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It's Usually About Money
By Charley Reese
02/27/06 "Lew
Rockwell" -- -- Conflicts are often about money. One
factor that might account for the Bush administration's hostility
toward Iran is Iran's plan to open a bourse – an oil exchange – in
March in which Iranian oil will be sold for euros, not dollars.
Now, a short, oversimplified history of money is in order. At the
end of World War II, the Bretton Woods Agreement stipulated that the
U.S. dollar would be redeemable in gold – for foreigners. In other
words, any foreign government or business that got antsy about the
value of the dollar and held a bunch of them could redeem them for
gold at a predetermined rate.
Thanks to the spendthrift ways of our federal government, by the
Nixon administration Europeans had such large claims against
American gold that President Nixon unilaterally abrogated the
agreement. No, he said, you can't redeem your dollars in gold, and
the value of the dollar will simply float on the open market.
Shortly thereafter, another agreement was made with the
oil-producing countries in the Persian Gulf that in exchange for
protection, they would always sell their oil for dollars. Thus was
born the petrodollar. This allowed the U.S. to continue its
spendthrift ways and, in effect, pass on its inflation to the rest
of the world. The dollar was and remains the world's reserve
currency.
Now, if the Iranian market in euros is successful, then more and
more people might decide that they don't need to hang on to their
dollars and might start dumping them for euros or some other
currency or commodity. That could, in effect, toss inflation back to
the U.S. – and not just creep-along inflation, but sudden and
painful inflation.
Unlike foreigners, Americans are captive of legal-tender laws. These
laws say you have to accept the Federal Reserve note as payment for
all debts and goods and services, no matter how worthless it
becomes. Remember, a fiat currency like ours, backed up by nothing,
has no inherent value. Its value is determined only by its
purchasing power. If the U.S. currency is greatly devalued,
Americans might find themselves in the same position as the German
people in the old Weimar Republic.
If you get a Social Security check for $400 and all of a sudden it
will only buy you $50 worth of goods and services, the U.S.
government can say to you, "Tough beans, peasant." Remember, the
more devalued a currency becomes, the higher the prices people will
demand. The poor Germans in the 1920s got to the point where they
needed a wheelbarrow to carry enough inflated currency to the market
to buy a loaf of bread.
Now, a respected Arab journalist does not believe that America's
hostility to Iran has anything to do with the bourse, scheduled to
open in March. Her reason for that statement is that she is sure
Bush has no understanding whatsoever of world financial affairs. I
tend to agree with her. I think our hostility toward Iran is made in
the same place our hostility toward Iraq was made – in Israel.
Nevertheless, we as Americans should be more concerned about the
fate of the dollar than the fate of Iran or Israel. The present
monetary system, based on a fiat dollar and a privately owned
central bank misnamed the Federal Reserve System, is a handy way to
rob the American people of the fruit of their labor.
Even creeping inflation that we have suffered since World War II in
effect steals money from our paychecks, our pension checks, our
savings accounts and our insurance policies. Many years ago, when I
bought a $10,000 life-insurance policy, $10,000 was a good sum of
money. Today it will buy about $2,000 worth of goods and services.
The federal process of deficit spending and monetizing the debt has
stolen the remaining $8,000.
The federal deficit and the huge trade deficits do mean something.
They mean we are heading for big trouble that we won't be able to
bomb our way out of.
© 2006 by King Features Syndicate, Inc.
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