This page is part of the homeplace advertisement-free web portal. (It is politics-free too, except for 3 sections which are obviously not.)



WHAT IS defending the dollar?

It is avoiding the expectation of excessive or uncontrolled inflation.


WHY defend the dollar:

"A nation-state taxes its own citizens, while an empire taxes other nation-states."  Krassimir Petrov


"...the United States is able to rule not through its position as world creditor, but as world debtor." Michael Hudson  Easier-to-read interview of Hudson

I. THE DOLLAR IS BECOMING LESS SUITABLE AS A STORE OF VALUE

The dollar is still an excellent medium of exchange .  It is suitable as a medium between selling what you have and buying what you want: you are taxed only at the rate of inflation and this is tolerable since the time involved is less than, say, a year. 

Its suitability as a store of value depends on its ability to preserve value for more than, say, a year.  In 1971, the US terminated the only remaining convertibility of the dollar into monetary metal.   The dollar's suitability as a store of value now depends entirely on the expected rate of inflation over multiple future years.

II. THROUGH INFLATION, THE USA CAN LIVE BEYOND ITS MEANS

Through controlled inflation, the USA lives beyond its means.  We are now accustomed to, and heavily dependent on, doing this.

III. TO SUCCEED, THE USA MUST


HOW to defend the dollar:

I. FORCE USE OF THE DOLLAR, BOTH AS A STORE OF VALUE AND AS A MEDIUM OF EXCHANGE

In 2000, Congress considered — but did not pass — the International Monetary Stability Act, which would have provided financial assistance to countries that adopted the dollar.

Encourage dollarization, and currency boards where the dollar is the hard currency to which the local currency is pegged.

Coerce countries like Iraq or Iran who threaten to price oil not in dollars to use dollar pricing.
References:





II. USE MONETARY POLICY

Defend the dollar by increasing interest rates and/or reducing the money supply.





III. USE FISCAL POLICY

Defend the dollar by moving the Federal Budget away from deficit towards surplus.




IV. SUPPRESS THE OLDEST INFLATION INDICATOR, THE PRICE OF GOLD

The Central Banks of several countries have colluded to sustain their fiat currencies by sales of Gold.  This had such a powerful depressive effect that they agreed to limit such sales to a [large but] predictable amount. See The Washington Agreement (1999) and The Second Central Bank Gold Agreement (2004). 

Possible motives for the U.S. Treasury and/or Federal Reserve to surreptitiously depress gold prices are:

(These are discussed in the Sprott report.)

These objectives are a subset of those of the Plunge Protection Team (PPT). , whose objectives include stabilization of all US financial markets.

To suppress the price of gold, there have been at least the following types of largely-secret operations:

They are effected by an entity often termed the Gold Cartel. Those paying close attention and willing to write about it believe that JP Morgan Chase represents the Fed's interest while Goldman Sachs represents the Treasury's. The Gold Cartel possibly operates through Caribbean Banking Centers which "include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama" and Hedge Funds incorporated there. The Cayman Islands is the prime location for offshore, non-transparent OTC derivatives trading.

PPT operations are possibly also in part effected by the Exchange Stabilization Fund (ESF).

References:





V. MAKE (COVERT) WAR ON INFLATION INDICATORS WHICH ARE PRICE INDEXES

The indicators of most interest are the PPI and the CPI.

You've probably heard of core inflation but have you heard of, say,  hedonic regression?
See page 48  of this.  Or eyeball this relatively dispassionate discussion or  this more impassioned/outraged coverage.  This devastating, silly, simple essay shows how deep into truthiness our government has sunk.

Here are some keywords to use in finding out more about how price indices are being [re]defined:

Just select, cut, and paste-into-google this:
 "Boskin Commission" substitution "geometric weighting" hedonics "seasonal adjustments" "core rate"

References:
 Kate Welling, John Williams, inflation.pdf by Kathryn/Kate Welling of Walter J. "John" Williams, Feb 21, 2006.



VI. OBFUSCATE

In general, defense of the dollar benefits from those around the world accepting it as a store of value to not even know how aggressively it is being defended: they could lose confidence in it.

Examples:



VII. ATTACK COUNTERFEITERS, INCLUDING THE NATION-STATES THAT DO IT OR TOLERATE IT

Obviously.


WHAT WILL HAPPEN WHEN THE DOLLAR IS NO LONGER DEFENSIBLE?

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion [depression], or later as a final and total catastrophe of the currency system involved [hyperinflation]."  Ludwig von Mises

History of the Dollar:

This one hits most of the high points!



This page assembled by: Frederick N. Chase