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Musbri Bin Mohamed Pengurus Besar Yayasan PEKIDA Malaysia ( 457496V)
The United States, despite recent problems, is still the strongest growth locomotive for the world economy, the pillar of the global system .
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?
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.
The world has entered a new, highly dangerous phase since the collapse of the US stock market bubble in 2001.
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.
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.
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!
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.
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.
Could it be that in this context, some longterm 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."
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.
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.
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."
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.
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.
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."
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!
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.
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.
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.”
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. “
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.”
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.