By Alan Ho Chok Chan
The Dollar Standard
This paved the way for the greenback to replace gold as the universal currency.
And the era of The Dollar Standard began. Most of today’s economic malaise, turbulent exchange rates, violent upswings and downturns, runaway inflations and deflations ,can be traced to this.
It all boils down to control. Loss of control.
Printing fiat currency
With the Dollar Standard, the Federal Reserve is the ultimate gatekeeper. The printing presses can now run round the clock. It costs next to nothing to churn out greenbacks. And money is created out of thin air. Which defies common sense and logic.
Funding wars
It was used to fund the Korean war, the Vietnam war, the Iraqi, Iranian wars, the Afghan mujahideen’ war against the Soviet Union, and multiple other skirmishes in the Middle East and South Americas.
Wars always deplete the national coffers and weakens the currency. It is estimated that the current war on terrorism is going to be the costliest war yet!
And guess who’s funding it ? Me and you and a dog named Boo!
Easy money
At home the Fed’s easy money policy flooded, and fed both the stock market and real estate market bubbles. Adding fuel to fire, poor Federal regulation of investment banks, real estate finance companies, and laxity in overseeing the rating agencies (Moody’s ,S&P, Fitch : they are all a den of thieves, they function on an ‘ Issuer pay’ system, where the issuer of bonds and derivatives pay them to rate the product. Of course the ratings come out roses) allowed UNREGULATED financial derivatives like CDOs ( collateralised debt obligations), Mortgage backed securities, to bundle subprime mortgages and sold it as AAA rated securities.
Toxic products
These Toxic products are palmed off to pension funds, insurance companies, foreign banks and Sovereign wealth funds, and wealthy investors, who ended up carrying a load of junk.
Warren Buffet called financial derivatives Weapons of Mass Financial Destruction.
The rest of the world helped fuel the US current account deficit by buying up government bonds with their own current account surpluses, and their central governments held increasing amounts of USD in their national coffers and their Sovereign Wealth funds.
Profligate spending
Charles de Gaulle had long ago seen the truth, the futility of the rest of the world throwing their hard earned cash to subsidise the America’s profligate spending pattern. He called America’s bluff as early as February 1965, stating that the US is never going to be able to balance its budget, and called for a return to the Gold Standard.
Return to Gold
He concluded : there can be no standard other than Gold, which never changes, which can be shaped into ingots, bars, coins, which has no nationality, and is eternally and universally accepted as the unalterable fiduciary value par excellence.
De Gaulle pressed the US to settle future debts with France in gold, rather than Dollars.
Faced with a relentless drain on its gold reserves, Richard Nixon, the archetypal crook in US politics, in 1971 severed all links of dollar to gold, closed the gold window (where Dollars could be exchanged for gold), in effect killed the Bretton Woods agreement, which was proposed and initiated by the US post WWII.
Thus marks the end of reason and rationality.
Foreign Funds
The US economy is sustained by an inflow of foreign funds exceeding 2 billion per day, or 800 billion a year. These are already dated numbers.
How will the US settle its debts? By printing whatever Dollar figures creditors demand on the day of reckoning.
The saying : The Dollar is America’s currency and everyone else’s problem has become a truism!
If you have reached this line, you must be very engrossed and intrigued, and wonder what I have in store for you next.
Why, GOLD of course !
Dr Alan Ho Chok Chan is a Paediatrician in private Family Practice. He also spends time golfing, swimming, playing tennis, wine tasting, playing guitar and singing. He is also a bibliophile and voracious reader.
