Can the World Really Abandon the Dollar As A Reserve Currency?

Throughout history there has always been a dominant currency. As each empire became the new financial capital of the world, their currency became the most prized and tended to circulate around the globe into even the fringe economies that they may have never heard of at that moment in time. Roman Coins made it China and there was even the attempt to establish diplomatic relations with China in 180AD as the Chinese historical records prove. Rome was very much like the United States today. It was the largest world economy with a huge consumer base. Even Cicero warned about the trade deficit in 55BC.

Cicero-55BC 2

Rome was feasting on Asian imports of spices and fine silk. Even the Emperor would not allow anyone to wear the color purple, also an import from Asia. The Silk Road predates even Rome. There was trade between east and west well before even the rise of the Greeks. This is why we find imitations of Greek and Roman coins made in distant lands that are not attempts to counterfeit, but to expand the local supply of such foreign coins that became popular.

The US dollar has filled that same role. When communism fell, dollars became the number one circulating medium of exchange in Russia and China. There were even Congressional hearings on the exportation of dollars to foreign lands. History repeats because the passions driving mankind never change.

It became the dollarization of the world economy just as it had been in ancient times with every dominant economy. The dollar became globalized in part because the USA also never cancelled its currency as was the routine case in Europe. Nations cancelled their currencies to force people to come clean and pay taxes. Some naturally blamed the New York Federal Reserve. Others blamed Soros’s currency warfare against the pound akin to invading shock  troops, deployed to destroy resistance in the form  of national credit. All of these wild accusations assumed two erroneous positions: (1) Somehow this was benefiting the USA, and (2) the British pound would not have cracked its peg but for Soros. The conspiracy nuts argued that this was some sort of a plot of repeated, successive assaults on the European Exchange Rate Mechanism which began in the summer of 1992. They were claiming the USA was seeking the dollarization of the world as a precursor to the kind of arrangements for world domination.

True, dollars were being  shipped  out  of  the  United States in record  amounts, not  only  through  transactions in  the drug trade and illegal economy, but also through  the Federal Reserve Bank of New York, in collaboration with Citibank and  Republic National Bank of New York of Edmond Safra.  The U. S. supply of physical dollar bills was $348 billion. The hoopla was claiming $190 billion had left the United States. Prior to the collapse of Communism in 1989, the amount of dollars outside the USA in physical form was about $80 billion. At the time, about $20 billion in physical US dollars were in Argentina as people there did not trust the government and preferred dollars. Dollars accounted for 70% of Bolivia’s money supply during the 1980s. Dollars were being hoarded everywhere. They were the black market in Vietnam for nearly a decade after Americans left. Business Week Magazine reported in its Aug. 9, 1993 issue that there may be as many as $20 billion in physical U.S. dollars in Russia. All of this was cast as some giant conspiracy of the United States to somehow take over the economy worldwide. The imagination knows no bounds.

The only trend at work here is the same thing why people are buying gold. When you do not trust the government, you seek alternatives. From ancient times, fringe countries have sought the money of the dominant economy. It has never been some clandestine plot – just human nature. All of these countries that the conspiracy theorists were so concerned about and blaming the USA, were politically in turmoil. People in such conditions seek to preserve capital the same as people buy gold right now.

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