Euro Dominance And American Policy


Get with the Program: Challenge for the Obama Presidency. Fundamentals vs. Brute Force

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro as the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” Rather than the old methods of brute force, Obama’s message of consensus will do more to stabilize our economy and foreign affairs than any of the proposals of his opponents or prospective opponents. Far from being in the clouds, Barack Obama, reflecting his experience at ground level on the streets of Chicago, understands the true dynamics of achievement, especially when it comes to peace and prosperity.

The European Union and the creation and adoption of the Euro as a competitive currency to the U.S. dollar was an inevitable bi-product of the Bretton Woods agreement and an American policy that pursued brute force and meddling in the affairs of other nations rather than the rather simple logic employed by such countries as Ireland, Brazil and Venezuela who have all achieved status by investing in their greatest resource — their own people. As nations join the European Union and the Euro gains increasing market share, the perceived safety of the judgment of a council of nations rather than dominance of a single nation is becoming apparent.

Things change. While the definition of “money” has not generically changed, the character of money has fundamentally shifted in every conceivable way. Agreement, acceptance and faith are elements of human interaction and society. They are also the cornerstone of “money,” by which we measure the value of things, store value and exchange goods. 

It is common theme that the perceived dominant world player has had its currency adopted by most of the commercial world and the governments of other sovereign nations. 

Prior to the dollar, it was the pound sterling. Over centuries the main currency of world commerce has shifted from the fiat money of one country to another depending upon world perception of the strength of their economy and their political and military strength to maintain their position. 

Everyone has their “fifteen minutes” and then it is up — but nobody gives up their position without a fight. Sometimes the fight is world war, extended regional wars or other military confrontations. Other times it is a diplomatic and commercial battle in the marketplace of ideas and the relative strength and weakness of competing treasuries. 

In the end, for better or worse, a new consensus arises and the currency of the dominant country shifts along with the enormous economic, political and social power and influence that commercial dominance endows the creator of the most favored currency.

In 1944, world leaders, prompted by “economists” and pure commercial interests came up with the forerunner of the new world order emerging today. It was the Bretton Woods conference. It was a formal meeting of sovereign nations and a negotiated agreement as opposed to “market forces” or competing unilateral sovereign agendas coming into balance. It was consensus of the kind that Barack Obama proposes and which even our enemies embraced as they have ever since scurried to enhance their holdings of U.S. dollars.

This event marked the beginning of a process that would pacify the U.S. and its ever-expanding ambitions, but ultimately end up with a shared unity that was NOT tied to whims of a single government. It was a relinquishment of sovereignty that could not and would not become undone. It would grow and evolve causing pervasive changes in business, banking and relations between countries.

The Bretton Woods Agreement did two things — set a gold standard, which was a temporary measure that only the the most forward thinkers understood, and set the currency for international (world) commerce as the U.S. dollar which was tied to Gold at $35.00 per ounce. 

Using gold is a standard that was hardly new. Yet the process of formal agreement was new and that process would emerge as the only lasting impact impact of the conference. 

Gold was valued because of its scarcity, its beauty and mythic reverence that was in the minds of believers from the dawn of commerce. It worked because of two factors — on the one hand a subjective set of factors including agreement, acceptance and faith and on the other, a scarcity that was somewhat controllable by additional mining. Periodically, gold strikes wreaked havoc with the price of gold but on the average it has been a relatively stable influence on commerce. 

The weakness of Gold was in its relative scarcity to population growth and related growth of commercial activity on the one hand and in the meteoric changes in the nature of money which has become increasingly symbolic tot he point where now most of it merely exists in electronic data files that nobody can touch, feel or roll around in their hand. There is no slight of hand coin trick to display for amusement because there is no coin.

Putting these factors together brings us to the inescapable conclusion that the supply of gold could not possibly keep up with the growth of human society. Indeed that was the precisely the issue when Nixon and Volcker, in 1971 decided to withdraw from the Bretton Woods agreement, and NOT promise to back every dollar with gold valued at $35 per ounce. 

While viewers of the popular show Bonanza were doubly disturbed that their favorite program was interrupted by the President on a lazy Sunday evening and that their currency was suddenly in free fall, the Nixon-Volcker decision was merely a statement of the obvious — the U.S. already was out of balance three to one (gold on hand versus dollars issued) and the situation was clearly permanent and getting worse. We had in fact passed the point of no return very soon after the Bretton Woods agreement was signed.

This decision eventually brought the U.S. back to dominance of the the perceived leader on world affairs. But lurking underneath was the positive knowledge of other world leaders and people who would become world leaders that an agreement was not only possible but inevitable. As long as the dollar was useful it would remain the currency of choice. Now the dollar’s usefulness is in doubt — the result of “creative schemes” from wall Street, overspending, failures to invest in itself and the inevitable downfall of the two engines of any economy — production of goods and services that people want, and the ability of people to pay for them. 

The European Union and the creation and adoption of the Euro as a competitive currency to the U.S. dollar was an inevitable bi-product of the Bretton Woods agreement and an American policy that pursued brute force and meddling in the affairs of other nations rather than the rather simple logic employed by such countries as Ireland, Brazil and Venezuela who have all achieved status by investing in their greatest resource — their own people. As nations join the European Union and the Euro gains increasing market share, the perceived safety of the judgment of a council of nations rather than dominance of a single nation is becoming apparent. It is proof positive that Obama’s perception of the world is right and that the other candidates are clueless as to the realities.

This represents a fundamental but entirely logical shift. It is a change from the acceptance of brute strength to consensus — a somewhat democratic consensus that captures the spirit of the American experiment if not its announced policies and secret agendas. 

It logically follows that the tide is changing with such force that it is unlikely that any one nation, no matter how strong, will gain world acceptance of its currency as the currency of choice for world commerce regardless of its military or political power. In the end it is people who determine agreement, acceptance and faith in the marketplace.  

When people start making distinctions of their own as to which “band” of dollar has greater value (recently issued or older) and discounting the dollar based upon their own individual perceptions the currency is in trouble. There are places where the signature of one U.S. Treasury secretary over another results in a discount of 10% or more. 

Thus it is the either the Euro that will eventually overtake the dollar or some other emerging union that will find acceptance. The dollar is in free fall and no amount of bailouts, regulation or creative solutions will suffice. The goal post has been moved. 

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro has the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” There are plenty of examples around the world as to how to do this — they all amount to the same thing — education of every man, woman and child, in skills, culture, knowledge and analytical ability. The words are very simple and have already been written: “The pursuit of happiness.”


2 Responses

  1. Hi,
    I like the way you write about Money, Finances and bank ..Its really different and interesting … keep the momentum going ..I hope this will really going to help me in future while making investments…I hate banks. They do nothing positive for anybody except take care of themselves. They’re first in with their fees and first out when there’s trouble.Central banks don’t have divine wisdom. They try to do the best analysis they can and must be prepared to stand or fall by the quality of that analysis..
    brilliant. .

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