Dollarization: Forging Chains of Paper

February 4, 2001

I has often occurred to me, when encountering road construction while travelling, that the only way to appreciate what was being done would be to view the site from the air. Seen from a car window, there seems to be no rhyme or reason to the construction: all is confusion.

And so it is with human affairs. It is easy to see, particularly with respect to others, how one can become virtually obsessed with some aspect of life which is, in fact, not very important. Reality is distorted by proximity. The truer picture may be discerned only from a distance; details can come later.

With that in mind, what, then, was the role of money in society? Forget securities, pension plans, IRA's, and other details; what's the big picture? Money was used in making exchanges. Our forefathers had the idea, now rather quaint, that one should, in return for something, receive something. That meant barter. Of course, direct barter is inefficient, if not impossible, in a complex society with a bewildering variety of products and needs. But some sort of universal bartering agents were known from antiquity: gold and silver. These forms of wealthy are desirable in themselves, and never lose their trading value. So the purpose of money was simply to make trades possible without the complexity of directly bartering what was surplus for what was desired.

That sort of money has not existed for over thirty years, in any official sense. Anyone today bartering wealth for wealth does so privately, among a very small circle of like-minded people. A mental concept called "credit" has replaced money; and it is not obtained from the earth free (save for the labor of extracting it), but is created out of nothing by bankers who lend is to those who want it. This modern money, therefore, serves another purpose very different from the wealth-money of old.

Creating a thousand dollars as a loan means the eventual repayment of, let's say, twelve hundred, or more, dollars. Where are the extra two hundred dollars to come from? Not from the earth, as in the days of tangible money, but from their only source: the banks. As a loan, at interest.

Of course, the interest could be paid from pre-existing money, but were that the case , we would find our money supply dwindling steadily; obviously, that is not happening. So in addition to acting as a medium of exchange (nothing for something) our modern money serves another purpose which, although obvious, is simply not discussed in any forum of which I am aware: a means of enslaving its users. When the users of modern money must expend a significant portion of their lives to pay the bankers, either directly, as interest payments, or indirectly, via taxation, for something which the bankers obtained for nothing, that's slavery, however indirect and comfortable. Moreover, the repayment is, itself, borrowed, and must be repaid with interest. Thus, the resulting enslavement is permanent.

Sooner or later, however, the slaves discover that the burden of interest is so great that it is hardly worthwhile to continue working. It certainly isn't desirable to do any additional borrowing. The system is in danger of imploding, for without additional borrowing, the money supply would shrink to nothing (and the interest would still be due!) Additional slaves must be recruited.

Of course, in our age of ease and comfort, we can't be expected to march into another country and enslave the people by force, any more than the domestic slaves were captured in that way. But it can be, and is, being done. The process is called "dollarization," and refers to the adoption, by foreigners, of our dollars as their "medium of exchange." I was pleasantly surprised, recently, to discover that this term exists to describe what I have long felt was necessary if our own monetary system was to be kept afloat a while longer. But I was not surprised to find that all discussions of dollarization omit any mention of its obvious, genuine, purpose: the enlistment of foreigners to support our currency.

Two Latin American countries have already officially adopted the dollar as their currency. They are El Salvador and Ecuador. Argentina and Mexico are considering it. And the writers on economics don't seem to see the big picture, at all!

For instance, they point out that one obstacle to dollarization is the loss of seigniorage to the dollarized country. Seigniorage is the profit resulting from the creation of money. For instance, if it costs 4 cents to print a dollar bill (or a hundred dollar bill) than the profit on that bill is 96 cents (or $99.96). The U.S. "earns" about 25 billion yearly on seignorage. But the very concept of seigniorage is ill-understood. When a group can create money, it cannot cost it anything to do so! It has been suggested that the Latin American countries who dollarize might "share" seigniorage with the U.S. This sounds like a polite term of accepting a bribe, but that shouldn't be surprising. Will the shared seigniorage find its way into the pockets of the peasants and workers? Don't be silly!

Writers also point out that the adoption of the dollar will prove a sort of discipline for the newly dollarized countries. They will no longer be able to finance government spending by simply printing money. Nor will they be able to bail out locally failing banks by printing money to do so. To the extent that they feel they must do these things, they will have to borrow from the Federal Reserve. And that, of course, is the whole idea: increased dependency upon the dollar-creators.

Officially, of course, U.S. bureaucrats insist that the Fed should not succumb to inflationary pressures from Latin America. The finance ministers of the dollarized countries must keep their economies in good shape if they are to be able to borrow from the Fed. Or must they? In the January 7, 1976, Wall Street Journal we read:

"In Kingston, Jamaica, this week, 20 representatives of the 128 members of the International Monetary Fund will be playing a marvelous game. The IMF Interim Committee---10 delegates from the industrial nations, 10 from the developing countries—will create about $14 billion in fresh money, after they haggle over who gets to spend it, under what conditions.

"The international bureaucrats assembled in the sunny spa don't normally admit that what they are doing is simply printing money; they describe the process as an expansion of IMF quotas."

Obviously, dollars can be created by foreigners, at their whim, to be spent as they see fit. All that is needed is a front, such as the IMF, which no doubt happily agrees to the new money-creation, since it gets to act as enforcer if the borrower can't repay. In that case, the wealth of the borrowing country is simply seized and delivered to its master. Exactly the point of the whole scheme!

All of the blather about increased monetary discipline, lowered interest rates, and seigniorage is window-dressing. The point is to expropriate the wealth of foreigners via the issuance of fiat currency, just as domestic wealth has been expropriated to such an extent that productivity can no longer sustain the drain. The expropriation of wealth is the very purpose of modern money.

It's the world's biggest, highest-stake confidence scam, and the victims, tragically, never seem to awaken. Hypnotized by the details, the big picture eludes them. There's nothing new in looting a population by means of fiat currency; but doing it on an international scale with the full cooperation of the to-be plundered countries sets a new high---or low.

According to the Talmud you should keep one-third of your assets each in land, business interests, and gold.

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