Here’s a brief summary of the elements and events that, we anticipate, will cause the death of the US dollar.
In 1945 the Bretton Woods agreement established the dollar as world reserve currency which meant that international commodities were priced in dollars. The agreement which gave the United States a distinct financial advantage was made under the condition that those dollars would remain redeemable for gold at a consistent rate of $35 dollars per ounce. The United States promised not print much money, but this was on the honor system, because the Federal Reserve refused to allow any audits or supervision of its printing presses.
In the years leading up to 1970 expenditures in the Vietnam war made it clear to many countries that the U.S. was printing far more money than it had in gold, and in response they began to ask for their gold back. This set off a rapid decline in the value of the dollar.
The situation climaxed in 1971 when France attempted to withdraw its gold and Nixon refused. On August 15th he made the move that would go down in history as the “Nixon Shock”. The move was the unilateral cancellation of the direct convertibility of the United States dollar to gold. Nixon directed Treasury Secretary Connally to “temporarily” suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold.
In 1945 the Bretton Woods agreement established the dollar as world reserve currency which meant that international commodities were priced in dollars. The agreement which gave the United States a distinct financial advantage was made under the condition that those dollars would remain redeemable for gold at a consistent rate of $35 dollars per ounce. The United States promised not print much money, but this was on the honor system, because the Federal Reserve refused to allow any audits or supervision of its printing presses.
In the years leading up to 1970 expenditures in the Vietnam war made it clear to many countries that the U.S. was printing far more money than it had in gold, and in response they began to ask for their gold back. This set off a rapid decline in the value of the dollar.
The situation climaxed in 1971 when France attempted to withdraw its gold and Nixon refused. On August 15th he made the move that would go down in history as the “Nixon Shock”. The move was the unilateral cancellation of the direct convertibility of the United States dollar to gold. Nixon directed Treasury Secretary Connally to “temporarily” suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold.
While Nixon's actions did not formally abolish the existing Bretton Woods system of international financial exchange, the suspension of one of its key components effectively rendered the Bretton Woods system inoperable. While Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, all attempts at reform proved unsuccessful. By 1973, the Bretton Woods system was replaced de facto by a regime based on freely floating fiat currencies that remains in place to the present day.
This was obviously not a temporary suspension as he claimed, but rather a permanent default and to put it bluntly it was theft.
In 1973 President Nixon asked King Faisal of Saudi Arabia to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In return Nixon offered military protection for Saudi oil fields. The same offer was extended to each of the world's key oil producing countries, and by 1975 every member of OPEC had agreed to only sell oil in U.S. dollars. The act of moving the dollar off of gold and tying it to foreign oil instantly forced every oil importing country in the world to start maintaining a constant supply of Federal Reserve paper, and to get that paper they would have to send real, physical goods to America.
This was the birth of the Petrodollar, Paper dollars went out, everything America needed came in and the United States got very, very rich as a result. Through 70s and the 80s the U.S. used the financial power gained by the petrodollar arrangement to build the most powerful military in the world,
Within that same year the U.S. invaded Iraq in the first Gulf war, and after crushing the Iraqi military and destroying their infrastructure, crippling sanctions were established which prevented that infrastructure from being rebuilt. These sanctions which were initiated by Bush senior and sustained throughout the entire Clinton administration lasted over a decade. In a final act of resistance Iraq began selling it's oil exclusively in Euros November of 2000.
This was a direct attack on the dollar and on U.S. financial dominance, and it wasn't going to be tolerated.
In response the U.S. government, with the assistance of the main stream media began to build up a massive propaganda campaign claiming that Iraq had weapons of mass destruction and was planning to use them. In 2003 the U.S. invaded, and once they had control of the country oil sales were immediately switched back to dollars.
This is particularly notable due to the fact that switching back to the dollar meant a 15 - 20% loss in revenue due to the euro's higher value. It doesn't make sense at all unless you take the petrodollar into account.
This was obviously not a temporary suspension as he claimed, but rather a permanent default and to put it bluntly it was theft.
In 1973 President Nixon asked King Faisal of Saudi Arabia to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In return Nixon offered military protection for Saudi oil fields. The same offer was extended to each of the world's key oil producing countries, and by 1975 every member of OPEC had agreed to only sell oil in U.S. dollars. The act of moving the dollar off of gold and tying it to foreign oil instantly forced every oil importing country in the world to start maintaining a constant supply of Federal Reserve paper, and to get that paper they would have to send real, physical goods to America.
This was the birth of the Petrodollar, Paper dollars went out, everything America needed came in and the United States got very, very rich as a result. Through 70s and the 80s the U.S. used the financial power gained by the petrodollar arrangement to build the most powerful military in the world,
Within that same year the U.S. invaded Iraq in the first Gulf war, and after crushing the Iraqi military and destroying their infrastructure, crippling sanctions were established which prevented that infrastructure from being rebuilt. These sanctions which were initiated by Bush senior and sustained throughout the entire Clinton administration lasted over a decade. In a final act of resistance Iraq began selling it's oil exclusively in Euros November of 2000.
This was a direct attack on the dollar and on U.S. financial dominance, and it wasn't going to be tolerated.
In response the U.S. government, with the assistance of the main stream media began to build up a massive propaganda campaign claiming that Iraq had weapons of mass destruction and was planning to use them. In 2003 the U.S. invaded, and once they had control of the country oil sales were immediately switched back to dollars.
This is particularly notable due to the fact that switching back to the dollar meant a 15 - 20% loss in revenue due to the euro's higher value. It doesn't make sense at all unless you take the petrodollar into account.
The Petrodollar Explained
The motive for these moves becomes clear when we look at them in their full context and connect the dots. Those in control in the United States understand that if even a few countries begin to sell their oil in another currency it will set off a chain reaction, and the dollar will collapse.
They understand that there is absolutely nothing else holding up the value of the dollar at this point, and so does the rest of the world. In a nutshell, the reason the U.S. is trying to stir up global military chaos is simple, the U.S. dollar is being systematically removed from its reserve and petrodollar status. The latest evidence of this is the news report yesterday that China and Argentina are also going to begin trading in their respective currencies, with trade settlement in yuan – NOT dollars. Read story here
Please note this news is not being reported by the U.S. mainstream financial media. In addition the Brics nation recently lauched the “New Development Bank” which is very significant because it is a direct challenge to the global order led by the West and the IMF. This also receive very little coverage from the media. Read story here
In addition and also unreported over the last couple of years is that China has been quietly arranging these bi-lateral trade deals with every major trading partner, including several European countries. Recently China signed huge deals with Iran and Russia to trade energy in their respective currencies. China and Russia are systematically extricating their trade activities from the dollar.
Quantitative Easing
One of the biggest contributors to the weakening of the dollar has been the recent policy of “Quantitative Easing”(QE). Quantitative Easing is an unconventional monetary policy used by central banks to stimulate the economy. In the QE policy a central bank buys specified amounts of financial assets from commercial banks and other private institutions with newly created money. This causes an increase of the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base. After several rounds of “Quantitative Easing”(QE), the value of the dollar has been completely diluted to the point that it has created global inflation in countries with large inventories of Federal notes. QE has not only diluted the value of the dollar to the point of leaving it completely vulnerable, it also has caused many countries to look for alternatives to the dollar as an investment and trading instrument.
Financial expert and best-selling author James Rickards’ book “The Death of Money,” predicts “the coming collapse of the international monetary system.” One of the sign posts is countries like Russia declaring it will shed the U.S. Dollar as reserve currency in international trade. Rickards explains, “Putin said he envisions a Eurasian economic zone involving Eastern Europe, central Asia and Russia. The Russian Ruble is nowhere near ready to be a global reserve currency, but it could be a regional reserve currency.”
Rickards goes on to say, “Right now, we are on the precipice now. When you are on the precipice, it doesn’t mean you fall off immediately, but you are going to fall off because you can see the forces in play. What I tell clients and investors is it’s not as if we are going to make some mistakes and some bad things are going to happen. The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse. That’s what the system is right now; we are just waiting for a catalyst.
People ask me all the time, what could it be? Technically, my answer is it doesn’t matter because it will be something. It could be a failure to deliver physical gold. It could be an MF Global financial failure. It could be a natural disaster. It could be a lot of things. The thing investors need to understand is the catalyst doesn’t matter. It’s coming because the instability is already there.”
The death of the dollar is upon us, the global power shift has already begun. And it will happen, it’s just a question of when. You’ll see the death of the petro-dollar. And I can’t emphasize just how serious of an issue that’s going to be.
People ask me all the time, what could it be? Technically, my answer is it doesn’t matter because it will be something. It could be a failure to deliver physical gold. It could be an MF Global financial failure. It could be a natural disaster. It could be a lot of things. The thing investors need to understand is the catalyst doesn’t matter. It’s coming because the instability is already there.”
The death of the dollar is upon us, the global power shift has already begun. And it will happen, it’s just a question of when. You’ll see the death of the petro-dollar. And I can’t emphasize just how serious of an issue that’s going to be.
Sources:
The Road to World War 3
The Road to World War 3
Recommended Publications
  |   |   |
RSS Feed