2009) Petrodollar Slavery. the red pill. Available at: http://the-redpill.blogspot.com/search/label/economics%20democracy [February 20, 2018].
2. Wikipedia contributors (2018) Gulf rupee. Wikipedia, The Free Encyclopedia. Available at: https://en.wikipedia.org/w/index.php?title=Gulf_rupee&oldid=851455375 [July 27, 2018].
3. Kotlikoff LJ (2014) Opinion: America’s Hidden Credit Card Bill. The New York Times. Available at: https://www.nytimes.com/2014/08/01/opinion/laurence-kotlikoff-on-fiscal-gap-accounting.html [June 20, 2018].

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Murali KV

A medic and a graduate of the University of Cambridge, England,involved in inter-disciplinary research for the inculcation of a scientific rigour in the outdatedfields of humanities: putting "science"
into social sciences.

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