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Voices Grow Louder To End The US Dollar's Reserve Status
When no lesser establishmentarian than Obama's former chief economist Jared Bernstein called for an end to the US Dollar's reserve status, it raised a few eyebrows, but as the WSJ recently noted, the voices discussing how the burden of being the world's reserve currency harms America, more than just Vladimir Putin is paying attention. While some argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.
Authored by Lewis Lehrman and John Mueller via The Wall Street Journal Op-Ed,
For more than three decades we have called attention on this page to what we called the “reserve-currency curse.” Since some politicians and economists have recently insisted that the dollar’s official role as the world’s reserve currency is instead a great blessing, it is time to revisit the issue.
The 1922 Genoa conference, which was intended to supervise Europe’s post-World War I financial reconstruction, recommended “some means of economizing the use of gold by maintaining reserves in the form of foreign balances”—initially pound-sterling and dollar IOUs. This established the interwar “gold exchange standard.”
A decade later Jacques Rueff, an influential French economist, explained the result of this profound change from the classical gold standard. When a foreign monetary authority accepts claims denominated in dollars to settle its balance-of-payments deficits instead of gold, purchasing power “has simply been duplicated.” If the Banque de Francecounts among its reserves dollar claims (and not just gold and French francs)—for example a Banque de France deposit in a New York bank—this increases the money supply in France but without reducing the money supply of the U.S. So both countries can use these dollar assets to grant credit. “As a result,” Rueff said, “the gold-exchange standard was one of the major causes of the wave of speculation that culminated in the September 1929 crisis.” A vast expansion of dollar reserves had inflated the prices of stocks and commodities; their contraction deflated both.
The gold-exchange standard’s demand-duplicating feature, based on the dollar’s reserve-currency role, was again enshrined in the 1944 Bretton Woods agreement. What ensued was an unprecedented expansion of official dollar reserves, and the consumer price level in the U.S. and elsewhere roughly doubled. Foreign governments holding dollars increasingly demanded gold before the U.S. finally suspended gold payments in 1971.
The economic crisis of 2008-09 was similar to the crisis that triggered the Great Depression. This time, foreign monetary authorities had purchased trillions of dollars in U.S. public debt, including nearly $1 trillion in mortgage-backed securities issued by two government-sponsored enterprises, Fannie Mae and Freddie Mac. The foreign holdings of dollars were promptly returned to the dollar market, an example of demand duplication. This helped fuel a boom-and-bust in foreign markets and U.S. housing prices. The global excess credit creation also spilled over to commodity markets, in particular causing the world price of crude oil (which is denominated in dollars) to spike to $150 a barrel.
Perhaps surprisingly, given Keynes ’s central role in authoring the reserve-currency system, some American Keynesians such as Kenneth Austin, a monetary economist at the U.S. Treasury; Jared Bernstein, an economic adviser to Vice President Joe Biden ; and Michael Pettis, a Beijing-based economist at the Carnegie Endowment, have expressed concern about the growing burden of the dollar’s status as the world’s reserve currency. For example, Mr. Bernstein argued in a New York Times op-ed article that “what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles.” He urged that, “To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.”
Meanwhile, a number of conservatives, such as Bryan Riley and William Wilson at the Heritage Foundation, James Pethokoukis at the American Enterprise Institute and Ramesh Ponnuru at National Review are fiercely defending the dollar’s reserve-currency role. Messrs. Riley and Wilson claim that “The largest benefit has been ‘seignorage,’ which means that foreigners must sell real goods and services or ownership of the real capital stock to add to their dollar reserve holdings.”
This was exactly what Keynes and other British monetary experts promoted in the 1922 Genoa agreement: a means by which to finance systemic balance-of-payments deficits, forestall their settlement or repayment and put off demands for repayment in gold of Britain’s enormous debts resulting from financing World War I on central bank and foreign credit. Similarly, the dollar’s “exorbitant privilege” enabled the U.S. to finance government deficit spending more cheaply.
But we have since learned a great deal that Keynes did not take into consideration. As Robert Mundell noted in “Monetary Theory” (1971), “The Keynesian model is a short run model of a closed economy, dominated by pessimistic expectations and rigid wages,” a model not relevant to modern economies. In working out a “more general theory of interest, inflation, and growth of the world economy,” Mr. Mundell and others learned a great deal from Rueff, who was the master and professor of the monetary approach to the balance of payments.
Those lessons are reflected in the recent writings of Keynesians such as Mr. Austin, who has outlined what he calls the “iron identities” of international payments, which flow from the fact that global “current accounts, global capital accounts, and global net reserve sales, must (and do) sum to zero.” This means that a trillion-dollar purchase, say, of U.S. public debt by the People’s Bank of China entails an equal, simultaneous increase in U.S. combined deficits in the current and capital accounts. The iron identities necessarily link official dollar-reserve expansion to the declining U.S. investment position.
The total U.S. international investment position declined from net foreign assets worth about 10% of gross domestic product in 1976 to minus-30% of GDP in 2013—while the books of U.S. private residents went from 10% of U.S. GDP in 1976 down to balance with the rest of the world in 2013. The entire decline in the U.S. net international investment position was due to federal borrowing from foreign monetary authorities—i.e., government deficit-financing through the dollar’s official reserve-currency role.
Ending the dollar’s reserve-currency role will limit deficit financing, increase net national savings and release resources to U.S. companies and their employees in order to remain competitive with the rest of the world.
Messrs. Riley and Wilson argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.
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"Dump it. Dump it all."
(Gordon Gecko)
The King dollar is dead. Long live the replacement King.
Bring on the #ShitShow!!!
Lemme get some popcorn ready for this debacle [whenever it arrives]
Central Banks: We profligated some people.
While a Gold Standard is probably better than the system we have (in the USA anyway), I doubt that it would work as intended. Almost surely the Gold Standard would be subverted (assuming it could ever get done at all).
FreeGold looks to be the best. Just "let gold go" (letting gold have no monetary role). When the system (FOFOA calls it the $IMFS -- the dollar international monetary financial system) goes, FreeGold will likely happen anyway.
All currencies will circulate as before. But the dollar will be worthless as a Store of Value. Gold wil be the Store of Value. Currency will circulate, just like now.
What brings on FreeGold? When the system breaks, and 99% of "paper gold" is shown to be worthless.
The complete (and very, very long) story is at:
http://fofoa.blogspot.com
The dollar’s reserve status reminds me of an old story when a psycho’s mother had died a long time ago, but he, instead of burying her, kept her body lying in her bed for years, while phucking the corpse and cashing her pension once a month. ;-)
Looney
Note to the Law Enforcement: MY MOTHER is alive and well. ;-)
Who Obola Obama?
The dollar reserve status reminds me of the movie "Weekend at Bernie's"
Minus the fucking, that's a fairly common practice in Japan: pretend an elderly relative is still alive and cash in. It could account for their high life expectancy, depending on how wide spread the fraud is.
ShitShow, indeed. Anybody who thinks that going off the dollar reserve will be good for everyday Americans is seriously delusional. I'm confident the bankers, corporations, and politically-connected will do well-- after all, they will never let it happen until they are positioned to profit from it-- but you and I are gonna get FUCKED.
Even if it is replaced by a modern version of the gold standard, it's still gonna royally suck, at least for a while.
Most likely it will be some kind of electronic one-world currency bullshit designed to strip us of our wealth and permanently enslave us.
"it -will- be"........hmmmm, sure it is not already? the dollar has such great counterfeit features, why would they let it go? enjoy the dollar ! we and the world are stuck with it. how possibly do you upend a reserve currency like the dollar? but, drama is good, so, make it look vulnerable !
... well my wealth has been stripped by da gummint and as far as i can tell i am already enslaved by the gummint sucking my pay check dry with their taxes & obamascare premiums as well ad their rampant fukn police state...
gummint. ctrl-alt-del
Aren't we F'ed anyway?
900 million ounces revalued to "parity" on a dollar basis means what? With 90 trillion floating around worldwide credit markets, is he saying gold "should be" $100,000 per ounce?
An excellent answer to your query:
http://redressone.wordpress.com/what-price/
Yeah, no shit. Dear, God! Oil production has soared and credit creation has been mind blowing! That reserve currency thing is total bullshit! Americans might be able to actually take a vacation!
I mean seriously "as gold prices continue to get hammered relative to the dollar the dollar is clearly the problem. BUT THERE IS STILL HOPE!"
Problem is the massive debt obligations run up by TBTF not "the dollar.". How else are those pension obligations going to be paid for?
Still long treasuries. Think payroll numbers today were total bs and that the riots and " let them eat cake" folks are telling the real story.
There will be a panic here once the massive amount of junk debt becomes "realized.". Not that Caddies aren't flying off the shelf here. That was the plan after all, right? " nothing succeeds like excess!"?
100,000 sounds good to me let it be done please
Yep, nope-1004 , a price of gold at $100,000 changes our gold holdings to some $4 trillion. That $100,000 price (you already know, this comment for other new people here) could come along before too long...
Yes please, $100,000/troy ounce, just as long as the average house cost in dollars comes down to $100,000.
Dont worry, it will be much lesser but in comparison to a "new " Dollar. The present one is simply going to implode. At least the Dollars outside the US. But maybe all. Who knows?
War or a Global Gold Standard? Personally, and speaking on behalf of my young family, I prefer the later. Unfortunately, the U.S. is pushing for the former. Sad. Really sad.
my classmate's step-sister makes $61 /hour on the laptop . She has been out of work for 5 months but last month her pay check was $12417 just working on the laptop for a few hours. browse around this web-site... www.yelptrade.com
she can make more if she gets a HD camera set up on her live feed and does a bit more DP
How does she make $61/hour by sitting on her laptop?????? I am confused
She sucks the laptop into herself, like those 'dancers' on the Patpong Rd in Bangkok, with the pile
coins.
How much do you make, by pimping this?
But wasn't that exactly why the certain people wanted Obama as president? The US T-bond bubble is the worlds greatest bubble-ripe for the "popping" by certain forces.
Japan is trying much harder to trash their currency. They will succeed in collapsing it, no doubt.
So the ruble has collapsed....but so has the Russian stock market. I thought the whole idea was to destroy the currency to make sure the market would go up no matter what? What's the problem here?
this is the guy who has been advising owebomba? and you want to take moar of his advice? okaaaaayyyyyyy....
YOU'RE A TOUGH ONE TO JUNK, FAT HEAD.
When the quality of my toilet paper changed for the worse, I changed products.
An American, not US subject.
And export what exactly?
Everything is going as planned.
Destroy borders.
Destroy governments.
Destroy religion.
Destroy national currencies.
Install global government.
Install global religion.
Install global currency.
Hint: If you think the global currency will be back by gold or that you will be allowed to hold gold, the joke is on you.
HA HA HA HA
Destroy the White race by race mixing
Destroy not only religion but all traditional institutions that foster societal cohesion
Borders: obsolete
Religion: obsolete
Government: obsolete
As these Old World , obsolete systems phase out , what will phase in ?
Hint: BTC
What will phase in? Slavery, real slavery.
Real slavery never went away , it was just re-branded and given a new name: Debt.
You won't have debt because you won't be allowed to borrow. Not debt slavery, real slavery. No assets. Complete and utter reliance on the elite that allow you to eek out an existence as long as you comply to their religion, their rules, and their shovels. There is a reason movies are used for propaganda, to desensitize us to the future they want. Think the Matrix, Hunger Games, 2012, Promethius (the new religion), I Am Legend, Independence day, Ancient Aliens, etc etc etc. How many movies feature a future dystopia where the citizens (slaves) are hungry and living a meager existence whilst the global elite control every aspect of their lives. Slaves got no use for gold, BTC, or anything of value. They are there to perform the work needed to take care of the elite. You are being desensitized to this future. You are being indoctrinated. You are being manipulated. It will happen because the masses will accept it without blinking an eye, they will think it is normal. After all, they've seen this movie before.
Conform or be cast out.
I believe we create our own reality. Looks like you are rapidly creating yours. Good Luck with that , I hope you enjoy it. Please accept my apologies for not being a part of it , I have my own reality to attend to and I can tell you - it is much brighter.
And when they destroy net neutrality, as they are attempting to do now, my reality will become yours as you can kiss your BTC goodbye.
The only prison that truly exisits is your own mind. It must be dark down there but please try to break the shackles my friend.
Physical (only) gold and Bitcoin will work well together. Fairly uncorrelated asset classes with interesting properties.
crazytechnician, your comments remind me of Emmet Fox, bravo.
Agreed , BTC and Gold complement each other very nicely. There were always stories on here about some gold bugs keeping a stack of 'dry-powder' available. Shame none of them invested in a couple of BTC when they were first told about it. It's next price upswing will be mouth watering.
Subdivisions
If, say, a new Power wanted to rise to global dominance, then it is absolutely imperative that all obstacles to its rise and power would have to be either eliminated or neutralized.
This includes certain nation states who are opposed to the Petrodollar (within which it resides), and to all strong ethnic, social or religious cultures within the Dollar system, who might offer resistance.
Someone seems hellbent on creating enough churn, chaos and problems, to set the stage for someone's canned solution and new Power block. No matter what flag of convenience this Power is using, to deceive the masses.
Giving up the dollar's status of reserve currency and adopting the gold standard will not solve the debt crisis, only one form or another of a Jubilee can do that. And the pressure to get off the gold standard came from the need to escape from what by 1910 was 30 years of economic depression - which would happen again.
If we end up with a gold standard it will be a kind of coup by the emerging powers. And a cause for war that may well destroy us all. If we get this second chance, it will not mark the beginning of a new "golden age" - unless we do something fundamentally different the next time around.
Isn't everybody?
" When no lesser establishmentarian than Obama's former chief economist Jared Bernstein called for an end to the US Dollar's reserve status, it raised a few eyebrows..."
When one of the anointed is laying the propaganda-pavement for the coming collapse, can there still be any doubt that the banksters and their cronies have pushed up the dollar in an effort to maximize their valuations as they flee the dollar, a la Enron?
An American, not US subject.
Summers and the White House economic team who met daily with Obama included Peter Orszag, Christina Romer, Timothy Geithner... and Jared Bernstein.
And now we have Federal Reserve operative Jared Bernstein preparing American citizens for the demise of the dollar as the reserve currency in order, no doubt, to usher in the Fed’s international financial reserve currency based on Special Drawing Rights (SDRs) issued by the International Monetary Fund.
That should do away with the globalists concern over Russia and the BRICS, constraining them to borrowing in the international capital markets, i.e., free to borrow from the international bankers if they follow orders from the new Bank of Issue.
In the “new world order” of things, there is to be no independent fiscal activity of the nations. And that means America.
But maybe there’s hope of ending our chains of enslavement to the Fed, not coming from America but from Russia. Is that why the U.S. Congress is setting up the world to Saddamize Putin?
Brother Nathanael Kapner wrote recently:
“The key that unlocks Jewmerica’s agenda to foist a war with Russia on Germany and the rest of Europe is its fear of Putin’s New Silk Road joining Germany and China through Russia.
“This portends the end of the Jew-enabled dollar as the world’s reserve currency.
“With Germany trading in the Yuan and the Ruble it’s bye-bye Jewmerica with its rule of the dollar soon to be dethroned.
“NATO is ‘good Jewish business’ but the store is about to have a clearance sale.”
http://www.realjewnews.com/?p=962
Banker control of gold can drive up or slam it down; a gold standard in the hands of international financiers or in the hands of unregulated government is as fatal to a nation as fiat currency.
Said former director of the Bank of England, Vincent C. Vickers, in Finance in the Melting Pot: “We returned to the Gold Standard in 1925 for the benefit of the City of London, and so ruined our basic industries. It does not follow that what is best for the City of London is best for the country.
“In consequence of past policy, a farmer who borrowed from his bank, say in 1920, the money-equivalent of 100 sacks of wheat, might be obliged to sell 200 sacks of wheat a few years afterwards in order to repay that same loans, simply because a pound became twice as valuable.
“This is typical of the ‘Gold Standard System,’ which involves Inflations and Deflation. A Monetary system which begets such flagrant injustice cannot be regarded as an equitable system. Yet no one in authority here dares to attempt to alter it, because the financiers don’t want it altered.”
kinda jewaphobic aint jya
old bircher or somethn?
Naa , just another fool that thinks there will actually be survivors after WW-III , that will of course be started by Zionists.
I though you were going to call him Anti-ceramic for pointing out the Criminal elements hiding within the Jewish community. Would you call him Italianophobic if he made points about the Italian Mob. Does the Jewish Mob get a free pass?
JR, you make me sick. This kind of anti jew crap gets you no listeners. I think you are a troll just trying to stir shit up. If you really want to talk about it, talk about Rothschild Zionism. The jews are some of it's biggest victims. They have been hung out to dry over and over by the Rothschild Zionists. See what crazy David Icke has to say about this, he says it the best.
https://www.youtube.com/watch?v=lNIcAcrvi2M
'...gets you no listeners...'
It would seem JR's up-votes and your down-votes would suggest otherwise.
You might want to cosider the views of the popular majority before you claim to speak on their behalf.
He gave a thumbs up to Brother Nathaniel.
Nathaniel Kapner is a jew dumbshit.
WAS a jew dumbshit. Brother Nathaniel proudly states than he renounced judaism...and that deserves respect.
While there certainly are some extremely evil jews about, it is not to say that they are all evil. Unfortunately for the few good ones, they get tarred with the same brush as the evil ones.
Don't forget Noam Chomsky, Norman Finkelstein and many others. It would be wrong to class these men alongside Larry Silverstein, Netanyahu, Wolfowitz etc. (and yes, this latter list does seem to be rather lengthy).
If you can't stand the heat, then stay out of the kitchen.
"Over the years, Obama administration officials have described Netanyahu to me as recalcitrant, myopic, blustering, pompous and 'Aspergery.'" --Jeffrey Goldberg, The Atlantic magazine
"old bircher or somthn?" Are you trying to say that the world's only superpower, the United Stales/Israeli Empire, is a force for good?
You're worse than an old bircher of sompin'. Figure it out, man, this racist anti jewish crap just shouts out that you are a moron. Figure out what is really going on.
who wouldnt be these days? just regular working Janes and Joes
"900 million ounces revalued to "parity" on a dollar basis means what? With 90 trillion floating around worldwide credit markets, is he saying gold "should be" $100,000 per ounce?"
nope-1004, If you're saying the gold standard would lead to a massive devaluation of the dollar, yeap then, that's right. That's unfortunately what happens when you join the gold standard with insane QE policies.
You can't have both, or you crash your currency. Which is why it's the only sane system: it impedes funny money conjured out of thin air.
Massive devaluation of the dollar is pretty much baked into the cake at this point. If you print $4 trillion, somebody is going to decide to spend it sometime.
Wow ... if they go back to the Gold Standard I'm going to print up a bunch of Paper Gold just like GS/JPM does now!!!!! my Paper Gold will be worth billions!!!!!.
e.
dit
.
peter leslie @verbewarp · Sep 21
"At all times sincere friends of freedom have been rare,
and its triumphs have been due to minorities..."
-- Lord Acton
.
Patti Smith - Rock N Roll Nigger (w/Flea & Johnny Depp) - live Wiltern, October 12, 2012
https://www.youtube.com/watch?v=bkwkzzuaJds
.
An Open Letter To Reid
https://www.youtube.com/watch?v=m0ejuG05N1s#t=425
there a clue, when the world seeks an illusion, any illusion, to escape the stench of broad daylight fraud. what is it the world seeks in this domain? seems "the world" merely wishes to continue the existing schemes but with better propaganda and pedigree. i pray good luck.
The problem with going back to a gold standard is there is no one you can trust.
The CB's are crooks.
The governments are corrupt and liars.
Central bankers will fight a gold standard tooth and nail. They want to be bound by nothing. They cannot accept any controls- how will their bankers continue to make obscene amounts of money if there is limit on what is put into the system. Gold is found at about the same annual increase as population growth-2.5%. Having this parameter will force them to treat capital as precious- which it is. Gone would be their subprime home and car sales, gone would be their issuing of 20 credit cards to someone with poor or no credit. This is a good thing. Think of all the green house gases that will be reduced because the world will be forced to live within its means. The tying of gold to currency will severely limit the Central Bankers control of the planet which is a good thing. They have proved time and again they do not know how to restrain their sector so let gold do it for them. The state will also be reined in as will nonsensical endeavors like fracking which clearly has more negative externalities that need consideration. Wars- if started will burn out quickly for there will be greater emphasis on negotiating to avoid using the capital. Congressional actions will be better thought out to protect precious capital. Society as a whole will fair better without having a bottomless pit of debt to draw from. It will be a better world if we are forced to see capital as precious.
+1 Nice post, and interest rates used to reflect that presciousness you speak of - didn't they (that's not a question). When they are zero as they are right now, it implies our capital is precisely the opposite of what you argue and as you have eloquently pointed out, is the source of all of our waste, binging, pollution, and so on. When shit (stuff) is perceived to be free, it is, as always, treated as such: cheap and expendable and with little regard for care or stewardship; when in fact because of scarcity, the very opposite is the truth.
Excellent posts, both of you guys.
Capital is indeed precious!
Further agreement chaps. Excellent posts. I'm glad I read this far down.
If I may add...capital is precious...because it is stored human endeavour. The blood, sweat and tears of our species. And as such it must be treated with respect...not just printed and fractionally lent into existence for the benefit of scum sucking filth.
Good post. 98% correct on gold and debt.
Downed you on nonsensical fracking bullshit.
Signed,
A fraccer ( note correct spelling)
The reality is the world loves the dollar.
of course they do-ha ha ha "OR ELSE!"
I'm not an economist, and so could someone please enlighten me: what the heck is "official reserve status" of the dollar? Official? What authority pronounced the dollar the official reserve currency of the world? I was under the impression that countries were free to hold their foreign reserves in whatever currency they wanted to. Is that not correct?
I thought that if countries wanted to dump the dollar they would just start selling it. Perhaps I've been laboring under a misconception.
Ask Sadam Hussein and Ghadaffi what happens when you start to think like that - therein lies your answer.
You are correct. Countries CHOOSE to hold the dollar as reserves. The reality is the world still loves the dollar. Zerohedge is a Russian propaganda site.
stop playing the idiot. there is no reward in it for you.
deagle44
"Countries CHOOSE to hold the dollar as reserves."
Correct, it's a choice. That could change of course...
Any deagle not chambered for .50AE is an abomination. Therefore your user name and by extension yoursef should be abolished.
the chambers are interchangable
It is official because enough people beleive it is.
Of course that can change.
Iraq, et al tried and look where it got them....bombed back into the stone age
that term "laboring under a misconception",
in the domain of the collective mind and engagement,
there, a universal principle if ever i heard one.
recently, i was accused of being a wannabe economist.
i responded that i am no economist nor would i wanna
be such a fraud, preening and lying to delude the as
many as possible sheep to the butcher's knife.
.
the term "countries were(being) free.." very curious
and interesting phrase. that inspires all sorts of
reflections and thoughts regarding history, finance
and warring nations; sovereignty and the individual.
life itself. the fascination of consciousness itself.
.
free to fuck up royally, that seems to be the delegation
today; of national leadership, to sell their posts, for
personal advantage and gain, at the sacrifice of their
charge. god, speaking to man, at the edge of man's
blade. i give up the ghost.
anyway poems ^tm
Here is a great analysis on the establishment of the dollar as the world’s reserve currency and the current situation as to How The U.S. Dollar Reserve Currency Dies… Slowly At First, Then All At Once, written by Chris Hamilton and posted at Charles Biderman’s TrimTabs August 14, 2014.
As for your specific question, this excerpt shows it was a “voluntary agreement” backed by financial muscle :
A LITTLE BACKGROUND
Following WWII, a new monetary system for international commerce and finance was implemented. This agreement known as Bretton Woods (the location in New Hampshire where the conference was held) gave the expected Allied victors the spoils and represented the World as of 1945.
CHIEF FEATURES OF THE BRETTON WOODS SYSTEM:
• An obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar.
• The ability of the IMF (created by the Bretton Woods agreement along with many other current day acronyms) to bridge temporary imbalances of payments (IMF would loan money to nations in trouble with strings attached to ideally resolve these imbalances and keep the system functioning).
• Address the lack of cooperation among other countries and to prevent competitive devaluation of the currencies as well (avoid countries printing money to cheapen their exports and gain advantage in trading).
• To ensure the US did not abuse it’s privilege as the world’s de-facto currency, the US dollar would be freely convertible into gold (if the US printed an excess quantity of $’s, nations accumulating too many dollars from US trade/budget deficits could convert and retire these dollar’s into gold (gold representing a relatively fixed quantity and storage of value).
WHAT ACTUALLY TOOK PLACE…
http://charlesbiderman.com/2014/08/14/how-a-reserve-currency-such-as-the-us-dollar-diesslowly-at-first-then-all-at-once/
The US dollar is a deadbeat currency. Looking for the next chump to exchange real goods for paper.
Yeah , I am sure a new Central Bank will be created that is so honest it will create a gold back currency that can be trusted , sure thing buddy ....
Meanwhile back on Earth , Bitcoin BTChez .......
I'm Bullish on BTC, but it will never replace all the world currencies and especially gold, both have their advantage and disadvantage.
To use BTC you need to be tech savy also.
I will be more than happy if BTC capture 1 % of the world currency "market cap".
BTC is a 5B $ market cap actually, a 100B $ would facilitate transaction and bring stability in the price.
It will not replace the world's currencies any time soon , but Crypto will underpin the global financial system within a decade or two.
Was not so long ago you needed a PhD in computer science just to send an emal , all these geek things improve with time.
Given present circumstances, Russia, China and Iran would see to have every reason to go all out in any way they can to undermine America's greatest strength and greatest source of military power. 1/2 of the military budget is printed money, only acceptable under dollar reserve status. A liscense to print to infinity is truely the well spring of American global power. Lose it, and lose the ability to spend double the yearly tax revenues on spies and armies.
Doesn't going to a gold standard sorta kill the wet dream of gold hoarders? Won't it be severely devalued in such a scenario?
Gold would be revalued much higher to match the money supply. That's why it's just a wet dream. Gold in a modern digital globalised economy is pretty much useless for high speed financials. It would be perfect if we went back to donkey carts and a flat earth with god making thunder when he was angry but that is not happening anytime soon. The nex gen will be using digital currencies. Gold may even go back into circulation at that point in the form of low value coins because people will stop hoarding it because it's value will be so low.
First you state it will be high than low. Which is it?
It will go lower , much lower. Yeah I know the old story about gold being 6000 year old money and all that , 6000 years ago people thought the earth was flat and travelled around on donkeys. Technology is displacing gold as money , as technology advances the price of gold will continue to drop. The nex gen will be using digital currencies , these will have significant perceived value in the future. Gold as money will be seen as an old relik , like a gramophone or a steam engine.
LOL, guess banks in other countries that want their gold back are stupid?
Just print all the money you need and go to the store and buy it out. Normally that's counterfeiting. The countries wanting their gold back have a very good reason for doing so.
Buy from whom, who is selling that much gold? They are siphoning gold from consumers with the gold buyer adds on tv. That is scraping the barrell.
I wonder why they don't run those ads in India? Much more gold available there ...
/s
So, if I lay out an ounce of gold, or 4 bitcoins and gave the entire world population the choice of which one they would accept as payment for work, which do you think they would choose. Yes, it is a 6000+ years old, but it is the money of Kings and is known throughout the world as a store of value (you can't just conjure up gold, you have to sweat and toil for it). That is the allure and reason for using it as real money.
Hey maybe the central banks intend to use the end of the dollar reserve status like they are using the Yen now; to dirve up stock prices and to slam down gold. The central banks have been using Japan as the prototype for much of their madness.
Without reserve currency status the US is an older version of Japan.
How many parasitic lawyers, bankers, insurers, politicians and other hangers on can we support without a value adding economy? How can we be murderer and corrupter to the world if we do not have a sound currency?
Control the narrative.
What, the day the US Dollar will loose its reserve currency status is not far now?
Quick, tell everybody that it's a bad thing to have the reserve currency and we want to get rid of that "burden"!
Exactly.
I understand where the author is going with this, but I think he conveniently forgets to mention that foreign monetary authorities purchased US public debts, including the fraudulent sub-primes, either through misplaced trust or at the point of a gun to fund the deficits that the author so laments.
If I were to start with a list of just what the fuck is wrong with the debt-as-asset money creation scheme starting at the very heart of the fractional reserve banking that creates money out of thin air for M1-M3, I'll be here all night ranting. So let's just say, nobody sane in the world (except the puppets that thrive on kickbacks from the State dept) wants the USD as the reserve currency. NOBODY.
It fails as a store of value and even as a common benchmark to measure the worth of goods and services worldwide. Where it excels is convenient medium of exchange, but there is something deeply unsettling, even immoral about handling the USD knowing that it is based on the promise of payment from generations of Americans yet unborn. That it actually has no intrinsic value. That it is the medium with which natural resources are stolen, people murdered, democratic governments usurped, and wars funded. It pays for your entitlements, roads, and institutions too, but those are all made possible by debt slavery and interest paid to the private banks of the Squids for the inconvenience of running the printers.
Love the dollar? You have got to be kidding me. As for the whole system of fraud, corruption, and delusion that enable it to be a currency, unless we get rid of all types of money except M0 and then have that based on something of intrinsic value or human effort which cannot be counterfeited (rehypothecated, fractionalised) or Ponzi-fied, we will continue to have the same problems as before. The thing is, I reckon we have simply run out of decent, honest people with the moral fibre to do the right thing in positions of power. It's all about bending the law and getting away with it these days, and if the law can't be bent then it is corrupted. There are groups of "exceptional" people who commit crimes in every strata of society, every day. Bankers, politicians, and civil servants - as they say, it's a club and you ain't in it baby. I'm tired.
You may be tired, YHC, but your pen is exceptionally sharp! Brilliant prose. Thanks.
Thanks mate. I'm honored to be complimented by someone as lucid and principled as you. Have a nice weekend.
Indeed a very well written post, YHC. You captured the dollar's dark side quite elegantly.
So funny - the article alludes to ending the dollar reserve status and replacing it with something much much worse, Gold. I stack gold but it has ZERO bearing on the productive capacity of a people and nation. Restoring the Gold standard would only succeed in depressing the world economy and making holders of gold the new kings of society.
Again, GOLD has zero bearing on the productive value of a society and it is a horrible currency in that measure. Bitcoin would be a far better reserve currency as at least it has nearly zero-friction (transport and transaction). Trying carrying your gold across boarders in any meaningful quantity. Bitcoin passwords can be stored in your head and are non-confiscatable in that regard. Try trading your gold in quantity without assay costs and high trading spreads. Bitcoin 2.0 transactions will cost fractions of a mili-penny to make microtransactions possible. Try that with modern Fiat or Gold. Impossible. Sending $50M in Bitcoin costs $0.04 today. Try that with Fiat or Gold.
Bitcoin is much much more than a currency as the distributed, programmable ledger will obsolete most modern financial institutions (banks, insurance, exchanges) and governments through public distributed ledgers for contracts and more. ZH'ers who can see beyond the knee-jerk reactionary elements against bitcoin and who can see beyond the public scaremongering by the NWO cronies will find that Bitcoin is the biggest weapon in the arsenal against the vermin that have ruled society for far too long.
Bitcoin is another scheme. Besides, it competes with the bank's fiat so therefore they will destroy it.
Bitcoin is good for transaction, especially if you want to send money to another country or simply bypass all those stupid governement regulation or sanction against countries (let's say you want to buy Iranian oil for exemple).
Gold on the other side will never lose it's value, it's a stable material, can store a lot of value for a very long time, his buying power was the same since thousand of years: In the Islamic Empire you could buy 2 or 3 sheep, a goat, and some chicken for one ounce one thousand years ago, now that same ounce can do the same exact thing, try that with fiat !
Now, you know why Middle Eastearn leader get killed when they try to put back the Golden Islamic Dinar...
Gold > Silver > Bitcoin >>>>> Fiat.
Basket of Assets and Goods >>>> Bitcoin > Silver >>> Gold
Problem with Gold is the extreme rarity and lack of easy fungibility. Silver is cheaper and simpler to assay. Silver would be a far superior reserve asset class for the average person than gold. A basket of assets and goods *will* form the reserve "currency" of the future. Bitcoin will be a small part of that reserve.
All roads lead to the SDR as the globalists want absolute control absolutely......then the Brave New World will be completed
http://www.financialsense.com/contributors/jim-rickards/death-of-money-interview-part-2
I agree that is their agenda, however, overall, their agenda has become runaway criminal insanity, because it is based on a completely globalized system of enforced frauds being able to survive itself!
Successful SDRs contradicts the way that such systems of enforced frauds WITHIN human society could survive the necessary attitudes of evil deliberate ignorance that are required by such a society to be able to continue enforcing those frauds.
Meanwhile, cryptocurrencies are merely a smaller parasite on top of a larger parasite, both of which operate through attitudes of evil deliberate ignorance regarding how the death controls necessarily back up the debt controls. SDRs demand that the globalized systems of electronic fiat money frauds, backed by the force of weapons of mass destruction, are able to be sustained over the longer term ...
While there is no doubt that the globalized social pyramid systems being consolidated IS the agenda of the current ruling classes, that agenda is based on continuing to be able to back up bigger lies with more violence in ways which are criminally insane to expect will be possible to maintain over the longer term.
In the end, nothing less than a better murder system can back up a better money system. However, that is in a head-on collision with how to operate murder systems after the development of weapons of mass destruction. The globalized electronic frauds can not function without force to back them up. The notion that such force could be stabilized by a global government based on even more deliberate ignorance and fear is preposterous!
A precious metals standard, or any other commodity backed money, has some merits from being consistent with the principle of the conservation of matter. However, such old-fashioned notions are totally out of touch with a world in which atomic bombs exist, and prove that matter is a form of energy. As my comment below outlined, the best standard for money is an energy based standard. However, that can not be understood without going through some profound paradigm shifts in the philosophy of science itself.
Explain, please.
What is the classical gold standard?
What is the gold exchange standard?
How can gold back a currency if that currency is not redeemable for gold?
How can 900 million ounces of gold back anything when Central Banks are printing their currencies like there's no tomorrow.
The Federal Reserve has printed as much as $10 trillion US dollars since 2009. Can those dollars be converted to gold?
How can a Bernanke Buck be distinguished from a William McChesney Martin Buck from a Marriner Eccles Buck?
Shall a nation with any debt be permitted to convert their currency into gold before they pay off their lenders?
Shall the US be permitted to come anywhere within 2000 miles of where the Golden Horde resides?
Thanks.
"How can gold back a currency if that currency is not redeemable for gold?"
This is why I posed the question regarding gold devaluation in the event of a return to a gold standard. Which I support by the way. To do so is to acknowledge what you have in your wallet is worthless. What IS gold that is valued valued at $1,200 USD per ounce? What does that mean anyway? I guess I will get down arrowed for asking any question that speaks of gold going down in terms of the reserve medium of exchange of planet earth.
just guessing
if there are only 900 million ounces of gold available to back a reserve currency, I think gold would be revalued higher to cover the amount of currency needed to liquify the global economy.
but it isn't worthless if everybody but you covets it and would slit your throat to have it in their wallet.
So a loaf of bread would cost a penny.
The loaf of bread is constant.
An ounce of gold is redeemable either for 1000 Pengo or 10,000 pengo.
You say 1000. I say 10,000.
You buy a loaf of bread for 100 pengo.
I buy a loaf of bread for 100 pengo.
You have no loose gold; I have no loose gold.
You make 20 pengo an hour. I make 20 pengo an hour.
I concede that in your fatherland anybody with a thousand pengo can redeem it for an ounce of gold while in mine it will take 10,000 pengo.
Splain why a loaf costs a penny, please? And if it does where's the crime in that?
Money backed by precious metals tends to merely be an illusion that the conservation of matter principle will be enough to ensure a sounder and more honest money. Money IS measurement backed by murder. Money backed by any commodities is actually the measurement of those commodities backed by murder.
While there is no reasonable doubt that the days of the USA Dollar being the overwhelmingly dominant global reserve currency must necessarily come to an end, anyone who thinks that going backwards to some "solutions" based on backing up money with precious metals is being ridiculous ... I presume that they are being deliberately ignorant, or perhaps worse.
What exists NOW is a globalized system of electronic fiat money frauds, backed by the threat of the force of atomic bombs. The best abstract theory is to have money backed by energy. However, IF one is serious about considering how human civilizations operate as general energy systems, then one can derive conclusions from first principles, which can also be verified empirically, that civilizations are controlled by the most labile components, and follow their own paths of least resistance, which in human terms means that human civilizations are controlled by the most dishonest and violent people, and so, follow the path of least morality.
Believing that money backed by precious metals will provide a sound and honest standard, is to believe in the old-fashioned ideas about the conservation of matter, after it has already be proven that matter is a form of energy. The best way to approach a sounder and more honest money should be based on the principle of the conservation of energy. HOWEVER, when one actually does that, then one discovers how and why the history of successful warfare based on deceits became the foundation for economics with fundamentally fraudulent financial accounting systems.
There can NOT be any better money without a better murder system to back that up. The American Dollar could not have been the world's global reserve currency without the American Military to back that up. However, there is nothing in human history to compare to the existence of weapons of mass destruction, which are trillions of times more powerful. There is pretty well NO general public understanding of the ways that the death controls back up the debt controls, and even less general understanding regarding how to reconcile the principle of the conservation of energy with the appearance of the phenomena of death.
The way that our society thinks about the concept of entropy is BACKWARDS, as shown by the way that an ARBITRARY minus sign was inserted into the entropy equations of thermodynamics, which was then extrapolated into information theory. The basic manifestation of the ways that the biggest bullies' bullshit social stories dominate our civilization flow through, and throughout, the philosophy of science and political science.
We have had enough progress in physical sciences to be able to create globalized electronic frauds, backed by the force of atomic bombs, but NOTHING remotely like those kinds of profound paradigm shifts have happened in the realms of political science, wherein the combined money/murder systems operate. Instead, extremely STUPID articles like the one above can propose RIDICULOUS nonsense that going backwards to a precious metals standard to back up a monetary system is possibly a good idea.
That is fine for those who continue to deliberately ignore the ways that the principle of the conservation of matter has become integrated into the principle of the conservation of energy. It is also fine for those who deliberately ignore the profound paradoxes which would be inherent to any "rule of law" that is dreamt of being able to back up the idealized notion of money backed by some commodities, without facing the ways that NOBODY GUARDS THE GUARDIANS, while any "rule of law" can not exist unless the people who enforce that rule of law are the best at being dishonest, and backing that up with violence.
The days of US Dollar as the global reserve currency are surely numbered. However, anyone who believes that we could move towards some better murder systems to back up better money systems, by going BACKWARDS to some old-fashioned ideas about the conservation of matter, can only do so as long as they continue to deliberately ignore all other forms of progress in physics, which have made all human problems become trillions of times worse than they every were before in known human history.
Any attempt to propose some better combined money/murder system should address the issues of how human beings could operate those murder systems after the development of weapons of mass destruction! While I think one could work towards some theories about how to do that, given that the real world is dominated by goofballs, who propose going backwards to find bogus "solutions" to the problems that the currently established systems have become runaway criminal insanities, surely makes actually agreeing upon any genuinely better solutions practically impossible.
Articles like the one above are "awesome" in the degree to which they promote old-fashioned nonsense with a straight face, while quoting other idiotic mainstream morons to support that position of nostalgic nonsense. Rather, the only way forward would be for a series of intellectual scientific revolutions in the philosophy of science, which would then apply to political science in general, and to the combined money/murder systems in particular.
However, OBVIOUSLY, we are actually headed towards the established systems going through serious psychotic breakdowns, which are aided and abetted by various idiotic, reactionary revolutionaries, who promote their notions that the "solutions" to the problems created by advancing science and technology could be found in going backwards, to old-fashioned ideas about money being backed by gold, which is one of the favourite shibboleths on Zero Hedge.
Yet another Grand Slam, RM. This may be your finest since I found you.
You are a coupling of the Cato of economic theory and the Petronius of political criminal behavior. It's difficult to believe you are not from some other, more enlightened realm, come to Earth to prepare the people for our imminent, yet long awaited, doomsday.
Getting to the criminal and murderous money of today from the first coinage of the Iron Age, would be like getting from feudal Europe to America without sailing ships.
Columbus' small squadron of galleons begat America's 20 aircraft carriers just as the bezant begat the repurchase agreements of the Fed.
When you say that, I assume that you refer to the "high energy objects" which pierced the fuselage of MH17 and brought it down in Ukraine. Indeed, there was ex post facto money involved in that event.
I have to tell you, I heart you, RM (I hope I don't get in trouble with management for saying it), bromantically, of course, and look forward to your next "Gird your loins" essay.
Mine are all girded and raring to go.
Thanks, bid the soldier!
As you know "Columbus' small squadron of galleons begat America's 20 aircraft carriers" which have atomic power potential!
America was primarily like a grafting. The previous human systems in North America were decapitated, and then the Neolithic style of civilization that has been developing since the metaphorical days of Babylon was inserted.
MH17 events look like another kind of false flag attack, as far as the North American media presented those stories. The recent article republished on Zero Hedge Ron Paul Warns, Reckless Congress Just 'Declared War' On Russia was SERIOUS! America has become controlled by people who are so criminally insane that is not possible to estimate how criminally insane they are, because there are no rational ways to assess what people are thinking who are able and willing to seriously risk starting any war involving nuclear weapons that could go very quickly out of control.
About the only thing we can maybe "control" is our attitude towards that situation. In that context, being oriented to take wild rides appears best, since there is no way that we could get off, even if we wanted to! Although I am NOT from another planet, a lot of people have made that joke. In my view, I am merely reporting on what it is really like on planet Earth, after one perceives that the ruling classes have become like "aliens" in the degree to which they are able and willing to start a world war, and appear to be working towards deliberately getting that going!
Of course, for the average American, to lose the benefits of the American Dollar having the standing of the global reserve currency, I estimate, would result in almost everything suffering at least 50% inflation. Tens of millions, if not more than a hundred million Americans would find their customary life styles impossible to maintain after the American Dollar lost its status as the global reserve currency.
The article above does not appear to be reasonable nor realistic regarding the ramifications for BOTH foreign AND domestic affairs regarding the American Dollar losing its status as the global reserve currency. It is mind boggling to try to imagine what the consequences could be, especially since the international banksters would still be jockeying to try to consolidate their global hegemony over whatever systems may emerge after that!
In my opinion, the global ruling classes do NOT know what they are doing, but rather have psychological and political habits which have become criminally insane! Meanwhile, it will be the lower level people who suffer from that the most, with poor American children increasingly becoming the worst victims of the consequences that would follow from the American Dollar losing its place as the global reserve currency.
The ONLY real, honest and stable "gold standard" must have the following characteristics:
#1: Humans only buy/sell with physical gold coins/bars.
#2: No form of fractional reserve anything.
#3: No paper receipts.
-----
If any of the above are avoided, the predators-that-be will ALWAYS take control of all wealth (over time), enslave everyone, and make those in control rich and powerful without them producing anything at all.
The above CAN theoretically co-exist with a system of "gold debit/checking accounts" wherein people transfer ownership of their physical gold held by some agent. But this only works if the owned physical gold is physically transferred often and periodically without exception (at absolute most, once per month). But I would even advise against this, because once the extreme predators who exist in the world today have ANY fancy mechanisms, they WILL find ways to multiply-hypothecate anything and everything of value, and steal sheeple blind, control governments, etc.
neato
If you are suggesting a system of "dual currencies" count me in. It's positively Habsburgian, and therefore AUSTRIAN.
And as everyone at ZH knows, economic theory doesn't get any better than Austrian.
There is very little discussion about what to do with the morons that implemented this giant fraud that went on for one hundred year and caused wars an disaster,
What to do with the Rotschield criminals , the Rockfellers and the rest .
You can be assured that they would try again to bribe their way around to achieve control of the system . I have a solution : extermination of their families . For crimes like this there is no pity !
I think Hitler felt the same way about the jews.
Getting ready to role out the new "Scheis" dollar. The dollar will be split up. The scheis dollar will be used for domestic purposes with much less purchase power and the the dollar held by foreigners like China will only be used for payments on US debt. The final agenda is the same. One world currency and one world gobermint.
China is the #1 economy now. The US is #2. China is aquiring all the gold it can. What does that tell you?
That you own gold ?
dt
There will be kung pow chicken in every pot.
I was reminded of an article that some hedger, who no longer post and I think has been banned, linked to regarding gold/silver and Americas first currency. Thought I'd pass it along for reconsumption.
http://www.no-debts.com/anti-federalist/files/ownmoney.txt
Is Mr. Bernstein a dual citizen ?
Louder?
They must be in the cheap seats.
What absolute nonsense! The article blames the reserve status for the huge deficits and foreign borrowing that the American politicians have engaged in. Pure foolishness.
USA is heading toward total collapse. I am afraid that that will devastate the entire world.