The Demise of the US Dollar.

Demise? Impossible! They say. You have got to have a base currency. Anyway the Dollar is too strong to destroy. Really? When buying USD one is primarily buying debt.

None of these arguments sustain dissection. The United States dollar has had glorious years, a period which enabled the United States to dominate the finances of the world. But there are good reasons to believe that it is coming to an end.

People have so long been subject to the dominance of the US dollar that they can’t believe that world can exist without this “currency of international settlement”. The architects of the European Union clearly intended to dispute this and replace the US dollar. Regrettably they went about it in a foolish way.

Note the currencies which cannot be readily exchanged because they are not “compliant”.  Compliant with what you might ask? This is a rule of the United states, and their view is that compliant means doing what the US wants. Therefore complient with the American imposition of their authority.

The predicted  attempts by the US to control world finance is the newest form of empire-building-invasion.

The Americans have now overplayed their hand, in their attempts to control. They believed that they could control nations, as powerful as Russia, by the economic threat of “sanctions”. But meanwhile there have been large shifts of capital to the Hong Kong dollar, to Singaporean, Arab and even Australasian currencies. Although the US dollar at its peak was involved in 75% of the world trade that has now dropped down to about 62% (Financial Times).

Over the last two decades, silently and surreptitiously other local currencies have been evolving. Call them supplementary or accessory currencies. In New York City alone there are five such currencies, about which I know.

These supplementary currencies have great value to the populations. Relatively impoverished populations are protected by local currencies because they are only accepted in that area. The danger of a more universal currency is that it is slowly bled away from an economically poor area by investors or others who bank it in distant big cities and ultimately it is banked in New York or San Diego. Local currencies remain within a far smaller geographical area, truly reflecting the value of the productivity of that area, with little threat of devaluation.

In any event, before the dollar’s dominance, multiple other currencies existed and functioned in a perfectly acceptable fashion. An example has been the currencies of Europe, before they were corralled into the dangerously inflexible Euro. That is probably now building up to a calamitous outcome. This is because different societies, different productivities, different values and different monetary ethics cannot be forced into a single behaviour pattern. A goatherd in Thessalonica cannot be expected to have it imposed upon him the financial and monetary machinery of a banker in Bonn.

It is likely that it is not necessary to have a “universal currency of settlement”.

What other alternatives are there? Well one which has been in existence for a considerable period is the International Drawing Rights of the World Bank.

Illustrating further the practical reality of small currencies, Zimbabwe –whatever its gross defects are – functions on a day to day level very satisfactorily on at least 5 currencies, the US dollar, the Japanese Yen, the Chinese Yuan, the Rand and the Australian dollar. People in their day to day dealings can do this and do, do it.

Of course it does take a little more effort, perhaps a little more hazard to continually assess and transfer using exchange rates. But when taken in the overall picture, this is relatively inconsequential.

This is illustrated by the fallacy when the European Monetary Union (EU) was sold to the general population as being an “easier” currency to use. It was held that one would be able to travel from country to country without having to do these calculations (and perhaps lose a small percentage on exchange rates). But, in the overall picture, and considering how infrequently one would have to change currencies anyway, this was also inconsequential and propaganda capitalising on laziness.

Given the American sanctioning Russia and Russian reactive ire, it is not unlikely that the Russians – with their own energy reserves – will begin to buy and sell oil, and perhaps gold, via the Rouble. This would undoubtedly give the Russians a great deal of satisfaction and some increased security.

The Americans have become excessively greedy and avaricious, and so are overplaying their hand. The new FICA and FATCA regulations illustrate that. These regulations, although pretending to offer honest endeavour by using terms like “transparency” “anti-terrorism” and “patriotism” are far from a truthful representation of their intension. These are simply a way of controlling the finances of as wide a group of people as possible. Currently they have total control over individuals, amplified by the subservience of the banks to governments. The banks no longer are employed by their customers and owe their allegiance to the governments. Individuals effectively no longer own their funds, but are borrowing these from the true “owners”, the state.

The FATCA Act is even more aggressive when one reads the details, since it demands that anyone with an  “Connection” (or a similar non-specific term) with the US becomes liable. Therefore almost anyone with money will be caught in this trap.

The French bank Paribus paid billions in fines to the US. The basis legal basis of that was that Paribus was dealing in US dollars, and by virtue of that alone fell under US jurisdiction.

As a regional note, anyone opening an account with Standard Bank (and likely Standard Chartered Bank and others) – even outside the US – must sign an acknowledgement that they are aware of the (wonderfully euphemistic) American Patriot Act, and will comply with it.

The good news is that this type of overkill is unlikely to survive. Other operators will come in and provide alternatives. The most obvious will be the Muslims, who will play the same game of attempting monetary control. Another is the Chinese association with the BRICS “monetary fund”, the first step to an independent monetary union.

The writing is already on the wall. Many financial institutions, embarrassed or handicapped by American regulations now will not deal in US dollars.

What is the lesson? Perhaps to abandon savings in US dollars. An alternative? Perhaps GBP. This might be one reason that the GBP has done so well. At any rate it is prudent, as always, to spread currencies, and perhaps go into tangible assets like property (where there is always a secondary market for the obvious reasons – God continues to create people)

The real problem for individuals is the time lag, and these “political” corrections often take more than a generation to change.

The end point will be that individuals baulk at this form of control.

The “tax havens” having been effectively suppressed by the domination of “big powers”, including the behemoth European Union will undoubtedly resurrect Phoenix like, in other jurisdictions. The Americans and Europeans are effectively committing financial suicide by crass, inept and naive legislation in a world which has populations which will outsmart the legislators and bureaucrats.

Once the EU collapses a number of the former tax havens will come back to life. The only reason that I can think that Malta was incorporated in the EU was to prevent it acting as a tax haven on the EU doorstep.

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About jp

Orthopaedic Surgeon
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