The invasion of Venezuela by U.S. and its proxies is just around the corner. Recently Vice-President Pence flew to Colombia once again—for the fifth time in recent weeks—to provide final instructions to U.S. local forces and proxy allies there for the next step in the U.S. regime change plan.

Evidence that the “green light” for regime change and invasion is now flashing are supportive public statements by former president Barack Obama, and several high-level U.S. Democratic party politicians and candidates, directly attacking the Maduro regime. They are signaling Democrat Party support for invasion and regime change. Events will now accelerate—just in time, perhaps, to coincide with the release of Mueller Report on Trump.

Behind the scenes it is clear, as it has been for months, that U.S. neocons are once again back in charge of U.S. foreign policy, driving the U.S. toward yet another war and attempt at regime change of a foreign government.

U.S. Strategy in Brief

The U.S. Neocon-led strategy is increasingly clear: establish a “beach-head” on the Colombian-Venezuelan (and Venezuelan-Brazilian) border under the guise of providing humanitarian aid. Use the aid to get Venezuelans on the border to welcome the U.S. proxy forces to cross over. Set up political and military structures thereafter just inside the Venezuelan borders with Colombia and Brazil, from which to launch further similar efforts deeper into Venezuela. Repeat this province by province, step by step, penetrating Venezuelan space until enough local units of the Venezuelan military change sides and convince one or more of the Venezuelan military hierarchy to join them, thus establishing a dual state and government within and along the border of Venezuela. Make it appear, by manipulating the media, that the Venezuelan people are rising up against the Maduro government, when in fact it is U.S. proxy forces invading and using opportunist local politicians, military, and others in the “conquered” zones, as the media covers for their invasion.

The main ideological justification being used for the invasion and regime change is that the Maduro government has grossly mismanaged the Venezuelan economy and driven its people into poverty. With Democrats now joining Trump and Republicans in support of invasion, the liberal mainstream U.S. media, as well as the right-wing alternative media, are both pushing the same line, to blunt U.S. opposition to invasion and yet another war before the final military assault is launched. Somehow the democratic elections less than a year ago, which returned the Maduro government to power, did not represent the “will of the people.” Explanations of how they did not are thin and unconvincing. Nor is any explanation given how U.S. policies and actions have played the central role in destroying Venezuela’s currency and economy. And the financial measures used to destabilize the economy are especially opaque.

Financial Imperialism: The Case of Venezuela

Venezuela today is a classic case of how U.S. imperialism in the 21st century employs financial measures to crush any state and country that dares to break away from the U.S. global economic empire and pursue an independent course outside the U.S. empire’s web of entangling economic and financial relations.

Here’s how U.S. “financial imperialism” has worked, and continues to work, with the intent of assisting regime change in the case of Venezuela.

In a world where U.S. capitalism is the dominant hegemon, the U.S. currency—the dollar—is the centerpiece of the U.S. global economic empire. The dollar serves as the global trading currency as well as the global banking reserves currency. More than 85 percent of all global trade (export and import) is done in dollars. Certain commodities, like global oil and oil futures contracts, are traded virtually only in dollars. Recently more countries have begun to peg their own currency to the dollar, allowing it to move in tandem with the dollar. Some have even eliminated their currency altogether and now use only the U.S. dollar as their domestic currency. Increasingly as well, more countries are issuing their domestic bonds in dollars (i.e. dollar-denominated bonds). And their central banks follow the U.S. central bank, the Federal Reserve, policy as it raises or lowers U.S. interest rates that in turn cause the U.S. dollar to rise and fall. They do so even if rising U.S. interest rates mean rising rates in their own economies that precipitate recessions and mass unemployment. These are all examples of the growing financial integration with the U.S. Imperial State and economy.

But even those economies that maintain their own currency are at the mercy of the U.S. dollar. Since the dollar is the global trading and reserves currency, whenever the dollar rises in value due to U.S. monetary policy changes, or U.S. inflationary pressures, or just changes in supply or demand for the dollar, the currencies of other countries fall in value.  As the dollar rises in value, other currencies fall. That’s how global exchange rates work in the 21st century global U.S. empire where the dollar is the trading-reserves currency. Other currencies—the British pound, Euro, and even less so the Japanese Yen or China Yuan—are still largely insignificant as reserves or trading currencies. And it appears very unlikely they will soon replace the dollar—one of the key pillars of the U.S. empire.

The U.S. has the power to engineer a collapse in a country’s currency. A collapse in its currency means the price of imported goods rises rapidly, especially those goods that can only be obtained by imports—i.e. medicines, critical food commodities, intermediate business goods necessary for domestic manufacturing, etc. Accelerating import inflation, in turn, leads to domestic businesses cutting back production due to lack of affordable resources, commodities, or parts. Mass layoffs follow production cutbacks. Rising inflation brought on by currency collapse is thus accompanied by rising unemployment. Wage income and consumption in turn collapse and thereafter the economy in general.

Widespread shortages of key imports, inflation, and domestic production decline and unemployment brought on by the shortages and inflation simultaneously lead to social discontent and loss of support for the government. Opposition groups and parties proclaim these problems are due to the mismanagement of the economy by the government, or corruption by its leaders, or just socialist policies in general. But in fact the economic crisis—i.e. shortages, inflation, production, unemployment—is traceable directly to the root cause of the collapse of the currency engineered by U.S. imperialist policies intent on crashing the economy as a prelude to regime change and economic reintegration to the U.S. global economic empire.

There are many ways the U.S. can, and does, cause a collapse of a country’s currency. One set of measures are designed to cause a severe shortage of dollars in the target country’s economy. A shortage of dollars drives up the value of the U.S. dollar in the target economy which, in turn, drives down the value of the country’s own currency. The U.S. has been engineering a collapse of Venezuela’s currency, the Bolivar, for years—first by causing dollars in Venezuela to flow out of the country and, secondly, by measures preventing Venezuela from obtaining dollars from abroad.

U.S. policy over the last several years has been to force U.S. companies doing business in Venezuela to repatriate their dollars back to the U.S. or else divert them elsewhere globally among subsidiaries. Or just to leave Venezuela and take their dollars with them. U.S. policy has also been to publicize and promote wealthier Venezuelans with dollars to take them out of the country and invest them in Colombia, where the U.S. has arranged an online investment firm with the assistance of its Colombian government ally. Rich Venezuelans have also been encouraged to send their money to Miami banks, and to move there in large numbers, which they have, taking their dollars with them or dumping their Bolivars in exchange for dollars. The outflow of dollars from Venezuela has raised the value of dollars that remain in Venezuela on the black market there, thereby helping to depress the value of the Bolivar in Venezuela even further.

These measures pale, however, to U.S. imperial efforts to prevent Venezuela from obtaining dollars in global markets in an effort to try to offset the outflow of dollars from the economy.

For example, the U.S. has taken action to prevent U.S. and global banks from lending dollars to Venezuela, or from participating in underwriting and insuring Venezuelan bond issues which would also raise dollars for Venezuela if allowed. Bank loans and bond funding thus dry up, depriving the government of alternative sources of dollars. More dollar shortage; more Bolivar domestic currency collapse—i.e. more expensive imports, more inflation, more shortages, declining production, rising unemployment….more discontent.

The main effort by which the U.S. is attempting to deprive Venezuela of dollars is to impose sanctions on other countries that try to buy Venezuelan oil. Oil sales are the number one source of the country’s dollar acquisitions, since all oil trade is done in dollars and Venezuela depends on 95 percent of all its government revenues from selling its oil. The U.S. imposes sanctions on would be buyers and thus cuts off access to dollars, as it simultaneously through other policies works to encourage dollar flight out of Venezuela and cut off bank loans and bond issuance by the country. And if the prior bonds and loans were “dollar denominated,” then the lack of dollars to pay the interest and principal coming due leads directly to defaults and in turn to business collapse and even more unemployment.

Venezuela has turned to selling its oil to China and Russia and a few other countries. It has been forced to resort to paying its interest and principal on past loans from these governments with shipments of oil instead of payments in dollars. As the U.S. turns to sanctions as an economic “weapon” to enforce its will on other countries, more countries are becoming aware of the tactic and are taking countermeasures, such as dumping dollars (or reducing their purchases of dollars in world markets) and buying gold. China and Russia are leading this way, while experimenting with non-currency dependent trade.

Another recent move by the U.S. to deny Venezuela dollars and collapse its currency has been to seize the Venezuelan oil distribution company, CITGO in the U.S. Its remittances back to Venezuela have been in dollars. By seizing CITGO, the U.S. deprives the country of yet another source of dollars, with which Venezuela might otherwise have been able to purchase imports of food, medicines, and other economically critical goods. So Venezuelans in this case are clearly forced to forego these critical imports due to U.S. policy—not due to economic mismanagement by its government. Moreover, adding insult to injury, the dollar funds from CITGO seized by the U.S. are being delivered to the Venezuelan government’s opponents and its hand-picked ally of the U.S., Guido. The opposition now gets to finance its counter-revolution with the money formerly remitted to Venezuela. The counter-revolution is financed at the expense of critical goods and services that otherwise might have been made available to the Venezuelan people.

Seizure of the CITGO asset is not the only such example of dollar deprivation. Other assets in the form of inventories, investments, cash in U.S. banks, etc. are also being impounded. And not just from the Venezuelan government. Individual Venezuelan companies and individual citizens have been having their assets in the U.S. impounded as well. And the U.S. is increasing its pressure on foreign governments to impound and seize assets as well—of the government, businesses, and citizens.

The impoundment and seizure has recently been extended to Venezuelan gold stocks held offshore in other countries, in direct violation of international law. Recently the U.S. company and mega bank, Citigroup, has been forced to withhold Venezuelan gold in violation of its contracts with the country. The Bank of England has also been asked, and is complying, with the U.S. demand to freeze Venezuelan gold deposited in the UK. And countries like Abu Dhabi, where gold is traded globally, have been asked to stop trading in Venezuelan gold. Gold is a substitute money for the U.S. dollar, so preventing gold access to Venezuela is like preventing dollar access as well. With its gold, Venezuela could more easily buy dollars, or trade for goods directly, than with using Bolivars that are falling in value and sellers are less likely to take as payment.

Countries with economies whose currency is seriously declining in value are able to get a loan to stabilize its currency from the International Monetary Fund (IMF). Recent examples are Argentina, Turkey, South Africa, and even Pakistan. But the IMF is an institution set up by the U.S. in 1944. The U.S. maintains with its close European allies a majority vote on IMF decisions. The IMF does nothing the U.S. does not approve. Its mission is to lend to countries in need of stabilizing their currencies. The IMF, however, as an appendage of the U.S. global empire, has refused to lend Venezuela anything to help stabilize its currency.

This is in contrast, for example, to the record loan of more than $50 billion recently provided to Argentina once that country put in its current business and U.S.-friendly Macri government. The record IMF loan, by the way, was so that Argentina could pay off debts owed to U.S. and other speculators in the early 2000s. So Argentina saw little of that $50 billion. What the payoff did enable, however, was for Macri and other Argentinian bankers to go to New York to get new loans from U.S. banks once it repaid the speculators, from which Macri and friends no doubt personally benefitted immensely.

As the Venezuelan currency collapses due to U.S.-arranged dollar shortages, Venezuela must print even more Bolivars to enable it to purchase what goods from abroad it might still be able to buy. A collapsed currency means the price of imported goods rises proportionately. So more Bolivars are needed to buy the goods that are continually rising in price. Printing more Bolivars adds to the supply of Bolivars in the economy which raises domestic price inflation even further. But the excess printing is in response to the currency collapse which is engineered by the dollar shortage and the falling exchange rate in the first place. The over-supply of Bolivars is not due to mismanagement; it is due to the shortage of dollars and the desperate effort by the Venezuelan government to somehow pay for inflating import goods.

The falling price of crude oil in 2017-18 added further pressure on the Bolivar. The collapse of oil prices globally appears unrelated to U.S. policy. But it wasn’t. The oil Venezuela has been able to continue to sell, mostly to China or Russia, declined by 40 percent in price in 2018. The global oil deflation of 2018 thus generated less oil revenue for the country and thus fewer dollars.

But that too was due, indirectly, to U.S. policy and economic conditions. The collapsing price of oil in 2018 is directly attributed to U.S. shale oil producers raising their output by more than a million barrels a day, which increased the world oil supply and depressed world oil prices. The U.S. then attempted to manipulate world oil output with Saudi Arabia but that exacerbated the over-production and deflation problem still further. Here’s how: the U.S. attempted to impose sanctions on Iranian oil in 2018. Saudi Arabia believed it would capture the customers that Iran would lose, and therefore it, Saudi Arabia, also raised its output of crude as U.S. shale producers raised theirs. But Iran was able to continue to sell its oil, as U.S. sanctions broke down. The result of the U.S. shale overproduction plus Saudi overproduction was a 40 percent collapse in world oil prices in 2018 that further deprived Venezuela of much needed government revenue—apart from U.S. sanctions on Venezuela oil sales.

U.S. monetary policy in 2018 further exacerbated the currency crisis in Venezuela—as it did elsewhere in Latin America and emerging markets in general. In 2017-18 the U.S. central bank launched a policy of raising interest rates. Since other world central banks respond to the U.S. central bank, world rates began to rise as well. Rising U.S. interest rates caused a rise in the U.S. dollar, and as the dollar rose in 2017-18 emerging market currencies fell. They fell for Venezuela in part due to this effect, as well as due to other causes mentioned.

Falling currencies precipitate what is called “capital flight” out of the country. Less money capital means less available for investment and thus lower production output and more unemployment. So currency collapse precipitates not only inflation but recession as well. To prevent the capital fight, emerging market economies raise their own domestic interest rates. This led to recession, for example, throughout Latin America in 2017-18. Capital flight out of Venezuela has been significant since 2016, as wealthy Venezuelans sent more of their dollars out of the country to Miami, thus exacerbating dollar shortages in Venezuela and further driving down the value of the Bolivar left behind.

U.S. sanctions on other countries, banks, and companies offshore are designed not only to prevent Venezuela access to dollars and money capital offshore. Sanctions also target real goods trade, like oil and other key commodities. But there’s another means by which the U.S. shuts down the flow of real goods into and from a country, causing shortages of critical goods. It’s the U.S.-controlled international payments exchange system, called SWIFT. This is where U.S. banks arrange the exchange and transfer of payments for goods and services by converting from one currency to the other and transferring the funds from one bank to another across countries.  The U.S. has been preventing Venezuela from normally using the SWIFT system. So even if another country is willing to buy Venezuela goods, including oil, and exchange Bolivars for its own currency, it is prevented from doing so by the U.S. bank-controlled SWIFT system.

Summing Up

Financial imperialism has been waged against Venezuela for decades, but the attack on Venezuela employing financial measures has recently intensified as U.S. neocons and imperialists have accelerated their plans to launch a more direct attack by political means, including military, to force regime change in Venezuela. At the center of the on-going, and now intensifying, financial warfare against the country by the U.S. are measures designed to destroy Venezuela’s currency. Imperialism is often thought of as military conquest and colonialism. That’s 19th century British and European imperialism. But the American Empire in the 21st century does not need colonialism. It has a more efficient system for forcing the integration of other economies and for extracting value and wealth from the rest of the world. The U.S. empire is increasingly knitted together in the 21st century by a deep web of financial relationships that afford it multiple levers of economic power it can pull if and when it desires. And when those economic and financial levers prove insufficient to overthrow  domestic forces and governments that remain intent on pursuing a more independent path outside the Empire’s economic and political relations, then the breakaway State is attacked more directly once the economy is sufficiently wrecked. Such is the case of Venezuela today. Financial imperialism has paved the way for more direct political and military action.

Jack Rasmus is the author of the recently published book, Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression, Clarity Press, August 2017, and the forthcoming The Scourge of Neoliberalism: US Policy from Reagan to Trump, Clarity Press, 2019. He hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network in New York, blogs at jackrasmus.com, and tweets at @drjackrasmus. His website is www.kyklosproductions.com.