EURO "BIN LADEN"
Alex Wallenwein
How the Euro will Finish What Osama Couldn't Achieve
The US has flexed its military muscle, and Iraqi's and the whole world marvel at the might of the US military machine - a not unintended side-benefit to "siccing" Saddam, destroying a hotbed for terrorist activity, and preventing other oil countries' conversion from dollars as "the" oil currency to euro.
Yes. In November of 2000, Saddam announced that he decided to conduct all "food for oil" transactions under the UN program in euro instead of the traditional US dollar (and, coincidentally, that was the month the euro stopped dropping and began its slow but relentless rise to where it is today).
What would happen if the euro were to become "the" oil currency of OPEC? The US dollar would crash, the euro's already-underway march toward world reserve-currency status would be vastly accelerated, and the US' legendary economy would burn to the ground in sudden hyper-inflation.
You see, the US dollar's status as the world 's only reserve currency since the Bretton Woods agreement in 1945 gave it (and the US) certain advantages other countries didn't have.
The dollar underpinned the domestic currency of every country in the entire world. All of their respective central banks hold dollars "on reserve" to bolster their own currency's value.
Since over 75% of all foreign central banks reserves are US dollars, there are "a whole lotta dallas" floatin' around out there. What's more, because of that, all foreign trade transactions are settled in dollars, upping the amount in foreign circulation even more - and creating an enormous demand for the American currency.
All of that essentially allowed the US to literally export it's domestic inflation to other countries, thus escaping the unavoidable consequence of "monetary" inflation (increase in the volume of money) - namely price inflation (more money chasing the same goods and services in an economy, thus driving up their prices).
Instead of experiencing price inflation at home, the US could "export" it by sending it abroad (when buying oil for example).
That was all fine and good until the euro started to appear on the scene. For the first time since Bretton Woods, the dollar now had a competitor: a single currency of a combined market that is actually bigger in population size than the US - and a currency that has a positive relationship to the price of gold.
For, the euro countries mark their gold reserves "to market." That means they value their gold reserves at gold's market value, which in turn means that the euro's value goes up when the price of gold rises. And the price of gold is rising, not least of all because the euro countries' central banks have agreed to limit their gold sales and gold leasing activities.
The dollar, on the other hand is stuck in a rat race against the price of gold. When gold rises, people in America think it's "inflation time" and they pull in their consumer horns - which is bad for the economy, and that makes it bad for the dollar's foreign exchange value. Americans buy less stuff, and foreigners buy less American stuff (stocks, bonds, etc.), and the foundation of the house of cards starts getting a bit shaky.
But now, imagine that all those foreign trade and reserve dollars start heading "home" as the euro methodically replaces them, country after country, transaction after trade transaction. Now the house of cards doesn't just fall, it gets buried under an unimaginable avalanche, a veritable deluge of dollars.
Remember post-WWI Germany, when people had to have a wheelbarrow of paper cash (of RM 10,000,000 bank notes) just to buy a loaf of bread? Well, that will seem like paradise when the US dollar chickens start coming home to roost.
Without the almighty US dollar, how long do you think the mighty US military machine will last? How long do you think before communist China starts thinking that its now safe to "reunite" with Taiwan and launch an attack from its Panama Canal beach-head into the southern US? (Thanks, Jimmy)
Don't think for a moment that this is all just some rambling columnist's speculation. Russia's central bank has already sold
dollars for euros. China's has, too. After Saddam got "religion" and converted to euro, Iran has made similar noises.
The OPEC's "chief", Javad Yarjani, gave speech at a Seminar on the International Role of the Euro on April 14, 2002, in Spain. During that speech he presented a virtual "how to" lesson in what the OPEC countries expect form the Euro nations before they would "convert" to euro for all of their oil transactions.
The certain effect of a flood of dollar "homecomings" is also not the stuff of speculation.
So, what's the US financial establishment's reaction to this threat?
According to an Associated Press report of April 7, 2003, by Martin Krutzman, the US money-supply tsar, His Excellency Sir
Alan Greenspin, had this creative epiphany:
"the central bank is signaling that it is poised to move beyond its
traditional buying and selling of short-term Treasury securities
to the direct purchase of longer-term securities in an effort to
pump more money into the banking system and influence long-term
interest rates."
Oh, goodie!! More inflation!!
"Also, Fed officials have indicated they are prepared in the
event of an unexpected shock to the system to lend massive amounts
of money directly to commercial banks to make sure
that financial markets do not freeze up."
Yippieee!! More debt!!!
What should President Bush do then? (Counting on Alan is obviously a waste of time).
As long as the dollar's relationship to gold is inverse, the euro has already won the war. What President Bush needs to do is to get Congress to flush the laughable, outdated "official" US gold price of $41.222 per ounce (the market price is currently at $323.00), start valuing US official gold reserves at market prices to boost the value of the dollar in the face of the inevitable rise in gold prices, and ditch "too big to fail" bullion banks (who have sold gold short for decades to artificially help prior administrations
prop up the dollar.)
Doing this will surely cause the kinds of 'cascading cross-defaults' Mr. Greenspin warned of in the lead-up to Y2K. But these cross-defaults will be peanuts in comparison to the certain consequences of even a partial but significant displacement of international reserve dollars.
In Iraq, George W. has shown he has the guts to do what everyone else thought impossible - and he succeeded. But his victory in Iraq will be short-lived if he keeps listening to Alan Greenspan too much longer.
For in that case, the euro will complete what Osama tried, but couldn't do: bring the "Great Satan" America to its knees. As bad as 9-11 was, Osama and the other Jihadists just kind of ticked us off. He got Americans just mad enough to get up and kick their collective booties" over in the Middle East, but the euro will finish us off, at least under a leadership that fights an economic frontal assault by hurling monetary baloney.
The only way to protect yourself from this umitigated disaster is though ownership and possession of physical gold (bullion, semi-rare, and rare coins) and maybe euro. Dollar-denominated assets will be flushed out along with the dollar.
May 8, 2003
Alex Wallenwein
Editor, Publisher
The EURO vs DOLLAR CURRENCY WAR MONITOR
Moneypulation Watch (FREE E-zine)
www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
Owner,
A1 GUIDE TO GOLD INVESTMENTS
www.a1-guide-to-gold-investments.com
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