Category Archives: fiat currency

How much is the dollar really worth?

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The dollar is a fiat currency. It is created out of thin air through debt. A person goes to the bank and wants to borrow 10,000 dollars and if the borrower meets the criteria of paying back the sum plus interest agreed on, the bank issues a cheque of 10,000 dollars or direct deposits the amount to his account. Money has been created out of nothing to enslave that person for 10,000 dollars which he must now pay back at a certain interest rate for a specific period of time. In other words, he sells his labour, his life force, to pay the debt. He is exploited, he is a slave. This is the essence of capitalism, and the fiat currency is an instrument of enslavement.

Initially, the dollar was a gold backed currency as were other world currencies. President Franklin Delano Roosevelt, early in his presidency devalued gold from 20.67 dollars an ounce to 35 dollars an ounce. Also, he made it illegal for Americans to own gold, unless it was in a jewelry form of 18 karats or less. The Bretton-Woods Convention made the dollar the Reserve Currency of the World. The US would keep the gold and the rest of the world would keep the dollars. Other central banks could exchange dollars for gold at 35 dollars an ounce. Gold, however, would be stored in the US and some would be stored in London. This arrangement was propped up by fear that “the Communists” would take over if the gold was not stored in the US. Publicity  made Fort Knox, Kentucky, infamous as the storage place  for the world’s non-communist gold. General Charles de Gaulle, President of France, was not fooled. He realized it was the perfect scam. He had never trusted the Anglo-Americans. He knew how perfidious they were during the Second World War II. The Anglo-Americans hated him, and of course, he reciprocated. He withdrew France from N.A.T.O. and sent French warships to retrieve French gold from the US. Other European countries followed. A run on gold followed…

The gold drain from the US followed. President Nixon closed the Gold window. This closure was permanent, contrary to the President’s statement that  it was temporary. The US was running trade deficits and the Vietnam War was draining the country of its real wealth, gold. The dollar paper drainage was no big deal, because it was only paper. The Arab oil embargo saved the dollar and the US. The US told the oil producers to increase the price of oil but just have it denominated in dollars. The excess dollars of the world poured into US treasuries and helped finance government operation. The decade of 1970’s showcased growth throughout the world but with inflation. Gold was allowed to reach its equilibrium value of 850 dollars an ounce. Silver, taken out of circulation in 1965, went to 50 dollars an ounce in 1979-80. Interest rates were high because demand for money was high. Demand for real money, gold and silver, was high. But the dollar was losing value. In 1969, one could get four Swiss Francs for one dollar, but in 1979-80 period, the Swiss Franc was on parity with the dollar.

President Carter appointed Paul Volcker Chairman of the Federal Reserve Bank. The Prime Rate went to almost twenty percent. The price of precious metals collapsed and value of the dollar rose. Money from all over the world poured into the US. By 1992, the USSR and communism had disappeared in Europe. The end of history was proclaimed. The plunder of the ex-USSR and Eastern Europe, along with the rest of the world began with increasing tempo. A unipolar world of ten years duration was achieved. In Nature, when one extreme is reached, opposite forces start building momentum, and new forces started brewing on the horizon…

Vladimir Putin was appointed Prime Minister of Russia in 2000, and the economic decay started in the first decade of the New Millennium in the West. It is now worsening and encompassing the entire world. The central player in all this has been the dollar. It has no intrinsic value like gold, land or water, but is the instrument of US power. The US wants to maintain that power come hell or high water, and in order to maintain it, debt in dollar terms has to grow. The IMF and World Bank, along with other private organizations, are working overtime to trap more and more countries into unsustainable debt and milk them for all they are worth. This is the MODUS OPERANDI of capitalism…

But opposing forces are rising, and the de-dollarization of the world has began. The World is trying to dis-infect itself from the dollar. Very interesting and dangerous times are approaching. But the US will not willingly give up its instrument of power. It is negotiating trade deals with Europe, South America, and South East Asia to insure the dollar to be the supreme currency. It is confronting China in the South China Sea, but at the same time, it is enticing  it to join the IMF arrangement of Special Drawing Right Currency. The US wants the China to row the dollar-SDR boat, and the US would steer it. Whether China falls for it or not remains to be seen. China, Russia, Brazil, Iran, and other countries that have backbone are trading amongst themselves in their own currencies. The river of history is flowing and it cannot be reversed.

How much is the dollar really worth? Nothing. It is merely an instrument of power, intimidation, and war, like aircraft carriers. And history will be unkind to both. Only time will tell.

Deflation is impossible under fiat currency regime.

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The fiat currency regime is a profoundly parasitic system. It is parasitic because the dominant currency (the US dollar),also known as the reserve currency or official currency of the world sucks the energy and blood of the rest of the world. It affects the whole non Anglo-American World.

The system was set up in Bretton-Woods, New Hampshire in 1944. The sucking instruments were the International Monetary Fund, the World Bank, the Agency for International  Development and others. The modus operandi  was the creation of debt denominated in dollars.The plan was and still is to place into debt the entire world, especially the Third World and the former Communist World.

Being in debt in a foreign currency implies that a country must earn that currency by selling its own natural resources  at ever cheaper prices. Devaluation of the local currency ensues, inflation follows. The local population, already poor, is faced with a threat to its survival but the creditors’ mission has been accomplished. This method of operation is repeated over and over again. The governments of these miserable countries are blamed and if they rebel they are overthrown. Hyperinflationary  depression is the end result.

A similar fate is awaiting the US. Since 1945 the US has been sucking the blood of the rest of the world. First, on the basis of the dollar being linked to gold at thirty five dollars an ounce. When this policy became too costly, the US simply defaulted. The US was losing too much gold. New policy was introduced, the petro dollar,by inducing oil producing countries to sell their oil only in dollars. The Shah of Iran played a key role and his role in this policy sealed his fate. One must remember that Iran is a millennial civilisation. Also, all trade and debt continued to be based on dollars. In the nineteen seventies the dollar weakened and precious metals spiked as inflation spiked to almost hyperinflationary levels. Interest rates were raised to almost twenty percent. Savers were doing great. The Cold War intensified. The Soviet Union dissolved itself. Japan entered a declining phase. China accommodated the US, formed a “modus vivendi” with the US but Russia was on its knees. It was plundered by the the  West  via Yeltsin and the oligarchs. Europe was compliant to the US and the dollar reigned supreme.

Good things never last. The tech bubble burst in 2000. The housing bubble inflated. 911 happened. The sympathy of the world was on America’s side. Wars were started. First Afghanistan,then Iraq. In Afghanistan, the Taliban were US allies but then they reduced the production of opium to only ninety six tons. That threatened the value of the dollar. The US attacked  Afghanistan. The excuse was El-Quaida  and 911. The production of opium went from ninety six tons to six thousand four hundred tons. In dollar terms, this is over six trillion annually and all traded in dollars. That trade supports the dollar and keeps domestic inflation at bay because the opium or drug trade is the biggest form of trade in the world (it is bigger than even the automobile or oil industries! ) Weapons of mass destruction were the reason given to attack Iraq. The real reason was Saddam Hossein wanted to sell Iraqui oil for Euros.  Libya was destroyed because Gaddafi wanted to use Gold Dinar.

Housing and the debt bubble collapsed. The system was shaken to its foundation. Zero interest rates were introduced. Quantitative Easing was instituted. Easy money poured into the stock market, the bond market, high end real estate market, and various kinds of speculations. Money poured into the US from all over the world. The dollar rose. Gold and other precious metals went into collapse. All commodities went into collapse mode. The third world is entering hyperinflationary depression. In the US, they are talking about deflation. The only deflation that is being experienced in the US is the standard of living of ninety percent of Americans. This has never happened before. During the nineteen thirties, the standard of living of people who worked rose because the prices of everything had collapsed, including the dollar. Dollar was devalued with respect to gold to thirty five dollars an ounce from twenty dollars and sixty seven cents.

There is no deflation in America except in living standards for ninety percent of its people. The prices of everything including groceries, services, health care, rents,etc are going up. Wages are stagnating. The buying power of the dollar is going down. Since 1945, the US has been exporting inflation to the rest of the world. The rest of the world is slowly de-dollarizing. The dollar will be abandoned. Nobody will want a  piece of paper that is backed by nothing except  the “Full Faith and Credit” of the United States. Inflation is coming to the US. If the dollar were gold backed currency, the US would not be having these problems. Under fiat currency deflation it is not possible. Only gold or gold-backed currency leads to deflation. Time will tell.