Must Read Article: "The End of Dollar Hegemony"

[Ugnmoose]

http://www.house.gov/paul/congrec/congrec2006/cr021506.htm

This article from Rep Ron Paul (R) Texas is both chilling and sobering, especially coming from one of our elected representatives. Please read the entire article. It gives us great insight into how our dollar evolved to become the world's fiat currency; how and why the dollar is under attack; and how U.S. foreign policy is being shaped around protecting our currency.

(snip)

Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every year from our gracious benefactors, who work hard and take our paper for their goods. Then we borrow all the money we need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today’s “gold.” This is why countries that challenge the system-- like Iraq, Iran and Venezuela-- become targets of our plans for regime change.

Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.

But real threats come from our political adversaries who are incapable of confronting us militarily, yet are not bashful about confronting us economically. That’s why we see the new challenge from Iran being taken so seriously. The urgent arguments about Iran posing a military threat to the security of the United States are no more plausible than the false charges levied against Iraq. Yet there is no effort to resist this march to confrontation by those who grandstand for political reasons against the Iraq war.

It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It’s only after the cost in human life and dollars are tallied up that the people object to unwise militarism.

The strange thing is that the failure in Iraq is now apparent to a large majority of American people, yet they and Congress are acquiescing to the call for a needless and dangerous confrontation with Iran.

But then again, our failure to find Osama bin Laden and destroy his network did not dissuade us from taking on the Iraqis in a war totally unrelated to 9/11.

Concern for pricing oil only in dollars helps explain our willingness to drop everything and teach Saddam Hussein a lesson for his defiance in demanding Euros for oil.

And once again there’s this urgent call for sanctions and threats of force against Iran at the precise time Iran is opening a new oil exchange with all transactions in Euros.

Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.

The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.

[malaise]

1. A very good read

recommended

[katty]

2. read globalresearch.ca - they have many articles on this

[trotsky]

3. Ah, the gold bugs.

Always good for a laugh.

Yeah, let's return to the monetary system that inevitably led to worldwide depressions.

[OrangeCountyDemocrat]

8. Worldwide Depressions You Say?

Hmmmmmm. I don't think we need a Gold standard to get that. It's well on the way.

At least gold will always be worth something. In case nobody has noticed, you can't just print more gold. Limited resource and all. Money on the other hand, is quite easily reproduced. I guess we should just forget the gold standard, and keep printing more and more dollars, until they're really worthless. Yeah, that's the ticket.

When Gold is over $1,000/ounce, the only ones laughing will be the "gold bugs" who bought in at around $250 back when King george was Selected.

[trotsky]

10. You don't understand the downside of the gold standard.

Is either system perfect? No. Fiat currency takes responsibility to manage. Up until recently, we had this responsibility, and we had a very stable currency.

With a gold standard, your monetary system is tied to a fixed amount of gold. How does your economy expand, if the money supply is limited?

For a more in-depth analysis of the flaws of the gold standard, I recommend the late Steve Kangas' writeup:

http://home.att.net/~Resurgence/L-gold.htm

Summary

The far right advocates the gold standard because it gets government out of the business of controlling the money supply. They fear that printing money creates inflation, and retracting money causes recessions. But the opposite is also true: printing money cures recessions, and retracting it cures inflation. Governments in the last 60 years have used these policies with tremendous success. There has not been a single depression or bank panic in any nation anywhere in the world using Keynesian monetary policies. But during the Gilded Age of the late 19th and early 20th centuries, depressions and bank panics were common. The historical record is so strong that mainstream economists reject the gold standard almost universally.

[OrangeCountyDemocrat]

11. So....We've Got The Expanding Economy

Perhaps it's tougher to expand with a gold standard, but at least there is less opportunity for fraud and twisting of rules and standards.

Your following statement says it all....Fiat currency takes responsibility to manage. Up until recently, we had this responsibility, and we had a very stable currency.


Unfortunately, our country is no longer run by responsible folks. by the time it is again, it will probably be too late. Damage done. If things continue the way they're going, we won't have an economy to worry about in 3 years. Of course, once Gold is over $1,000/ounce, it will be impossible to ever think of converting to anything resembling a gold standard. It is exactly the lack of one, which has allowed the expanding economy you refer to, and at the same time, has resulted in the mortgaging of the $ and the future of Amerika with a $8.2+ TRILLION DEBT!

[trotsky]

12. Less opportunity for fraud?

Did you study the Gilded Age in school???

Read Kangas' article. It lays out the facts very simply.

[Ugnmoose]

13. It has only been 35 years since we went off the gold standard

In the whole spectrum of history this is just a blip on the radar screen. So I can't see how relevant the statement is "There has not been a single depression or bank panic in any nation anywhere in the world using Keynesian monetary policies. But during the Gilded Age of the late 19th and early 20th centuries, depressions and bank panics were common. The historical record is so strong that mainstream economists reject the gold standard almost universally". And as Paul points out the central banks have been very accomodative not withstanding that they knew there was nothing but smoke and mirrors backing the currency.

[trotsky]

14. Let me give you two clues.

1) 35 years ago was the last bit of international trade based on the gold standard. We had ceased allowing currency to be converted shortly after WW2. And considering just how frequent depressions were prior to abandoning the gold standard, going 60+ years without one is highly significant.

2) The people pushing a return to the gold standard are right-wing libertarian types. Tell me when those folks have ever had the best interests of Democratic constituencies at heart.

[kenny blankenship]

4. This is so true

we make two things in this country: the best military hardware and the biggest mountains of uncollectable debt. The two facts are not unrelated but actually sides of the same coin. (I'm not advocating metal money, but the abuse of fiat money by the late American Empire cannot be overlooked)
Forcing others to use our money makes us rich--that is until suddenly it stops working. The very rich will have skated to other countries at that point, but the rest of us will still be sitting here when the roof caves in.

Nothing in the history of the world will compare for sheer ruination and explosive misery. Even Rome declined by degrees.

[cliss]

7. Absolutely true.

I read somewhere that "because of our dollar currency hegemony, we're basically getting our oil for free".

And you're right: "until it suddently stops working". Like rats crawling out of the bottom of a ship when it starts to sink, I have NO doubt that the wealthy have already bailed on this country.

But -- there's one little problem. As they settle in nicely in their beautiful new homes in Argentina and Madagascar, there's just one little problem. If the U.S. falls, the rest of the world will be in a world of hurt. Did they think of that, I wonder?

[n2doc]

5. man there has been a buttload of scary stuff coming out lately

Peak Oil, CO2 climate tipping points reached, Greenland glaciers melting fast, Arctic icecap melting...if one didn't know better one might suspect that someone was trying to warn us to change our ways...Not that head in the sand a**in the air USA could ever bother to plan for the future...

[Ugnmoose]

6. Very true but the sheeple just don't get it

The sad thing is that only a small percentage of the people, mainly folks like us who take the time to read things on the Internet (they sure don't get it from the MSM) know what the hell is going on. Maybe they are the lucky ones - since they will go into oblivion in a total state of blissful ignorance.

[Warren Stupidity]

9. Ron Paul remains honest to his beliefs.

I'm not particularly fond of right-libertarians, but he has been consistent in his application of his principles to the political reality. Most libertarian republicans pay lip service to libertarianism and are just asshat republican fascists like the rest of the party.

[EVDebs]

15. March 20th Iran is set to go off the dollar and switch to Euros...

Saddam threatened to do this too...