By Francis Lee for the Saker Blog
It was the French politician Valery Giscard D’Estaing who first coined the phrase ‘Exorbitant Privilege’- a reference to the many advantages enjoyed by the US ownership and control of the world’s reserve currency. This was a situation dating back to the agreement reached in 1944 between the allied powers and established in Bretton Woods a town in New Hampshire; it was to become known as the Bretton Woods Agreement. During the conference key negotiators, most famously John Maynard Keynes for Britain, and Harry Dexter White chief US delegate, hammered out a blueprint for a new global and currency and trading system. Keynes explained the central idea as ‘the expansion of a currency union, based upon international money, called … bancor, fixed (but not unalterable) in terms of gold and accepted the equivalent of gold … by all members of the Union for the purpose of settling international balances.’
This didn’t go down at all well with White who was now given the nod by Secretary of the US Treasury, Henry Morgenthau, who announced ‘’He …’ White’… will be in charge of all foreign affairs for me. I want it in one brain, and I want it in Harry White’s brain.’’ Given that sort of backing White was to call the shots on monetary policy. The battle between White and Keynes would become one of the grand political duels of WW2 although it was largely buried in financial minutiae. Thus the US$ backed by gold at the parity of 1 oz gold = $35, was to become the reserve currency of the global system. (1)
But then Keynes was somewhat hamstrung in this situation since he was also angling for a sizeable US loan to the UK in the not-too-distant future which circumscribed his room for manoeuvre; and the loan of course came with strings – viz., the ending of the British imperial preferential trading system with her empire and dominion partners and the opening of these markets for US capital flows. (The loan finally came to fruition shortly after Keynes’ death in 1946.) At that time Britain was bankrupt as were the other European powers and its bargaining position was relatively weak vis-à-vis the Americans who had emerged from the war by far and away the strongest economy in the world. Little wonder then that the British and Europeans had little choice in acceding to American proposals. This was the start of the post-war US economic and political dominance of Europe – firstly in Western Europe and then later in Eastern Europe – by the United States which has continued (and even expanded) to this day.
The Bretton Woods monetary system (BWS) was based upon a relatively fixed exchange-rate with the base consisting of a dollar-gold standard. The US$ would be fixed against gold at $35 per ounce, and fully convertible. The rest of the hard currencies, UK pounds, French Francs, Italian Lira, German Marks and so forth, would have a given parity rating against the dollar albeit with limited room for changes in their exchange rate. The fixed exchange rate in fact became a currency peg whereby individual states could devalue/revalue by 1%. Both financial repression, capital controls and exchange rate controls were a feature of the system. Thus, this financial repression was a key institutional facet of the BWS – and if Keynes had had his way it would have been a permanent feature.
This system appeared to work during the period of rapid expansion in Western Europe circa 1950-70, North America, Australia and Japan, all of which experienced high levels of growth, low inflation and low unemployment. Although, undoubtedly, other causal factors included post-war reconstruction and the Marshall Plan.
The BWS also spawned the International Monetary Fund (IMF), International Bank for Reconstruction and Development (World Bank) and the General Agreement on Tariffs and Trade (GATT) now renamed the World Trade Organization (WTO) which still remain, although their present remits remain profoundly changed from the original purposes. For better or worse the BWS collapsed (or was collapsed) in August 1971 when the Nixon government ended the gold/dollar convertibility. This was to a considerable extent due to the costs of the Indo-China wars and President Johnson’s domestic spending on the ‘Great Society’ social programmes. Additionally, there was the catch-up in productivity of the recovering states, Germany and Japan in particular. These events had led to recurring US trade deficits with a concurrent outflow of US$s. The Europeans, particularly the French were cashing in their surplus US$s for gold which led to an outflow of gold from the US which the American authorities needed to stem – by drastic measures if necessary. These drastic measures amounted to a de facto default when dollar/gold convertibility on demand formally ended in August 1971. These events could be properly described, using the much-overused cliché, as being a paradigm shift.
This set the stage for a new world of floating currencies, uncontrolled capital flows, privatisation, deregulation and the rest of the neo-liberal ideological policy baggage. But even before the momentous events of August 1971 there was considerable resentment at what was a de facto subsidy to the US from the rest of the world. The US still continued to run massive trade deficits after all the brouhaha with the abandonment of dollar/gold convertibility. But there were problems from the outset with this policy.oHo When a country runs quasi-permanent trade deficits there will be a downward pressure on the value of its currency. This might be enough to dissuade global investors to view holding dollars or dollar denominated assets such as US Treasury Bonds as being problematic. The US was able to circumvent this obstacle, however, when Henry Kissinger cut a deal with the Saudis in 1973/74, in which it was agreed that the Saudis would invoice their oil sales in US$s only. This meant that since oil was on the shopping list of nearly all states, the dollar was also in demand, and this demand pushed up the value of the greenback. Thus, the Petro-dollar was born. The US was able to carry on with running deficits on current account, consuming foreign products at subsidised prices. An exorbitant privilege indeed.
Consideration of the many advantages of the US$ as the world’s reserve currency is generally understood by the term ‘seigniorage rights’, this is the name of the privileges which this position gives, and which had accrued from the Bretton Woods system still remain; perhaps the most important is that of the US being able to print dollars which are recognised as viable stores of value universally. As Barry Eichengreen points out:
‘’A … controversial benefit of the dollar’s international currency status is the real resources that other countries provide the United States in order to obtain our dollars. It costs only a few cents for our Bureau of Engraving and Printing to produce a $100 bill, but other countries have to pony up $100 of actual goods and services in order to obtain one.’’ (2)
Moreover, there are the savings in what economists’ call ‘transactional costs’ of doing business. For example, take a European or south American business firm who want to borrow to finance investment or receive payments for goods exported these business activities will be intermediated by the US$. If a French firm wishing to export goods to Pakistan and receives payment in US$s they will have to convert those dollars into Euros, and this implies an additional (transactional) cost for the French firm. If the firm was American, however, the payment will be in dollars as will any other debt repayments. The United States can nominate debts in its own currency and save itself from conversion costs.
At a higher level, if a non-American business wants to borrow dollars in the US money markets for investment purposes he will be exposed to any movement in the value of the dollar. Consider an investor in Thailand who borrows in dollar and invests in a particular project in a medium-term enterprise. But woe betide this entrepreneur should there be a rise in US interest rates and consequent rise in the exchange rate against the borrower’s domestic currency, since he will now have to find additional monies in his own devalued currency to pay back the enhanced value of the dollar loan. This is a problem which plagues emerging market economies who are using a foreign currency which they do not print and cannot control.
Furthermore, central bank liquidity around the world was 60% held in dollars and dollar-denominated assets, principally US Treasuries. China and Japan being the biggest holders although China is now quietly diversifying its foreign asset portfolio (more of China in due course). But the dollar dominance retains its position due to historical factors which no longer pertain; in this sense it owes this position through incumbency; it is there, because it is there, or put another way, it benefits because of first mover advantage. These advantages include the following.
‘’The dollar remains far and away the most currency for invoicing and settling international transactions, including exports and imports which do not touch America’s shores … The principal commodity exchanges quote prices in dollars. Oil is priced in dollars (see below, the Petro-Yuan). The dollar is used in the majority of all foreign exchange transactions worldwide. It includes nearly half the global stock of international debt securities.’’ (3)
Moreover, insofar as the demand for dollars from foreign firms and banks has been absolute the price of these dollar denominated assets – in the case of Treasuries – has seen buoyant prices and lower rates of interest for the foreign holders due to the fact that bond prices and interest rates move in opposite directions. Foreign institutions holding dollars will get 2 to 3 % points lower interest than American holders of American financial securities.
Here we have a situation where the US is not only gaining from securities trading but also because as foreign buyers of US Treasuries – overwhelmingly China and Japan – had been recycling their export dollar earnings back into the US and therefore keeping long term US interest rates at record lows. Moreover, even when the dollar declines in value there is no serious impact on the dollar since the US denominates its debts in its own currency. Dollar holdings of foreign assets actually increase in value as the dollar falls due to a relative revaluation of these assets. Moreover, we are also reminded that in times of crisis there is always a ‘flight to safety’ by investors into the dollar particularly including US Treasuries.
Thus, global dollar dominance is not just about economics but also includes a significant geopolitical dimension. American financial and economic power rests on the nexus of the Fed/The Treasury Department/Wall Street/Silicon Valley nexus, and the cultural/political legs; a dominance which not only survived the collapse of the Bretton Woods System and the great blowout in 2008. US hegemony is, in Europe at least, not a theory, but a fait accompli.
Janet Yellen has been central to this configuration. First as Chairperson of the Fed which is a private banking consortium. And lately, Secretary of the Treasury which is a department of state. Could there possibly be a conflict of interests here? Just asking?
‘’The central political fact is that the dollar standard places the direction of the world monetary policy in the hands of a single country which thereby acquires great influence over the economic destiny of others. It is one thing to sacrifice sovereignty in the interests of interdependence; it is quite another when the relationship is one-way. The difference is that between the EEC(EU) and a colonial empire. The brute fact is that the acceptance of a dollar standard necessarily implies a degree of asymmetry in power which, although it actually existed in the early post-war years, had vanished by the time that the world was sliding into a reluctant dollar standard.’’ (4)
All very peachy for the US$.
However, given the existence of human frailties it is commonly understood that you can have too much of a good thing, or that a privilege which is open to abuse will be abused. And this is exactly what has been happening to the US and its global dollar policy. To cite an example the ‘Fed’s’ method of dealing with record levels of debt and deficits has been simply to create more debt, through rolling over existing debt and adding new debt. This of course is the definition of a Ponzi scheme; and all Ponzi schemes eventually meet the same fate. US Sovereign debt which was 40% GDP in 2000, 105% of GDP in 2018, and 108% in 2021. It has been argued by prominent US economists Reinhart and Rogoff that when an economy reaches a growth to debt ratio of 90 percent or above it will start to lose traction and enter a long decline. This has been disputed by other academic economists who seem to think that the situation of growth can be maintained, albeit with occasional disruptions, in perpetuity. But nothing lasts for ever; at some stage, the debt has to be liquidated since it has become a permanent impediment to further growth. There must be an unprecedented and massive event, or series of such events, needed to bring about this restructuring. Whether this will be the final crisis of capitalism is a moot point. I for one am not prepared to put a date on it.
Moreover, In addition to US Sovereign US$ 21 trillion debt, total debt in US including municipal debt, household debt, personal debt, and corporate debt rose to 60 trillion dollars, by 2014 – bear in mind also that these figures exclude unfunded future liabilities such as Social Security, Medicaid and Medicare, which according to a recent article by John Maudlin in Forbes magazine October 2018 is somewhere between US$47 trillion and US$210 trillion. Total US household debt at present stands at $12.58 trillion, almost as much in nominal terms as right before the 2008 financial crisis, which was triggered by the failure of the mortgage-backed securities market. Most of these figures are out of date but it would be reasonable to assume that they have if anything not been able to stop their dizzying ascent, and even the Fed’s report anticipates that these levels will be surpassed sometime in the coming years. Then there is the trade debt owed to overseas purchasers of US Treasuries which becomes payable as these bonds reach maturity.
None of this would matter if national income (GDP) were growing faster than debt, but unfortunately the reverse is true: debt is growing faster than national income GDP. Instead of growing its way out of debt, the US is actually growing its way into deeper debt. (David Ricardo’s dreaded law of diminishing returns seems to be in play here.)
The US budgetary position is heading toward a critical denouement with spending deficits spiralling out of control, against a background of weak economic growth.
Of course, these debts will never be repaid, and a huge default is on the cards. This will take the form of an outright refusal to honour the debts in question, or more likely, a default by the back door – inflation.
‘’The fate of the dollar hinges, in this case, on US budgetary policy. And here there are grounds for concern. First there is the overhanging deterioration in the fiscal position even before the 2008 blowout … Next there are the eye-popping deficits resulting from the 2008 crisis. Budget deficits were unavoidable given the circumstance; tax receipts collapsed. But the resulting deficits were enormous: the 11% of GDP in 2009 was not just unprecedented in peacetime; it was larger than the national income of all but six other countries in the world … (Now) there is the prospect of even larger deficits as the baby-boomers start to retire in large numbers raising health and pension costs.’’ (5)
That was then. Now we have a crisis of considerably greater dimensions, and as we have seen, the whole show will only be kept going by artificially supporting the price of oil. To keep the permanent demand for dollars going, oil sales must remain in dollars. But will they? At this point China enters the fray. Chinese trade policy is based upon gradually weaning itself off holding US Treasuries. It has been a slow but inexorable process. In addition, China along with Russia and Iran are pricing their energy trade in their own currencies. Moreover, this increasingly integrating and coalescing Eurasian counter-hegemonic alliance has been amassing gold to enable its currency diversification away from the dollar fiat standard. It would not be an overstatement to suggest we are witnessing the beginnings of a new Eurasian gold standard.
The term ‘existential threat’ to US hegemony now has significant meaning with the emerging Eurasian bloc and the economic power of China as realised in the ascent of the Yuan and a Petro-Yuan currency. These developments should not be overstated, but unquestionably we are at the beginning of that process.
Moreover, there is a little problem that goes by the name of the ‘Triffin Dilemma’ to be considered. Robert Triffin, a Belgian economist, postulated that the country which issues a reserve currency – at the present time, the US – has to run trade deficits to ensure there is a satisfactory supply of the reserve currency for it to function as such. There is a complacent assumption by the Americans that this is a continuing process, which will always ensure demand for the reserve currency. A type of perpetual motion machine not too different from any of the get-rich-quick, something for nothing rackets currently touted. But as Professor Triffin pointed out, possession of a reserve currency is a short-term expedient that creates a longer-term problem. There is also the problem that the dual role of the dollar to 1. Function as a flexible domestic currency, and 2. Function as a global anchor currency, which means that it must remain invariant – but these roles are mutually exclusive. That is the Triffin dilemma.
‘’Turning to the Triffin problem faced by the dollar. Just at the moment when the role of the petrodollar is being undermined by the new yuan contract, and the non-American world is still awash with dollars following the last financial crisis, President Trump increased the budget deficit, and consequently we can expect the trade deficit to increase further as well.
There can only be one result, and that is substantial and sustained selling of the dollar on the exchanges. It is reminiscent of the situation in the mid to late 1960s, when returning dollars led to three distinct failures: a failed attempt to absorb dollar sales for gold by setting up the London gold pool, a failed devaluation of the dollar from $35 to $42.22, and finally the collapse of the Bretton Woods Agreement in August 1971. That was the last great Triffin unwind, and now the next one is in prospect.
Foreign holders of dollars, including China, will wake up to the threat, if they have not already done so. So far, China has been reluctant to undermine the dollar by threatening its reserve status. She is, after all, a very large holder of both dollars and US Treasuries. But China’s priorities are now changing, and the outlook for the dollar has suddenly become a less urgent priority.
The nettle that China must grasp is that her mercantilist plans for the Asian continent are leading to the decline of American influence. There comes a point where she cannot pursue her own objectives without undermining the dollar, and with the introduction of the yuan-settled oil future, that Rubicon has now been crossed. (6)
Anticipating the usual sneering response from the Atlanticist financial crowd, i.e., China cannot and will not dump the dollar since that would mean a big hit on those dollars and Treasuries that China already holds; they would do well to note MacLeod’s observation that ‘China’s priorities are changing, and the outlook for the dollar has become a less urgent priority.’’ Quite so.
History moves on, with new political and economic cleavages and fusions emerging together with an increasing momentum in the decline of the post-1945 World Order. How long will the rest of the world put up with the free lunch of the global dollar or the protection racket that is NATO is a matter of conjecture. Unquestionably, however, these two pillars of the Anglo-Zionist empire look to be increasingly unstable and frankly parasitic.
We shall wait, and we shall see.
NOTES
(1) Robert Skidelsky – Volume 2, John Maynard Keynes – Fighting for Britain -pps.222/239
(2) Barry Eichengreen – Exorbitant Privilege – The Rise and Fall of the Dollar – p.3
(3) Ibid. Eichengreen)
(4) John Williamson – The Failure of International Monetary Reform 1971-74 – 1977)
(5) (Ibid. Eichengreen)
(6) Alasdair MacLeod – The Yuan-Oil Future and Gold 29 March 2018 – Goldmoney)
The response appears to be related to trade, and if the theory (the theory of the truest definition of inflation) holds true.
The exorbitant # of $ floating in an economy vs the tradable goods available to said economy.
Or in short, too much money chasing to few goods, is about to slam the economy into an inequality tailspin in which the fall from dizziness is probable.
“God chose the foolish things of the world to shame the wise; God chose the weak things of the world to shame the strong.” 1 Cor 1:27
The Anglo-Zionist empire thought itself so clever and so wise that what they believed was their strength has become their weakness. Suddenly their money – or rather the god in whom they trust – has itself become the problem. Yikes!
http://biblicisminstitute.wordpress.com/2015/08/14/when-money-is-the-problem/
Doug, it’s not “their” problem it’s our problem. The money that we put into our bank savings account is no longer our money; it is legally the bank’s money. If we draw it out in panic the first thing the bank will do is declare itself bankrupt and shut down: thus keeping “its” money out of our hands. Or else the banks will ask our government for some “quantitative easing” of the problem: in which case our government will sign more debt on our behalf — debt to the banks; thus the banks will release “its” money back to us: in return for us repaying our government debt (and our childrens childrens government debt) — to the banks.
The solution? Buy bitcoin. At least a portion of your portfolio to hedge against the dollar. Gold is of course another good hedge, but the larger bet on btc as the world’s future reserve currency does seem to pan out.
Until a large solar flare wipes out the internet no more bitcoon etc.
The bad news is that the solution comes from a God they don’t believe in.
Should be an interesting scrape. or even butting of heads.
How long will the rest of the world bankroll the Ashkenazi-Anglo-Saxon empire’s free lunch? If the latest sabre rattling is an indicator, – and do notice that it matters not that Netanyahu is about to be retired – it depends on who wins the war the empire wants so badly against the rising Eurasian dollar-dumpers, in order to continue hiding their insolvency.
If the empire wins it could be another millennia of our collective usury slavery by fiat reserve currency. If the empire loses, then never again:
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Blinken claims Iran’s nuclear bomb ‘breakout time’ may soon be a ‘matter of weeks’, with talks held hostage to US sanctions
https://www.rt.com/usa/525941-blinken-iran-nuclear-breakout/
Martin Armstrong has up a fascinating 2 videos on the collapse of WT7. It really is a must see and the why he believes is related to the missing trillions of dollars at the Pentagon. He makes a good argument for sure.
https://www.armstrongeconomics.com/world-news/corruption/new-evidence-that-world-trade-center-was-not-s-surprise-more-lies/
Strange, very strange are the happenings in the last few decades. As for waiting to see what comes I fear it will be some type of techno tyranny for sure in keeping with what is written in the Book of Revelation chapter 13. Its not for nothing that we read in two places:
Here is the mind that has Wisdom when it speaks about a king and the last economic system.
There are two problems, not one. Francis Lee has very well summarised the failures of the dollar-as-global–fiat-currency, but still seems to accept economics as a discipline, as he uses the woolly and malleable concept of GDP. An unwoke example of this woolliness is that, if housewife A pays housewife B $X to do A’s laundry, and housewife B pays housewife A $X for doing B’s laundry, neither housewife is wealthier, but the GDP has increased by $2X. The late David Graeber in Bullsh*t Jobs had many examples of the “gentry-level” in today’s finance feudalism being offered a goodish salary for this kind of worthless, circular activity.
I am a chemist/biochemist by profession, and my subject started 20 years later than economics (compare Adam Smith b1723 with Antoine Lavoisier b1743), yet chemistry is cumulative (we know, or can find out, the arrangements of atoms in just about anything, and have a good idea about how they will react) whereas economists still argue about what money is. Most economists will be in propaganda and public relations, but Is there a core who believe in the reality of what they are doing (like early modern alchemists)?, Is it possible that good-faith economic predictions (and those of other social scientists) fail because of wrong averaging mathematics? Nineteenth-century economists (and other social scientists), without computers, attempted to copy the averaging procedures of the kinetic theory of gases. But gas molecules are indistinguishable, and people very much not. LN Tolstoy (in the sixth appendix to War and Peace) pointed out that his relatives’ recollections of the War of 1812 followed Official Truth, but their contemporary diaries did not, and suggested that individuals’ actions arose from the actions of others close to them, rather than some overarching purpose. The Tolstoyan model of collective behaviour has been established for other vertebrates, most spectacularly for the murmurations of starlings, clouds of a million or so individuals at roosting time circulating in (mathematically) chaotic patterns. Perhaps economists and other social scientists would do better with models which reflected close neighbour interaction (Tolstoyan statistics) rather than the current whole economy averaging ( Kelvinian) statistics.
We need a stable store of value. Gold has a lot going for it, but why not a basket of precious metals stable in air, including platinum? Gem-quality diamond can be synthesised (there is a lot of mumbo-jumbo about “natural diamond” to obscure the fact that the Antwerp diamond centre is a racket) and its price reflects the cost of energy used to produce it. At very high temperatures, though, it burns.
Maybe the solution is to not try to make money do two things at once- act as a medium of exchange and as a store of value. We do that crudely when we exchange our currency for real assets, including some very liquid assets such as ETFs and index funds, that reflect real value in one way or another.
There are other stores of value than PMs, the stock market (eg. index funds and ETFs), commodities, real estate (including funds that hold real estate) and so on. Perhaps technology could allow individuals to democratize the value storage by apportioning the nature of the storage to their personal preferences, domestic and foreign. Then money would only be used as a medium of exchange and the value would be determined at the time of exchange. Wealthy people already do this, crudely, and often in large chunks, but it could be instantaneous and scale down to the price of a cup of coffee. There is some hazy outline of this in things like Robin Hood (electronic broker) and digital yuan.
A welcome breath from the real world of physics and chemistry: real wealth is energy. More precisely, real wealth is what thermodynamicists call Free Energy; not to be confused with Free Beer which is a monetary process. Free energy is the amount of energy we need to put into (or can extract from) a physico-chemical process. The free energy of the brewing process is the same whatever price we buy or sell beer at. It was a brewer, James Joule, who discovered this “new and beautiful truth” which enabled natural sciences to progress while economics remains primitive.
Not only beer. As Wiganer says, a diamond has the same free energy however you make it, and physico-chemistry can make perfect diamonds for a few joules of energy input. So de Beers and other Anglo Zio Capitalists who run the diamond racket are consider engravingy a holographic hallmark on the diamonds which their cheap labour digs up from the ground, to maintain a high price as “genuine natural diamond”.
Living creatures evolved with respect to the natural law of free energy, and biological process evolved a “universal energy currency” called ATP (Adenosine Tri Phosphate). Uncle $cam’s “almighty $dollar”, and his frantic attempt to collar the Earth’s energy resources, is a very poor attempt at universal currency.
Pedant’s corner: “James Prescott Joule FRS (1818 –1889) was an English physicist, mathematician and brewer. Joule studied the nature of heat, and discovered its relationship to mechanical work (see energy). The joule is named after him.” — Wikipedia
Very insightful comment. Economists just love them some physics equations, which they naively latch onto to put some shine on their decidedly pseudo pseudo-science. Alas, they weren’t very good students – no doubt why they took to economics in the first place – and so we get such silly nonsense as perpetual growth, free beer, and other such over the rainbow fairy tales.
The only real store of value that will be sustainable is education based on the laws of nature. Everything else is dilutable.
My take on economics, as with all ‘social sciences’ is that treating it as a science, where experimental design and interpretation are (somewhat) rigorous, violates Heisenberg’s Uncertainty Principle. In the social sciences, the design, , and interpretation of an experiment are absolutely dependent on one’s mind, and one’s mind is indeed the limit of resolution in any such experiment. The Uncertainty Principle essentially states that one can know nothing beyond the limits of one’s resolution; so trying to do an experiment using people and peoples’ behaviors is useless when a person is conducting the experiment. Now, if a dog were to do an experiment on people…Of course, they’ve been very successful in applying their research.
“yet chemistry is cumulative (…) whereas economists still argue about what money is.”
That is, I think, because chemistry is science, while economics is not (or, at least, not entirely).
Nonetheless, “cumulative science” is only a simplification, because it’s not exactly cumulative (or, at least, T. Kuhn and many others argued that its development follows more complex mechanisms).
But, apart from that, economics’ need for metaphysic concepts is far greater than the one of the so-called “hard” sciences (chemistry, physics… while basically all the rest of “soft sciences”, like “human science”, are just ridiculous nonsenses).
Anyway, I very mush enjoyed your comment and the one by mr.Deplorable, which is a very funny nickname, so… thank you both!
Cheers from Italy
To really assess the current world economic situation, the paradigms about how money works we learned back in economics class are quite likely out of date.
Say, we view the flow of money much like water in a pipe. The source, that being the U.S. Fed’, prints up money which then flows through our “economy”; the economy being the pipe. The sink or sinks, i.e. the places where the money eventually ends up, that being on the other end of the pipe are likely multi-billionaires like Jeff Bezos, and countries like China who simply stockpile the money not knowing where else to go with it. Theoretically, such a scenario can go on indefinitely so long as the source keeps printing, and the sinks keep on collecting. In such an economic model, the concept of U.S. Federal debt becomes meaningless as the U.S. Fed’ really does not owe anything to anybody. The only problem I see is when the sinks decide to let go of their cash stockpiles and effectively become sources themselves. Then the original source, i.e. the U.S. Fed’, loses it’s power, and with a world awash in free money the entire concept of money as a measure for trading goods gets undermined. Like an engine that has lost its speed governor, production of goods spins out of control. If an environmental catastrophe does not happen first, world economies will eventually go haywire. I believe we are already seeing this today.
excellent short analysis! Best I hv read thus far…
FED is meaningless… and clueless… and the price for meaningless and clueless is???
Not sure if there is any here that share my view – china has zero or very little real exposure to the dollar denominated assets…
be well be safe
Your comment on the GDP calculation is valid. Also, when the government spends or “invests” money, no matter how useless or frivolous the expenditure, that amount is directly added to the GDP, even if it is done with deficit spending.
GDP = private consumption + gross investment + government investment + government spending + (exports – imports).
Note also the way that “productivity” is measured- by the ratio of GDP to total hours worked in the economy. So a “high productivity” economy may actually be producing nothing domestically, and may in fact be bankrupt.
Calling all the MONEY experts for your opinion, analysis, imagination…
I have had this question for a long time,
pls see if you can share your expertise here :)
1) can we live W/OUT reserved currency in our current economic and financial paradigm? physical gold? billions of uncontrolled crypto?
2) can we live W/OUT reserved currency in a NEW type economic and financial paradigm? What would that be?
I am quite sure in the ancient past, we have survive w/out reserved currency and the world economy and trades still flows and small ppl like us still continue w their daily lives… and happily :)
So we CAN live w/out reserved currency – or am I wrong?
We need to redefine economy/financial rules and laws, not controlled solely by/to the white history and their idiotlogy – Agree?
We are many colors. We are multipolar world.
… thus our money should reflect that – not choked by the white color gatekeepers paper or digital paradigms…
Yes I understand money is a tool, it is the money ‘makers’ and their love of ‘money’, which is really absolute control, that is evil.
be well be safe
Not sure I’m an “expert” on the subject exactly, but as I understand it the main advantage to having a reserve currency at all is to facilitate free trade between nations using different currencies; the reserve currency serving as a common denominator for vital commodities such as oil. But as we’re seeing now, that privilege is and was easily corrupted to become advantageous to the issuer, which was probably always the intent from the very start, as Francis’ account above strongly implies. We’re long overdue for a new paradigm, which the wealthy US and its minions will no doubt resist to their dying breath. Regardless, since China is rapidly replacing the US in productivity by whatever measure you like, the change is coming whether wealthy western bankers like it or not.
A specific subset of inbred ‘white history’ controls the economy, financial, and political rules you speak of, they have been working on the project for a very long time………unfortunitly while poking the Bear, they woke the Dragon. Lucky for them Mr Dragon is still clearing the sleep from his eyes. The ?, in the past we lived without any reserved currency system, we’d barter for goods or trade labour, got us quite far until someone placed a worth on ‘beads, shells and beaver fur’. Not sure if we can internationally live without some reserve currency for trade (not sanction domination), but we sure can live without the ‘inbred control freaks’ and their financial scams. Hmmm….millions of years of human evolution without money……..could we survive like that again, some could………others, many others, yikes!
Cheers, M
Not sure if we can internationally live without some reserve currency for trade
A basket of currencies has been proposed, but of course negotiating the details of that has been problematic, to say the least. No doubt our current masters of the universe will resist that to the very end, since it would effectively end their ‘exorbitant privilege,’ but the brainpower to enact it is certainly no problem. Which highlights the fact that the current impasse is first and foremost a political problem, which in turn highlights the fact that economics is a social science, and not a “hard” physical/mathematical science like its practitioners purport it to be. The widespread realization of that fact alone would take a goodly amount of air out of economists’ sails and possibly bring the discussion of options to our current predicament back down to earth again.
Thank you both for your splendid discussion here :)
Thinking way out of the box, the set white paradigm, their made-up economic laws, which is a social science,
I think –
As w bileteral trade worked to solve lots of white-sanction problems,
perhaps a bileteral currency could solve the ineuqality of the currency (as lamented by our iran poster here)
The currency will be backed by whatever the country choses, of course would be thier strenght, maybe military, maybe resources maybe rare earth/minerals, maybe a type of fruits that only produce in that island etc
This put the power back to the ppl in the country that ACTUALLY produce TANGIBLE STUFF!
The other thing is to forbid the country, the cbs, and the coporation to buy treasury and instead allow only citizen of the world to buy them…
say as a chinese, if I think russian is going to be powerful and friendly in the region, I will vote w my money and buy russia treasury. And if the season change, as holders of russia treasury, I will make my shareholder views known in the public.
Again this puts the power back to the ppl of the world and we, the citizen of the world, are financiers to every country in the world, and we are accountable to each other. If we want to have a stronger voice or vote, we will have to produce more, to make the money, so we can invest it, to buy the treasury of the other country. No more funny business that CB makes decision on our behalf, using our money, and our future money, which they all take a cut for free and enjoy their high life for free. Each generation will have its debt sorted and clean/zero out, say every 10 yr.
Both here invert the triangle to be bottom up, and the gov are as they are elected to be, managers, and can be fired, can be jailed, and can be send to death panelty.
Dreaming? or we are getting there – say the billions of untold cyptos?
It is social science after all right?!
disclaimer: I am anti-cryptos. I am old-fashion.
be well be safe
Let’s say Iran sells its oil to China for Yuans. Who will then accept Yuans from Iran? Only China and China’s customers. I am no expert, but this places China in the same position that the US currently holds. Considering the fact that China produces practically everything, for them to get to pay for oil with Yuan is a dream come true, I’m sure, ie. China gets to print some paper (money), exchange the paper for oil, produce stuff with the oil, and then exchange the paper once again for the products made with the oil. Win win for China, lose lose for the consumer. Or am I missing something?
Since you mention Iran, Iranian currency is not accepted anywhere in the world, and the world is legally obligated to refrain from giving Iran US dollars, as per the demand of the US, which is being adhered to very strictly by every country in the world.
_Someone_ has absolute power over the world’s financial-monetary structure. And that someone is a transnational actor, towering over nations like China, which are forced to comply with sanctions against Iran.
@anon
why should china or russia help or save iran?
You are implying that china and russia CANNOT help or save iran, which is a question of ability, not the question of motivation.
Be brave and look inward, if you can – How did the great Persia allow itself to be in this state to day?
China and russia arte great civilisation, so it india and many others.
Why is Iran suffering from this fate and not other country?
Uncle Sam? Seriously? Didnt china trade goods for oil w you??? and how did Iran get all the tech know-how to build nuk?
friend, your life and your ppl is not easy, I understand.
But strenght always comes from within you, friend, not from without.
What you imlpy china would do, is also same for the great Persia,
but I am going beyond that.
And no china does not produce everything, they are business man, they are middle man.
What can Iran offer to china and russia to make the deal to allow iranian currency free floating in the international market, in the multipoler world,m would be my question for you :)
stay safe there and be strong
be well be safe
Where did I imply Iran needs help from Russia or China, much less state that they should ‘save’ Iran? Save Iran from what? Taking over the Middle East? I think you need to come to Iran for a visit, you most likely have a very inaccurate image of Iran in your head.
I am using Iran’s situation to demonstrate the monetary power structure in the world, which is hidden from an observer that is not aware of the Iranian situation vis a vis the rest of the world. Nothing more.
And to actually answer your question, it doesn’t take a genius to figure out the threat to Russia in case Iran falls to the US. And China’s plans for its new silk road will also hit a bit of a snag if Iran becomes aligned with the US, no?
Meanwhile, Russia and China enforce US sanctions on Iran.
This lack of pragmatism in doing what is clearly in one’s best interest is a symptom of globalist monetary power, which the US and the EU, and Russia and China, all suffer from, whether you choose to accept it or not.
Pragmatism dictates that Russia and China stand behind Iran 100% in support of the war against the US-Israel. As someone who is in the know regarding the matter, I would say the level of support is closer to null.
How can it hurt Russia and China to quickly kick the US out of the Middle East, get rid of ISIS, and evict the Zionist regime from the region? Why is there no will for any of this in Moscow and Beijing?
Maybe they want to live a normal live and not sit in the ruins as effect of a nuclear exchange? Secondly they are not ready to be kicked out of the US dollar trade yet?
“Didnt china trade goods for oil w you???”
Iran doesnt want Chinese goods, Iran needs US dollars, which China has at its disposal, in light of which one could label China’s oil for goods proposal, at worst as ‘animosity’, and at best as “taking advantage”.
Yesterday Nasrallah suggested that Lebanon buy oil and fuel from Iran, and pay for it with Lebanese Lira. Contemplate that for a moment.
So, how about it? Will China sell goods to Iran in exchange for Iranian Rials?
“..they are business man,..”
That is the difference between Iran and China. Iran helps the Palestinians, Yemenis, Lebanese, and Syrians because it is the right thing to do, not because it is a good ‘business’ move.
If it was a good business move, we expect that the Arabs, the US and China would all be lining up to get in on it.
Sure, let’s piss off the countless Jewish billionaires all across the world by going against their Jewish state, to help a bunch of Palestinian nobodies. That’s a great ‘business’ move.
Pardon my French, but, fuck business. People are being raped and murdered and evicted from their homes, displaced by the millions, while humanity’s “great civilizations” do business, as usual.
I would appreciate it if you didn’t lump Persia in together with the great civilizations. We are clearly not as business savy and capable of Jewish appeasement as some of the greatest.
Good to know Iran, according to you, is well and good.
So China and Russia should leave ME and let whatever happens, happens.
Right?
… and Iran can consider joining up w USA? Or Iran can make it alone?
And pls what exactly does Iran has to offer?
… to the international world (products/services) and international market (inc the money markets)? I am curious now.
be well be safe
This person or thing whom has the absolute power, only has a mechanism of destruction of the financial-monetary structure. It does not have a creation mechanism, which is the mechanism currently being used, and I think satan owns or currently controls that.
So to me its a toss up as to the outcome of this financial war, and who and when does the loser have to pay for the consequences of wanting and desiring to go to war?
Going to be quite the hangover to recover from after going on that drunken sailor spending spree.
Imploding homeland I knew who my enemy was when I saw the new American dream. I drove past third world decrepit cities, masses of ragged people with no homes. dispossed dying off in the broken streets. https://youtu.be/-g-oAjLjQdA
John, your Link made some hard hits (though I thought they were diluted by a lot of kitsch art). The pic title $4,000 for a flu vaccine that used to cost $4 explains why 9 recent billionaires arose in the vaccine racket. But were all those “third world” scenes really photographed in the U$A?
I thought the most interesting photo was of well fed, good looking but bored teenagers in a classroom. They seemed to suggest a nation that has lost its way. There is a lot of good in the U$A but not among its Leadership. (As illustrated by your composite of geriatrics with criminal records in the Oval Office).
Bravo! theonly comment i would have is that i think AOL is less ‘zaftig’.
The problem comes from the financial elites thirst for power, or in other words, the fact that banks have become money machines. In theory, the higher the total amount of debt, the more money the bankers make from interest. But when the debts become so high at the same time as the end of growth, the interest can no longer be paid. At this point, an arbitration is needed that cancels the debts in an orderly way to avoid a collapse of production. But in our world this is impossible because to cancel the debt is to cancel the power of unreasonable people who would rather destroy the world while losing power. This is where we are.
The solution is being provided by China and Russia, which have become economically and militarily dominant. The politicians and diplomats of these two powers are working hard so that little by little the productive forces will turn away from the dollar, that is to say make the power of the masters of the money printing press irrelevant.
The financial elites are aware that the plan of domination by the $ and the money printing press has lived.They are trying with the internet to connect all goods and people for total control. It is unlikely that their plan will succeed.
But the USA are levitating out of the economic reality.This country has become a crystal trap that could be deprived of the necessities to sustain an organized life by the fall of their currency. Their adversary does not want their destruction, which is possible at any time, but the abandonment of their imperial mentality. They stubbornly refuse what aggravates the crisis to a climax.
The solution will come in the usual way. Creeping rapid inflation turning into hyper-inflation, followed eventually by default after the inflation effectively makes the currency worthless anyway. Will there be a war – likely nuclear as the US is realistically incapable of fighting any other kind these days – thrown in during the process? Stay tuned, remains to be seen.
They don’t call us the AngloZIONIST Empire for nothing. That coming war you refer to is what 50 million US Christian Zionists long for. Their influence on US foreign policy didn’t end with Biden coming into power. ReTrumplicans in Congress will never call out Israel for its crimes. They will never accept any nuclear deal with Iran. All Israel has to do is stage some 9/11-style false-flag attack that will be blamed on Iran and off to war we go, nukes and all. May Heaven protect us from the wrath of the Christian Zionists and the chosenites.
Tommy, the izzies are still looking for their tail after the last go round, to think they can false flag an attack to start a war, they tried it on the Lebanese border and had to run back to Gaza, who really got flagged? The izzies are done, pin prick strikes to stoke an already bruised ego ain’t gonna cut it, and special deliveries from Iran will be magnatudes greater than what flew out of Gaza…….we are entering a ME wind down phase headed and guarunteed by Russia…Biden meets Putin….where he will be wound up then gently untied by The Boss.
Cheers, M
Problem is, Sean, 50 million US Christian Zionists think you’re wrong. They have a collective hard-on for Armageddon and nothing but WWIII will get them off. Their end-times eschatology involves a suicidal war with Iran and Russia that will be the end of the USA and the beginning of some kind of Zionist theocracy. They are a death cult… and every single one of them voted for Trump in the last election.
Imagination, the greatest nation of them all
It was said that it is a financial war, (probably among reserve currencies), and that since it was a financial war, the military would stay out of it.
There is the saying that “common sense is not that common”,and I think in today’s world that is very true. Russia is the second or third largest oil producer and seller.And maybe first in gas production and sales. Announce that Russia will not accept the US dollar in its energy sales (accept for sales to the US).And if China,by far the worlds largest oil and gas buyer, would also announce she won’t be paying for her energy imports using the US dollar, there will be a large drop in US dollar usage in the world.Either the Saudis would need to change their agreement with the US on dollar oil sales.Or,the vast Chinese oil buying will bypass them and move mostly to buying from Russian,Iranian,and other oil sellers. After that,if those countries would ban the US dollar from their countries overall trade (unless in trade directly with the US),like magic,we would see the end of US dollar dominance.
Exactly, the dominance of Petro dollar appears to be a myth to me. Maybe it was true back then in the 70s when Saudi was the number one in petroleum export leading far ahead of everyone else. Fast forward to this decade it is no longer true. Russia’s production and export accounts for a significant fraction. I don’t see why Russia cannot do away with sole acceptance of US dollars when dealing with her clients. That move would definitely upset the established order. Sell it with discount even if clients elect to pay in Rubles. Yes a discount as compared to buying oil in open international exchange.
What use are economists and their entourage? Swedish stand-up comedian Fredrik Lindström provided a most convincing answer — or, rather, a hlnt — in a hilarious sketch which I saw live a few years ago. The roaring laughter of the audience can readily be imagined. Somewhat shortened, here it is brought to the Saker’s readership.
”Whenever I make new acquaintances, the topic of profession/employment is nearly always brought up as a matter of convenience. An interesting thing is that when it comes to most of my new acquaintances among immigrants, what they are working with is self-explanatory in most cases, like ’I’m a bus driver’ or ’I’m a window cleaner’. With native Swedes, this may or may not be as straightforward. I asked an affable native Swedish guy I befriended recently what he made for a living, and I really couldn’t remember even a quarter of it. It was something about, like, ’monitoring commodity prices in a context of volatile speculations pertaining to whatever-it-was’. As an aside, what I found quite interesting here is the fact that it’s easy to imagine the tangible impact in case a bus driver or a window cleaner doesn’t show up at the job. Now, what could possibly be the ”impact” in case someone paid to ’monitor commodity prices in a context of volatile speculations pertaining to whatever-it-was’ doesn’t show up at the job?”
On a more serious note, what I find extraordinarily contemptible is the in-your-face fakery consisting of applying tons of formal mathematical rigour so as to lend ”scientific credibility” to what’s much closer to pure ideology, and a totally corrupt and reactionary one at that. As many people seem to know, the so-called ”Nobel Prize in economics” is absolutely no such thing, and it hasn’t been awarded to charlatans such as Milton Friedman and Paul Krugman (plus a whole host of other equally convincing Pindos) for no reason.
Back in the 1970s when I was a fresh-faced undergraduate, the first economics lecture I attended and remembered so well. The lecturer – a cynical but amusing type of guy – opened proceedings with the following observation.
”Economics is about as scientific as astrology.” I was somewhat taken aback at the time – well I was only 19 years old – but it didn’t take me long to find out that he was absolutely right. There is a brilliant description by British business economist which I think is the last word in the demolition of academic economics:
”Academic economics has become a disaster and a disgrace … Not only did most academic economists fail to see the great explosion coming (the GFC) but they were’nt even looking in the right direction. And having been surprised by its arrival they have little to say about its implications – the greatest event to have befallen the capitalist system since WW2.
This is not the first time that something like this has happened. Much the same was true as the fall of communism, which broke on an unsuspecting academic community that had written nothing about how a society should move from communism to a market system. It is as though the average economist considers such question beneath him (or her). One wonders what questions should be worthy of their study.
Although there are some shining examples, most academic economists, whilst clinging to the idea that their subject is relevant and of interest to the wider world, in fact practice a form of medieval scholasticism – of no use or interest to man or beast. The output of this activity consists of entombed in ‘scholarly’ journals usually about questions of startling irrelevance, badly thought out and appallingly badly written, littered with jargon and liberally dosed with mathematics, destined to be read by no-one outside of a narrow coterie of specialists – and increasingly not even by them.” (Roger Bootle – The Trouble With Markets – 2009)
The world reserve currency is gold. You will not find this in the daily newspaper or on mainstream media. But the dollar is already just another junk currency people or nations with lots of it are just looking for place to get rid of it. China will continue to trade milking the last of the wealth out of America but only on their terms. The shift from west to east is complete. They have most of the capital and most of the technology. It will get harder and harder for the empire to find lackeys in Asia as none of them want to be weighed down with the crippling requirements of any alliance with the west. We have become toxic to rational development and so is our currency of choice.
Dr. Michael Hudson is *the* best economist in the world who explains very simply how the US and its currency/military became a world power
http://www.michael-hudson.com or “org.
A very important factor in HOW the US grew into a hegemonic state, starts way back to WWI. The US mavericks understood that loaning money to western nations, back then, was a huge money-maker. THIS IS HOW Germany became an indebted nation, because they accepted US loans $$ to get the country back on its feet. Sadly, they didn’t understand that these loans would cost monstrous amounts of German money to pay just the interest on these loans.
The US, using different Western money institutions, did this all around the world. Latin America, Asia, Africa, etc. So the US said to these nations, “Well, you want to grow your economy? We have a solution for you X Nation. We’ll give you loan at X interest rate, but be careful, if you don’t pay us back on the loans, then we’ll strip you of your resources: minerals, lumber, vast areas of the land, etc. etc.” Meaning, This caused immense poverty with millions thrown out of their livelihood because, by then the US had bought off the politicians, and the ultra wealthy in those nations. The politicians were forced to raise taxes, increase massive unemployment all to pay off those loans.
The cycle continues, with the US hegemony forever stealing a nation’s most valuable resources; something that the US needs since they no longer produce much of anything. And who benefited most from this: America’s wealthiest. You should see the charts showing the massive accumulation from the 1980s to now for the ultra rich multi-billionaires in the US. It’s something like, 5% of the wealthiest owns MORE $$ than 90% of the US citizenry.
“the whole show will only be kept going by artificially supporting the price of oil. To keep the permanent demand for dollars going, oil sales must remain in dollars.”
So, to keep the dollar stable and functioning as the planet’s reserve currency not only must the price of oil remain high but the demand for oil dare not drop significantly. Then why do all the industrialised nations, including the US, plan to outlaw the internal combustion engine by the mid-30’s and stop generating electrical energy by burning fossil fuels (including a wide array of petroleum distillates), switching instead to solar, wind and perhaps nuclear? When oil ceases to be traded, the petro dollar disappears. Bit of a pickle for American finances across the board, no? Lotsa luck, oh brave new world!
“The Europeans, particularly the French were cashing in their surplus US$s for gold which led to an outflow of gold from the US which the American authorities needed to stem”
This always comes up while Britains actions in that respect go unmentioned.
I read somewhere that Britains impact was at least twice that of the french.
While I dont remember the source now it appears somewhat surpricing that Britain wouldnt be in the mood for such moves unless Britain’s interests would coincide with those of the US.
But did they coincide that much?
Ever since Ross Perot began highlighting the presence of “debt” I have been frustrated that as a rule no one
ever identifies exactly who are the creditors here? Is this debt truly enforceable by lawsuits, judgments,
seizure of assets, evictions and so on? Or is it only some bookkeeping technicality “on paper” which has no
practical consequence or significance, or can some of the debt be simply disallowed-repudiated like some debt
gets disallowed in bankruptcy proceedings.
The right of seigniorage may not necessarily amount to an “exorbitant privilege”. In an absolute monarchy, that right will help to sustain the institution of the monarchy and may also help to reduce taxes on the citizens. In a democratic system, not necessarily US or western-style democracy, the value that accrues to the state from the right of seigniorage should help to minimise income tax.
What makes it an “exorbitant” privilege in the case of the US is the financial profligacy stemming from abuse of this right i.e. the right to print the world’s reserve currency. The driver of this abuse is the need to sustain US primacy/hegemony and the financial interests of the Industrial-Military Complex that is vested in prolonging this hegemony. The US had been paying for the costs of its many wars through the abuse of this privilege. If the US did not fight so many expensive wars since WW2, then perhaps the right to print the world’s reserve currency will not become such an “exorbitant privilege”.
If the US had not been so financially profligate, even the so-called “Triffin Dilemma” could be overcome by the simple use of currency swaps with countries that are temporarily short of US dollars.
As for the dollar being tied to gold, this needs to come off as the massive increase in international trade leads to a demand in dollar liquidity that a dollar tied to a fixed amount of gold can not meet.
But the cause of President Nixon decoupling the dollar from gold was not due to the demand for dollar liquidity but rather due to financial profligacy – the US living beyond its means as a result of having to fund the ongoing Vietnam war and the military commitments due to the cold war with the USSR.
But coming off the gold standard also led to even worse financial profligacy as a result of the easy money that this occasioned. Just print the dollars that the US needs. And in the present age of electronics, don’t even have to print – just a few (electronic) book entries will do.
So how will all this end? It will end with hyperinflation and the collapse of the US economy, i.e. if the US continues to alienate China or if China refuses to help.
But it seems that the US and China will cut a deal so that with China’s help, the US (and the world, especially the western countries now frantically printing money to revive their economies), will starve off hyperinflation.
Although raw material prices rose in China by 9% in May, consumer prices in China rose only about 1.3%. That’s because the factories absorbed the cost increase through sheer volume output and efficiency of production helped by the increase in demand and in the value of the Yuan against the US dollar of just about 10% from 12 months ago.
China has just signaled to the US that it is able to help the US (and the West/World) avoid economic collapse due to hyperinflation.
And the response from the US so far is positive. Even Blinken (who blinked at his meeting with Yang Jy Jie in Anchorage) called Yang to sound off some positive vibes:
https://www.globaltimes.cn/page/202106/1226000.shtml
It WILL end, and it will end no matter who ends up in the “driver’s seat.” The entire scheme, no matter who is vying here, is that of perpetual growth. Not until we tie our “economics” to something than cannot be altered (I’d proffer that the most meaningful measure would be that of daily solar output- energy; if this would ever go away that’s the end of everything!) will there be true sustainability/stability and something resembling peace.
“Faith” in a system is touted as being paramount. Faith in the US and the USD is the only thing that really keeps the US in the position that it currently is in. Consider that “Anarchists” are always the first group that governments look to eradicate: Anarchists promote anti-faith. Stepping out of the System is the biggest threat- the loss of faith in said System. Looking at the political climate in the US I’d have to say that that faith is clearly in decline: there are more “independents” than total in the “two parties” which control everything. The ruling powers know this and it’s why they’re struggling, and IMO failing, to keep control of the narrative: conventional media is being torn apart by independent (and factual-based) media; POWER is attempting to undercut this challenge by way of clamping down on “free speech;” in no way do I see this succeeding. US military will, finally, be seen for what it is -a tool of oppression- and the majority of US citizens will refuse to stoke it with largess. Without massive US military spending the USD loses the enforcer of this racket. These will be the steps. Watch for these signs.