Collapse of the U.S.

Dollar
system

Musbri Bin Mohamed

Pengurus Besar
Yayasan PEKIDA Malaysia
( 457496V)
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The United States, despite
recent problems, is still the
strongest growth locomotive
for the world economy, the
pillar of the global system .

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What if we were to
discover that, instead of
being the pillar, that the
United States was, in
fact, the heart of a
dysfunctional economic
system, which is
spreading instability,
unemployment, and
depression globally?

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The US position in the
world since 1945, and
especially since 1971,
has rested on two pillars,
however : The superiority
of the US military over all,
and, the role of the dollar
as world reserve
currency.

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The world has entered a new, highly
dangerous phase since the collapse of
the US stock market bubble in 2001.

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How the Dollar System works

After 1945, the US emerged from war with the world's gold
reserves, the largest industrial base, and a surplus of dollars
backed by gold. In the 1950's into the 1960's Cold War, the US
could afford to be generous to key allies such as Germany and
Japan, to allow the economies of Asia and Western Europe to
flourish as a counter to communism. By opening the US to imports
from Japan and West Germany, a stability was reached. More
importantly, from pure US self-interest, a tight trade area was built
which worked also to the advantage of the US. That held until the
late 1960's, when the costly Vietnam war led to a drain of US gold
reserves. By 1968 the drain had reached crisis levels, as foreign
central banks holding dollars feared the US deficits would make
their dollars worthless, and preferred real gold instead.

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In August 1971, Nixon finally broke the Bretton Woods agreement,
and refused to redeem dollars for gold. He had not enough gold to
give. That turn opened a most remarkable phase of world economic
history. After 1971 the dollar was fixed not to an ounce of gold,
something measurable. It was fixed only to the printing press of the
Treasury and Federal Reserve. The dollar became a political
currency—do you have "confidence" in the US as the defender of
the Free World? At first Washington did not appreciate what a
weapon it had created after it broke from gold. It acted out of
necessity, as its gold reserves had got dangerously low. It used its
role as the pillar of NATO and free world security to demand allies
continue to accept its dollars as before. Currencies floated up and
down against the dollar. Financial markets were slowly deregulated.
Controls were lifted. Offshore banking was allowed, with
unregulated hedge funds and financial derivatives. All these
changes originated from Washington, in coordination with New
York banks.
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In the years between 1945 and 1965, total supply of
dollars grew a total of only some 55%. Those were
the golden years of low inflation and stable growth.
After Nixon's break with gold, dollars expanded by
more than 2,000% between 1970 and 2001!

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The question is if the Dollar System is reaching its real
limits? The Dollar System for the past 30 years has been
built on growing dollar debt. What if the rest of the world
decides it no longer wants to give its savings to the US
Treasury to finance its deficits or its wars? What if China
decides that it should diversify its risk by buying Euro debt?
Or Japan or Russia? That day may come sooner than we
think. In addition to colossal debts to the rest of the world,
the US internal debt burdens have reached alarming levels
in the past three decades, especially the past decade. The
total US debt—public and private—has more than doubled
since 1995. It is now officially over $34 trillion.

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The fundamental reason for the Iraq war, beyond agendas
of Richard Perle or other hawks, is hence, strategic in view.
US economic hegemony in this distorted Dollar System
increasingly depends on a rising rate of support from the
rest of the world to sustain US debt levels. Like the old
Sorcerers' Apprentice. But the point is past where this can
be gotten easily. That is the real significance of the US shift
to unilateralism and military threats as foreign policy.
Europe can no longer be given a piece of the Third World
debt pie as in the 1980's. Japan has to cough up even
more, as does China now. Even ordinary Americans have to
give up their pension promises. If the Dollar System is to
remain hegemonic, it must find major new sources of
support. That spells likely destabilization and wars for the
rest of the world.

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Could it be that in this context, some long-
term thinkers in Washington and
elsewhere have devised a strategy of
establishing US military control of all
strategic sources of oil for the one
potential power rival, Eurasia, from
Brussels to Berlin to Moscow and Beijing?
The dollar vulnerability and debt problems
are well known in leading policy circles.

As Henry Kissinger once noted,

"Who controls the food supply controls the

people; who controls the energy can
control whole continents; who controls
money can control the world."

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The US portrays a false economy since its a
'super-power' as it claims. The world is heading
for a massive financial recession and we need
to take stock and not waste public funds
foolishly.

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This economic fact is known to our leaders but
unfortunately they are quite powerless to stem
the tide.It is like trying to bail out of a yacht
with a tea spoon.There are many initiatives
that are viable, among them the gold dinar
project but they face opposition due to fear &
ignorance rather than fundamental reasons.
At the heart of the gold dinar system is an
intercountry settlement system using gold as
the peg. What is so hard to understand about
this system. Payments, realised and
unrealised thus becomes a form of savings
but pegged to a real item of value - gold.
History shows that gold has an intrinsic value
that cannot be wiped out - unlike treasury bills
etc. In reality, the US $ is more like the
Japanese bananna notes that were once
printed in large amounts in Malaya.
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Pretty scary to know that the currency of the world's biggest
power is not backed by gold reserve.

1) Will the day come when they print too much paper money like
what the Japanese did towards the end of 2nd World War and all
that money became worthless?
2)Why should China, Germany or Japan or for that matter any
other country trade with USA when they know they are not going
to be paid? If I knew US treasury bonds can never be redeemed,
I would rather trade with anyone but them.
3) Presumably USA is able to do all these nonsense and get
away with it because at the moment they are the world's only
Super Power with their overwhelming superiority in nuclear
weapons. But with so many countries holding so much worthless
US treasury bonds, will their own economies collapse? As the
American says, "something's gotta give." The bubble will surely
burst one day.
When it comes to a matter of survial. will the rest of the world
gang up and go against the Big Bully? 14
Players playing this game know that, in the
long term, currencies can't be stronger
than the national economies from which
they derive. Consumption without
production, imports without exports, growth
on credit -- these are all things that can't
last in this world. Ken Rogoff, the former
chief economist of the International
Monetary Fund (IMF) and a man who
thinks as clearly as he speaks brashly,
recently criticized US economic policy even
as he seemed to be praising it: Rogoff said
the current boom in the United States is
"the best economic recovery money can
buy."

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Great Depression

Last century, the United States

already suffered from one deep
economic crisis that gradually
spread to the rest of the world. The
Great Depression lasted 10 years
and brought mass unemployment
and starvation to the United
States. The country's economic
power sank by one-third. The crisis
virus wrought havoc all over the
West. Six million people were
unemployed in Germany when the
economic fever was at its peak.

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These days, the dollar is making a lot of
people uncomfortable. One morning many
dollar-owners will wake up and look at the
facts about the US economy without their
rose-colored glasses -- just as private
investors woke up one day and took an
unflinching look at the New Economy, only
to see companies whose market value
couldn't be justified by even the most
dramatic of profit increases. Some of the
revenue forecasts that had been issued
far exceeded the total value of the market.
The Nasdaq presented the spectacle of a
stock market whose added value
increased by 1,000 percent in just a few
years, when the nominal growth of the US
economy during the same period was only
25 percent.
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The markets are already rife with rumors
that Asia and the Middle East are
exchanging their currency reserves for
euros on a large scale in an effort to
spread their risk. British financial
historian Niall Ferguson even believes
that the dollar regime has already come
to an end. His gloomy prediction is that
"no monetary system lasts forever,"
noting the fate of the pound sterling. The
euro, in Ferguson's view, is certainly
capable of "giving the dollar a run for its
money as the international reserve
currency."

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Nostradamus prophecy the 3rd anti Christ is "Mabus"
- a leader with "few commandos" and not a head of
nation, but come from outside Europe (1st anti Christ
- Napoleon, 2nd anti Chirst - Hitler) that will start "3rd
world war" and the "blood plague" (disease
pandemics on global scale) are the likely scenarios
that will affect the world economically and politically.
The likely period to take place is from 2007 - 2012.
So, it is just in front of us - terrorism and bird flu.
So, don't worry about the greenback that will affect
the world!
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The US dollar is facing an imminent collapse and the global
economy will suffer a "catastrohpe" when it is rejected as the
currency for trade, former Malaysian prime minister Mahathir
Mohamad said. Mahathir, who famously ignored International
Monetary Fund (IMF) advice and instead chose to peg his country's
ringgit to the US dollar during the Asian financial crisis, said a
standard gold currency was now the best alternative for world
trade."But the catastrophe will come one day because even the
most powerful country in the world cannot repay loans amounting to
seven trillion dollars," Mahathir said.

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Dua orang penganalis yang telah merangka
semula maklumat bekalan wang (money
supply data) selepas ‘The Fed’
menghentikan penerbitannya ,
membayangkan kejatuhan nilai mata wang
dollar akan memungkinkan kerajaan
Amerika mewujudkan satu mata wang
bergelar ‘AMERO’ sebagai mata wang
Amerika Syarikat untuk menggantikan
dollar.

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Bob Chapman yang telah memengedarkan
anggaran M3 kepada 100,000 orang pelanggan
risalahnya, The International Forester.
“Dunia ini menyimpan terlalu banyak wang dan
hutang,” kata Chapman. “Congakan saya
menunjukkan M3 terus meninggi pada kadar 10
peratus buat masa ini.”
Chapman yakin ekonomi AS akan merudum
menjelang Februari. Dalam risalah beliau bertarikh
9 Disember, beliau meramalkan The Fed akan
mengekalkan kadar faedah pada 5.2 peratus.
“The Fed sedang kalut sekarang,” kata Chapman.
“Seandainya mereka naikkan kadar itu, pasaran
hartanah akan jatuh, dan kalau mereka turunkan
kadar, dollar pula yang akan lingkup.”

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Apakah serius kejatuhan dollar nanti?
“Orang di Amerika akan merasa pukulannya,” kata
Chapman. “ Dalam kejatuhan ekonomi yang sedang
berlaku, Bush akan terus berhujah bahawa kita perlu
menubuhkan satu North American Union (Pakatan Amerika
Utara) untuk bersaing dengan euro.”
“Dengan mewujudkan “AMERO” jelas Chapman, “ ia akan
dikemukakan kepada rakyat Amerika sebagai satu jalan
penyelesaian pentadbiran Bush untuk mengembalikan
martabat dollar. Dalam proses mewujudkan Amero,
pentadbiran Bush akan hanya menggugurkan dollar. “

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Apabila ditanya kenapa The Fed menghentikan
penerbitan data M3, Kuever berkata, “Mungkin juga
The Fed mahu menyorokkan berapa banyak kecairan
yang disuntik ke dalam pasaran, dan saya menjangka
trenda itu akan berterusan, khususnya sejak ekonomi
Amerika semakin menurun.”
Kenapakah ini Penting?
“Garisan trenda dalam ‘carta M3 campur hutang ‘ yang
saya lakar ternyata beralun,” kata Kuever. Sudah lama
wujud satu garisan lurus sejak 2000. Untuk jangka
panjang kita mencetuskan inflasi dan dolar sudah pun
kehilangan hampir 98 peratus nilai asalnya sejak 100
tahun yang lalu.”
Sebagai seorang pelabur yang sudah bersara, Kuever
amat prihatin dengan bajet yang membesar dan deficit
perdagangan. “Dollar akan jatuh merudum.”

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The dollar is still the world's reserve currency, even
though it hasn't deserved this status for a long time.
The devaluation of the dollar can't be stopped -- it
can only be deferred. The result could be a world
economic crisis.

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