They who control the credit of the nation direct the policy of governments, said Rt Hon Reginald McKenna (1928) – a former Chancellor of the Exchequer and one time director of the Bank of England. Today, such a claim is today highly relevant to the future relationship between Iraq and the United States – the world’s only super power. Having occupied Baghdad, one of the first actions of the United States was to encourage the Iraqis to exchange 2000 of their dinars for one American dollar.

The traditional method of exercising imperial power is through the acquisition of colonies and the imposition of taxation upon the subject people. This was the British imperial approach – most obvious in India. With the demise of the Soviet Union, the United States clearly became the great imperial power of the day (superpower). Typically, the United States extended and maintained its sphere of interest through monetary means; the military occupation of Iraq is quite uncharacteristic of the Americans. However, it is unlikely that the occupying troops will remain to be supported by locally imposed taxation. Financial and corporate control over the economy is much more effective – and much less obvious.

It can be taken that, in the name of democracy and the free market, American corporations will take control of the banking system and key elements of the Iraqi economy. There will be particular concern to gain privileged access to crude oil and to ensure priority in its refining. The Iraqis need not relinquish ownership of the oilfields but just as effective will be a requirement that royalties, and possibly all exports, be paid for with American dollars. In this circumstance, no matter how elected, any future government of Iraq will have to accept what is held to be monetary and economic reality.

The practical effect of the recommendations made at the Bretton Woods conference of 1944 was that each nation’s credit system be underpinned by the American dollar. In practice, this meant that the availability of each nation’s currency depended upon having adequate access to the world’s master currency. The Cold War was won for a variety of reasons – not least of which was having the American dollar recognised as the world’s reserve currency. The greenback had worldwide acceptability when paying for goods and services in ways not applicable to the rouble.

The requirement that a nation’s currency depended on that nation’s access to US dollars gave organizations like the IMF the means of dictating the policy of national governments. Of course, the greenbacks made available by the IMF and in circulation have all been created within the United States banking system – unrestrained by the size of the US current-account deficit.

However, what has endured for more than half a century is now threatening to unravel. There appears little doubt that the Euro has the potential to rival the greenback as the world’s master currency and the commensurate ability to exercise imperial power. In a rapidly changing world, the American corporate and banking takeover of Iraq is unlikely to experience the plain sailing that has been true for more than fifty years. Indeed, such means of exercising imperial power seem to have been recognised by those members of the European Union who opposed the war.

Furthermore, the decadence and unjustifiable inequity associated with the present international monetary system is increasingly being recognised. Protest is taking two forms. One is a mounting call for monetary reform. The other is based on religious grounds, primarily by those of the Muslim faith for whom the usurious nature of the system is of deep concern.

- Les Hunter is a member of the Committee for Economic and Monetary Reform and author of the book "Courage to Change" – A case for monetary reform (published by Harbourside Publications Ltd and available through www.monetaryreform.co.nz).