Monday, September 15, 2014
Contrary to popular belief, the conduct of nations on the international stage is almost never driven by moral considerations, but rather by a shadowy cocktail of money and geopolitics. As such, when you see the mouthpieces of the ruling class begin to demonize a foreign country, the first question in your mind should always be "what is actually at stake here?"
The U.S. dollar is a unique currency. In fact its current design and its relationship to geopolitics is unlike any other in history. Though it has been the world reserve currency since 194 this is not what makes it unique. Many currencies have held the reserve status off and on over the centuries, but what makes the dollar unique is the fact that since the early 1970s it has been, with a few notable exceptions, the only currency used to buy and sell oil on the global market.
Prior to 1971 the U.S. dollar was bound to the gold standard, at least officially. According to the IMF, by 1966, foreign central banks held $14 billion U.S. dollars, however the United States had only $3.2 billion in gold allocated to cover foreign holdings.
Translation: the Federal Reserve was printing more money than it could actually back.
The result was rampant inflation and a general flight from the dollar.
In 1971 in what later came to be called the "Nixon Shock" President Nixon removed the dollar from the gold standard completely.
At this point the dollar became a pure debt based currency. With debt based currencies money is literally loaned into existence.
Approximately 70% of the money in circulation is created by ordinary banks which are allowed to loan out more than they actually have in their accounts.
The rest is created by the Federal Reserve which loans money that they don't have, mostly to government.
Kind of like writing hot checks, except it's legal, for banks. This practice which is referred to as fractional reserve banking is supposedly regulated by the Federal Reserve, an institution which just happens to be owned and controlled by a conglomerate of banks, and no agency or branch of government regulates the Federal Reserve.