One More Coffin Nail in the Economy

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Survivopedia Economic CollapseThis week, Russia and China signed an important treaty, which looks to be one more coffin nail for the American Dollar. While not the first of its kind, this agreement means that international business between two of the world’s largest countries, both of whom are historic rivals of the United States, will no longer be carried out in U.S. Dollars, but in their own currency.

China already has such an agreement with Japan and the Euro can be seen as accomplishing the same thing for the nations who are using it. Nevertheless, this is just one more indication of what the world thinks of the U.S. Dollar.

The Last Man Standing

The dollar has been the world’s reserve currency and means of exchange ever since the end of World War II. This is easy to understand if we think of that “war to end all wars” as the “War of the last man standing.” Quite literally, the United States was the last man standing, at least economically speaking. At the end of World War II, the United States literally had the only major economy that wasn’t in a shambles. Every other country had been decimated by the effects of the war.

Germany, Japan and Italy had lost the war of course, leaving their countries and their economies in ruin. On top of this, whole factories were moved out of Germany by the victors (especially the Soviet Union) as recompense for the war.

The Soviet Union had gone bankrupt fighting the war as well. During the latter years, the United States was sending war material to the Soviets as part of our “lend lease” program. In other words, we were providing them the means to stay in the war, with the Soviets providing the warm bodies and the United States providing just about everything they needed to fight with. While Russia was a victor, it was an expensive victory for them.

In some ways, England was the worst hit by World War II. They carried the bulk of the war, along with its costs for a couple of years, before the United States got involved. Lend lease was started to provide them with war material, the Soviets were an add-on. While the British Empire survived the war, it was at the cost of losing their empire.

With all that destruction, the United States was the only viable economy left on the face of the earth. We had expended about 40 percent of our gross national product on the war, not the 100 percent that other countries had. No wonder our economy was the only one standing, it was literally the only one large enough to pay for the high cost of that war.

This catapulted the United States into world leadership. We became the guarantor of world peace. At the same time, the U.S. Dollar became the world currency. In an agreement signed by the major nations of the world at Bretton Woods, the major industrialized nations of the world tied their currency to the dollar for the purpose of international trading. That agreement is essentially still in place, although it was nullified by Nixon’s move to unilaterally terminate the convertibility of the dollar to gold.

Okay, so what does this have to do with the agreement between China and Russia?

When the agreement was signed at Bretton Woods, the dollar became the world’s reserve currency. While Nixon’s actions have made the dollar a Fiat dollar with a free-floating value, most countries are still investing in dollars as a means of securing the value of their own country’s currency. In other words, the dollar has still been the world’s reserve currency. International trade has required that it be so.

As more and more countries move away from doing business in American dollars and start using their own currencies for international trade, they lose the need to keep dollars in the bank. This frees them to make the decision to stop buying American dollars and instead invest in other currencies.

{adinserter usdeception}Since the value of the dollar has been held up by all these countries holding on to our currency, as they begin dumping our dollar, the value of the dollar will drop. If they dump the dollar quickly, the value could plummet.

The problem is that the world is losing faith in the United States, specifically in our political leadership. They look at the White House and see a President who is lying, who won’t stand up for anything and in bent on destroying the greatest country on the face of this earth.

For several years now, China has held the largest foreign portion of the national debt, with 26% of all foreign debt. That amounts to somewhere over two trillion dollars worth of our debt that China, a country who really isn’t all that friendly with the United States, has in their hands. All they would have to do to destroy our economy and our country with it is decide to sell off that debt.

While making such a massive sell-off would hurt China financially, they would win the war. It would probably be the cheapest war of such major proportions ever fought. By comparison, the war in Iraq has cost the United States about seven billion dollars per month, and we didn’t get anything for it. If China were to initiate the first economic war, they could stand to replace the United States as the world’s premier economy for less than it cost us to fight the war in Iraq.

Is this the opening salvo of such a war? Only time will tell. Regardless of what China ends up doing, this step that they have taken can only weaken the strength of the dollar and the economy of these United States.

Find out more about surviving an economic collapse in Conquering the Coming Collapse.

This article has been written by Bill White for Survivopedia.

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Bill White

About Bill White

Bill White is the author of Conquering the Coming Collapse, and a former Army officer, manufacturing engineer and business manager. More recently, he left the business world to work as a cross-cultural missionary on the Mexico border. Bill has been a survivalist since the 1970s, when the nation was in the latter days of the Cold War. He had determined to head into the Colorado Rockies, should Washington ever decide to push the button. While those days have passed, the knowledge Bill gained during that time hasn’t. He now works to educate others on the risks that exist in our society and how to prepare to meet them. You can send Bill a message at editor [at] survivopedia.com.
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Comments

  1. And what exactly does this do to the dollar? and it's value?

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  2. this problem and it's potential for destruction is NOT a recent thing that has developed in the past 6yrs. this has been building for a very long time. the war in/against Afghanistan was small potatoes compared to the dishonest and subversive war against Iraq and played big part in the HUGE LOSS loss of respect for the US.
    after WWII we were victorious, yes. and we help countless countries rebuild. especially the ones that we helped destroy. it was a time of great pride, patriotism and compassion.
    but..... since then we have developed a superior complex and 'god' like attitude over all the world. that "we" as a country know more and better than any other. and that the US haS the right to interfere with everything that goes on in the world, no matter what it is. 'we' as a country have let our own country and it's citizens go to hell while telling the world how to live, act, produce and breath. we
    help prop up the world while we skimp and renege on promises to our own people. our government for decades has been quicker and more apt to help any other before their own people.
    our doors and borders are open to millions of immigrants and changing laws to better suit "them" at the detriment to the actual naturalized citizens of this country. while other countries have focused on 'their' infrastructure, borders and people first. they have grown and prospered. all this with our money, our manufacturing businesses, jobs, and help.
    when the US pulls it's head out of it holier than thou, we are the best, superior, smug ass, opens it's eyes and wakes up???? just maybe there will be something left worth while or available to save.

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    • Very well said, Echo. I'm hoping that maybe -- just maybe the United States public will wake up, get involved, and say no more. Our government no longer represents us the people of the United States. It represents big business. Even our Supreme Court has ruled that businesses are individuals. Money runs this country, and the US money is soon going to be worthless.

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    • Reinhardt says:

      @ECHO: I couldn't say it better... If You (America) will get you economy back, including the jobs (from China), stop spending half of Your GDP in wars, stop conquering the World in a Fascist way, and go back to the roots of your own foundation (the Constitution of your founding fathers), which, IMHO, is the best ever laid down, you may be able NOT to wake up one day (soon) in a Gulag or Nazi Concentration Camp, as chances are now.

      The list of Your (US) military interventions since 1950 up to today is literally endless, so therefore why You Americans think You are not so 'loved' around the world? Why on earth America is not able to mind His own business? Everything You allegedly changed to the 'better', have been changed to the 'worse'. Besides You ruined your own economy and now You 'rely' on the whole World to use the US Dollar just to keep up the false self-perception of Your nation. History repeats itself, simply because people refrain learning from history. It's that simple. You (hopefully soon) will share the fate of the Roman Empire! I don't say that, because I have resentments against American people, at the contrary, I have too many friends there, but I wish You to Fail for the sake of Humanity and the survival of this Planet!

      I'm a German, born after 1945, living next to the iron curtain for a long time. I'm thankful for the US intervention to get rid of the Nazi system. But thankfulness must have an end when someone (You) jeopardise the world as a whole.

      I've seen and experienced the influence of Communist agitation as well as American influence and propaganda. Both sides have been similarly brainwashed from ground up. As European we (finally) have learned to live with many languages and many cultural differences, and today no one thinks about to force a (doubtful) benefit onto our neighbours, simply because they do not use our currency (no longer the case), our beliefs or our language, or sell us their oil dirt cheap.

      In my opinion the biggest enemy of America is America.

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  3. Stephen hall says:

    Interesting article. My concern is Bill interjects many of his own opinions with what might be fact. When an author does this in a news article, the entire article becomes suspect. Example:

    "The problem is that the world is losing faith in the United States, specifically in our political leadership. They look at the White House and see a President who is lying, who won’t stand up for anything and in bent on destroying the greatest country on the face of this earth."

    "By comparison, the war in Iraq has cost the United States about seven billion dollars per month, and we didn’t get anything for it."

    It's interesting how he bashes President Obama regarding the loss of faith in US leadership, but doesn't mention President Bush's lies to Congress (an act of treason) regarding the Iraq war. The reality is even though we may think President Obama isn't doing a very good job, the World has much more respect for US leadership now than they did when George W Bush was president.

    The information in this article needs to be deciminated. I wish Bill would have left his own opinions out of it because then a wider range of citizens would accept the information. As it is now, President Obama supporters will not take this information seriously.

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    • paranoid says:

      You picked up the very paragraph that offended me in the author's report, Stephen. It's so easy to blame one administration which has been in power for 6 years, and ignore the degradation of the previous administrations since the introduction of Reagan's "trickle-down economics" where the infamous use of a pyramid scheme allowed a small percentage of the citizens (if you want to consider corporations & money people) to rule over the masses who were subject to their political decisions. Go ahead and point fingers, Mr. White. What the Chinese and Russians are doing is what the U.S. knows best...at least used to know best... teach the world how to build an empire at the expense of their own citizens.

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  4. Jack waggoner says:

    My book, The Rainbow Zhanlue (strategy), details my take on how China used
    Obama to do what you are suggesting.
    Aloha
    Jack Waggoner

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  5. Gerry deyoung says:

    With the major backers of Oboma and the majority of the American people in favor of the oil pipeline, why is Mr. Oboma against it? Providing high paying jobs in the U.S. and devaluing the Arab nations oil income would siphon off the Saudi monies with which they are building Mosques and bribing millions to "convert" as their only means of getting married, jobs and education for their children. Could it be that he has a greater allegience to Islam than to America?

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