by Lowell Ponte
“There is no such thing as a global anthem, a global currency, or a global flag,” said President Donald Trump at the Conservative Political Action Conference days ago. “This is the United States of America that I’m representing.”
But there is a global currency, wrote economist Ralph Benko: the U.S. Dollar, which since the end of World War II has been the “world’s reserve currency”…once a blessing but now a curse.
The dollar was formally crowned with this title and power then by the Bretton Woods Agreement, whereby most of the world’s industrial nations agreed that the U.S. currency would be pegged to gold at a fixed value of $35/ounce, and other major currencies would be pegged to the dollar.
The French finance minister Valery Giscard d’Estaing once called this America’s “exorbitant privilege” because we could print a $100 bill for pennies – but other nations had to buy our money, the currency of international trade, by selling actual goods.
But the French would have their revenge after we had printed mountains of money out of thin air to fund the Vietnam War. In 1971, to prevent France from buying all the gold in Fort Knox by converting its accumulated paper dollars, President Richard Nixon in 1971 abruptly terminated our last vestige of a gold standard, and the dollar’s value began to drift rapidly downward.
What one dollar could buy in 1971 would today cost at least six dollars – a 500% loss in value. But things might have been even worse.
With the dollar’s golden anchor gone, President Nixon used America’s might to secure another. He agreed to defend the Saudis in exchange for their agreement to sell their oil only for dollars. We thus jumped from a gold standard to an oil standard, the “Petrodollar.” This preserved the dollar’s status as the world reserve currency – but it tied us to an alliance in the unstable Middle East that could cost treasure, blood, and liberty – and that, along with the Cold War, has turned the U.S. into an empire, as monetary expert Craig R. Smith and I explain in our 2016 book Money, Morality & The Machine: Smith’s Law in an Unethical, Over-Governed Age.
America and President Trump now have three options, according to economist John D. Mueller.
(1) We can try to muddle through using the current dollar standard. Two problems: this condemns us to perpetual economic chaos because of what economists call the Triffin Dilemma; we, in effect, must uphold the entire global economy with money we print, and if we use fiat money printed out of thin air, this is unsustainable. And second, if the Saudi royal family collapses or withdraws support, the dollar will go up in a blaze of inflation as its value burns to ashes.
(2) We can let the International Monetary Fund (IMF) create its own currency from Special Drawing Rights (SDR) to carry the global economy, shifting the burden off America’s Atlas shoulders. Trouble is, the IMF is highly political and arbitrary, and not necessarily in a pro-U.S. Direction. It has wanted to impose a global tax on the rich, and to favor a world government. The U.S. would lose its global reserve currency power.
(3) President Trump could move toward a new modernized international gold standard that could restore our currency’s power and end our dependency on the Saudis. Such Monetary Rearmament could begin with Mr. Trump naming pro-gold standard people to the Federal Reserve Board. Trump has already spoken favorably of the Gold Standard, which if approved could increase the value of gold to $5,000 or more per ounce. This change would be manna from heaven from those who got gold for pennies on the new dollar.
For a fascinating interview with Lowell Ponte, contact: Sandy Frazier firstname.lastname@example.org 516-735-5468
For a media copy of Craig R. Smith and Lowell Ponte’s latest book, Money, Morality & The Machine: Smith’s Law in an Unethical, Over-Governed Age, contact: David Bradshaw, email@example.com 602-918-3296
Ralph Benko, “President Trump: Replace The Dollar With Gold As The Global Currency to Make America Great Again,” Forbes, February 25, 2017.
John D. Mueller, “Trump’s Real Trade Problem Is Money,” Wall Street Journal, January 25, 2017.
Tyler Durden, “Donald Trump, Saudi Arabia, And The Petrodollar,” ZeroHedge, February 22, 2017.