[Marxism] The US dollar and the financial pyramid: two views
andromeda246 at hetnet.nl
Tue Jul 20 16:50:14 MDT 2004
In a keynote address Dr Zbigniew Brzezinski said at the Centre for Strategic
and International Studies on 3 October 2003:"And what is sovereignity in
this day and age ? Sovereignity is a concept, but it's a relative concept."
It was the voice of Capital speaking, and here's two interpretations of
Since 1971, when the American government ceased exchanging dollars for gold,
they have forced the whole world to use their national currency as the world
currency. This has multiplied their power many times over, since they have
been able to appropriate revenue from cash issues on a world scale. More
dollars are issued for circulation abroad, than for internal use.
Since the dollar supply is 80% created against U.S. government bonds, this
means that anybody using the dollar is effectively financing the U.S. budget
free of charge.
Therefore the Americans can wage expensive wars and terrorize the whole
world; and everybody who holds or uses the dollar is paying for these
[Note: about two-thirds of global currency reserves are denominated in US
dollars; an estimated 460 billion cash dollars or so are held outside the
US]. The total value of international merchandise trade in 2002 was $4.9
trillion, and the total value of international commercial services trade in
2002 was $5.5 trillion (excluding significant re-exports), giving a total
value of world trade of $10.4 trillion. As regards services, the USA
accounts for17.4% of world exports, and 14.3% world imports, and as regards
merchandise, the USA accounts for 10.8% of world exports, and 18 % of world
imports - JB].
The Americans are currently in a very difficult situation. Thirty years of
printing dollars without restraint have created a global financial pyramid.
Only 4% of the dollars in circulation are backed by U.S. gold and currency
reserves. The currency's stability is entirely dependent upon the demand for
Suffice it for someone to initiate the large-scale dumping of dollars, and
an avalanche-style collapse of the dollar-based world financial and monetary
system could begin, bringing with it the end of American economic dominance.
It would immediately become evident that the United States owes the rest of
the world over $30 trillion, including around $5 trillion owed by the U.S.
Federal government directly. Under such a scenario, the inevitable
bankruptcy of the U.S.A. would also create a difficult situation for all
countries holding their reserves in dollars.
Having drawn the whole world into servicing the dollar-denominated financial
pyramid, the United States cannot stop this process. Because they must
constantly generate demand for the dollar in order to support it, they push
others to endlessly refinance their old loans and take out new ones. As the
financial pyramid expands, it becomes more and more difficult to do this,
since in order for the dollar to be stable, the demand for dollars must grow
more rapidly than ... U.S. indebtedness.
With the world economy's entry into a structural depression, caused by the
shift in technological development phases, the situation becomes even more
severe, due to the contraction of demand for credit. Declining profits, as
the growth possibilities of traditional types of production are exhausted,
lead to crises on the financial markets. Losses on the U.S. stock market
during the past four years exceeded $7 trillion, with similar processes
under way in Europe and Japan. The volume of foot-loose dollars is growing
worldwide, and they could descend on the U.S. market at any moment.
The jump in oil prices, which are denominated in dollars, temporarily tied
up part of the surplus dollars. Signaling a structural change in the
economy, it should lead to expanded demand for credits on the part of
industry, which needs to assimilate new technologies and reduce its
consumption of energy. The process of creating a new technological
development phase will mean a growing demand for credits for new types of
manufactures. But this takes time. Until a structural transformation of the
world economy picks up steam and new centers of rapid economic growth
emerge, they have to provide every possible incentive to increase the demand
for dollars and block attempts at any large-scale dumping of dollars. That
is why it suits the Americans to escalate international tension! ...
Under the pretext of a crusade against international terrorism, the U.S.A.
froze large dollar assets, belonging to Arab organizations and individuals.
Building up its geopolitical influence on the wave of escalated
international tension, the U.S.A. blocked the initiative by Asian countries
to create a new international monetary fund, using their national
Finally, with the war in Iraq ratcheting international tension up another
notch, the U.S.A. obtained yet another instrument with which to block
attempts to dump the dollar-freezing the accounts of whole nations. Also,
military spending is denominated in dollars, which promotes demand for this
Thus, U.S. actions are quite logical: In order to avert their own
bankruptcy, the weight of the global dollar pyramid they have constructed
forces them to provoke ever new upward spirals of international tension....
They have defined their interests as worldwide. And they will defend them in
every corner of the globe, declaring any country that attempts to escape
from the American financial pyramid and the dollar domain to be "criminal
World trade is now a game in which the US produces dollars and the rest of
the world produces things that dollars can buy. The world's interlinked
economies no longer trade to capture a comparative advantage; they compete
in exports to capture needed dollars to service dollar-denominated foreign
debts and to accumulate dollar reserves to sustain the exchange value of
their domestic currencies.
To prevent speculative and manipulative attacks
on their currencies, the world's central banks must acquire and hold dollar
reserves in corresponding amounts to their currencies in circulation. The
higher the market pressure to devalue a particular currency, the more dollar
reserves its central bank must hold.
This creates a built-in support for a strong dollar that in turn forces the
world's central banks to acquire and hold more dollar reserves, making it
stronger. This phenomenon is known as dollar hegemony, which is created by
the geopolitically constructed peculiarity that critical commodities, most
notably oil, are denominated in dollars. Everyone accepts dollars because
dollars can buy oil. The recycling of petro-dollars is the price the US has
extracted from oil-producing
countries for US tolerance of the oil-exporting cartel since 1973.
By definition, dollar reserves must be invested in US assets, creating a
capital-accounts surplus for the US economy. (...) The Quantity Theory of
Money is clearly at work. US assets are not growing at a pace on par with
the growth of the quantity of dollars. (...) The US capital-account surplus
in turn finances the US trade deficit.
Moreover, any asset, regardless of location, that is denominated in dollars
is a US asset in essence. When oil
is denominated in dollars through US state action and the dollar is a fiat
currency, the US essentially owns the world's oil for free. And the more the
US prints greenbacks, the higher the price of US assets will rise. (...) The
world economy, through technological progress and non-regulated markets, has
entered a stage of overcapacity in which the management of aggregate demand
is the obvious solution.
Yet we have a situation in which the people producing the goods cannot
afford to buy them and the people receiving the
profit from goods production cannot consume more of these goods. The size of
the US market, large as it is, is insufficient to absorb the continuous
growth of the world's new productive power. For the world economy to grow,
the whole population of the world needs to be allowed to participate with
its fair share of consumption. Yet economic and monetary policy makers
continue to view full employment and rising fair wages as the direct cause
of inflation, which is deemed a threat to sound money. (...)
It is hard to see how sound money can ever lead to full employment when
unemployment is necessary to maintain sound money. Within limits and within
reason, unemployment hurts people and inflation hurts money. And if money
serve people, then the choice becomes obvious. Without global full
employment, the theory of comparative advantage in world trade is merely
Say's Law internationalized.
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