The US Dollar And The Stability Of The World Economy

@EmperorNero,

EmperorNero wrote:

What do you think about this? I have not checked up on all the facts yet.

In 1944 the US Dollar was made the reserve currency of all international financial institutions.
It was a stable, gold backed currency, allowing for a effective reconstruction after world war II.
This gave the US the ability to just print as many Dollars as they wanted, without diminishing the value of the Dollar.
By just printing Dollars, the US ran a trade deficit that it could no longer cover with gold.
By the end of the sixties other countries started losing their faith in the US Dollar.
In 1971, gold coverage of the US Dollar was ended to to avoid bankruptcy, as the US only had a fifth of all foreign debt covered with gold.
The Dollar would have lost it's value, but the US made a deal with OPEC, that ensured that all sales of oil would be denominated in US Dollars.
This forced all industrialized nations to hold US Dollars to buy oil.
Since then, the US has been buying oil for free by printing worthless paper Dollars.
The Euro as a competing currency to buy oil could destabilize the Dollar and render the US insolvent.

Eureka! Someone understands. Everything that's going on right now is ultimately about the U.S. dollar and its (soon to be former) status as the world's reserve currency. We are fighting in Iraq because Sadam Hussein had begun to trade oil in euros. We are threatening Iran because they are setting up an oil bourse on which their oil will be priced in euros, or yaun. We supported the 'democratic' (wink wink) president of Georgia and the other corrupt regimes in the former Soviet republics of central asia in order to control that oil. The dollar is now rallying because investors owe have made a alot of bad bets in $US denominated assets. To cover them, they have to buy dollars. In other words, once the rest of the world, the productive part, the part not wridden with debt and based on credit-fueled consumption, begins to recover from the greatest fraud in the history of the world, they will stop buying dollars to deleverage and, of course, they will stop buying our sovereign debt. The Fed will have to monetize more and more new bonds, further discouraging investment. Let me just say, every fiat currency has ended the same way. It rhymes with pyperinflation. The Chinese, our largest creditor, are already cutting back on their dollar holdings, when, in light of our record deficit, just te keep the status quo, they would have to buy more. In my opinion, the Chinese, amoung others, will slowly exhange their increasingly questionable dollars for commodities and real goods over the next few months. When the dollar officially loses world reserve status, they will be in a position to replace it with the yaun, back by gold, silver or some basket of commodities, along with the might of Chinese industry. These are the final days of the Bretton Woods system.

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@EmperorNero,

Why do US citizens even pay taxes? Couldn't the government just print the money?

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@EmperorNero,

That has been the philosophy of our brave and glorious leaders for a long time. Inflation is a kind of tax, but people don't understand that. If the population was required to actualy pay directly, through higher income taxes e.g., for all the spending the government has been doing for the last several decades, they would refuse and things would changes pretty fast. And that is exactly why the government prints instead.

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@EmperorNero,

Yeah, but look at the tea party protests, people pay a lot of taxes.
Citizens in Iraq don't pay taxes, they have oil, the US can print money, so why take income tax at all?

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@EmperorNero,

The U.S. government can print money, but not without tax revenue. Even fiat insanity has its limits, as will shortly become VERY obvious. We are being put into indentured servitude...guess what the collateral for the debt is...our FUTURE labor. :perplexed:

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@EmperorNero,

What happens when the bubble bursts?
Can the US just get a new currency and move on, will there be a war or will the US economy crumble?
I always imagined the US holding out longer than Europe. - Which will probably fall apart within a decade or two.

1 Reply

@EmperorNero,

That's the $64,000 question. I can say with as much certainty as I can say anything about anything that the bubble WILL burst: exactly how is anyone's guess. Predicting macroeconomic events in a free market is hard enough, making predictions when so many aspects of the system are manipulated by people behind closed doors is all but impossible. I would guess that hyperinflation will precede a new currency: i.e. that it's too late to gradually transition to a new currency. If that happens, we can safely assume that this 'recession' will rapidly turn into a depression (or be acknowledged as such; it already is in my opinion). There will be a bank holiday like there was in Argentina when the currency collapsed; i.e. during a period when people can only withdraw a certain amount of money daily, the currency will experience its great plunge, prices will explode and by the time you get all your money out, it'll be worth a fraction of what it once was. At the same time, either as cause or effect of hyperinflation, our foreign creditors will stop lending, and the world will stop pricing oil and other commodities in dollars. The inflation itself will increase prices for basic neccessities in the U.S., but the relative strength of other currencies will enable foreigners to buy up U.S. assets ans resources on the cheap, causing more price inflation. That's what happened on a small scale last summer; the dollar was weak and foreigners bought more of our wheat than they usually do, causing prices to spike here. Massively rising prices in the middle of a depression...hunger...anger...riots. As for war, I wouldn't be suprised; regimes with troubles as home foten look for foreign adventures to distract the people. However, this is special in that a global empire cannot be maintained if the imperial power's currency is worthless; foreign suppliers of food, fuel, etc can't be paid. So, I would guess that american military bases would close, troops would come home (they'd probably be needed to suppress unrest) and an all new balance of powers would come into being. There may well be wars as a result of this vacuum of power, just not ones involving the U.S. Anyway, that's all specualtion on my part. There are plently of other possibilities.

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@EmperorNero,

I do think so too. That all sounds very plausible. Thanks for explaining. Smile

1. How long do we have till s hits the fan?
2. Will my student loan inflate away? :-)
3. Will the rest of the western nations be pulled into the crisis?
4. If the US ceases to exist as world police force, will pacifist Europe be defenseless? And maybe be conquered by Islam?
And a little more far out:
5. If the US and Europe go away as super-powers, will China be the new super-power?

1 Reply

@EmperorNero,

EmperorNero wrote:

I do think so too. That all sounds very plausible. Thanks for explaining.
1. How long do we have till s hits the fan?
2. Will my student loan inflate away? :-)
3. Will the rest of the western nations be pulled into the crisis?
4. If the US ceases to exist as world police force, will pacifist Europe be defenseless? And maybe be conquered by Islam?
And a little more far out:
5. If the US and Europe go away as super-powers, will China be the new super-power?

In my opinion:

1) I would guess that we're going to get our faces splattered some time this fall, with either a reversal of the dollar's recent strength, if not outright collapse, and/or another leg down for the stock market.

2) I hope so, I have em too!

3) Arguably, Britain is in worse shape than we are. Spain, Italy and Greece are also in pretty bad shape and are experiencing a housing/mortage derivative bust. The Austrian finanicial system is extremely exposed to E. Euope, which is faring the worst of any nations so far. Many of them, like Belarus, owe more than their entire GDP to western banks: i.e. in foreign currencies, so they can't just inflate their way out like we can. I don't know much about France, but I can say hat Germany is doing pretty well and is resisting more stimulus in the EU, i.e. German subsidy of the rest of the Europe. My feeling is that, if the EU holds together, all the EU nations will go down. If it breaks up, some will be alright, but that brings up new questions.

4) Right now Russia has more influence is Europe than does the U.S., because they have contorl of the thermostat and the oven. If the U.S. collapses as a world power, Russia will take its place as Europe's patron superpower. However, unless the Europeans start mating like rabbits, Europe will be predominantly Muslim in the near future, regardless of geopolitics.

5) In my opinion, China will most definately be the next superpower. How can it not? Even if the U.S. can 'recover' (go back to massive overconsumption and borrowing), that status quo constantly benifits China and weakens the U.S. China has been using its reserves recently to buy rights to minerals, especially oil, all over the world. China has more of a presence in South and Central America than we do, and they're rapidly moving into Africa. Remember how the U.N. was considering sanctions against the Sudanese government? What happened to that? China and Russia, now de facto allies against American imperialism, vetoed the sanctions because China has oil contracts with the ruling government...nevermind a little butchery. The only reason we haven't attacked Iran, besides being far too weak to win, is that they have the support of China, to whom they plan to sell most of their oil future, and in yaun, not dollars. I like something that Jim Rogers said; 'the 19th century was the century of Great Britain, the 20th the century of the U.S., and the 21st will be the century of China.' People can't imagine that the U.S. will ever cease to be the greatest nation on earth, but how many Britons I wonder thought the same thing in 1900?

1 Reply

@BrightNoon,

1 Reply

@EmperorNero,

My guess is that we will never actually see hyperinflation as the government will institute price controls, which will in turn drain the money supply and ramp up unemployment instead. Unemployment will then be blamed on everybody but the US government and American spending habits.

The results would be massive military spending and intense nationalism brought about by government subsidies and scapegoating.

Next is a political push for war. With us presently driving Mexico down the crapper, continuing to foster a genuine hatred for all things USian in South America and the Middle East, and largely causing a dangerous destabilization of Pakistan, who knows if American society as we know it will survive.

How's that for a doomsday prediction.

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@EmperorNero,

I think you're right about Obama, not that he's different from his predecessors in this respect. He's spending alot of money, not to save the country, but to delay the collapse, and to enrich his private supporters, like Goldman Sachs e.g. It's remeniscent of what happened at Enron; the insiders keep the stock afloat just long enough for them to unload their own and loot anything of value from the company, then the bottom falls out and the little peple get crushed. Also, alot of money is going into very disturbing, totalitarian programs. I think he's preparing for a post-prosperity, post-empire, post-republic U.S. The national service plan is, IMO, a not very well concealed attempt to enlist the discontents of society, or the naive, in the service of the state, for the purpose of harrassing and intimidating the rest of the population. Hitler's brown shirts, or Mussolini's black shirts come to mind; to construct a quasi-private, paramilitary force for domestic use has historically been a prelude to fascism. The green agenda may be even worse. I love nature as much as the next guy, but these green-peace types who are being suckered into supporting the government's plans don't know what this is really about. If you read about what happened in Argentina, there are alot of similarities; the government talked about and mandated conservation. These are policies of austerity which debt-laden countries tend to adopt. In other words, because the ever-mounting debt is collaterized by our future labor, the government has to ensure that as much as possible of that labor is spent on the debt, which means less can be spent by us. The green agenda is a deliberate attempt, IMO, to lower our standard of living; in any case, that will be its effect. There is nothing that can replace fossil fuels any time soon. I reccomend watching Chris Martenson's 'Crash Course,' about economics and population growth and how 'peak everything' is affecting society. If you can't watch the whole thing, which get a little dull at times, at least watch 17a, 17b, 17c, and 18. After that, consider that the government's actions, thought authoritarian, might be the rational (not to say just!) decision: to bring society down to a sustainable level, rarther than let is crash. This is rational from their perspective of course, as they are in control, want to stay in control, and don't want to risk that control in a chaotic situation.

As for Europe, Germany is export driven, number 2 or 3 in the world I think. If they join in the general keynesian insanity, they'll go down with the rest of europe. If not, the EU will break up, in effect anyway, if not formally. The problem in western europe is analagous to the problem here; the banks are full with essentially worthless securities which rest on bad loans made during the boom: some bought from Americans, some from domestic markets, some from eastern Europe. I don't know much about the Scandanavian countries, but I think they are somewhat insulated from global problems simply because their populations are very small and they have managed to make a form of stable socialism work, more or less (not that I support it!). If I were moving out of the country, and I wish I could, I'd probably head for Brazil, the far east, or maybe Scandanavia. I used to think about moving to Iceland...well that's out now.

Crash Course Chapter 17a: Peak Oil - Economy | Crash Course Videos at Chris Martenson - Economy, Energy, export land model, fuel shortages, oil production, Peak Oil, supply and demand, three Es

1 Reply

@BrightNoon,

BrightNoon;60686 wrote:

I think you're right about Obama, not that he's different from his predecessors in this respect. He's spending alot of money, not to save the country, but to delay the collapse, and to enrich his private supporters, like Goldman Sachs e.g. It's remeniscent of what happened at Enron; the insiders keep the stock afloat just long enough for them to unload their own and loot anything of value from the company, then the bottom falls out and the little peple get crushed. Also, alot of money is going into very disturbing, totalitarian programs. I think he's preparing for a post-prosperity, post-empire, post-republic U.S. The national service plan is, IMO, a not very well concealed attempt to enlist the discontents of society, or the naive, in the service of the state, for the purpose of harrassing and intimidating the rest of the population. Hitler's brown shirts, or Mussolini's black shirts come to mind; to construct a quasi-private, paramilitary force for domestic use has historically been a prelude to fascism. The green agenda may be even worse. I love nature as much as the next guy, but these green-peace types who are being suckered into supporting the government's plans don't know what this is really about. If you read about what happened in Argentina, there are alot of similarities; the government talked about and mandated conservation. These are policies of austerity which debt-laden countries tend to adopt. In other words, because the ever-mounting debt is collaterized by our future labor, the government has to ensure that as much as possible of that labor is spent on the debt, which means less can be spent by us. The green agenda is a deliberate attempt, IMO, to lower our standard of living; in any case, that will be its effect. There is nothing that can replace fossil fuels any time soon. I reccomend watching Chris Martenson's 'Crash Course,' about economics and population growth and how 'peak everything' is affecting society. If you can't watch the whole thing, which get a little dull at times, at least watch 17a, 17b, 17c, and 18. After that, consider that the government's actions, thought authoritarian, might be the rational (not to say just!) decision: to bring society down to a sustainable level, rarther than let is crash. This is rational from their perspective of course, as they are in control, want to stay in control, and don't want to risk that control in a chaotic situation.

As for Europe, Germany is export driven, number 2 or 3 in the world I think. If they join in the general keynesian insanity, they'll go down with the rest of europe. If not, the EU will break up, in effect anyway, if not formally. The problem in western europe is analagous to the problem here; the banks are full with essentially worthless securities which rest on bad loans made during the boom: some bought from Americans, some from domestic markets, some from eastern Europe. I don't know much about the Scandanavian countries, but I think they are somewhat insulated from global problems simply because their populations are very small and they have managed to make a form of stable socialism work, more or less (not that I support it!). If I were moving out of the country, and I wish I could, I'd probably head for Brazil, the far east, or maybe Scandanavia. I used to think about moving to Iceland...well that's out now.

Crash Course Chapter 17a: Peak Oil - Economy | Crash Course Videos at Chris Martenson - Economy, Energy, export land model, fuel shortages, oil production, Peak Oil, supply and demand, three Es

That is quite interesting. Thanks.
Now I got a new long-time project on the computer, watching the Crash Course videos.
If you can think of anything else interesting, post links if you can think of anything that should interest me.

---------- Post added at 11:58 PM ---------- Previous post was at 10:59 PM ----------

Watchin' the crash course... What I don't necessarily agree on with the guy, is that we are at this turning point now, where growth can't continue.
I do believe that we can't define these graphs maximums, as technology will push the maximums upwards, even if we can't imagine that yet. So the turning point of the exponential graph is not yet necessarily reached.

I think that every generation thinks that it is lives in the time of the turning point of history, where all the important stuff will happen. Don't you think that they thought that fighting the civil war? Or in the sixties when the president was assassinated and it seemed that the Soviets would win and this whole American experiment would just come to an end? I only watched the first few parts, but I think we can go on for a while.

---------- Post added at 12:04 AM ---------- Previous post was Yesterday at 10:59 PM ----------

Holy cow. I nearly fell off my chair watching part 7. 1000 Dollars is 10.000 Dollars. It's so simple!

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@EmperorNero,

Dull? The crash course is like 24! I can't keep myself from watching the next episode.

1 Reply

@EmperorNero,

Glad you think so, I'm trying to get my parents to watch it. There's always the possibility that some new and currently unimaginable technology will allow growth to continue, but even that has its problems. Unless something is invented which can power existing cars, homes, factories, etc. with the existing infrastructure, which is meant for fossil fuels (gas stations e.g.), there will have to be a significant period of time available to construct the new infrastructure. There is no such time if we are at 'peak everything' already. As Martenson explains, our economy depends not only on growth, but on massive exponential growth to sustain itself. I think we've reached the point where the obligations we've made are too great to be satisfied, i.e. that the future prosperity that we've effectively borrowed against cannot possibly be as great as we imagine it to be; even if it eventually is, there will be a period of decline during the transition to a new system. In other words, default on the debt with which we've built our modern society is inevitable, except that, rather than default, the government will inflate. The result is the same for the real economy. It's pretty obvious that, having reached the peak, or at least neared the peak of the inflationary system, we are not backing away slowly, but 'putting the pedal to the floor,' as Martenson says.

I don't know, call me a pessimist, but I am starting to subscribe to the idea that the industrial revolution and industrial society (~1800-present) is a historical anomaly, and that humanity is destined to return to a simpler way of life, and a much lower population. This wasn't necessarily inevitable though. If we had had a free market and sound money, the massive depletion of resources over the last two centuries could have been invested productively, ensuring future prosperity. Instead, we took the easy route, installed an inflationary monetary system that allowed society to live above its means by borrowing against the future to fund the present, thereby causing an epic misallocation of resources (millions of excess homes, shopping malls, etc.), which ensures that the future prosperity won't be sufficient: a ponzi scheme that collapses in the end.

To better understand the role of the Federal Reserve System, who created it, and why, I'd watch this. (the one entitled 'the creature from jekyll island part 1 of 12')
http://video.google.com/videosearch?q=the+creature+from+jekyll+island&hl=en&emb=0&aq=0&oq=the+creature+from+jeky#

http://video.google.com/videosearch?q=the+creature+from+jekyll+island&hl=en&emb=0&aq=0&oq=the+creature+from+jeky#q=norman+dodd+griffin&hl=en&emb=0

http://video.google.com/videosearch?q=the+creature+from+jekyll+island&hl=en&emb=0&aq=0&oq=the+creature+from+jeky#q=griffin+austin+texas&hl=en&emb=0

The Fabian Society and its influence on world affairs (the one entitled 'world communitarianism and the Fabian society')
http://video.google.com/videosearch?q=the+creature+from+jekyll+island&hl=en&emb=0&aq=0&oq=the+creature+from+jeky#hl=en&emb=0&q=fabian+society

http://video.google.com/videosearch?q=the+creature+from+jekyll+island&hl=en&emb=0&aq=0&oq=the+creature+from+jeky#q=council+on+foreign+relations&hl=en&emb=0

"For more than a century, ideological extremists at either end of the political spectrum have seized upon well-publicized incidents to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as "internationalists" and of conspiring with others around the world to build a more integrated global political and economic structure - one world, if you will. If that's the charge, I stand guilty, and I am proud of it." David Rockafeller, from David Rockafeller: Memoirs

The tactics of Fabian gradualism, explained by a former member of the KGB (the first one)
http://video.google.com/videosearch?q=soviet+subversion+of+the+free+world+press&hl=en&emb=0&aq=0&oq=soviet+subver#

You should be familiar now with the concept of debt as a vehicle for control. Imposing debt on the third world is the means by which powers in the west control global developments. This is an interview with a man who wrote the book, Confessions Of An Economic Hitman. (the second one)
http://video.google.com/videosearch?q=confessions+of+an+economic+hitman&hl=en&emb=0&aq=1&oq=confessions+of+an+#

As I said before, I'm of the opinion that global warming is an excuse to implement policies of austerity, reduce standards of living, and increase government control of daily life. That is debatable I suppose, but the science really is not...in that there is no global warming (the one titled 'CBC-Global Warming Doomsday Called Off')
http://video.google.com/videosearch?q=global+warming+hoax&hl=en&emb=0&aq=1&oq=global+w#

I hope you find these interesting. I try to spread the word about this as much as possible. Enjoy

1 Reply

@BrightNoon,

Thanks, for the links. Smile

BrightNoon;60781 wrote:

a ponzi scheme that collapses in the end.

The roman empire was constantly dependent on influx of wealth and slaves from newly conquered territories. It had to grow to maintain itself. Just as he US monetary system is dependent on printing a certain amount of money each year to cover the debt. Exponential growth has to reach a tipping point, where further growth is untenable. I'm not sure if I'm being clear. I think that I'm saying that ponzi schemes "natural". They just become more elaborate with times. Just like humanity invents better bombs, it invents better scams.

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@EmperorNero,

Absolutely true. Yeast do something very similiar. They multiply and consume all the sugar in the envionment rapidly, both depleting their food source and poisoning themselves with their own exhaust (delicious alcohol) until they reach a tipping point and there's a massive die off. What's happened is natural, but it's also been accelerated and made much worse by the monetary system and the corruption.

edit: I don't know if you looked at any of the videos, but I just edited the links, some of them weren't quite right and led to the wrong place. Unfortunately, these videos are right alongside "Batboy found in Idaho!" and "Aliens abduct the white house!" in google video. The one's I specified are the best quality and full length videos, and the ones that haven't been edited by lunatics.

1 Reply

@BrightNoon,

BrightNoon;60784 wrote:

I don't know if you looked at any of the videos, but I just edited the links, some of them weren't quite right and led to the wrong place. Unfortunately, these videos are right alongside "Batboy found in Idaho!" and "Aliens abduct the white house!" in google video. The one's I specified are the best quality and full length videos, and the ones that haven't been edited by lunatics.

I'm going to look at all of them, but I didn't yet. You can edit if you like.

BrightNoon;60784 wrote:

Absolutely true. Yeast do something very similiar. They multiply and consume all the sugar in the envionment rapidly, both depleting their food source and poisoning themselves with their own exhaust (delicious alcohol) until they reach a tipping point and there's a massive die off. What's happened is natural, but it's also been accelerated and made much worse by the monetary system and the corruption.

I guess that was what agent Smith was talking about. :bigsmile:

So then is there some truth to what xris kept on about in the Socialism thread, is capitalism doomed to periods of over-reaction and bust?
I have the feeling that it is not the inherent attribute of capitalism if it is applied with common sense. Unfortunately that is something that can't just be assumed.

1 Reply

@EmperorNero,

The current system cannot continue, but the current system is not remotely free market capitalism. Theoretically, in a free market, growth should be able to continue indefinately, but not this kind of growth (ever increasing consumption, ever increasing debt, etc.). There are many kinds of economic growth. In a free market, what should happen when limits to physical resources are approached is adaptation and natural change toward a new path of growth: new energy source, more efficiency, etc. The profit motive itself ensures that old methods, which have become innefficent due to depletion of resources, will be abandoned in favor of new methods. In new methods are not available, then humanity is screwed either way; no amount of paper money or government regulation is going to conjur into existance new resources. To say that in the free market, the mechanism by which resources are allocated most efficiently in order to meet the needs of society, growth cannot continue indefinately, is to say that growth cannot continue indefinately under any circumstances. I look at it like this. A free market economy works because it is responsive to the physical reality and can adapt gradually to changing conditions. A centrally planned economy is fixed on one idea of what the system should be, or maybe changes form time to time based on the ideas of some bureaucrats which may or may not be realistic; it is not responsive to the physical reality. It follows a path, which is almost certainly not the most efficient path, directed by the government, consuming all the resources that, under a free market, could have been applied to productive, efficient endeavors. We have burned though a hugly rich and productive world in order to travel along the path chosen for us by our leaders, which is now at its end, and we don't have enough left to make a new path.

---------- Post added at 10:32 PM ---------- Previous post was at 10:26 PM ----------

Mr. Fight the Power wrote:

My guess is that we will never actually see hyperinflation as the government will institute price controls, which will in turn drain the money supply and ramp up unemployment instead. Unemployment will then be blamed on everybody but the US government and American spending habits.

The results would be massive military spending and intense nationalism brought about by government subsidies and scapegoating.

Next is a political push for war. With us presently driving Mexico down the crapper, continuing to foster a genuine hatred for all things USian in South America and the Middle East, and largely causing a dangerous destabilization of Pakistan, who knows if American society as we know it will survive.

How's that for a doomsday prediction.

Not too bad. Very Happy

You might be right about price controls, but it wouldn't make much of a difference, at least for us Americans. In hyperinflation, the price of bread soars to rediculous levels and no one can afford it; under price controls, the price fo bread stays the same, but there are shortages, and no one can find it. Either way, the end result is hunger...and anger...and, therefore, if history has anything to teach us, repression.

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The US Dollar And The Stability Of The World Economy

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