Friday, March 9, 2018

The vicious circle that protects dollar hegemony could be shattered by President Trump's trade war and inevitably lead back to a gold standard

When President Nixon closed the gold window and officially made the dollar a purely fiat currency, much of the world was not ready at that time to disconnect from the Bretton Woods system and thus reluctantly continued to accept dollars as the global reserve standard.

However this capitulation would lead to a vicious circle through which nations needed to be able to undercut the U.S. economy in order to accumulate dollars, and the U.S. needed the world to continuously buy dollars now that the currency was fully a credit instrument rather than money.

Finally 1971 came around, the US stock of gold was severely diminished, and Nixon had to revoke Bretton Woods by declaring that the US would no longer redeem dollars held by foreign governments, for gold. The gold window was closed. The world was compelled to work on a Dollar Standard – the irredeemable dollar became the essential currency required for Central Bank reserves, a situation which prevails at the present time. 
So since the world revolves around the US dollar, it is essential for the Central Banks of countries to hold dollar reserves. 
How can the rest of the world obtain those dollars? 
The only way for the Central Banks of foreign countries to own dollars, is by having their economies sell things to the US. 
The only way to sell things to the US, is by underselling US producers.Silver Doctors
This even the United States was backed into a corner since for them to be able to force the world to continue under dollar hegemony, it had to sacrifice its own economic future to do this.

The 2008 Financial Crisis, the Death of the Dollar, and the new Paradigm Shift

Western media and governments did a fantastic job of using propaganda to mask just how bad the 2008 Financial Crisis really was, because for all intents and purposes it was the death of the U.S. and the global financial systems.  And because Washington was completely unprepared for what occurred, their solution was the same as with nearly all legislation they pass today... short-term bandaids at an exorbitant cost.

However the rest of the world, and in particular the Eastern economies, saw through this charade to keep the dollar corpse alive through the Fed's printing of tens of trillions of dollars, and the engagement of military conflicts meant to destroy anyone who dared try to leave the system.

But now we are at a crossroads, and inevitably twilight has fallen on the American empire.  And despite his knowing that the offshoring of all their industry to foreign lands was all part of the plan to allow countries to beat us economically so that they would remain under dollar hegemony, the new American President is trying to retract what was done through tariffs and trade wars.  However the reality is now apparent that the U.S. is both bankrupt and unable to balance the scales that have moved so far to the other side, and the only recourse they have is to see the end of the dollar reserve currency system, and watch as the rest of the world moves both forward and back in time to once again have money backstopped by some form of the gold standard.
The current theme of whether “Trade War” is good for the US, misses the point entirely. The US collapse into the “Trade War” syndrome only obfuscates the real outcome: the end of the US dollar as the world’s fundamental currency. If countries are unable to obtain dollars for their Central Bank reserves, they will have to look for a substitute. And the only substitute will have to be GOLD.


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