The global economy has been dominated by the US dollar since just after World War II. Since the war raged away from our shores, we were spared the mass destruction and economical fall out of a home-front war. This, combined with the fact that the U.S. had recently filled its gold supply to the brim, led to the world readily accepting the US dollar as the premier exchange currency in the global market with the 1944 Bretton Woods agreement.
America bragged about the dollar being “as good as gold”, with the dollar representing 1/35th of an ounce of gold and convertible to all foreign central banks at that rate. While this gold bolstered the U.S. dollar, it was made illegal for American citizens to own gold at this time. In an effort to retain our gold supplies while furthering our grip on global economy, the Federal Reserve decided to simply print more money.
Come the late 1960’s, after 25 years of unchecked monetary superiority and money printing, by the United States, France asked the U.S. to make good on its promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. Such an event resulted in a huge gold drain which would have dropped the U.S. dollar in value had it been based on anything but paper.
On Aug. 15, 1971, the United States basically declared bankruptcy. Following France’s example, other foreign bodies ask for their share of gold for their U.S. currency and President Richard Nixon denied those pleas for payment and refused to pay out any of our remaining 280 million ounces of gold. The U.S. then made a move to back up the dollar not with gold but with oil.
Realizing the world was embarking on something new, elite U.S. money managers struck an agreement with the Organization of the Petroleum Exporting Countries (OPEC) to price oil in U.S. dollars exclusively for all worldwide transactions. Such a move made it mandatory for nations to stockpile U.S. dollars in order to buy oil for their country, thus, giving the U.S. dollar massive artificial backing. In exchange, the U.S. would protect the Middle East, which is almost laughable at this point. The U.S. dollar, printed off nearly at will by the U.S. with little tangible backing, was now officially tied to oil.
In 2000, the U.S./OPEC dollar-for-oil deal was gravely challenged. A dictator in Iraq by the name of Saddam Hussein committed the ultimate sin by offering to accept the Euro for oil. With the U.S. dollar in danger of losing its global foothold, the U.S. engaged in the “shock and awe” campaign. We all know where it went from there.
A hidden factor in the U.S./Middle East tension has come to light. Our administration has not shared this information with the American public. They have not included in their build up to war our goal to “defend the dollar.” The danger of the dollar depreciating is real, and our country will see the climax of the fight during our lifetimes.
In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year, there was an overthrow attempt against Chavez, reportedly with assistance from our CIA, despite him being democratically elected.
Now, Iran, our new “great enemy,” is preparing to open their own oil market in March 2006. They have already announced that their means of exchange will be the Euro, not the dollar. With tensions building constantly in the Middle East, and having already proven we, as a nation, will go to great lengths to protect our dollar, expect more bombings, military operations, and possibly, economic terrorism from our side. If we do not return to a monetary system based on a real commodity, hyperinflation is a real, and dire, possibility.
I leave you with a bit of wisdom; invest in gold. It is going to be a bumpy ride.
–Jason Harrison