June 9, 2010

Uncle Sam’s Scam

Filed under: Economics — Tags: , , , , — HarryCool @ 5:48 am

I can always post a link to this article, but then by god I like this dude so much that I want to post his full article on my blog.

Jug Suraiya, 08 June 2010, 09:51 PM IST

The Regency age dandy, Beau Brummell, who is credited with having invented trousers, also invented an economic model which could be called a debt spiral. When his tailor would present an unpaid bill, Brummell would order another three outfits, also on credit. Eventually, the dandy owed his tailor so much money that he became the tailor’s most valuable customer, whom the tailor couldn’t afford to offend in the slightest way for fear of forfeiting all of Brummell’s IOUs.

The world’s supposedly richest nation, America, has perfected Brummell’s economic model: US debt has spiralled not just through the roof; it has rocketed out of the stratosphere. China alone holds some $895.2 billion of US treasury bonds. All the countries in the world, in some measure or other, perforce have to keep US dollars for the simple reason that almost all international trade including the oil trade is conducted in American currency.

This represents the biggest financial confidence trick in the world. For what it means is that like Beau Brummell the US is living off the fat of the land on an ever-growing mountain of debt which is being financed by the rest of the world.

The US stopped making things cars, ballpoint pens, TV sets years ago. It didn’t have to make anything. Other countries made all the things that America needed and America bought everything from these other countries. Using US dollars of course. What else?

So the only thing that America actually had to produce were US dollars, or US treasury bonds. Whenever America has felt it was running out of cash as happened in the wake of the subprime crisis, when the Obama government authorised the pumping in of almost a trillion dollars into the economy to avert a total meltdown all it has to do was print more money. Then it could go on throwing away money like it’s nothing but bits of paper, because that’s exactly what it is: bits of paper, more and more of which can be printed up, as and when need arises.

The so-called Almighty Dollar is not backed by anything of real value. It is not backed by gold. It is not backed by any tangible goods that America produces and sells to the rest of the world, because America doesn’t make any such goods. There is only one thing that imparts value to the dollar: universal gullibility.

America has successfully pulled the wool over the world’s eyes. Like Beau Brummell’s tailor, the international community has been conned into paying to keep the US in the high-spending style to which it has become accustomed.

The more America spends i.e., the more dollars it prints the more the world laps up those dollars. The euro was supposed to be a counterbalance to the dollar monopoly. Unfortunately, fiscal indiscipline (an indiscipline learnt from the US) in Greece, Ireland, Spain, Italy and Portugal, has eroded confidence in the euro. The result? International investors are busily buying dollars and US bonds as a hedge against economic uncertainty. That’s not like a drowning man clutching at a straw; it’s like a drowning man clutching at an electrified wire to save himself. The dollar-rush is largely the cause of market volatility in India and other parts of the world. How does this affect India? If foreign investors pull out of India and park their cash in US bonds as they’re doing Indian enterprise could be starved for capital, shackling economic growth.

What can the world do to stop the US like a monstrous Beau Brummell take the pants off us? Maybe it’s time for the world’s two fastest growing economies, China and India, jointly to come up with a viable alternative to the dollar. They’ll never do it, of course. But it’s something to dream on. A yuan-rupee hybrid. The Sino-Indian yupee, anyone?


  1. Iraq had to be invaded and Saddam Hssain toppled because he had converted all transactions for the Oil for Food program to Euros. Immediately following the US invasion and the ‘regime change’ it was hurriedly reverted back to USD.

    Iran is the next US target because of its Oil Bourse that trades in Euros. The US interference in Venezuela because of their support of the iranian decision.

    The day the world does change to a petroeuro/petrorubel/petrowhatever – each dollar bill will only be worth the paper its printed on.

    Is India at last waking up to the realities of the (US) petrodollar hegemony, the geopolitics of oil?

    Comment by littleindian — June 9, 2010 @ 10:00 am

  2. littleindian, thanks for visiting and commenting.

    Iraq’s US – Euro issue is a known fact and is also a very strong argument towards the real reason for invasion. Venezuela, Syria, North Korea, Iran – whatever it is, American’s know what is good for them and they will go ahead and get it done irrespective of what the world thinks.

    India will never wake up. We got far too many internal issues (corruption being the biggest) to be able to stand on our own in the outside world.

    btw you got a nice blog. Sad to see the last post was quite some time back.

    Comment by HarryCool — June 9, 2010 @ 10:01 pm

  3. Hi HarryCool.

    I have felt that when it came to issues US, many Indians are blind to the truth. Or in denial.

    I guess you are right. We would rather sleep away our future than be united for our best interests.

    I no longer write on my blog, as I have taken a lot of unnecessary abuse for writing my mind. I no longer feel angry/passionate enough to argue my views.

    Thanks for visiting my cricket blog, which I am trying to resuscitate.

    Comment by littleindian — June 11, 2010 @ 6:38 pm

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