Brazil, Russia, India and China, four names that have emerged on the financial front as leaders in the dump the dollar movement. Their leaders have been more than vocal in joint disdain for the dollar. China’s Premier, Wen Jiabao, was quoted on March 13, “We have lent a huge amount of money to the United States, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises, and to guarantee the safety of China’s assets.” Just 10 days later, Bank of China Governor, Zhou Xiaochuan, suggested a new “super-sovereign reserve currency” to supplant the role of the dollar in the world’s marketplace. Brazilian President Luiz Inacio Lula da Silva, said he planned to discuss the prospects for dumping the dollar in trade between his country and China . Many would find it incredible to note that transactions between Brazil and China require the use of Federal Reserve produced dollars.
But there it is. In fact, the entire international finance architecture is based on the dollar. Nations may buy and sell with each other, but they all use dollars. Since 84% of the world’s trade is conducted in dollars, it is doubtful that this will change until an new contender emerges. For all the bravado surrounding the issue of the Euro, it is still largely a local currency with less than 10% of the world’s current savings being held in Euros. Contrast this with the nearly 72% of global currency reserves taken up by the dollar. Lest some contend that the Euro is coming on strong, consider that as recently as 1999, the year of the Euro’s issuance, foreign dollar holdings comprised only 49% of the worlds savings. A cursory examination of the balance of exports vs. imports reveals that the U.S. does not dominate world trade. The U.S. share of global exports is only 12% and our portion of global imports is only 18% of the total. That means that trade for the rest of the world is driving the roughly 80% difference. Think of it this way: the rest of the world uses 4 times as many dollars as we do. There are several disparate fields of use at the bottom of the food chain. We find the bulk of the Third World desperate to secure dollars to service dollar-denominated foreign debts. They are selling their natural resources in untold quantities to fulfill this task. The working condition are harsh and legendary. Environmental concerns are non-existent. They actually shoot protesters. The more dollars the Fed creates, the higher the value of these previously obtained assets will rise.
Many of the more developed countries, the so called BRICs, accumulate dollar reserves to support the foreign exchange value of their own domestic currencies. In addition international currency raiders, led by men such as George Soros, institute attacks on weaker currencies. This forces or encourages the central banks of those countries to effectively back their currencies 1 to 1 with dollar reserves. These so called currency boards world wide accumulate dollars in amounts corresponding to their currencies in circulation. So, essentially the Federal Reserve creates dollars and the rest of the world produces products and is forced to store excess dollars. Do you think this happens by accident? Do you think the currency raiders just instinctively know which currencies to attack? Everyone has been forced to accept dollars because of the “deal” Henry Kissinger struck with the OPEC cartel in 1973. We have to tolerate the Chinese as the ergo partners of the Fed as a result of Richard Nixon’s foray into China at the behest of the Rockefeller Clan. Not much has changed since then.
Every country needs oil and oil is priced exclusively in dollars. As a result, the globe is literally awash with dollars. The Federal Reserve cartel has in this fashion, taken ownership of the world’s resources. All that remains, of course, is to create the money required to buy it. I have studied this arrangement extensively over the last three decades. I am convinced that this model of domination is the most efficient yet developed. Throughout history the process of consolidation, or more abruptly world conquest, has been the result of overt and usually military action. The current policy is much better than the messy war thing. Control of the world’s currency unit has been the dream of money masters for most of recorded history. The current model has power firmly rooted in a control mechanism adored by those illuminated few who benefit from its largess. Domestically, a strong-dollar is great for the citizens. Low-cost imports have kept the appearance of inflation at bay.
So, as a nation we are certainly not going to complain. But we can only buy so much and when we stop buying, trouble sets in. Henry Ford’s solution was to pay his workers enough to buy one of his cars. Alas, there is no Henry on the horizon. We have allowed for the world economy to absorb the excess growth of dollars. We have subverted environmental costs by moving polluting industries to places where Greenpeace does not go. We have dismantled OSHA regulations on worker safety by moving dangerous jobs to lesser developed countries. The slave wages paid in other countries are the brunt of many jokes, certainly far below the proscribed minimum wage set here at home. What we need now is to have the rest of the world rise to the standard of Henry Ford’s workers. Yet the world’s ultra elite openly view low un-employment and fair wages as the cause of inflation instead of the result. The argument that the U.S. economy can profit forever from this imbalance is one that many are discussing right now. I believe the situation will remain as it is. The world may see a new world currency unit. It just won’t be new to us.