Preparing for the Single World Currency
Bloomberg has a commentary by Mark Gilbert, summarising the evidence to support the idea that the U.S. dollar’s days are numbered. His commentary concurs somewhat with one made by Bill Bonner on The Daily Reckoning. He describes the merciless battle between the forces of inflation versus deflation, but with rather more frankness suggests that the U.S. is doomed:
In a larger sense, the US is at war with capitalism…and with nature herself. Markets have natural rhythms. They go from boom to bust…from inflation to deflation…from expansion to contraction naturally. Trying to stop the bust is futile. It is a fight against Fate…a losing proposition. And it is diabolically unnatural.
Mr. Gilbert, despite his pessimistic views, believes that the US will not default on its debt obligations and, furthermore, will not have its credit rating downgraded from AAA status:
It is undeniable that the U.S. government’s ability to finance its borrowing commitments has deteriorated as its deficit has ballooned.
Using the definitions outlined by Standard & Poor’s, a one-step cut into the AA rated category would nudge the U.S.’s creditworthiness into a “very strong” capacity to fulfill its commitments, just weaker than the “extremely strong” capabilities demanded of AAA rated borrowers. That seems an appropriately nuanced sanction — albeit one that the rating companies might turn out to be too cowardly to impose.
In my view, there are mistakes in both analyses, owing to incorrect assumptions. Firstly, Mr. Gilbert may well be playing down his pessimism so as not to be accused of fearmongering, but surely he is aware of the degree to which U.S. mortgages are heading for the wall. The current picture is looking much worse than that which existed even before this whole economic crisis began.
Credit rating companies are not independent, scientific and unbiased organisations by any stretch of the imagination. They are privately owned outfits with great power in swaying public opinion. Indeed, they are crucial part of the fiannce sector, able to make or break whole economies by their assessments. They are, in a sense, no different to mainstream media outlets, privately owned by an oligarchy, providing heavily filtered news with bias at every turn. Yet both are threatened now by the obvious. More and more, media outlets are being forced to report undeniable facts (political and economic) which go against the current “political correctness”.
The world’s population is becoming painfully aware of the economic failings of the U.S., and to suggest that credit rating companies will ignore this fact is like suggesting that Fox News would fail to report an anti-war protest in Washington DC with ten million angry people brandishing torches and fighting riot police with their rubber bullets and teargas. As much as Fox News would probably like to under-report it as being several hundred angry youths having a small scuffle with police, it could not get away with it. The credit rating of the U.S. economy will be revised downwards. It’s as good as given already.
Mr. Bonner, on the other hand, is a believer in markets. They are, in theory, beautiful things. People come and trade, buying and selling whatever can be bought or sold. In so doing, they set the price and value of everything, ensuring the most efficient use of resources of a society. If markets are natural, then one can expect undulations in pricing, rises and falls depending on seasons, social changes and other explainable phenomena. One can even expect massive corrections in pricing as a result of a major changes in government policy (the chief cause of bubbles). On that thought, the U.S. economy has so many bubbles at the moment, that it could be better described as a froth economy. If we blow off the froth, what are we likely to find?
Unfortunately, markets today are far from natural. The presence of hedge funds, the Plunge Protection Team, the undeniable pervasiveness of insider trading, interventionist governments and the hysterical mass media all ensure that market movements are, more or less, predetermined.
Instead of sailing on an ocean, where navigation and seamanship are a fair mix of art and science, investing in the stock market today is like sailing in the presence of a wave machine and massive propeller fans generating false winds. All is well until someone decides to switch the wave machine off or alter the fans without notice. It would have been better for most not to have sailed at all. Yet how nice it would be to be a friend of the wave machine operator. What advantages could be had!
Death comes like a thief in the night, unpredictably and suddenly (except for when it doesn’t, of course). Whereas the miser wakes early each morning, thinking he will avoid danger, the thief rises the night before and was already at work before everyone else. The death of the U.S. currency will come in the form of a great heist. Already, the middle classes are being robbed blind. In a way, they have been blind drunk on credit, but are now waking with a splitting headache only to discover that the foam has been blown off their beer and, after all that, the glass is empty.
While to many it is an extreme view, even now, it is inevitable that the U.S. will soon default on its credit obligations. It might not be called a default, or a bankruptcy, or anything suggestive of the term ‘failure to pay’, but it will nonetheless happen. Like the bankruptcies of GM and Crystler, the U.S. economy and its people are going to be sold off, divided up and redistributed to its creditors. Some names will change, others will stay the same. Euphemisms are probably still to be invented to describe the coming events, but the coming ‘restructuring’ of the U.S. economy will be nothing less than the settlement of failed debts on an international level, which will effectively result in the handing over of sovereignty to foreign interests. With or without a war, the final and determining step in this process will be the dissolution of the U.S. currency and the adoption of a world reserve currency, and with it the end of the era of Democracy.