America's Weapons: "The Dollar And The Drone"

Authored by Brian Maher via DailyReckoning.com,

It was said that “the guinea and the gallows” were the true instruments of British imperial power.

The guinea represented the coined wealth of Great Britain.

The gallows represented its… constabulary zeal in policing restless natives.

This is the 21st century of course… a time of enlightenment.

Today’s instruments of imperial power are no longer the guinea and the gallows.

No. Today’s instruments of imperial power are “the dollar and the drone.”

The dollar and the drone are America’s weapons.

Like the 19th-century pound (which replaced the guinea), today’s dollar is the world’s reserve currency.

Like the 19th-century pound, the dollar finances some two-thirds of global trade.

And the gallows?

Britain hanged its foreign trouble. America explodes its own in drone attacks.

Here is civilization; here is progress.

The sun eventually sank on the British Empire… the gallows came down… and the pound lost its global reserve status.

The U.S. will have its drones. But is its other weapon, the dollar, close to losing global reserve status?

Recent developments may tell…

The global oil trade has centered on the dollar since 1974, when Saudi Arabia agreed to enthrone the dollar as currency of the oil market.

If it was oil you wanted… it was dollars you needed.

But now China — world’s top oil importer — is preparing to create an oil market that bypasses the dollar entirely.

The plan would let China buy oil from Russia and Iran with its own currency, the yuan.

But the yuan is not a major reserve currency like the dollar.

Under this plan, Russia and Iran would be able to swap yuan for an asset far more desirable than Chinese scraps of paper — gold itself.

Perhaps that explains why China’s been hoarding so much gold in recent years?

Jim Rickards says this system marks the beginning of the end for the petrodollar:

China, Russia and Iran are coordinating a new international monetary order that does not involve U.S. dollars. It has several parts, which together spell dollar doom. The first part is that China will buy oil from Russia and Iran in exchange for yuan.

 

The yuan is not a major reserve currency, so it’s not an especially attractive asset for Russia or Iran to hold. China solves that problem by offering to convert yuan into gold on a spot basis on the Shanghai Gold Exchange…

 

This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.

But it’s not only China, Russia and Iran that are out to dethrone King Dollar.

They’re joined by the rest of the “BRICS” nations — Brazil, India, South Africa.

Together they represent 25% of global economic output.

At last week’s annual BRICS summit in China, members announced full-throated support for China’s plan.

The message, clear as gin: The dollar’s days of “exorbitant privilege” must end.

And yesterday brought news that could further accelerate China’s de-dollarization plans…

Treasury Secretary Steve Mnuchin announced the U.S. would consider locking China out of the international dollar system if Beijing doesn’t cooperate with new sanctions against North Korea:

If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system. And that’s quite meaningful.

“Meaningful” might be one word for it. “Menacing” would be another.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a network that facilitates trillions of dollars in international money transfers each year.

It is the oil that lubricates the machinery of the international financial system — or as Jim Rickards styles it, “the oxygen supply that keeps the global financial system alive.”

And to cut off China’s oxygen?

“That is why China buys gold,” Jim Rickards tweeted this morning from London.

Our colleague Dave Gonigam of The 5 Min. Forecast half-jestingly wonders, “Is the Trump administration trying to kill off the U.S. dollar’s status as the globe’s reserve currency?”

Of course, the dollar will not lose reserve status tomorrow, next week, next year.

But the direction of travel seems clear enough.

Jim:

In 2000, dollar assets were about 70% of global reserves. Today, the comparable figure is about 62%. If this trend continues, one could easily see the dollar fall below 50% in the not-too-distant future.

How does one go bankrupt?

Slowly at first, said Hemingway — then all at once.

That’s how the dollar will likely lose its reserve status… slowly at first… then all at once…

Comments

silverer Thu, 09/14/2017 - 23:11 Permalink

"This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold."

Yep. The "Kissinger of death" for US currency. Thanks, Henry. You made your friends rich, at the expense of the rest of the planet.

sinbad2 Newsboy Thu, 09/14/2017 - 23:41 Permalink

Not as silly as it sounds.The US controls all the trade choke points, control the flow of food and energy and you control the world.That's why the US is trying to stop the New Silk Road, it won't be able to control it.All those carriers(money) and the Chinese use overland, very Sun Tzu.

In reply to by Newsboy

The Wizard silverer Thu, 09/14/2017 - 23:18 Permalink

After reading Confessions of a Hitman, I was convinced the over 800 military bases are there to protect the petrodollar. Now that the petrodollar is on its deathbed, it's time to bring the troops home and place them on the borders protecting this country. There is no need for a wall with technology and human defense. The troops would be much safer here than in the Mideast which we have helped turn into a rat hole.

In reply to by silverer

sinbad2 silverer Thu, 09/14/2017 - 23:31 Permalink

Actually Johnson killed the dollar, and sold the gold.The petrodollar was supposed to be a temporary fix, but Nixon got removed, and everybody else just kicked the can down the road. The Vietnam war consumed all of Americas money, since that time the US has been running on credit.  Because the US has a Platinum Visa card it has been able to spend up big on lots of wars. The credit card is pushing the limit, and the can is reaching the end of the road.

In reply to by silverer

HRClinton sinbad2 Fri, 09/15/2017 - 01:18 Permalink

Consuming America's honest money and 50,000 lives on Vietnam was surely worth it, no?Just think of how it benefited their economy, and how it provided a cheap supply of Vietnamese labor for cost-conscious, bonus-seeking US execs.Our (((Banksters))), MIC and politicians always have our best interests at heart. So much so, that it makes you all tingly and patriotic,  hoist and salute the flag, sing the Anthem and even enlist. Yiiihhaaa! 

In reply to by sinbad2

Matteo S. sinbad2 Fri, 09/15/2017 - 17:14 Permalink

Neither Johnson, nor Nixon, nor Kissinger killed the dollar.

It is the US as a whole, both its common people and its corporate elites, that doomed the dollar.

The downfall of the dollar began as early as the late 1950's when the US payments balance fell structurally and massively into deficit. And the reason of the structural and ever bigger deficits was that the US decided to live above the standards it could sustainably afford.

They did it because the dollar standard established at Bretton Woods made it possible. They could not resist doing it. Like some sportsman doping for the pleasure of winning prizes it should not have won.

The system could and should have ended in the early 1970´s : US gold reserves had massively decreased during the 1960´s.

But both the US elites and people did not want the party to end.

Which did just postpone the dollar's downfall but will make it much more painful when it happens.

In reply to by sinbad2

sgorem Thu, 09/14/2017 - 23:20 Permalink

if i had my druthers, i would pass on getting my ass incinerated by a mother of all fucking bombs, aka., moafb. better bein' on the big boys side..:)

White Devil sgorem Thu, 09/14/2017 - 23:27 Permalink

Primus "DMV" lyrics

I've been to hell. I spell it, I spell it DMV
Anyone that's been there knows precisely what I mean
Stood there and I've waited and choked back the urge to scream
And if I had my druthers I'd screw a chimpanzee-call it pointless

When I need relief I spell it THC
perhaps you may know vaguely what I mean
I sit back and smoke away huge chunks of memory
As I slowly inflict upon myself a full lobotomy-call it pointless

Barbecues, tea kettles, gobs of axle grease
There comes a time for every man to sail the seas of cheese
Now, life's a bowl of bagel dogs, but there are unpleasantries
Cold toilet seats, dentist chairs and trips to DMV-call it pointless

I've been to hell. I spell it, I spell it DMV
Anyone that's been there knows precisely what I mean
I've stood in line and waited near an hour and fifteen
And if I had my druthers I'd screw that chimpanzee-call it pointless

In reply to by sgorem

Reaper Thu, 09/14/2017 - 23:27 Permalink

Drones won't work in China, Russia, or Iran.   The fool, Mnuchin, threatens China, where to give in is to lose face.  The power of the US rests with US courts, which can issue orders on dollars held in US banks.   If your local banker said do as we say or you can't have your deposit, you'd leave that bank after slowly withdrawing your money.  China and Russia will not respond militarily, but instead use financial weapons.   How much gold has the Fed loaned out and how will they get it back without filing a public lawsuit, which would create a run?

JuliaS Reaper Fri, 09/15/2017 - 01:58 Permalink

Drones are as stealthy as the internet is anonymous.I vaguely recall that there was an incident with our F-117's, that we believed were undetectible. Meanwhile Russia had been tracking them just fine from day one, without letting us know they had countermeasures. We kept pouring money into the project, while they were quietly laughing their asses off. When the intel leaked, US accused them of not letting us know the truth. We were spying on them. They knew we were spying and it was, apparently, their fault for staying silent in order to preserve our sense of confidence, while collecting data.I think it was Dmitry Orlov who had written about Russian vs. American concept of might and superiority. The Western strategy is to exaggerate strength in order to intimidate those who weren't capable of opposing us militarily to begin with. Meanwhile, Russian strategy relies on misdirection, in order to keep us unprepared for a real confrontation, should one ever take place.

In reply to by Reaper

stecha (not verified) Thu, 09/14/2017 - 23:49 Permalink

Ive been saying it over and overr and over til im blue in the face over. But i still dont see this GOV. listening. "BRICS" nations are further along than we think. As soon as SA does thier latest deal with russia( cause they like russian arms better) the US will be like 47% of the world market. Petro dollar will truely be dead and china , russia, india, pakastan and turkey will be the top trading nations in the world. what do we make in america again?

East Indian stecha (not verified) Fri, 09/15/2017 - 01:05 Permalink

Don't write off America so easily.Once the petrodollar is dead, there will be a deluge of dollars flowing homewards - about 5 - 10 trillion, they say - and everything that is not nailed to the ground will be bought and taken away; this will result in an uncontrolled inflation; and then the real assets and companies will be taken over by foreigners, mostly Chinese. The American oligarchs will find that their wealth was made of paper. And then the Americans will start working like they used to, like before this parasite of debt money banksters started sucking their blood. America will be certainly great again. As long as it remains American. 

In reply to by stecha (not verified)

Maestro Maestro East Indian Fri, 09/15/2017 - 04:52 Permalink

Why are you people so stupid?

What makes you think that Americans will give you foreigners anything of real value in return for electronic digits they can create out of nothing?

All that you non-Americans will get from the Americans is their collective middle finger.

The Americans will devalue to a fraction of their previous value, all electronic and physical dollars found outside of US jurisdiction the moment foreigners start redeeming dollars in significant amounts. There is no honor between thiefs.

You people are so stupid, especially the BRICs common folks.

In reply to by East Indian

fattail East Indian Fri, 09/15/2017 - 08:24 Permalink

The bankers and globalists are picking the american carcass clean.  There won't be anything left worth having.  Except for our guns. They won't ever take our guns.  The right to keep and bear arms is the only thing left that is great in america.  The rest is vapid, pointless, or controlled propaganda for our consumption.

In reply to by East Indian

stecha (not verified) Thu, 09/14/2017 - 23:51 Permalink

killing the debt ceiling is the best way to kill the banks. You really have to understand the economics of it. ok ok, alot of you are going to argue this but i have solid know on how this works. so lay out your args and i will debunk them one by one.

onmail1 Fri, 09/15/2017 - 00:02 Permalink

Thumbs up to Venezuela for ban on dollarDollar is a means of slavery of USAReject the dollar and free yourselfand rejection of dollar is the death knell to USAw/o firing a bullet 

Curiously_Crazy Fri, 09/15/2017 - 00:11 Permalink

The dollar may be a weapon, but it's a doubled edged one at that.The volume of UK pounds floating around before the $US reigned supreme was tiny compared to the current amount of $US held overseas. Those dollars are inevitably gonna want to head back home at some stage, and it won't be pretty.

moorewasthebestbond (not verified) Fri, 09/15/2017 - 03:16 Permalink

Gold-backed Yuan has a date with gold-backed Ruble. I wonder who is going to go down on the other first.

Maestro Maestro Fri, 09/15/2017 - 06:01 Permalink

No, the situation is so bad that no human can fix it.

The BRICs are all IMF member countries and are thus forbidden to monetize gold, or link their currencies to gold, or use gold as a trading or exchange mechanism:

http://m.beforeitsnews.com/silver/2016/04/how-the-imf-forbids-the-use-o…

http://www.24hgold.com/english/news-gold-silver-why-does-the-imf-prohib…

India recently collaborated with Western bankers and following the West's instructions, temporarily destroyed the purchasing power of its own Indian population by demonetizing physical cash, under the guise of eliminating tax evasion and cash-only criminal activity. This has had the effect of crashing the gold price by temporarily removing the Indians from the gold market, exactly when the Trump inauguration lit a fire under the gold price.

The Russians never abstained from using dollars even at the time of the communist USSR! If they did not demand gold for their oil during the Cold War, why would the Russians do it now when the Russian central bank is owned and controlled by the City of London banking establishment since the creation of the new Russian Constitution under Yeltsin? The Russians are forbidden to issue their own currency the Ruble without permission from Western bankers and the Russians can only buy US Treasuries with the dollars they get for their oil, not gold. There are more dollar assets than Rubles in Russia:

http://anonhq.com/checkmate-central-bank-russia/

http://www.pravdareport.com/russia/economics/30-12-2014/129431-usa_russ…

The gold price would have skyrocketed if the Russians and the Chinese were buying gold hand over fist as alleged. Why do you think that Western bankers would give gold away at or below cost to their purported enemies?

Unless they were not enemies in reality, and just partners playing good cop, bad cop for the purposes of fooling and manipulating their unsuspecting respective populations?

http://www.mygen.com/users/ufo/Mao_was_a_Yale_Man_2.html

Why do the Russians never ask the Americans to leave Syria where the Americans are illegal invaders under international law? Why did the Russians never prevent the Israelis from attacking their allies the Syrians?

The Shanghai Gold Exchange is a fraud designed to legitimize the fraudulent COMEX "discovered" gold price. Goldman Sachs and JPM never could have manipulated the gold and silver prices lower without active Chinese collaboration. That the Shanghai Gold Exchange is a physical only market is a LIE:

https://www.sprottmoney.com/blog/the-new-shanghai-gold-exchange-does-an…

The Chinese government defrauded and stole from their own Chinese citizens by encouraging them to buy gold at the top. The Chinese bankers then colluded with JPM and Goldman Sachs to crash the gold and silver prices. Large amounts of physical silver were leased out and sold into the physical markets by the Chinese authorities as well:

http://www.silver-investor.com/charlessavoie/cs_july04.htm

http://m.digitaljournal.com/article/279166

http://www.dnaindia.com/money/column-china-urges-citizens-to-buy-gold-a…

Do not forget: It's the international ruling classes against the common folk. That's the real meaning of globalism.

Fireman Fri, 09/15/2017 - 04:46 Permalink

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It's already over as China's gold backed Yuan brings the Saudi Barbarian oil peddlers under its wing. Now that the USSAN banksters have stolen back all that "treasury" debt owed to the feudal crypt of Saud and tried to frame them for 9 11..... Kiss the IOU Petroscrip (no longer) I$I$ backed Saudi Mercan toilet paper free loader dollah goodbye. Jim Wille's  Scheiß dollah is coming home to Slumville in a tsunami of toxic derivative shit after all the lost judaic wars and bananas republic debt splurge and it's going to guarantee overnight Third World status for 98% of USSANS, already on the edge of ruin. No one likes a slacker and a hustler and the "exorbitant privilege" reserve currency gig is all maxed out as the Pentacon mob fizzle out in a swamp of hubris and corruption not to mention their total subjection to the zionazi mutts in occupied, apartheid Palestine. https://www.youtube.com/watch?v=Xp0nMNzz_lQ

redmudhooch Fri, 09/15/2017 - 08:58 Permalink

Is anybody not concerned with illegals being allowed into our military. I haven't researched it much, but we've been hearing a lot about it the past few days.Think about that, we hate mass immigration, we get out protesting, military of illegals shows up, what do you think will happen?Why isn't there anyone asking this question, seems like a recipe for disaster, as usual.