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Council on Foreign Relations on U.S. Dollar: “An Absurdity…
Supported Only by Faith”
Cryptogon.com
Thursday, May 10, 2007
The
End of National Currency is the most astonishing thing that I have
read since Zbigniew Brzezinski’s appearance
before the Senate Foreign Relations Committee earlier this year.
Foreign Affairs is the most important and influential journal
of International Relations in the world. It is the mechanism by which
the Council on Foreign Relations disseminates the game plan to people
in polite circles. CFR’s positions on core issues represent the
raw building blocks for most of the gibberish spewed by the corporate
media and the maniac fascist policies of the “developed world.”
Publications like the New York Times and the Wall Street
Journal are dumbed down versions of Foreign Affairs that
are published daily. Television news is the same thing, but dumbed down
again. Foreign Affairs is also where politicians from several
countries look to determine what’s safe to say, which policies are
doable and what needs to be done. A degree in International Relations
is largely a certification of a student’s ability to internalize
CFR jargon and concepts.
Got the picture?
Now, what did the most important and influential journal of International
Relations in the world just say about the U.S. Dollar and the global economy?
In summary: The U.S. dollar is an “absurdity” and the only
way to stave off a global disaster is for most countries to join one of
three global currencies, based loosely on: the dollar, the euro and a
pan Asian currency.
I encourage everyone to read The
End of National Currency in its entirety, but I’ll quote some
of the more remarkable parts below:
The dollar’s privileged status as today’s global money
is not heaven-bestowed. The dollar is ultimately just another money
supported only by faith that others will willingly accept it in the
future in return for the same sort of valuable things it bought in the
past. This puts a great burden on the institutions of the U.S. government
to validate that faith. And those institutions, unfortunately,
are failing to shoulder that burden. Reckless U.S. fiscal policy is
undermining the dollar’s position even as the currency’s
role as a global money is expanding.
Four decades ago, the renowned French economist Jacques Rueff, writing
just a few years before the collapse of the Bretton Woods dollar-based
gold-exchange standard, argued that the system “attains such a
degree of absurdity that no human brain having the power to reason can
defend it.” The precariousness of the dollar’s position
today is similar. The United States can run a chronic balance-of-payments
deficit and never feel the effects. Dollars sent abroad immediately
come home in the form of loans, as dollars are of no use abroad. “If
I had an agreement with my tailor that whatever money I pay him he returns
to me the very same day as a loan,” Rueff explained by way of
analogy, “I would have no objection at all to ordering more suits
from him.”
With the U.S. current account deficit running at an enormous 6.6 percent
of GDP (about $2 billion a day must be imported to sustain it), the
United States is in the fortunate position of the suit buyer with a
Chinese tailor who instantaneously returns his payments in the form
of loans — generally, in the U.S. case, as purchases of U.S. Treasury
bonds. The current account deficit is partially fueled by the budget
deficit (a dollar more of the latter yields about 20-50 cents more of
the former), which will soar in the next decade in the absence of reforms
to curtail federal “entitlement” spending on medical care
and retirement benefits for a longer-living population. The
United States — and, indeed, its Chinese tailor — must therefore
be concerned with the sustainability of what Rueff called an “absurdity.”
In the absence of long-term fiscal prudence, the United States risks
undermining the faith foreigners have placed in its management of the
dollar — that is, their belief that the U.S. government can continue
to sustain low inflation without having to resort to growth-crushing
interest-rate hikes as a means of ensuring continued high capital inflows
…
At the turn of the twentieth century — the height of the gold
standard — Simmel commented, “Although money with no intrinsic
value would be the best means of exchange in an ideal social order,
until that point is reached the most satisfactory form of money may
be that which is bound to a material substance.” Today,
with money no longer bound to any material substance, it is worth asking
whether the world even approximates the “ideal social order”
that could sustain a fiat dollar as the foundation of the global financial
system. There is no way effectively to insure against the unwinding
of global imbalances should China, with over a trillion dollars of reserves,
and other countries with dollar-rich central banks come to fear the
unbearable lightness of their holdings.
Ordo ab chao.
The CFR created this mess to begin with. Its fingerprints are on every
policy, politician and corporation involved with the funneling of wealth
up to the top of the pyramid.
Now what?
What do we do now, as we find ourselves gazing into oblivion, into the
chaos that They created?
Seek order with fewer national currencies, my son. Trust us. We’ve
gotten you this far. We have almost reached the promised land of a global
federal government, with a single currency, with no dissent, no war, no
crime, no hunger and no disease and…
But before we can move to the single currency, we need to move to three:
A future pan-Asian currency, managed according to the same principle
of targeting low and stable inflation, would represent the most promising
way for China to fully liberalize its financial and capital markets
without fear of damaging renminbi speculation (the Chinese economy is
only the size of California’s and Florida’s combined). Most
of the world’s smaller and poorer countries would clearly be best
off unilaterally adopting the dollar or the euro, which would enable
their safe and rapid integration into global financial markets. Latin
American countries should dollarize; eastern European countries and
Turkey, euroize. Broadly speaking, this prescription follows from relative
trade flows, but there are exceptions; Argentina, for example, does
more eurozone than U.S. trade, but Argentines think and save in dollars.
But wait, there’s one more thing:
Gold.
This following paragraph is so weird, I had to read it several times.
I still don’t know what to make of it:
So what about gold? A revived gold standard is out of the question.
In the nineteenth century, governments spent less than ten percent of
national income in a given year. Today, they routinely spend half or
more, and so they would never subordinate spending to the stringent
requirements of sustaining a commodity-based monetary system. But
private gold banks already exist, allowing account holders to make international
payments in the form of shares in actual gold bars. Although clearly
a niche business at present, gold banking has grown dramatically in
recent years, in tandem with the dollar’s decline. A new gold-based
international monetary system surely sounds far-fetched. But so, in
1900, did a monetary system without gold. Modern technology makes a
revival of gold money, through private gold banks, possible even without
government support.
Woh. Hold on a second.
On the one hand, “A revived gold standard is out of the question,”
but on the other hand, “private gold banks already exist, allowing
account holders to make international payments in the form of shares in
actual gold bars. Although clearly a niche business at present, gold banking
has grown dramatically in recent years, in tandem with the dollar’s
decline. A new gold-based international monetary system surely
sounds far-fetched. But so, in 1900, did a monetary system without gold.
Modern technology makes a revival of gold money, through private gold
banks, possible even without government support.”
So, we’re going to have a few “absurd” fiat currencies
and private gold banks that will be used to make international
payments in the form of shares of actual gold bars? Did the CFR just transmit
a veiled and obscure tipoff to the wealthy people who read their rag?
Or is it something else…
I don’t know what to make of it. That paragraph is such a non sequitur
in the article that it practically slaps you right out of your chair as
you read the thing. Steil points out that rape and plunder (Globalization)
can’t happen with currencies that are tied to things. So…
Why mention private gold banks that can facilitate international payments?
It gets weirder. This article was published within days of the U.S.
Government’s shut down of eGold, the oldest private electronic
gold bank. On the same day that the indictments came out against eGold,
Brinks, a U.S. firm
that provides bullion vaulting services, dropped BullionVault as a client.
BullionVault allows individuals to easily and efficiently move their fiat
currencies into physical gold, but it does not allow payments to other
parties. [I am a satisfied client of BullionVault, by the way.]
Are factions of the Elite in open conflict? Do some of them want access
to these gold services, while others, mainly U.S. dollar interested parties
inside the U.S., view those same services as a threat? Is Steil warning
governments to shut down these services, lest individuals abandon their
“absurd” fiat currencies?
I don’t know what’s going on here, but I’d really like
to find out.
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