Читать книгу The Post Pandemic Economy - William E. Scholz - Страница 22

Weak currencies, throughout history, tend to lead a Nation to a spiral downward and eventual collapse. The debt-based economy over-time weakens currency or creates an inflationary atmosphere. Despite the best efforts of The Federal Reserve over the past four decades, inflation has run rampant. While the Federal Reserve maintains annual inflation targets much more consistently than in decades past, however, "shocks" lead to the overnight inflation of real goods and services on Main Street economies everywhere.

The same challenge is foreseen with the petrodollar. The petrodollar is simply the currency upon which major international transactions are conducted, the preeminent transaction being oil. The "petrodollar" is how the United States can run obscene National deficits. No other Nation can effectively print their own money to service debts, but the United States can because of its currency's status as the World's Reserve.

Nations in the past have considered the idea of unseating the petrodollar as the World's Reserve currency. China and Russia notably held talks to do so, however, United States leadership maintained a strong relationship with Russian leadership likely thwarting Chinese efforts at the negotiation table.

The problem, nevertheless, persists that the World does not have a neutral reserve currency. It seems intuitive for American interests to protect its status as world's reserve so that the United States can continue to reap the spoils of unlimited debt. However, the financial crisis in ‘08-09 and the echo, the coronavirus crisis, demonstrates how tenuous the United States has become even as it seemingly enjoyed its perch on top of the world’s financial order.

It is not in the best interest of the United States, or any Nation, to enjoy a reserve status even if only acting as reserve for a network of vassal Nations. This goes beyond a question of basic fairness. The reserve currency system, in a debt-based financial order, is doomed for collapse. The Nation who holds the reserve currency could see the weakening and collapse of their currency as a rising Nation seeks to "pick-up" the status as reserve. This is China's aim currently and they have unscrupulously used the coronavirus to further this ambitious national interest.

What is likely to occur is the bifurcation of the world into two spheres of influence based on reserve currency status if the world does not intervene to create a neutral and strong currency system. To do so, Western Nations must rethink the Federal Reserve system entirely.

A great example of hyperinflation took place in the Asian markets in 1997. During the Asian Financial Crisis, a combination of factors contributed to hyper-inflation including an immature labor market for the production of industrial goods and services, an unskilled financial services sector, and a global downtown brought on by currency exchange networks among Nations [6].

Establishing a strong currency system requires fairness. Select Nations should not be able to take advantage of preferred status or treatment. When this occurs, special interests within the Nation drive it to ever-ambitious geo-political goals including goals that are beyond the Nation's means. A fair world currency, gold-backed, must be facilitated by strong International Institutions with legislative control over the Nation's ability to issue currency.

One example of a successful monetary rule is the reign of Cyrus the Great. King Cyrus is best known for freeing the Jewish People from the captivity of Nebuchadnezzar II [7]. King Cyrus and his successors also instituted a uniform monetary policy that united disparate kingdoms under the Achaemenid Empire. The currency reforms allowed trade to flourish on what was known as “The Royal Road.”

At the time of writing, the coronavirus has not led to a collapse in currency. However, the already completed bail-outs threaten to further weaken the United States petrodollar past the point of no return. Not only will the American Government have an excess supply of foreign currency returned to the United States should other Nations begin to reject the petrodollar, but Main St. prices will rise significantly even if hyper-inflation is not achieved.

For these reasons, a debt-based economic order cannot stand! The coronavirus, sadly, has brought to light the many weaknesses of this type of financial system. However, even though the coronavirus is a new type of disease and a rare global pandemic, the underlying economic and financial cracks that it has unmasked are not new, but regularly occurring shortcomings of our economic order.