How Long Can Rumors Keep the U.S. Dollar on the Decline?

Notwithstanding the ever-present worry that the Chinese and the Russians, even the oil giants of the Gulf region may begin to run away from the dollar in panic at any moment, the dollar seems to be doing reasonably well against its peers, given how severe the deterioration of the U.S. finances are.

Let’s put the picture into perspective: the American government is now counting in trillions, not in billions as it used to do in the past, when discussing the financing of its grand schemes. The nation is busy with pursuits in Afghanistan, a nation-building effort in Iraq, and a war against an elusive, shadowy entity called “terror”. Unemployment is at ten percent and rising. Once the envy of the world, the American finance complex is totally disgraced at home and abroad, as the once unflinching defenders of unbridled capitalism more and more embrace the various discredited mechanisms of socialism in fear of complete economic collapse.

Meanwhile, the government is attempting to expand various social benefit programs which are already cases of future bankruptcy unless greater taxes are imposed on the electorate, and that, of course, is an impossible task in this economic environment. Finally, as Americans keep considering imposing much tighter regulation on all aspects of financial speculation, the speculators themselves are looking at places beyond Europe and the U.S., to locations like Singapore, Shanghai, and Hong Kong, where the various factors of economic freedom, and a business-friendly atmosphere (not to mention a corrupt bureaucracy that can be made to bend for the correct amount) ensure that there are a lot of opportunities to be exploited.

So how does the dollar still hold at where it is, and the sky doesn’t come crashing down on the American econo-shambolics, taking the whole edifice of the global economy with itself down, plunging us into a decade-long chaos? It doesn’t happen because nobody wants it to happen. Americans essentially created the world order as it stands, and as people realized that it was impossible to defeat them, they decided to cooperate rather than fight, which means that at the moment there is no corner of the world free from the catastrophic implications of the collapse of American capitalism, should it indeed occur. A monopoly is usually a bad thing. The absence of competition means that when the single version of the product used by everybody proves to be deficient, there’s no entity in possession of a good one that will keep functioning. Such is the case with American financial hegemony. When all that we had was the American system, and everybody looked to New York to hear the unerring pontiff of free markets speak, errors would be regarded as manifestations of genius, and so they were.

As such, those who anticipate a sudden and general dollar collapse are usually unaware that the end of the dollar is the end of the global financial system as it stands today. Could anyone really expect free trade, and the culture of free competition to survive, in the short term, if its main building block, the dollar, were to be discredited completely? Obviously that cannot happen. We don’t imply a dollar collapse to be impossible at this stage, but only suggest that its collapse would be a true global economic catastrophe from which just about everyone would be harmed to a great degree. The Lehman Event gave a pre-taste of what could happen if the system did indeed crash. Authorities and most economic actors are aware of this, that’s why, for now, the dollar, and the system are being maintained by them. In short, we don’t believe that the dollar will collapse anytime soon, and argue that when it does, we may simply find out that there was too little of it after all in comparison to the amount of euphoria, debt, and good will financed by it all over the word.

Comments

[Babeouf:]

Since Socialism has never existed anywhere its difficult to see how its instruments could be discredited. As for the rest the disintegration of all of the Cold War alliances is well underway. And for a fiat currency like the dollar this process will in the longer run reduce its importance. It is certainly not necessary for a new World currency to emerge. Multipolarity would work best with a number of regional(block) currencies modeled on the Euro. Most Empires are ideologically unprepared for decline and consequently waste enormous resources in a futile battle against the changes that their activity has helped bring about. So if Obama is a one term President the next will sweep in on a wave of Religious fever
and Flag fetishism.

Oct 26 06:32 AM

[Bill Jencks:]

In a recent article by Robert Fisk in the Independent(UK) newspaper, apparently China, Japan, Russia, France and all the Gulf States will be dumping the petro-dollar.

Read it here:

www.independent.co.uk/...

Oct 26 09:58 AM

[Mr. G:]

From a fundamental standpoint, I believe we have to accept that the US may not be as influential economically as it once was. The larger BRIC nations grow, their fundamentals will have a rising affect on currency value and the dollar is slowly losing supremecy status.

Oct 26 11:19 AM

[Dopamine:]

I was happy to read Forex Traders, it was the desert I was hoping to read. US intrest rates will rise by January.

Oct 26 03:00 PM

[newamericanow:]

The Current Dollar or Federal Reserve Note is not backed by Gold but instead is a unit of Debt that is backed by the earning potential of the American Citizenry. It seems clear that given the state of manufacturing and industry the American earning potential is rapidly declining. Unless we turn our manufacturing capacity around the American earning potential will continue to fall way below today's numbers and thus the value of the Dollar. Our very way of life is in jeopardy because of our unsustainable economic policies, political will and civic apathy in our political system. If something drastic is not done it will be a curtainty that the Dollar will collapse. For the many people reading this post our society will have gone through a learning phase in which the simple things will again achieve their rightful place in the family. Having worked in healthcare for more than three decades I have noticed an increase in depression in our population. Substance abuse is the norm because people feel empty and unfulfilled. We are embarking on a new world where the simply things fulfill the human heart as they should. For the many people reading this article things must be turned on their head before the healing can begin. Have hope in your life and in your hearts the time for the human species to excel is at hand. We have a great opportunity because of our experiences and history to make the greatest age of man for us and our children. Have courage! Times will be tough for many but in the end, nothing that is easy is ever worthwhile. Stock food, plan for the worst and everything will work itself out. Have faith and God will bless.

Oct 26 03:03 PM

[bob dempsey:]

you believe in santa clause too dont you !!!!

Oct 26 06:20 PM