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Re: SC40

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April 11, 2007 11:00PM
http://www.globalresearch.ca/index.php?context=viewArticle&code=WHI20070411&articleId=5341

Doomsday for the Greenback

..............America’s biggest export is its fiat-currency which foreigners are increasingly hesitant to accept.

Can you blame them?

They have begun to figure out that we have no way of repaying them and that the “full faith and credit” of the United States is about as reliable as a Ken Lay-managed 401-K retirement plan.

The fragility of the US economy will become more apparent as Greenspan’s housing bubble continues to lose air and consumer spending remains flat. As we noted earlier, home equity withdrawals are drying up which will slow growth and discourage foreign investment. The meltdown in subprime loans has drawn more attention to the maneuverings of the banks and mortgage lenders and many people are getting a clearer understanding of the Federal Reserve’s role in creating this economy-busting monster-bubble.

The 10% to 20% yearly increases in property values are unprecedented. They are “pure bubble” and have nothing to do with increases in wages, demand, productivity, capital investment or GDP. It was all “froth” generated by the world’s greatest Frothmeister, Alan Greenspan.

As Addison Wiggin notes, “There is only one real source of wealth: a healthy and competitive environment involving the exchange of goods coupled with control over deficit spending.”

Elites at the Federal Reserve and in the Bush administration have steered us away from this “tried and true” course and put us on the path to debt and catastrophe. It won’t be easy to restore our manufacturing base and compete again in the open market, but it must be done. Strong economies require that their people produce things that other people want. This is a fundamental truism that has been lost in the smoke and mirrors of Greenspan’s shenanigans at the Fed.

Regrettably, we are probably facing a decades-long economic downturn in which the dollar will weaken, stocks will fall, GDP will shrivel, and traditional standards of living will decline.

The trend-lines in the real estate market will most likely be the inverse of what they have been for the last 10 years. This will dramatically affect consumer spending (70% of GDP) and put additional pressure on the dollar.

The dollar is already in big trouble--the only thing keeping it afloat is foreign purchases of US debt by creditors who don’t want to be left holding trillions in worthless paper.(US debt is Japan’s single greatest asset!) These “net inflows” have created a false demand for the dollar which will inevitably dissipate as central banks continue to diversify.

Last week the IMF issued a warning that there would have to be a “substantial” decline in the dollar to bring the trade deficit to sustainable levels. That, of course, is the intention of the Fed and Team Bush—to reduce the debt-load by deflating the currency. It’s a crazy idea. No one destroys the buying power of their currency to pay off their debts. It just illustrates the recklessness of the people in charge.

Also, on March 20, 2007 the Governor of China’s Central Bank Zhou Xiaochuan announced “that China will not accumulate more foreign reserves and will cut a small amount of current reserves for the formulation of a new currency agency”. Zhou’s statement is a hammer-blow to the dollar. The US needs roughly $70 billion in foreign investment per month to cover its current trade deficit. China is one of the largest purchasers of US debt. If China diversifies, then the dollar will fall and the aftershocks will ripple through markets across the world.

The Chinese are very careful about how they word their economic statements. That’s why we should take Zhou’s comments seriously. Three weeks ago he issued an equally ominous statement saying, “China will diversify its $1 trillion foreign exchange reserves, the largest in the world, across different currencies and investment instruments, including in emerging markets.” (Reuters)

This should have been a red flag for currency traders, but the media buried the story and the markets dutifully shrugged it off. The truth is that our relationship with the Chinese is changing very quickly and the days of cheap credit and a “high-flying” dollar are coming to an end.

70% of China’s currency reserves are in US dollars. The effect of “diversification” will be devastating for the US economy. It increases the likelihood of hyperinflation at the same time the housing market is in its steepest decline in 80 years. When currency crises arise at the same time as economic crises; the problems are much more difficult to resolve.

Doomsday for the Greenback

It is impossible to fully anticipate the effects of the falling dollar. The dollar is a currency unlike any other and it is the cornerstone of American power—political, economic and military. As the internationally-accepted reserve currency, it allows the Federal Reserve to control the global economic system by creating credit out of “thin air” and using fiat-scrip in the purchase of valuable manufactured goods and resources. This puts an unelected body of private bankers in charge of setting interest rates which directly affect the entire world.

Iraq has proven that the US military can no longer enforce dollar-hegemony through force of arms. New alliances are forming that are reshaping the geopolitical landscape and signal the emergence of a multi-polar world. The decline of the superpower-model can be directly attributed to the denominating of vital resources and commodities in foreign currencies. America is simply losing its grip on the SOURCES OF ENERGY upon which all industrial economies depend. Iraq is the tipping point for America’s global dominance.

When foreign central banks abandon the greenback the present system will unwind and the “unitary” model of world order will abruptly end.

This may be a painful experience for Americans who will undoubtedly see a sharp fall in current living standards. But it also presents an opportunity to disband the Federal Reserve and restore control of the nation’s currency to the people’s legitimate representatives in the US Congress.

This is the first step towards REMOVING THE CABAL of powerbrokers in both political parties who solely represent the narrow ambitions of private interests.

The War on Terror is a public relations ploy that is intended to disguise the use of military and covert operations to secure dwindling resources to maintain dollar supremacy. It is a futile attempt to control the rise of China, India, Russia and the developing world while preserving the authority of western white elites.

The strength of the euro portends increasing competition for the dollar and a steady decline in America’s influence around the world. This should be seen as a positive development. Greater parity between the currencies suggests greater balance between the states--hence, more democracy. Again, the superpower model has only increased terrorism, militarism, human rights violations and war. By any objective standard, Washington has been a poor steward of global security.

The falling dollar also suggests growing political upheaval at home brought on by economic distress. We should welcome this. America needs to remake itself—to recommit to its original principles of personal freedom, civil liberties and social justice--to reject the demagoguery and warmongering of the Bush regime—to reestablish our belief in habeas corpus, the presumption of innocence and the rule of law. Most important, we need to RECLAIM OUR HONOR.

Big changes are coming for the dollar; it’s just a matter of whether we allow those changes to bog us down in recriminations and pessimism or use them to create a new vision of America and restore the principles of republican government. IT'S UP TO US.
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