From: Gary S. Gevisser
Sent: Thursday, March 02, 2006 7:39 PM PT
To: Devin Standard
Cc: rest; Mary Valder - Trilateral Commission; George G - FREEDOM ROAD SOCIALIST ORGANIZATION; JOHNZIEGLER@clearchannel.com'; United States Justice Department; FBI; Nicholas Oppenheimer - DeBeers-Anglo American Cartel [DAAC]; Edward Jay Epstein - Author of The Diamond Invention; Bruce.firstname.lastname@example.org; JRK@class-action-law.com; SupremeInternetCourt@yahoogroups.com; Mark Gevisser - The Nation's southern African correspondant; Stephen Cohen - Codiam Inc.; Vicky Schiff - co-Managing Director of Wetherly Capital Group
Subject: FW: For your commentary
Once again RBS produces not only another timely document that he himself is quite capable of producing but one that I was looking for before responding to Bruce Bigelow of the San Diego Union-Tribune who his editors will now be telling him that he should have “left good things alone.”
I have placed 4 hyperlinks over certain key words in RBS’ request for my “commentary” that do more than simply add “color” to this very important and timely story to mention little of the very important date, August 15th 1971 which increasingly edgy Edward Jay Epstein mentions in Chapter 18 THE AMERICAN CONSPIRACY of his fascinating INTERNET ONLY book THE DIAMOND INVENTION while conspicuously leaving out that in March 1971 the big time American financier of the United States Democratic Communist Party, Charles Engelhard who was also the co-inventor-conspirator of THE DIAMOND INVENTION finally succumbed to the poison paid for by his Anglo partner Harry Oppenheimer.
While there are some very inaccurate suggestions in this highly informative piece including the Bush Administration’s concern that if they didn’t go into Iraq then the Israelis would have more likely than not sent us all back to the Stone Age long before our Special Forces found Saddam hanging out in a hole big enough I am sure for him to avoid defecating all over himself, there is not a mention of the word “diamond” or “DeBeers” or even this 3 step book Marie suggests I write that combines Special-General Relativity, Quantum Mechanics and Chaos Theory into one
For the inner workings
Of the universe.
course just a glancing mention of the word “
With all that said, it would be pure folly for me to be gracious in victory knowing as we do that most having been raised in communist states like South Africa and the United States only see graciousness as weakness but at the same time to paint with a broad brush brings with it the harsh reality of what it means to save the world by having to kill off quickly with short-circuitry using exclusively mental telepathy those who know no better than to keep raising one excuse after the next why it is that they are so damaged as they continue to go about being pigs at the trough.
I am, however, quite confident that my dilemma would be resolved by the time I get around to telling Biglow to grow up!
From: Ron Bellows Senior – Senior Risk Management specialist - AIG
Sent: Thursday, March 02, 2006 6:33 PM
Subject: For your commentary
The End of Dollar Hegemony
A hundred years ago it was called “dollar
diplomacy.” After World War II, and especially
after the fall of the
It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value.
First it was simply barter of goods. Then it was discovered that gold held a universal attraction, and was a convenient substitute for more cumbersome barter transactions. Not only did gold facilitate exchange of goods and services, it served as a store of value for those who wanted to save for a rainy day.
Though money developed naturally in the marketplace, as governments grew in power they assumed monopoly control over money. Sometimes governments succeeded in guaranteeing the quality and purity of gold, but in time governments learned to outspend their revenues. New or higher taxes always incurred the disapproval of the people, so it wasn’t long before Kings and Caesars learned how to inflate their currencies by reducing the amount of gold in each coin-- always hoping their subjects wouldn’t discover the fraud. But the people always did, and they strenuously objected.
This helped pressure leaders to seek more gold by conquering other nations. The people became accustomed to living beyond their means, and enjoyed the circuses and bread. Financing extravagances by conquering foreign lands seemed a logical alternative to working harder and producing more. Besides, conquering nations not only brought home gold, they brought home slaves as well. Taxing the people in conquered territories also provided an incentive to build empires. This system of government worked well for a while, but the moral decline of the people led to an unwillingness to produce for themselves. There was a limit to the number of countries that could be sacked for their wealth, and this always brought empires to an end. When gold no longer could be obtained, their military might crumbled. In those days those who held the gold truly wrote the rules and lived well.
That general rule has held fast throughout the ages. When gold was used, and the rules protected honest commerce, productive nations thrived. Whenever wealthy nations-- those with powerful armies and gold-- strived only for empire and easy fortunes to support welfare at home, those nations failed.
Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules”-- at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people-- just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.
The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one’s actions is rejected.
When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules-- rules no longer written by those who ran the now defunct printing press.
“Dollar Diplomacy,” a policy instituted by William Howard
Taft and his Secretary of State Philander C. Knox, was designed to enhance
This new policy came on the heels of the “gunboat” diplomacy of the late 19th century, and it meant we could buy influence before resorting to the threat of force. By the time the “dollar diplomacy” of William Howard Taft was clearly articulated, the seeds of American empire were planted. And they were destined to grow in the fertile political soil of a country that lost its love and respect for the republic bequeathed to us by the authors of the Constitution. And indeed they did. It wasn’t too long before dollar “diplomacy” became dollar “hegemony” in the second half of the 20th century.
This transition only could have occurred with a dramatic change in monetary policy and the nature of the dollar itself.
Congress created the Federal Reserve System in 1913. Between then and 1971 the principle of sound money was systematically undermined. Between 1913 and 1971, the Federal Reserve found it much easier to expand the money supply at will for financing war or manipulating the economy with little resistance from Congress-- while benefiting the special interests that influence government.
Dollar dominance got a huge boost after World War II. We were spared the destruction that so many other nations suffered, and our coffers were filled with the world’s gold. But the world chose not to return to the discipline of the gold standard, and the politicians applauded. Printing money to pay the bills was a lot more popular than taxing or restraining unnecessary spending. In spite of the short-term benefits, imbalances were institutionalized for decades to come.
The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world’s reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.
It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it-- not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.
Realizing the world was embarking on something new and
mind boggling, elite money managers, with especially strong support from
This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.
During the 1970s the dollar nearly collapsed, as oil prices surged and gold skyrocketed to $800 an ounce. By 1979 interest rates of 21% were required to rescue the system. The pressure on the dollar in the 1970s, in spite of the benefits accrued to it, reflected reckless budget deficits and monetary inflation during the 1960s. The markets were not fooled by LBJ’s claim that we could afford both “guns and butter.”
Once again the dollar was rescued, and this ushered in the age of true dollar hegemony lasting from the early 1980s to the present. With tremendous cooperation coming from the central banks and international commercial banks, the dollar was accepted as if it were gold.
Fed Chair Alan Greenspan, on several occasions before the House Banking Committee, answered my challenges to him about his previously held favorable views on gold by claiming that he and other central bankers had gotten paper money-- i.e. the dollar system-- to respond as if it were gold. Each time I strongly disagreed, and pointed out that if they had achieved such a feat they would have defied centuries of economic history regarding the need for money to be something of real value. He smugly and confidently concurred with this.
In recent years central banks and various financial institutions, all with vested interests in maintaining a workable fiat dollar standard, were not secretive about selling and loaning large amounts of gold to the market even while decreasing gold prices raised serious questions about the wisdom of such a policy. They never admitted to gold price fixing, but the evidence is abundant that they believed if the gold price fell it would convey a sense of confidence to the market, confidence that they indeed had achieved amazing success in turning paper into gold.
Increasing gold prices historically are viewed as an
indicator of distrust in paper currency.
This recent effort was not a whole lot different than the U.S. Treasury
selling gold at $35 an ounce in the 1960s, in an attempt to convince the world
the dollar was sound and as good as gold.
Even during the Depression, one of
Once again the effort between 1980 and 2000 to fool the market as to the true value of the dollar proved unsuccessful. In the past 5 years the dollar has been devalued in terms of gold by more than 50%. You just can’t fool all the people all the time, even with the power of the mighty printing press and money creating system of the Federal Reserve.
Even with all the shortcomings of the fiat monetary
system, dollar influence thrived. The
results seemed beneficial, but gross distortions built into the system
remained. And true to form,
In the short run, the issuer of a fiat reserve currency
can accrue great economic benefits. In
the long run, it poses a threat to the country issuing the world currency. In
this case that’s the
It sounds like a great deal for everyone, except the time will come when our dollars-- due to their depreciation-- will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.
The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.
The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can’t last.
Price inflation is raising its ugly head, and the NASDAQ
bubble-- generated by easy money-- has burst.
The housing bubble likewise created is deflating. Gold prices have
doubled, and federal spending is out of sight with zero political will to rein
it in. The trade deficit last year was
over $728 billion. A $2 trillion war is
raging, and plans are being laid to expand the war into
Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.
Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged—as it already has been.
In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein-- though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.
It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.
There was no public talk of removing Saddam Hussein
because of his attack on the integrity of the dollar as a reserve currency by
selling oil in Euros. Many believe this
was the real reason for our obsession with
After these attempts to nudge the Euro toward replacing the dollar as the world’s reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.
It’s become clear the
Now, a new attempt is being made against the petrodollar
Most Americans forget how our policies have
systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a
democratically elected president, Mohammed Mossadeqh, and install the
authoritarian Shah, who was friendly to the
choose to harm
But that didn’t stop us from turning Saddam Hussein into
a modern day Hitler ready to take over the world. Now
It’s not likely that maintaining dollar supremacy was the
only motivating factor for the war against
But the truth is that paying the bills for this aggressive intervention is impossible the old fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That’s not so today. Now, more than ever, the dollar hegemony-- it’s dominance as the world reserve currency-- is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for, one way or another. Dollar hegemony provides the vehicle to do just that.
For the most part the true victims aren’t aware of how
they pay the bills. The license to
create money out of thin air allows the bills to be paid through price
inflation. American citizens, as well as
average citizens of
It is an unbelievable benefit to us to import valuable
goods and export depreciating dollars.
The exporting countries have become addicted to our purchases for their
economic growth. This dependency makes
them allies in continuing the fraud, and their participation keeps the dollar’s
value artificially high. If this system
were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just
as the Romans did, but their gold finally ran out and the inability of
The same thing will happen to us if we don’t change our
ways. Though we don’t occupy foreign
countries to directly plunder, we nevertheless have spread our troops across
130 nations of the world. Our intense
effort to spread our power in the oil-rich
Once again Congress has bought into the war propaganda
Our whole economic system depends on continuing the
current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every
year from our gracious benefactors, who work hard and take our paper for their
goods. Then we borrow all the money we
need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the
“backing” of our currency. There are no
other countries that can challenge our military superiority, and therefore they
have little choice but to accept the dollars we declare are today’s
“gold.” This is why countries that
challenge the system-- like
Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.
But real threats come from our political adversaries who
are incapable of confronting us militarily, yet are not bashful about
confronting us economically. That’s why
we see the new challenge from
It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It’s only after the cost in human life and dollars are tallied up that the people object to unwise militarism.
The strange thing is that the failure in
But then again, our failure to find Osama bin Laden and destroy his network did not dissuade us from taking on the Iraqis in a war totally unrelated to 9/11.
Concern for pricing oil only in dollars helps explain our willingness to drop everything and teach Saddam Hussein a lesson for his defiance in demanding Euros for oil.
And once again there’s this urgent call for sanctions and
threats of force against
Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.
The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.