5 April 2009

US fiat dollar hegemony ~ The Ponzi scheme that destroyed US finance

It was the US dollar that was monetized, or more specifically US debt obligations, which are now substantially worthless and will have to take a significant haircut in real terms. This is similar to the Japanese experience in which they monetized their real estate.


(Your blogger had a go at this subject)

As long as the US trade deficit kept expanding to supply new dollar credits and the illusion that returns on past dollar instruments were real and sustainable this bubble; whereby the more the US spent, the more they had to spend, was sustained.

The world's appetite for dollars mispriced upward US domestic production and slowly undermined all but financial exports, hence the hollowing out and complete domination of the economy by malls, suburbia and consumption, of petroleum above all else.


The confluence of imperial hubris, ideology, renumeration policy, inertia, the chatter of paid optimists, the way political institutions were eroded by flows from the monetisation of illusionary gains in asset prices.

Absolute power corrupts absolutely. It is as simple as that..

I don't beleive that the left or right have any monopoly on wisdom, thesis becomes antithesis. I think that my original thesis of "Late empire credit bubble dynamics" is a better explanation because it set the scene for money shuffling to move to central stage.

I don't think you can blame economics or economic theory, because these problems arise in a setting of imperial decay even when it predates modern economic approaches. As I wrote elsewhere....

"Athenians had a fratricidal democracy, a polity torn apart by inequity and inequality that shipwrecked on failed imperial ambitions. Plus autocrats who bailed out mortgagees and elites with endless ambition. They didn't need Marx or Freedman for it to play out the same.

Rome had bread and circus's and a idle proletariat on welfare without attributing it to the malign ideological influence of a socialist opponent, or the sweet talk of lotus eaters. As sending capital to the margins paid off for elities, the home crowd was bought off.

Both had an Imperium that failed when its economic raison detre dissappeared."

So I remind readers again that an Australian, amidst the heroism and self congradulation of victory post World War Two saw the potential of the system being set up to run off the rails.

"I am convinced that the agreement [Bretton Woods] will enthrone a world dictatorship of private finance more complete and terrible than any Hitlerite dream. It offers no solution of world problems, but quite blatantly sets up controls which will reduce the smaller nations to vassal states and make every government the mouthpiece and tool of International Finance. It will undermine and destroy the democratic institutions of this country - in fact as effectively as ever the Fascist forces could have done - pervert and paganise our Christian ideals; and will undoubtedly present a new menace, endangering world peace. World collaboration of private financial interests....... (will mean)...financial destruction.

As freedom loving Australians we should reject this infamous proposal."

Labor Minister of Australia, Eddie Ward, during the inception of the World Bank and Bretton Woods.

Well, he might have had a point after all......

I do not beleive we will see economic recovery for a decade, when we do it will be in a world that is post Bretton-Woods institutionally and largely post fossil fuel by way of economic direction.

My hope is for a world where the classical human virtues are in the assendant, one rather cyberpunkish, bioinformatic but green and sustainable.One that harnasses biology for process and is solar energy based. Getting there will be a wild ride....

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