The US$: America‟s WMD! US domination of
The US$: America‟s WMD!
US domination of the world affairs is often attributed, among others, to its technological prowess; nuclear arsenal; fleet of aircraft carriers; satellite networks gathering intelligence round-the-clock. But its most potent weapon that has wrecked foreign economies; destroyed nations; and has been used to buy Prime Ministers, Presidents, Army Generals, Judges and Ministers is often ignored. That is the power of its currency. United States dollar (US$) was born when Continental Congress of the United States authorized the issuance of the US$ on 8 August 1785.
Post World War II (WWII) the creation of The International Monetary Fund (IMF) & The World Bank was the first step towards establishing a global US$ hegemony. The US sat back and watched the WWII unfolding, saying that this was not its war, until the attacks on Pearl Harbor. In response, after nuking Japan, the US-led allied forces claimed victory in this global mayhem. Nearly all the European and Asian countries were war-wrecked and started borrowing from the US to rebuild their infrastructure and economies. This gave the US an opportunity to develop institutions and make fiscal policies to enslave the world in the coming decades.
The centerpiece of this neo-imperialism was to turn a green piece of paper into the most lethal weapon the world has ever witnessed. Starting from Bretton Woods to the US$ hegemony and then to the modern day foreign exchange (currency) markets, understanding these three phases are essential to grasp the intricacies of the subject.
The Bretton Woods Accords were entered into at the end of World War II, on 22 July 1944, “to regulate the international monetary system”. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments. Currencies were allowed to fluctuate from this “peg” only within a very narrow band of plus or minus one percent.
The principal architects of the Bretton Woods Accords were British economist John Maynard Keynes and Assistant U.S. Treasury Secretary Harry Dexter White. Keynes envisioned an international central bank but the United States had just become the world‟s only financial superpower and was not ready for that step in 1944. The IMF system was formulated by Dexter White, and it reflected the power of the American dollar.
Under the White Plan, the US$ would be backed by gold, which were considered “as good as gold” because the United States had agreed to maintain their convertibility into gold at US$35 per ounce. As long as people had faith in the US$, there was little fear of running out of gold, because gold would not actually be used.
The Bretton Woods worked for a while, but it was mainly because fewer countries actually converted their dollars into gold. Trade balances were usually cleared in US$, due to their convertibility into gold. US suffered a great blow in the Vietnam War. International confidence in the US economy declined. The French started converting their US$ reserves into gold. Other countries followed.
The US had lent more dollars than the gold it had in its vaults. A massive conversion would drive the US into bankruptcy. President Nixon issued Executive Order 11615 in August 1971 closing the “gold window” permanently. This meant the dollar would not be converted (a promise on which it was originally issued) into gold anymore. Since the US was a superpower no country would dare retaliate let alone go to war. This act was known as the Nixon Shock. The result of taking the dollar off the gold standard was to finally take the brakes off the printing press. Now Fiat dollars (or dollars backed by nothing) became the new global currency!
The cost of producing a US$ to the US is simply the cost of printing the note, whereas a foreign government must provide a US$‟s…