Previous editorials have dealt with the failure or refusal of mainstream media outlets to present the facts about the war on Iraq and the war on terrorism. This week we look at the related failure of financial reporting. We reveal what the "professional" finance papers and investment tipsters dare not tell you...that the power of the $US has ended, and that no preparations have been made for the new post-globalised times that are imminent.

At the end of World War 2, the world was effectively divided into two financial zones - the "free" world and the communist world. Effectively, was no direct trade between them because there was no framework for currency exchange. It was possible for government to government barter to occur, but the mechanisms which facilitate trade, such as mutual recognition of currencies and agreed exchange rates did not exist. Within the "free" world, within the "World" Trade Organisation, trade could occur with recognised rates of exchange, with payment being made when cargoes were loaded, not just when they were delivered and sold, and it came about that the strongest, most stable currency, the US dollar became the "free" world's foreign trading currency. Because the percentage of US dollars used in offshore trading remained offshore to be used in further trading, that part of the total number of US dollars did not matter in the same way as ordinary domestic dollars. Normally, if governments print more money without the increase being matched by increases in the amount of goods and services available to be bought with that money, then the value of the money falls. US dollars did not fall when billions were printed to circulate offshore, instead they became more valuable, and indeed generated value, because they were loaned, and interest was paid on them. Interest paid on those offshore dollars became the US's main income stream, and the ability of New York bankers to set interest rates for other countries became the US's means of controlling those countries. In the run-up to Australian elections, it is usual for a representative of a credit rating agency, say Standard and Poors, to visit Sydney and let it be known that if we vote for this party, our nation's interest rates will be this, or if we vote otherwise, the rates will be otherwise. This very effective means of controlling political outcomes, has run into a problem...New York has lost control of the dollar.

When the Cold War ended, the world did not move to a post-left/right financial basis, which would have recognised that both the communist and capitalist systems had points of merit. Instead of gathering this peace dividend, the US took the fall of the Soviet Union as signifying a final victory for primitive capitalism, and imposed harsh terms on Russia as the price of its entry into world trade. When it came to China, however, there was a very different result. Like the Russians, the Chinese were expected to allow US corporations full access to Chinese markets, real estate and labour, and to re-configure their society along US lines in order to be admitted to the WTO. China did not need to comply because it had enormous economic strength already, with its cheap products dominant world-wide, particularly in third-world countries. For ideological and propaganda reasons, the size of the Chinese economy was under-reported for years, but the fact has now been implicitly recognised with China's assession to the WTO. What has not been recognised (in financial media, that is) is that the size of the Chinese economy and its inertial mass make the Chinese currency (yuan or renmimbi) a realistic future alternative to the US$ as an international medium of exchange. The other alternatives are the euro, gold, or, as recommended by Dr Mahatir, the gold dinar. In any event, the US$ has lost the role of the singular world currency, with the result that the billions which previously circulated offshore earning interest, are now returning to the US. The first effect of this flow is to boost the US stock market, but this should not be interpreted as it has as signifying health or growth. There is no equivalent growth in production, exports or jobs. This means that a unprecedented crash in the US economy and in the value of the $US is near.

What does a $US dollar crash mean for us? In the medium to long term we can survive, because of the amount of trade we do with Asia and Europe. In the short term we face enormous problems socially and politically. The falling US$ dollar is already causing difficulties for local businessmen. Chinese-made goods are getting cheaper and cheaper (because the renmimbi is still tied to the $US at a fixed rate) meaning that stores are realising that unless they clear their shelves and warehouses, they will be left with old stock which cost more than is being asked for new stock. Banks are finding that interest rates on loans are irrelevant, because they are being repaid in rising Australian dollars, while they repay New York banks amounts in falling $US.

Politically, the adjustments called for will be great. Both Liberal and Labor have been in the past very much allied to the US, to the point that we could be accused...make that 'have been accused' of being puppets of the US. The media demonstrated during the run-up to the invasion of Iraq that they too are entirely US-dominated. If Australia is to make the adjustment to a new world order in which the US is not the be-all and end-all, we should at least be discussing the possibility that the US might fall, if not militarily, then financially.

Big Island Gazette October 2004

 

Sometime in 2004, Big Island correspondents travelled forward in time to October 2009. There we obtained a copy of The Independent, which contained Robert Fisk's article The Demise of the Dollar. On returning to 2004, we shamelessly plagiarised the story, using it for a series of articles and comments, which we called The Death of the Dollar. Now that we are in October 2009 again, we would like to apologise to Robert Fisk and to all our readers for this deception.

While we are apologising, we should 'fess up to this one, too ... which we called Goodbye $US, hello new dinar?

 

The emerging Eurasian bloc headed by China and Russia will be the world's major economic grouping - and soon! The SCO already includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan as full members, and observer states India, Iran, Mongolia and Pakistan may be promoted to full membership at the next meeting in Russia. In terms of population, resources and manufacturing capacity, the SCO is now the world's largest economic entity. more