Greenback debased and doomed? Not so fast … "As far as investors are concerned, there's an old saying: don't fight the Fed. The Fed has a larger credit line than you do." Indeed, one of the main reasons why the dollar has been under pressure in recent months has been the diversification of reserves by central banks, mainly in Asia, away from the US currency. These reserve managers have been accumulating dollars as they fight to stem the appreciation of their currencies. But, if the Federal Reserve is really trying to debase the dollar, it may need to rethink its strategy. In spite of the prospect of cheap US money flooding currency markets, the dollar has rallied since the central bank's decision last week to embark on another round of Treasury bond-buying. – Financial Times
Dominant Social Theme: The dollar is healthier than you think.
Free-Market Analysis: It is common knowledge that the dollar is doomed and that the powers-that-be seem to be in a hurry to consign it to the grave apparently prepared for it. But this Financial Times article makes an argument that we have made in the past: It is not so easy to kill a reserve currency. (No surprise there as the Financial Times along with the London Times and the Economist magazine act as major outlets for power elite plans.) Yes, there are reasons in fact, as the article excerpt above points out, why even printing another trillion or so dollars may not have a substantial impact. In this article, we shall further examine this supposition.
There are certainly reasons to believe that the dollar is not long for this world as a reserve currency. There is a great deal of dissatisfaction with the way the US is handling the currency and this has pushed other countries to discuss alternatives. Chief among these alternatives is the idea of an IMF bancor (not yet invented) that would take the place of IMF SDRs (currently circulating).
But many countries – especially, Russia, China and Venezuela – have spoken up suggesting other alternatives including a gold-backed currency that could take the place of the dollar or a basket of currencies. China is making a try at replacing the dollar with its own yuan by completing bilateral currency and trade agreements with numerous countries.
Why does China need to complete bilateral agreements? Because the yuan is NOT a reserve currency, strictly speaking, and thus to induce countries to hold the yuan and to increase its liquidity, China must craft agreements on a one-off basis. This, in fact, shows us how difficult it is to dislodge King Dollar from its still-lofty position.
In fact, what many may not understand is that the entire world's financial system is built around the dollar and the various instrumentalities that grew out of Bretton Woods after World War II. While the Bank for International Settlements (the central bankers bank) was a pre-World War II elaboration, much of the rest of the current infrastructure was developed after the war: the International Monetary Fund, the World Bank and, of course, the UN itself.
The dollar was installed as the world's currency not by happenstance but by linking it to oil. The US demanded that Middle Eastern countries honor only dollars when selling barrels of oil. This forced countries to maintain "dollar reserves" in order to buy precious "black gold." It wasn't just national governments of course. Private enterprise, including large corporations and banks had to purchase dollars in order to leverage the oil marketplace.
This gave the US (the Anglo-American axis, really) enormous – almost unlimited – power. It allowed US leaders to print virtually as much currency as it wanted to (within astronomical limits) knowing that there would always be a ready market for dollars as nations and businesses around the world always needed to stockpile them.
Over time, in fact, generations of economists lost sight of the origins of the dollar reserve: It was born out of brute force and imposed on the world after a terrible military cataclysm. The dollar may fade over time but it is not an occurrence to be easily predicted. It is also difficult as well to determine whether the Anglo-American power elite has a working plan to generate a world currency as the dollar presumably fails. Perhaps the combination of the Internet – a modern day Gutenberg Press – and the elite's increasingly hasty efforts at generating various sorts of global agreements are pushing the envelope of what can be done at what speed.
The US did not do well at the G20 meeting in Seoul South Korea last week. President Obama did not get a trade treaty with South Korea, did not get an agreement from the Chinese to moderate their yuan strategy and, finally, did not receive support from the G20 to adopt language that might discipline China. In fact, much of the sentiment at the G20 lined up AGAINST the US, especially given that Obama was apparently asking countries to do something that the US itself would not do: Give up currency manipulation for purposes of economic advantage.
Given that the elites must certainly have anticipated the outcome of the G20, we are left with a number of unanswered questions. If we accept that the truth-telling of the Internet has interfered with a number of elite memes (global warming comes to mind) then we can, perhaps, conclude that Western elites have moved too far and too fast in attempting to realize their goal of world domination.
On the other hand, as Bell feedbackers have recently pointed out, one can make the argument that money power is fungible and that what Western elites have in mind is not ending in failure but is part of a larger plan. How would such a plan work? It is clear that Western elites have had in mind damping the national economies of both Britain and America. At the same time they have advanced regional powers such as the European Union as a building block toward world government. But this still leaves unresolved issues.
Just because Western elites have had their way with their own countries does not mean that they can count on similar control in other countries. It is not clear how much control Western power elites have over Russia, or even India at this point (speaking of the BRICs). But most of the questions center around China, which continues to put up a public display of opposition to the West and certainly to the US when it comes to economic matters.
Let us accept that Western elites are well aware that the economy worldwide is crashing, and are even encouraging it behind the scenes. This presumably would provide an avenue for global reconfiguration and perhaps even a new currency. The assumption to be made here is that Western elites are able to either a) impose their will on other large nation-states such as China or b) find complimentary elites that can be reasoned with so that a New World Order can be erected.
We have, for instance, identified the Lis in China as a family that occupies an elite perch and may therefore offer Western elites a negotiating party. It is, from this view, a bit like Western perceptions of the mafia. The elites, controlling trillions, sit down to divvy up not just regions of the world but the entire planet.
Seen from this point of view, much of what is taking place now is a kind of charade. Setbacks and infighting certainly accomplish the purpose of misleading observers as to what is going on behind the scenes and if these controversies play out on a world stage such as the G20 provides, so much the better. On the other hand, as the Financial Times article shows us, the dollar reserve will not easily founder. It is possible that Western elites are actually doing their best to kick start Western economies (especially America's) fearing civil unrest if things stay as they are.
The elites certainly have good cause to worry about civil unrest and even civil disobedience, especially given that the Internet is continually exposing their plans and promotions. Perhaps as a result, regulatory democracy has grown increasingly authoritarian of late and such nascent fascism when combined with a severe economic downturn is a noxious brew. Seen from this point of view, perhaps the US's quantitative easing is a legitimate, if desperate, attempt at kick-starting the US economy.
Does the Western power elite actually intend to aggravate the current crisis? Is it ready for the troubles that will certainly arise from such a development? Does it have agreements in place with China for a deepening New World Order? No one who is not directly involved with the elite can say of course. But we will end this article by concluding as we have before that we see significant cracks in the elite's ability to operate efficiently. We think it perfectly feasible that the Internet's truth-telling has caused Western elites to speed up whatever plans were laid in advance, but that this has not necessarily guaranteed success.
On every front, we see trouble for Western elites, anyway. Scarcity memes are not believed anymore, financial systems are failing, central banks are held in increasing disrepute and even NATO's serial wars are misfiring. We believe, in fact, control may be slipping due to a combination of the economic crisis and the Internet. It could be, therefore, that the hegemony of King Dollar is maintained for a longer rather than shorter time as reality forces Western elites to take a step back even though their preference is to move forward. Nothing is certain of course. But that is the point of Bell analyses, as we construct them – to examine different elite perspectives and public scenarios until we can close in on what seems to be the unfolding reality.
We continue to project that one ending to the current crisis would be a breakdown of the current global structure and the rise of uncoordinated private silver and gold standards, worldwide, perhaps combined with private banking of a sort (and Real Bills, too). This would surely be preferable to an elite brokered world currency, or even a renewed gold standard.We are also aware of increased cynicism regarding Western elites as their machinations have become more widely known. It is perfectly possible that what is taking place in the world has pre-planned elements. But if this is the case, certain patterns should eventually emerge publicly. We intend to watch world events closely to see if we can detect them, and do our best to do so.
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