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Towards The End Of The U.S. Dominated International Money System
Welcome to the end of Brenton Woods and the Washington Consensus that defined the world money systems around U.S. controlled institutions and the U.S. dollar as the sole reserve currency.
Defying U.S., European allies say they'll join China-led bank
Germany, France and Italy said on Tuesday they had agreed to join a new China-led Asian investment bank after close ally Britain defied U.S. pressure to become a founder member of a venture seen in Washington as a rival to the World Bank.
The concerted move to participate in Beijing's flagship economic outreach project was a diplomatic blow for the United States, reflecting European eagerness to partner with China's fast-growing economy, the second largest in the world.
It comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund due to give China and other emerging economies more say in global economic governance.
Especially under the Obama administration the U.S. abused its important role in international finance to further its political pet projects at the cost of other participants in the system.
On Washington's insistence the International Monetary Fund is breaking its rules to finance a civil war in Ukraine. U.S. spying on the SWIFT banking information exchange is used to sanction U.S. enemies by excluding them from the international banking system. Foreign banks get punished with huge fines because they conduct business with countries the U.S. sees as unpalatable. Wall Streets huge mortgage scam and selling of worthless derivatives to foreign entities left the world economy in shambles and investors and whole countries bankrupt but went completely unpunished.
Enough. Over time the world will no longer adhere to the rules set in Washington. The global banking system will evolve into a multipolar system where different public international banks will act and where monetary information exchanges can be conducted on various systems under various jurisdiction.
This will be a huge loss to the coercive power of the U.S. and thereby a good step towards a more Westphalian world where power is more equally distributed. International sanctions against countries that defy U.S. regime change orders will no longer be sustainable.
Posted by: Murican | Mar 17, 2015 8:55:31 PM | 40
What effect does fiat US$ have on this scenario? With gold being finite and therefore not backing most of the paper dollars the U.S. has printed? Maybe off-topic, but how does Bitcoin fit in this equation?
We, the US, went off the gold standard domestically in 1934. It was the best thing that ever happened to us. It was the Republican Mormon banker, Marriner Eccles, (didn’t finish high school, but had become very rich as a banker in his early 20s) who went to DC (1932) to explain how we could get out of the Depression, and urged that we drop the gold backing and issue our own currency per the Constitution. He appeared before the Senate. He was really plain-speaking and became more popular than Mylie Cyrus.
FDR later made him the first Chairman of the Federal Reserve (1935).
Oddly enough, the ideas that Eccles told the Senate were the same as, but four years before, John Maynard Keynes “General Theory” (1936) came out.
The gold standard (National Gold Standard Act 1900) tied us to another fiat that was in short supply: gold. We had some gold mines, but we didn’t have a lot. Everytime a new gold mine around the world was discovered, the value of our dollar went down during the last half of the 1800s, so the National Gold Standard Act pegged an ounce of gold at $20 to provide some stability.
When FDR took us off the gold standard, the dollar was now back on the full faith and credit of the US government, and we were a young, rich country. The 1870 Supreme Court Legal Tender Case Laws had determined that anything the US government puts the US Great Seal on and determined that it would only accept for taxes made the US dollar legal tender. Eccles knew that.
Eccles also told FDR that he could, and he urged him to, start the great projects that a country with a fiat currency could now do: build out the country’s infrastructure, build schools and finance real education, create telecommunications, build roads and post offices, hire artists and writers, build dams and monuments. Put the people back to work. And provide for the young, infirm, and old people.
So FDR did that. Unemployment went down from 25% to 14% in two years. The Republicans and his stupid Treasury Secretary, Henry Morgenthau, got scared when they saw the outlays, not understanding how the new currency worked. They scared FDR into putting on the spending brakes, which he did. Unemployment soared within 11 months to 20% in 1937-38. Back to the depression.
Then WWII started in 9/1939. Three government economists DID understand how the new currency worked, and they created the Victory Plan–
not the military
to meet the country’s needs. We were selling planes and weaponry to Britain. These three economists put the entire country back to work. Eccles knew that the country’s workers had bulging savings accounts because they couldn’t spend it on anything, everything was rationed.
So they made plans for after the war. They raised the taxes on the rich and ultra-rich to keep them from spending, and kept the taxes on the little people low. That created the middle class.
To be contd.
Posted by: MRW | Mar 18 2015 1:56 utc | 52
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