War And The Dollar

by Valentin Katasonov, The News Doctors Although many funerals have been held for the US dollar, still it lives on. On the eve of the collapse of the Bretton Woods currency system, the dollar made up almost 80% of global foreign-exchange reserves (in 1970 it totaled 77.2%, and in 1972 – 78.6%). Then, after the transition to the system negotiated at the 1976 Jamaica Conference, that percentage gradually declined, reaching its lowest level – 59.0% – in 1995. In the wake of financial globalization, the dollar’s positions strengthened again (reaching 70-71% between 1999 and 2001), but then a new decline was seen in the dollar component of global foreign-exchange reserves – dropping below 61% in 2014. Nevertheless, it is still higher than in 1995. According to the Bank for International Settlements, in April 2010, 84.9% of global foreign-exchange market transactions were carried out in dollars, a figure that had increased to 87% by April 2013. For comparison, the percentage of those transactions conducted in euros during that same period fell from 39.1 to 33.4%. The discrepancy between the positions of the dollar in world finance vs. the US positions in the global economy cannot be overlooked. The US share of world GDP is currently about 20%. China has already surpassed America in terms of GDP (based on the purchasing power parity of the currency), but in the global currency market, only 2.2% of transactions were carried out in yuan in April 2013. There is no accurate data regarding how much of the world’s foreign-exchange reserves are held in yuan, but experts estimate that it is not much higher than 1%. These disparities are quite reminiscent of the global economic panorama of the late nineteenth and early twentieth centuries. In those days the world’s economic leaders were being reshuffled. The United States was in first place due to the volume of its industrial and agricultural output. Germany was moving into second place in some categories. And Great Britain, which for most of the nineteenth century had been considered “the world’s factory”, had begun to slide into third place. However, the British pound sterling remained a global currency, which served as a reserve fund and was used in international payments. Following is a breakdown of the world’s reserves, by currency, in 1913 on the eve of WWI (%): the pound sterling – 47; the French franc – 30; the German mark – 16; the US Dollar – 2; other currencies – 5 (Officer, Lawrence H. Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press, 1996). As we see, the share held by the US dollar was extremely low. The discrepancy between the level of economic development in the US and the positions of the dollar in the global financial system was similar to today’s discrepancy between the economic development of China and the positions of the yuan. dollar A hundred years ago global bankers who had placed their faith in the dollar needed a world war so that the dollar could assume its place in the sun. As 1913 drew to a close, the US Congress, under strong pressure from the “moneybags”, voted in favor of creating the Federal Reserve System, which in 1914 began to print dollar banknotes as the unified national currency of the US, and six months later world war broke out. The war changed the balance of power between the mightiest nations and their currencies. In 1928, the world’s foreign-exchange reserves were distributed as follows (%): the pound sterling – 77; the US dollar – 21; and the French franc – 2. (Officer, Lawrence H.). That meant that the pound sterling, despite Great Britain’s sharp economic decline, not only retained the strength of its positions, it actually became even more robust. Compared to 1913, the US dollar had dramatically increased its footprint and had confidently moved into second place. Other competing currencies had fallen by the wayside. In order to definitively prevail over the British pound, the masters of the Federal Reserve needed to plan and wage another world war, after which the dollar was tied to gold and became, in effect, a single global currency. * * * Technically, the dollar’s position in the world is fairly good at present, but the biggest shareholders of the Federal Reserve System must be confounded by the growing discrepancy between America’s GDP and the position of its dollar. The dollar is becoming increasingly unstable. If they wished, a few powerful countries could coordinate their efforts, pool their resources, begin to unload their dollar reserves, and cause the dollar’s collapse. However, the power of the masters of the Federal Reserve lies in the fact that they have always known how to act proactively. And now there are many signs that they are taking practical steps to protect the dollar, primarily in order to prepare for a major war. The “money masters” (the owners of the Fed’s banknote printing press) have several reasons to unleash such a war. 1) The owners of the printing press need to prop up the demand and price for their product. Europe’s voluntary “flight to dollars” ended over 50 years ago. Globally, we see few rational economic incentives to buy them. After all, the Federal Reserve is currently printing many times more dollars than are being created by the US economy. And America’s gold reserves, although the largest in the world (over 8,000 tons), suffice only to back a fraction of a percent of the supply of “greenbacks.” That leaves only one course of action: to forcibly impose upon the world the “goods” being produced by the Federal Reserve. Today only the US armed forces are capable of backing the dollar, and their primary function is to make sure that there is continued demand for these green notes. America’s classical military-industrial complex was long ago transformed into a military-banking complex. After the collapse of the Breton Woods currency system, it was replaced with the new system devised at the Jamaica Conference. This is a petrodollar system, since the dollar became pegged to black gold in the 1970s (when oil trading began to be carried out exclusively in dollars). Oil remains the foundation of the dollar system. Although today the US is almost independent of oil imports, she controls the oil-producing countries. This control is intended to prevent any move to trade “black gold” in any currency other than the dollar. To do this, Washington has had to resort to conducting military operations in the oil-producing regions when needed. Primarily in the Middle East. Muammar Gaddafi was overthrown and brutally murdered just because he first switched from dollars to euros in his oil transactions, planning to later move to the gold dinar. Continue Reading>>>

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