How the Dollar System works After 1945, the US emerged from war with the world's gold reserves, the largest industrial base, and a surplus of dollars backed by gold. In the 1950's into the 1960's Cold War, the US could afford to be generous to key allies such as Germany and Japan, to allow the economies of Asia and Western Europe to flourish as a counter to communism. By opening the US to imports from Japan and West Germany, a stability was reached. More importantly, from pure US self-interest, a tight trade area was built which worked also to the advantage of the US. That held until the late 1960's, when the costly Vietnam war led to a drain of US gold reserves. By 1968 the drain had reached crisis levels, as foreign central banks holding dollars feared the US deficits would make their dollars worthless, and preferred real gold instead. In August 1971, Nixon finally broke the Bretton Woods agreement, and refused to redeem dollars for gold. He had not enough gold to give. That turn opened a most remarkable phase of world economic history. After 1971 the dollar was fixed not to an ounce of gold, something measurable. It was fixed only to the printing press of the Treasury and Federal Reserve. The dollar became a political currency—do you have "confidence" in the US as the defender of the Free World? At first Washington did not appreciate what a weapon it had created after it broke from gold. It acted out of necessity, as its gold reserves had got dangerously low. It used its role as the pillar of NATO and free world security to demand allies continue to accept its dollars as before. Currencies floated up and down against the dollar. Financial markets were slowly deregulated. Controls were lifted. Offshore banking was allowed, with unregulated hedge funds and financial derivatives. All these changes originated from Washington, in coordination with New York banks. The dollar debt paradox What soon became clear to US Treasury and Federal Reserve circles after 1971, was that they could exert more global influence via debt, US Treasury debt, than they ever did by running trade surpluses. One man's debt is the other's credit. Because all key commodities, above all, oil, were traded globally in dollars, demand for dollars would continue, even if the US created more dollars than its own economy justified. Soon, its trade partners held so many dollars that they feared to create a dollar crisis. Instead, they systematically inflated, and actually weakened their own economies to support the Dollar System, fearing a global collapse. The first shock came with the 1973 increase in oil by 400%. Germany, Japan and the world was devastated, unemployment soared. The dollar gained. This Dollar System is the real source of a global inflation which we have witnessed in Europe and worldwide since 1971. In the years between 1945 and 1965, total supply of dollars grew a total of only some 55%. Those were the golden years of low inflation and stable growth. After Nixon's break with gold, dollars expanded by more than 2,000% between 1970 and 2001! The dollar is still the only global reserve currency. This means other central banks must hold dollars as reserve to guarantee against currency crises, to back their export trade, to finance oil imports and such. Today, some 67% of all central bank reserves are dollars. Gold is but a tiny share now, and Euros only about 15%. Until creation of the Euro, there was not even a theoretical rival to the dollar reserve currency role. What is little understood, is how the role of US trade deficits and the Dollar System are connected. The United States has followed a deliberate policy of trade deficits and budget deficits for most of the past two decades, so-called benign neglect, in effect, to lock the rest of the world into dependence on a US money system. So long as the world accepts US dollars as money value, the US enjoys unique advantage as the sole printer of those dollars. The trick is to get the world to accept. The history of the past 30 years is about how this was done, using WTO, IMF, World Bank and George Soros to name a few
all joking aside...I wonder how long it would take until our situation turns out like Zimabawe. nice post
Well I hope you're wrong about that. Like they say: "When the US have a cold, the whole world sneezes." They better have geniuses fixing the problem or the whole dollar will crash and you'll need a wheelbarrow full of it just to buy a loaf of bread. Nice to see a post about something else other than pudding :biggrin:
I would not like to pay for dinner like this, with the rate we are printing money...its just a matter of time. Mugabe tried to pass a law telling retailers they can't raise prices...so retailers just stop accepting cash.
I understand George Soros made a large bulk of his fortunes betting against the French whatever it is, the British Pound, and now the American dollar. Quid pro quo [sp] for that 3/4 Billion spent electing an American president.
It's was the French Franc now the Euro of course. It was not an attack on anyone, so why are you always so obsessed with attacking democrats? The system has been fucked for over three decades but it's Obama's fault. Obviously. Like he's the first one to spend a fortune on elections. I have a question about this kind of attitude by the way, being Canadian and all. I remember the media being accused of emboldening the terrorists and being unpatriotic for being critical of a president (Bush) in a time of war; and now the same people who called the media unpatriotic are criticizing a president (Obama) in a time of war. How does that make sense? A few quotes from our favorite pundits: “Why don’t you liberals just admit it? You don’t like the military. It’s all phony when you say you support the troops,†Mark Levin (Hannity calls him “The Great Oneâ€), 11/2/06 “The left has a disdain for the military… They’re dangerous… trying to undermine the will of the American people.†Tom DeLay, 10/31/06 “It’s clear that the Howard Dean, Nancy Pelosi, John Kerry wing of the Democratic Party has a visceral loathing for the American military and for, frankly, America as a country in the world. Their whole approach is to blame us for what, in fact, our enemies do… I think it tells you how deep the sickness is in the left wing of the Democratic Party.†Newt Gingrich, 11/1/06 “That’s your Party that undermines our troop morale and emboldens our enemies,†Sean Hannity, 2/1/08. “When you have Democrats saying it’s time to get out, artificial timetables and saying that the Commander-in-Chief lied, distorted, hyped and misled the troops. Is that the thing to do during a time of war?†Sean Hannity, 12/2/05 I love that last quote by Hannity. Because this is exactly what he's doing right now. Sounds like the pot calling the kettle black.
Like he's the first one to spend a fortune on elections. Yes he is. About three times the previous record thanks to untracked political donations from people like Soros. Hence the "Quid Pro Quo" statement. 3/4 of a Billion do you have any idea any slight comprehension of just how much money that is? The media attacked the war effort in full force and are covering for Obama. Name for me ONE just ONE Bush lie. JUST ONE I want to hear it. Obama has made HUNDREDS I'm sure. I can name MANY and they are irrefutable. Attacking Obama for trying a non-American terrorist in the American court system is attacking Obama for real and valid reasons and to defend out troops and their efforts. Re-read your statement. Surely I don't have to point out the obvious you views are asinine.
