Collapse of the U.S.

Dollar
system?

Prepared by :-

Musbri Mohamed
DIL; ADIL ( ITM )
Pursuing MBL ( UKM )

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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?

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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 , 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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