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The Dollar System

by Antifa Thu Sep 21st, 2006 at 07:16:59 AM EST

The world's economy rests on the solid foundation of the dollar, which rests on the solid foundation of the oil trade. America doses and overdoses on the ocean of petrodollars that flow through our economy, and America's military defends that river of petrodollars and the consequent foreign investments in our T-bills it brings.

That's the Dollar System. That's the way the world works.  It's an American monopoly, and it belongs entirely to the wealthiest five percent of Americans.  The Dollar System is what lets our elites run up an insane $8.3 trillion national debt, and keep right on printing green paper money as if it were real.  It's taken for real, all over the world, day after day, so what's the difference?  A worldwide infrastructure of globalized capital and corporations and livelihoods and nations and civilization rests on the Dollar System. Lo, it is sacred above all else.

Nothing -- repeat -- nothing will be permitted to threaten, block, or break this monopoly, this Dollar System. That is absolutely negatory, good buddy.  No elections, no ethics, no humanity, no rules, no laws, no international treaties, no civil unrest, no melting ice caps, no protesters, no drowning polar bears, no guerillas, no army, and no nation will be permitted to stand against it -- absolutely nothing is off the table, including nookyuler war, says Mistah Bush.

The coming war on Iran, whether it is this October or next spring, is to preserve the American dominance of Middle East petro development and market trading, and to open the way to further American political and economic dominance northward from Iran, into the gas and oil belt of the Caspian Basin.  Then it's on to Venezuela!  Wherever the planet's petro products are, that's where the American petrodollar has to stand tall, or fall hard.

This coming war on Iran is unnecessary.  If Iran would roll over, appoint the late Shah's son their King, and invite Exxon to privatize their oil industry, this war need not happen.  But, they won't. That makes them evil.  Saying no to America is the most evil, awful thing that can happen. Anywhere. Ever. Even on other planets, when we get there, they had better not say no. That's just evil.

If America's political and economic elites fail to destroy Iran and its allies -- Syria, the Shia of Iraq and Saudi Arabia, and any other freedom loving fools over there who stand against the total sway of the Dollar System -- well, these American elites might as well hand in their school ties and water boards and limo keys and pinstripe suits and Cuban cigars and their keys to the Watergate Hotel's poker suite right then and there because the party's over from that moment, including both political parties.  As they say around the halls of Congress, "Ya can't make salad without lots of green!"

The Dollar System is why China and Russia are willing to join in the current Security Council pressure on Iran to cease their nuclear enrichment, which enhances Iran's independence, which enhances the Middle East's independence, which threatens the Dollar System.  China and Russia are not currently prepared to lose the Dollar System, any more than Europe is. Some day, certainly. Not yet. Not right now, anyway.

China in particular has a symbiotic economic relationship with America. They use us to grow their economy 20 times faster than they could hope to otherwise, and we use them to live on borrowed monies and borrowed tomorrows.  It will eventually come to an unpleasant end, but not during this election season, which is as far as anyone in America can see into the future so party on WalMart, and Shell, and Wachovia, and Boeing, and Halliburton and ABC and Donner and Blitzen . . .

The Dollar System is why the Democratic Party is not fighting the GOP on anything serious, and never will. This is their Dollar System, too. This is the way the world works.  Do you seriously expect them to upset it?  They want to be in charge of it, not upset it.

Gentle Reader, do you seriously expect the Democrats to actually choose America's defunct unions, dying middle class, imaginary manufacturing base, suffering small business sector, and its uninsured and undereducated masses over the oil and banking and defense industries?  Aw, come on now . . . pull the other leg.  In fact, pull my finger.

A genuine opposition party in American politics has not existed since 1980, when the Democrats became a wholly owned partner to the GOP.  They now operate AS opposition, but are careful to provide no real opposition. That would give the Dollar System heartburn.  Prominent people get shot in such times. Small planes crash. People are spoken to firmly about their options. Honorable gentlemen shake hands, and the world works as it has before.

The Dollar System is why the New York Times, the WaPo, and every other major media outlet are onboard with this Iran shakedown, and anything else the Dollar System may need for its explication, explanation, furtherance, sustenance, daily care and feeding. This is their Dollar System, too.

Six major corporations own and operate over 85% of the newspapers, radio stations, TV stations and magazines in the USA. None is in disagreement with the way the world works.  None of them thinks twice about the way the world works.  They look after the Dollar System, no matter what it does to the country. No matter what it does to the country, they will be fine, as long as they keep reporting that there are two sides to every issue, and no hard facts. The facts are the No Man's Land, between the trenches. Journalism has become the art of keeping the population firmly in their opposite bunkers and trenches, lest facts be discussed, or the future perceived.

In America, the future is next week.  History is yesterday.

What in hell do America's wealthy elites and internationalized corporations care about America's future, anyway? They have disconnected their financial survival from the USA, and have less and less stake in its citizen's safety or success with every passing tick of the clock. All they care about is continuing the political passivity and the spending and borrowing habits of the American consumer.  I mean citizen.  I mean prey.

They keep that consumer culture going by endless media ads for consumer goods, consumer lifestyles, consumer politicians, consumer cars, and consumer wars to fuel them.

It's the Dollar System.  It's the way the world works.

So, what's not to like?


"The rich march on Washington every day."
-- I.F. Stone

Frames exist within larger frames. Draw a larger frame around your opponent's frame; he will appear wrong or insufficient. This is how wizards play.
by Antifa (antifa@bellsouth.net) on Thu Sep 21st, 2006 at 07:17:57 AM EST
Right now, the dollar system seems to me to be a big bubble. It is living on borrowed time. As soon as China feels it is no longer in its interests to support this bubble, there will be a major earthquake of the world's economy. And the timing will be totally up to China.

Hey, Grandma Moses started late!
by LEP on Thu Sep 21st, 2006 at 08:45:09 AM EST
Aye, a bubble.

Even the bursting of this dollar bubble will not upset the top five percent. It will simply represent an opportunity to buy up American hard assets at pennies on the fallen dollar.

Then, every American can rent their home, and food, and life itself from the company store.

Frames exist within larger frames. Draw a larger frame around your opponent's frame; he will appear wrong or insufficient. This is how wizards play.

by Antifa (antifa@bellsouth.net) on Thu Sep 21st, 2006 at 08:55:08 AM EST
[ Parent ]
ho yeh, the top five percent is not really investing in US anymore, their funds/private equity are invested offshore(europe/china/australia/japan) since a while and thus are somewhat protected from a drop in value of their money.

but when the drop happen, they will find very enjoyable to be able to buy US at cheap price.

by fredouil (fredouil@gmailgmailgmail.com) on Thu Sep 21st, 2006 at 11:53:52 PM EST
[ Parent ]
It is indeed a bubble, but it's not China that will burst it. As antifa wrote, they have too much riding on the bubble themselves. They are trying to limit the growth of their exposure (their dollar reserves), but they won't reduce it.

The threat will come from the freeriders of the system - the Irans, Russias and Venezuelas that sell oil in dollars but buy goods in euros.

And this points to the biggest threat to the Dollar System: a credible alternative exists: the euro: it is stable, backed by real export capacity and real institutions.

I more than ever expect the coming crisis to burst in the form of a dollar crash against the euro. China will then have to make the tough decision to hang on to the dollar (at a huge loss to its reserves) or to let the yuan follow the euro (at a huge loss to its export competitivity).

The choice is becoming increasingly easy as China's exports to Europe now outstrip those to the USA, but they will not trigger it. But someone else might. The bigger the overall US trade deficit, the more likely it will happen at some point - and the longer it takes, the bigger the drop will be.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Sep 21st, 2006 at 11:40:54 AM EST
[ Parent ]
But you poo-pooed my diary on this 6 months ago?

You can't be me, I'm taken
by Sven Triloqvist on Thu Sep 21st, 2006 at 12:13:03 PM EST
[ Parent ]
Or was it six weeks - hard to tell these days

You can't be me, I'm taken
by Sven Triloqvist on Thu Sep 21st, 2006 at 12:13:32 PM EST
[ Parent ]
I presume you refer to this: The End of the Dollar's Hegemony?.

The crash will not come from oil sellers switching their sales from dollars to something else, it will come from one or more exporters to the USA selling their dollars (for another currency) because they consider that they cannot be used to buy anything of equivalent in the USA, the place where they would need to be ultimately redeemed.

That can come from oil exporters, or from toy and electronics exporters like China, or even from Europeans. What matters is not so much the link between the dollar and the oil, but the fact that the USA are living beyond their means.

The reason why this has not happened yet (and that the USA can abuse the system) is that the dollar is the currency for international trade - universally accepted as a means of payment, as a expression of value and as a stable way to store value. It is a public good. Because they provide this service to all, the USA can borrow internationally in its own money, and borrow a lot more than balance of payments theory (and practice) allows for other countries - because they cannot default on their debt, being able to print as much of it as they want.

What could bring the downfall of the dollar is not that it will be abandoned as a means of payment or an expression of value, but that its role as store of value has been undermined by the USA's profligacy (which is not particularly linked to oil as it is all-encompassing). Once someone cries that the emperor is naked, it could trigger a stampede as dollar holders try to convert their holdings into something that holds more value - in all likelihood the euro.

So I refute the link between the various oil bourse projects, or the claim s by various parties to sell their oil in euros and the fall of the dollar. The fall of the dollar will come because the USA has destroyed its value by spending fiat money like a drunken sailor.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Sep 21st, 2006 at 02:21:46 PM EST
[ Parent ]
Jerome Why do you call Iran, Russia and Venezuela free riders? It seems to me that they are not benefiting at all by selling their resources in dollars and purchasing in Euros.
Further, do you not see the possibility of China using its enormous dollar holdings as a political weapon against the U.S.?

Hey, Grandma Moses started late!
by LEP on Thu Sep 21st, 2006 at 06:36:41 PM EST
[ Parent ]
I disagree with Jerome re the Euro: I don't think the ECB would go along with printing the necessary quantities and de facto declaring economic war on the US.

Fact is that no fiat "deficit-based" currency can work long term. It's just replacing one confidence trick with another.

IMHO we have to go down the Keynes/Stiglitz road of an International Clearing Union and a meaningful - asset-based -- "Value Unit".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Sep 21st, 2006 at 07:05:24 PM EST
[ Parent ]
The ECB will not print more euros. That's why the dollars will crash: because euros will be scarce and thus valuable.

And they are valuable precisely because the hawkish ECB does not like defict-based money and fiat money (you know, the German hyperinflation episodes are still in its genes).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Sep 22nd, 2006 at 03:02:28 AM EST
[ Parent ]
What does it matter whether the ECB prints Euros? Isn't money created by private banks when giving out Euro-denominated loans?

Those whom the Gods wish to destroy They first make mad. — Euripides
by Migeru (migeru at eurotrib dot com) on Fri Sep 22nd, 2006 at 03:22:10 AM EST
[ Parent ]
The Central Bank controls this indirectly via reserve requirements and/or via the refinancing rate. If banks want to lend money, they have to borrow it first, and the central bank rate has an impact on how cheap that is at the short term end of the yield curve where banks manage their liquidity.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 22nd, 2006 at 08:48:58 AM EST
[ Parent ]
I understand that. I am just increasingly irked by the pervasive "the bank prints money" image, which has little to do with how the monetary system actually works.

Those whom the Gods wish to destroy They first make mad. — Euripides
by Migeru (migeru at eurotrib dot com) on Fri Sep 22nd, 2006 at 08:58:13 AM EST
[ Parent ]
because they do not have an underlying reason to prop up the dollar like the Chinese do (to stay export-competitive). They are happy to hold dollars as long as they are worth it, but will be a lot more willing to switch to an alternative if available.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 22nd, 2006 at 03:03:46 AM EST
[ Parent ]
the Irans, Russias and Venezuelas that sell oil in dollars but buy goods in euros.

I know nothing about this stuff, so I am afraid I'm asking a stupid question, but who are the major players selling euros to the the "Irans, Russias and Venezuelas" in exchange for dollars?  The central banks of China, Japan and the USA?

Truth unfolds in time through a communal process.

by marco on Fri Sep 22nd, 2006 at 03:25:44 AM EST
[ Parent ]
As a European you are obviously looking at it from a European viewpoint. But it seems to me that you have a mote in your own eye, in the form of the unsustainable fiscal situation in Italy, Europe's own utter dependence on imported oil, and the fact that Europe's primary trading partner is the U.S.

We're all in this together.

by asdf on Fri Sep 22nd, 2006 at 07:42:20 PM EST
[ Parent ]

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