By Mike Whitney
June 17, 2022:
Information Clearing House
--
Here’s your ‘reserve
currency’ thought for the day: Every US
dollar is a check written on an account that is
overdrawn by 30 trillion dollars.
It’s true. The “full
faith and credit” of the US Treasury is largely
a myth held together by an institutional
framework that rests on a foundation of pure
sand. In fact, the USD is not worth the paper it
is printed on; it is an IOU flailing in an ocean
of red ink. The only thing keeping the USD from
vanishing into the ether, is the trust of
credulous people who continue to accept it as
legal tender.
But why do people remain
confident in the dollar when its flaws are known
to all? After all, America’s $30 trillion
National Debt is hardly a secret, nor is the
additional $9 trillion that’s piled up on the
Fed’s balance sheet. That is a stealth debt of
which the American people are completely
unaware, but they are responsible for all the
same.
In order to answer that
question, we need to look at how the system
actually works and how the dollar is propped up
by the numerous institutions that were created
following WW2. These institutions provide an
environment for conducting history’s longest and
most flagrant swindle, the exchange of
high-ticket manufactured goods, raw materials
and hard-labor for slips of green paper with
dead presidents on them. One can only marvel
at the genius of the elites who concocted this
scam and then imposed it wholesale on the masses
without a peep of protest. Of course, the system
is accompanied by various enforcement mechanisms
that swiftly remove anyone who tries to either
break free from the dollar or, God help us,
create an alternate system altogether. (Saddam
Hussein and Muammar Qaddafi come to mind.) But
the fact is– aside from the institutional
framework and the ruthless extermination of
dollar opponents– there’s no reason why humanity
should remain yoked to a currency that is buried
beneath a mountain of debt and whose real value
is virtually unknowable.
It wasn’t always like
this. There was a time when the dollar was the
strongest currency in the world and deserved its
spot at the top of the heap. Following WW1,
the US was “the owner of the majority of the
world’s gold” which was why an international
delegation “decided that the world’s currencies
would no longer be linked to gold but could be
pegged to the U.S. dollar, “because the
greenback was, itself, linked to gold.”
Here’s more from an article at Investopedia:
“The arrangement came
to be known as the Bretton Woods
Agreement. It established the authority of
central banks, which would maintain fixed
exchange rates between their currencies and
the dollar. In turn, the United States
would redeem U.S. dollars for gold on
demand….
The U.S dollar was
officially crowned the world’s reserve
currency and was backed by the world’s
largest gold reserves thanks to the Bretton
Woods Agreement. Instead of gold
reserves, other countries accumulated
reserves of U.S. dollars. Needing a place to
store their dollars, countries began buying
U.S. Treasury securities, which they
considered to be a safe store of money.
The demand for
Treasury securities, coupled with the
deficit spending needed to finance the
Vietnam War and the Great Society domestic
programs, caused the United States to flood
the market with paper money….
The demand for gold
was such that President Richard Nixon was
forced to intervene and de-link the dollar
from gold, which led to the floating
exchange rates that exist today.
Although there have been periods of
stagflation, which is defined as high
inflation and high unemployment, the U.S.
dollar has remained the world’s reserve
currency.” (“How
the U.S. Dollar Became the World’s Reserve
Currency”, Investopedia)
But now the gold is
gone and what’s left is a steaming pile of debt.
So, how on earth has the dollar managed to
preserve its status as the world’s preeminent
currency?
Proponents of the dollar
system, will tell you it has something to do
with “the size and strength of the U.S. economy
and the dominance of the U.S. financial
markets.” But that’s nonsense.
The truth is, reserve
currency status has nothing to do with “the size
and strength” of America’s post-industrial,
service-oriented, bubble-driven, third-world-sh**hole
economy. Nor does it have anything to do with
the alleged safety of US Treasuries” which–
next to the dollar– is the biggest Ponzi flim-flam
of all time.
The real reason the
dollar has remained the world’s premier currency
is because of the cartelization of Central
Banking. The Western Central Banks are a de
facto monopoly run by a small cabal of
inter-breeding bottom-feeders who coordinate and
collude on monetary policy in order to preserve
their maniacal death-grip on the financial
markets and the global economy. It’s a
Monetary Mafia and– as George Carlin famously
said: “You and I are not in it. You and I are
not in the big club.” Bottom line: It is the
relentless manipulation of interest rates,
forward guidance and Quantitative Easing (QE)
that has kept the dollar in its lofty but
undeserved spot.
But all that is about to
change due entirely to Biden’s reckless foreign
policy which is forcing critical players in the
global economy to create their own rival system.
This is a real tragedy for the West that has
enjoyed a century of nonstop wealth extraction
from the developing world. Now– due to the
economic sanctions on Russia– an entirely new
order is emerging in which the dollar will be
substituted for national currencies (processed
through an independent financial settlement
system) in bilateral trade deals until– later
this year– Russia launches an exchange-traded
commodities-backed currency that will be used by
trading partners in Asia and Africa.
Washington’s theft of Russia’s foreign reserves
in April turbo-charged the current process which
was further accelerated by banning of Russia
from foreign markets. In short, US economic
sanctions and boycotts have expanded the
non-dollar zone by many orders of magnitude and
forced the creation of a new monetary order.
How dumb is that? For
decades the US has been running a scam in which
it exchanges its fishwrap currency for things of
genuine value. (oil, manufactured goods and
labor) But now the Biden troupe has scrapped
that system altogether and divided the world
into warring camps.
But, why?
To punish Russia, is that
it?
Yes, that’s it.
But, if that’s the case,
then shouldn’t we try to figure out whether the
sanctions actually work or not before we
recklessly change the system?
Too late for that. The
war on Russia has begun and the early results
are already pouring in. Just look at the way
we’ve destroyed Russia’s currency, the ruble.
It’s shocking! Here’s the scoop from an article
at CBS:
“The Russian ruble
is the best-performing currency in the world
this year….
Two months after the
ruble’s value fell to less than a U.S. penny
amid the swiftest, toughest economic
sanctions in modern history, Russia’s
currency has mounted a stunning turnaround.
The ruble has jumped 40% against the dollar
since January.
Normally, a country
facing international sanctions and a major
military conflict would see investors
fleeing and a steady outflow of capital,
causing its currency to drop….
The ruble’s
resiliency means that Russia is partly
insulated from the punishing economic
penalties imposed by Western nations
after its invasion of Ukraine…” (“Russia’s
ruble is the strongest currency in the world
this year“, CBS News)
Huh? You mean the attack
on the ruble didn’t work after all?
Sure looks that way. But
that doesn’t mean the sanctions are a failure.
Oh, no. Just at look at the effect they’ve had
on Russian commodities. Export receipts are
way-down, right? Here’s more from CBS:
“Commodity prices
are currently sky-high, and even though
there is a drop in the volume of Russian
exports due to embargoes and sanctioning,
the increase in commodity prices more than
compensates for these drops,” said Tatiana
Orlova, lead emerging markets economist at
Oxford Economics.
Russia is pulling
in nearly $20 billion a month from energy
exports. Since the end of March, many
foreign buyers have complied with a demand
to pay for energy in rubles, pushing up the
currency’s value.” (“Russia’s
ruble is the strongest currency in the world
this year“, CBS News)
You’re kidding me? You
mean the ruble is surging and Putin is raking in
more dough on commodities than ever before?
Yep, and it’s the same
deal with Russia’s trade surplus. Take a look at
this excerpt from an article in The Economist:
“Russia’s exports…
have held up surprisingly well, including
those directed to the West. Sanctions permit
the sale of oil and gas to most of the world
to continue uninterrupted. And a spike in
energy prices has boosted revenues
further.
As a result,
analysts expect Russia’s trade surplus to
hit record highs in the coming months.
The IIF reckons that in 2022 the
current-account surplus, which includes
trade and some financial flows, could come
in at $250bn (15% of last year’s GDP), more
than double the $120bn recorded in 2021.
That sanctions have boosted Russia’s trade
surplus, and thus helped finance the war, is
disappointing, says Mr Vistesen. Ms Ribakova
reckons that the efficacy of financial
sanctions may have reached its limits. A
decision to tighten trade sanctions must
come next.
But such measures
could take time to take effect. Even if the
EU enacts its proposal to ban Russian oil,
the embargo would be phased in so slowly
that the bloc’s oil imports from Russia
would fall by just 19% this year, says Liam
Peach of Capital Economics, a consultancy.
The full impact of these sanctions would be
felt only at the start of 2023—by which
point Mr Putin will have amassed billions to
fund his war.” ( “Russia
is on track for a record trade surplus”,
The Economist)
Let me get this straight:
The sanctions are actually hurting the US and
helping Russia, so the experts think we should
impose more sanctions? Is that it?
Precisely. Now that we
have shot ourselves in the foot, the experts
think it would be wise to shoot the other one
too.
Am I the only one who is
struck by the insanity of this policy? Check out
this clip from an article at RT:
“Russia could earn
a record $100 billion from gas sales to
European countries in 2022 due to the sharp
rise in energy prices, French newspaper
Les Echos reported this week, citing
Citibank analysts.
According to the
paper, the projected income from gas
sales will be almost twice as much as last
year. The analysis does not take into
account profits from the sale of other
Russian commodities, such as oil, coal, and
other minerals.
Les Echos reports
that, despite sanctions and warnings of a
sweeping embargo on Russian energy, the 27
EU countries continue to send roughly $200
million per day to Gazprom.” (“Russian
gas revenues projected to hit new highs”,
RT)
So the revenues from gas
and oil sales are literally flooding Moscow’s
coffers like never before. Meanwhile, energy
prices in the EU and America have skyrocketed to
40-year highs.
Can you see how
counterproductive this policy is?
The EU is sinking into
recession, supplylines have been severely
disrupted, food shortages are steadily emerging,
and gas and oil prices are through-the-roof. By
every objective standard, the sanctions have not
only failed, but backfired spectacularly. Can’t
the Biden people see the damage they’re doing?
Are they completely divorced from reality?
Imagine if the Ukrainians
use Biden’s new artillery battery (HIMARS) to
shell cities in Russia? Then what?
Then Putin takes off the
gloves and shuts off the flow of hydrocarbons to
Europe immediately. That’s what’s going to
happen if Washington continues to escalate. You
can bet on it. If Russia’s “Special Military
Operation” suddenly becomes a war, the lights
across Europe will go dark, homes will begin to
freeze, factories will go silent, and the
continent will slide headlong into a protracted
and painful depression.
Does anyone in Washington
think about these things or are they all so
drunk on their own press clippings they’ve
completely lost touch with reality?
Here’s more from an
article at RT:
“Even as the
collective West continues to insist –
against all observable reality – that the
conflict in Ukraine is going well for Kiev,
major media outlets are becoming
increasingly uneasy with the situation on
the economic front. More and more
observers are admitting that the embargoes
imposed by the US and its allies aren’t
crushing the Russian economy, as originally
intended, but rather their own.…
“Russia is winning
the economic war,” the Guardian’s economics
editor Larry Elliott declared on
Thursday. “It is now three months since the
west launched its economic war against
Russia, and it is not going according to
plan. On the contrary, things are going very
badly indeed,” he wrote…
In a May 30 essay,
Guardian columnist Simon Jenkins also said
that the embargo had failed…
As Jenkins points
out, the sanctions have actually raised the
price of Russian exports such as oil and
grain – thus enriching, rather than
impoverishing, Moscow while leaving
Europeans short of gas and Africans running
out of food.” (“As
sanctions fail to work and Russia’s advance
continues, Western media changes its tune on
Ukraine”, RT)
Did you catch that part
about “Russia winning the economic war”? What do
you think that means in practical terms?
Does it mean that
Washington’s failed attempt to maintain its
global hegemony by “weakening” Russia is
actually putting enormous strains on the
Transatlantic Alliance and NATO that will
trigger a re-calibration of relations leading to
a defiant rejection of the “rules-based system.”
Is that what it means? Is
Europe going to split with Washington and leave
America to sink beneath its $30 trillion ocean
of red ink?
Yes, that’s exactly what
it means.
Uncle Sam’s 30 Year
Bender
Proponents of
Washington’s proxy-war have no idea of the
magnitude of their mistake or how much damage
they are inflicting on their own country. The
Ukraine debacle is the culmination of 30 years
of bloody interventions that have brought us to
a tipping point where the nation’s fortunes are
about to take a dramatic turn-for-the-worse.
As the dollar-zone shrinks, standards of living
will plunge, unemployment will soar, and the
economy will go into a downward-death spiral.
Washington has greatly
underestimated its vulnerability to catastrophic
geopolitical blowback that is about to bring the
New American Century to a swift and excruciating
end.
A wise leader would do
everything in his power to pull us back from the
brink.
The views expressed in this article are
solely those of the author and do not necessarily
reflect the opinions of Information Clearing House.
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