Semula saya tidak berniat mempublish tulisan non-original pratolo.com, but
after I read this article I decided to make exception. When you finish reading
this article, you will find out the reason why U.S invaded Iraq, why U.S
President hates Iran and Venezuela, and why the oil price continues to soar.
You may change the way you invest.
———————-
WHEN BAD IS GOOD; What is Money Anyway?
By Dan Eden
This information is not new. International bankers and politicians know these
facts all too well. It’s the ordinary people — the little guys like us — who
are told that these things are too complex for us to understand; yet it is
because of “global currency” that we invaded Iraq, Afghanistan and, perhaps
soon, also Iran. Sure, it’s all about oil — but not the way you think.
What is “money?”
At the dawn of civilization, the earliest way to get something that you needed
was called barter. I give you a cow and you build me a hut to live in. But what
if I want a tiny hut? Do I give you half a cow? Placing a standard value on
goods and services was first achieved through the use of currency, or money.
Almost every culture has money. Ancient cultures used everything from sea
shells and beads to huge circular stones to buy and sell. Eventually, precious
metals were used and more recently the standard currency has been based on gold.
The value of precious metal is determined by its weight. Instead of carrying
chunks or nuggets of gold and silver, early empires made standard “coins” of
the metals and set a standard value in the marketplace. Coins were great for
most transactions, but they were heavy and wore out your pants pockets quickly.
Soon a new idea, paper money, was invented.
The original idea behind paper money was convenience. Each piece of paper
represented a specific weight of a precious metal, usually silver or gold, that
was kept somewhere in a treasury. If an individual wanted to, he could exchange
the paper money for the gold or silver that it represented. It was all based on
trust and a promise. In fact, the early paper money in America was called a
“promisary note.”
If you can find old dollar bills, you will read the promise written on each
note. You will also notice that the notes are numbered. In this way, each note
is unique and represents a corresponding weight of silver or gold in the US
Treasury vaults.
On a global scale, when someone in America bought something from a foreign
country, they would pay in US dollars. The foreign company would then go to
their local bank and exchange the dollars for their local currency. When
foreign banks had a surplus of US dollars, they would then exchange them for
gold. This meant that the US Treasury was always needing to acquire more gold
to replenish its vaults and maintain the “gold backed” dollars in circulation.
Prior to 1971 the dollars of the US were trusted all over the world. Each
dollar was based on 1/35th ounce of gold, held in the US Treasury. The value of
gold was fixed by law at 35 dollars = 1 ounce, so the value of each dollar was
very stable. This made the dollar attractive as an international currency. But
in 1971 this all changed.The Nixon Legacy — fiat moneyThe Vietnam War was a
painful time for America. We’re still paying for the sins of our past leaders —
quite literally. The war was so expensive (estimated at $500 Billion) that
America didn’t have sufficient dollars in print to pay the bills for the
disaster (The gold reserve only had about 30 Billion). But Nixon had a plan.
Why not just print more dollars? Never mind that there isn’t enough gold on
reserve to back each note. Just print as much as you need to pay the bills.To
do this he needed to change the law. So he did. The new system is called “fiat
money” and is defined as
follows: “Definition: Fiat money is money that is intrinsically useless; is
used only as a medium of exchange.” He ended the system of “promisary notes,”
ended the fixed value of gold and allowed the system of “supply and demand” to
set the value of both gold and American currency. But wait! There’s more!
Enter Oil: Black Gold
Back in the early 1970’s, America produced most of the oil it needed. Texas oil
fields were active and a far cry from the rusted rigs you can still see there
today. We imported a fixed amount, about 25%, from foreign countries, but our
thirst for oil was getting stronger. Nixon knew that America and every
developing nation in the world would need more oil in the future. He also knew
that OPEC, the handful of countries that produced foreign oil, wanted the
limits of American imports lifted so they could sell more. So he cut a deal.
The cap on 25% imported oil was lifted in exchange for the agreement that oil,
purchased from any country in the world, would be bought only with American
dollars. OPEC agreed and almost immediately there was a strong demand for
dollars throughout the globe. This demand was not based on the value of gold
but on the value that each dollar had in the marketplace. Since anyone who
wanted oil had to have dollars, the dollar remained strong.
Another thing that helped pull this scheme off was the fact that gold, held by
the US Treasury, went from its fixed value of $35/ounce to its present value of
over $600/ounce. Of course a cup of coffee was once 5¢ and now my Starbucks
Latte-Macchiato-double-Skim is close to $5!
Coffee, Automobiles and Computers: The Plot Thickens
Oil is a big import but not the biggest. Americans buy so many things from
foreign countries that it is staggering to imagine. In 1973 the US sold more
goods to foreign countries than it bought. But in each successive year the
tables have turned.
All of these goods are bought with “fiat dollars,” meaning that the currency
itself is worthless since it can never be exchanged for gold or silver. Of
course, a foreign country could exchange it for something else — something that
was produced by America, like… hmm… (anyway). As the chart above shows,
American exports, although representing 1.25 million dollars every two seconds,
are insignificant.Fiat dollars remain in circulation mainly because they are
needed to buy oil. For this reason lots of countries keep huge supplies of
dollars in their reserves. It has become a way of storing their national
wealth. The fact that US dollars represent foreign national wealth adds to
their value..Good Is Bad: Bad Is GoodThis kind of system turns traditional
logic on its head. Like, a trade defecit is supposed to be a bad thing, right?
Wrong. It’s actually good for the dollar! Imagine what would happen if everyone
started using their dollars to buy
things from America. The US would be flooded with dollars which would cause
inflation and, besides, we don’t have enough goods and services to exchange for
all those foreign US fiat dollars! In fact, America is technically, as of last
year, bankrupt!
And what about higher oil prices… bad? No way. That keeps those pesky foreign
flat US dollars “out there” and in high demand. It’s very good for the dollar.
Globalization, Nafta and Free Trade? Yep, they’re also good for the dollar
since they perpetuate the demand for greenbacks.
The whole system is kept running smoothly by global central banks who monitor
the supply and demand for dollars on a daily — even hourly — basis. If there
are too many dollars “out there” in the world, the US buys its own currency to
create a scarcity. If there are too few, it sells more dollars or buys more
foreign goods to replenish the supply.
If this is beginning to sound like a classic “pyramid scheme,” you’re starting
to get the picture. But sooner or later, someone has to pay.
Houston, we have a problem!
Imagine what would happen if the oil producing countries in OPEC decided to
sell oil in some other currency besides US dollars! What if they changed the
system to use the Euro, the Franc or the Yen? What would happen if no one
needed US dollars anymore? Hang on tight, it’s already started.
Iraq
On November 6, 2000, Saddam Hussein switched the oil currency from the US
dollar to the Euro. Two years later the Euro was rising in value while the
dollar was sinking so low that the International Monitary Fund warned of the
dollar’s imminent collapse. The solution: Iraq was invaded on the pretext of
developing weapons of mass destruction, the oil fields were seized and the
newly installed government returned to the US dollar standard on March 19,
2003. Other nations, who held large dollar reserves, joined the coalition and
contributed troops to pull this off.
Venezuela
Hugo Chavez has recently announced plans to nationalize the country’s oil
industry. Although Venezuela is a major oil producer and a member of OPEC, they
have sold their oil to Cuba and other regional countries without the use of
dollars and often in a barter exchange for domestically produced products. In
2001, Venezuela’s ambassador to Russia announced that Venezuela was considering
switching to oil sales in the Euro. Within one year the American government was
seeking a regime change and America has been accused by Chavez of attempting to
assassinate him in a failed coup attempt backed by the CIA.
Russia
Since June 8, 2006, Russia’s Putin has been selling its reserves of US dollars.
This has been done slowly to diminish any dramatic effect on the global supply,
but it represents a decision of Russia to divest itself of a dollar reserve.
The world market has taken notice.
China
An unprecedented signal from senior Chinese leaders that the Asian economic
giant might abandon the U.S. dollar sent shockwaves through the markets today
as the Dow Jones Industrial Average lost 360 points and the greenback fell to a
record low against the euro.
November 19,2007:
Xu Jian, a Chinese central bank vice director, told a conference in Beijing,
“The dollar is “losing its status as the world currency.” Meanwhile, at the
same meeting, Cheng Siwei, vice chairman of China’s National People’s Congress,
said, “We will favor stronger currencies over weaker ones, and will readjust
accordingly.”
Craig R. Smith, CEO of Swiss America Trading Corp., told WND he’s been in the
investment business for 30 years and has “never seen people more nervous.”
Alarmed by today’s economic news, he dispatched a note to brokers with a
warning of ominous potential consequences if China and other trading partners
abandon the dollar.
“If that were to happen, all bets are off, and we will be in a depression that
makes 1929 look like child’s play,” he said, “or we will experience Weimar
Republic inflation as the dollar makes extreme moves toward devaluations.”
India
Dollar no longer welcome at Taj Mahal
By Andrew Buncombe in Delhi
Published: 19 November 2007
The Taj Mahal may have been built as a testament to love but some hard-headed
business decisions are now holding sway at India’s most famous monument. First
among them is that the US dollar is no longer welcome.
With parts of the American economy in turmoil and the dollar rapidly losing its
long-held position as the currency of choice, Indian authorities have
calculated they are losing considerable sums of money by allowing foreign
tourists to pay using greenbacks.
A statement by India’s Ministry for Tourism and Culture said the government had
decided to act “in view of the international practices and also to avoid any
anomaly on account of falling exchange rates of the US dollar vis-a-vis the
rupee and the consequent fall in revenues”.
Until the change, foreign tourists visiting the Taj Mahal in Agra, south-west
of Delhi, could enter by paying a fixed $5 (£2.45) fee Ð a price that was set
when the dollar was worth around R50. But with the dollar having fallen by 12
per cent this year against the rupee and the current exchange rate closer to
R39 to the dollar, the government has now fixed the entry price for foreigners
at R250 Ð more than $6.
“These rates have been fixed in line with international practices,” a ministry
spokesman said. “It will avoid any anomaly on account of falling dollar-rupee
exchange rates.”
The ruling will affect around 120 sites overseen by the Archaeological Society
of India, of which 27 Ð including the Taj Mahal Ð are World Heritage sites. The
new rates are expected to be introduced as soon as this week to avoid a loss of
income as the value of the dollar continues to fall.
Indonesia, Malaysia and Lybia
Other oil producing countries have already stated that they will begin moving
from the dollar to the Euro. Indonesia, Malaysia and Lybia have already started
this transition. Other countries like China and Japan are also beginning to
convert a portion of their reserves to the Euro.
Iran
The US buys no oil from Iran following the hostage crisis in the 1970s. But
Iran is a major global oil producer and, therefore, a major player in the “fiat
dollar” scheme. In 1999 Iran announced plans to sell its oil in Euros. It
actually started doing this in the spring of 2003. Iran sells about a third of
its oil to European countries, the remaining share is largely bought by China.
Following the announcement by Iran, the country was called an “axis of evil” by
Bush and is currently the target of threats over its development of nuclear
energy. At this writing, the US Navy has a large fleet in the Persian Gulf with
contingency plans for an attack. Undoubtedly the desired outcome is regime
change and re-establishment of the fiat dollar scheme.
(You can finish reading the complete article here)
For advanced readers, please read further about these in “Bad Money; Reckless
Finance, Failed Politics, and the Global Crisis of American Capitalism” by
Kevin Phillips (especially if you are a fan of Noam Chomsky)
facilitated by http://pratolo.com
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