Volume 11, Issue 18
The threat to the world and the United States’ role in global leadership is much greater. Why?
Because western allies are becoming disillusioned with America’s competence in managing the world’s reserve currency. Inflation is more destructive to countries outside the U.S. There are extra carrying charges for foreign countries to exchange their local currencies for U.S. dollars to purchase strategic products. The smaller the country or the weaker the economy, the greater the carrying charges.
The United States government appears ignorant or ambivalent to the fact that the U.S. Federal Reserve is, in one context, the world’s federal reserve. The price of oil, wheat, rare earth minerals, and other strategic commodities are denominated in dollars. America continues to run budget deficits on an annual basis, regardless of full employment. For elected officials and political pundits to argue that inflation is a worldwide problem detached from U.S. government policy is a canard. No other government can print dollars. The United States government is primarily responsible for the total supply of dollars in world circulation. The global economic system is complicated, but U.S. economic policy directly impacts the price of strategic commodities. These strategic global materials are the base elements of worldwide inflation.
China is intent on establishing the yuan as an alternative reserve currency to the dollar. They are attempting to do this by offering foreign governments a choice of competing economic systems. China has for over a decade tried to lure other countries into a trading system where accounts are settled in yuans. To date, all such monetary protocols have failed. Venezuela, even though friendly to China’s desire, in order to take yuans for oil, they first must determine how to integrate yuans into the rest of their economic matrix. This has proven to be very difficult because the exact value of a yuan compared to other world currencies cannot be precisely calculated pursuant to a free-floating exchange rate. Even if a yuan is initially entered into a system, the economic chain reaction of second and third transactions is short-circuited. In barter trade, the value of one particular trade may not be transferrable to a second transaction involving different assets. That’s what a currency does. It provides a medium of exchange that can “make change” (money left over) transferrable to the next transaction.
Saudi Arabia has sold small amounts of oil to China in renminbi (RMB). Yes, to make things more complicated, China does have two currencies; one for internal use (RMB) and one for external trade and investment (yuan). However, the Saudis exchange the RMB they receive by pre-arranged purchases of gold within 24-hours through the Hong Kong gold exchange. China claims to be completing commodity purchases in yuan backed by gold when, in fact, they are actually buying oil indirectly with gold. This is unsustainable as an ongoing strategy for China.
What is occurring now is that countries like Brazil, Egypt, and India are considering joining a new Chinese economic system wherein the yuan is used exclusively for strategic purchases. The transactions are guaranteed by China. How? Manufactured goods are made available by contract for a guaranteed price. The yuans received can be used to buy any manufactured goods produced in China at a set price for a period of years. China reciprocates by directly accepting the partner country’s currency for certain strategic products. This allows the participating country to avoid exchange fees from their local currency into another medium of exchange (the dollar) in trade transactions.
The breakthrough for this new restricted economic zone is an agreement with Russia. Russia will sell oil to China in yuans. In return, China will provide manufactured goods pursuant to pre-arranged contracts. Segments of the pricing and reciprocal transactions will be redeemable in rubles. This is, in fact, one definition of a barter system between two sovereign nations. Russia pretends to sell oil to China in yuans. And China pretends to pay for it in yuans.
What is necessary for any economic trade system to work is access to food, water, and energy sold and transferred in a common currency. Brazil is intending to establish a currency based upon commodities to include wheat and soybean. This provides a key element for the Chinese economic strategy. China imports oil and food to meet its people’s needs. They struggle for clean water supplies. Access to oil purchased in yuans is accomplished with Russia. Brazil is key to solving the food issue.
Cozying up to China does not answer the question for Brazil and India as to how they pay off their sovereign debt denominated in dollars. China will advise them to default. No entity can repossess a nation-state. China will honor all currency arrangements and pre-arranged purchase contracts, regardless of any outstanding debt owed to the west. Given the United States’ insensitivity to the currency, inflation, and economic development needs of developing countries, the Chinese alternative, in terms of survivability, might become a more attractive option.
At the fall of the Roman Empire in the early 5th century, Rome had become imperceptive of the chaos that the Roman republic engendered. Rome had become so self-centered in reference to its own selfish needs of comfort, pleasure, and hedonism that it neglected the discipline of order that made it the ruler of the known world at the time. Further, the Roman people were tolerant of their leaders’ moral corruption.
Some historians argue that barbarian kings initially traveled to Rome to seek enforcement of existing laws in the outer provinces. Finding Roman leaders incapable of commitment to their own proven discipline, the next alternative was to invade Rome by force and take control of their own destiny. The Visigoths are credited with the fatal sack in 410 AD.
When rules of discipline break down, whether by the oppression of an excessive king or the lack of commitment by a sovereign nation to enforce eternal transcendent moral principles, subjects and or alliance partners will revolt to take control of their own destiny.
The United States of America is the only nation in the world that internally controls: an adequate means of production of food to feed the population, energy necessary to sustain its economy, a banking system to finance national commerce, and a currency of denomination capable of facilitating critical elements of international trade for its own economic independence (without exchange fees). Prudent management of these unique national resources and blessings is not only critical to America’s prosperity, but the world’s.
America has everything it needs under its dominion to remain committed to the principles that established it as the most powerful nation on earth. The United States does not have to compromise with any foreign government or influence to honor its founding principles.
Cutting the government deficit without cutting government services is absolutely possible. What is required is for the President and Congressional leaders to revisit the vision that made America great: individual determination, discipline to moral transcendent principles, family authority, and life, liberty and the pursuit of happiness. The attributes of these rights are not just ephemeral words. They are measures of foundation and purpose for government policy.
America has achieved great power. With great power comes great responsibility. Universal influence dictates that sensitivity and awareness of the impact of policy administered on those who are not only citizens of the governing authority, but on partners in the alliance of shared values, be managed righteously for all.
It now becomes every citizen’s task to be vigilant in selecting and supporting leaders in the 2024 election cycle. Every candidate must be vetted for true commitment to America’s founding principles. The success of the American Dream did not happen by accident. Respect for societal order, ordained by God, established government authority for protecting and advancing freedom domestically and throughout the world.
As citizens, not taking the democratic process seriously, and expecting others to produce desired outcomes without every citizen’s personal participation, will result in underwriting egocentric leaders who are oblivious to pain inflicted on their own citizens and alliance partners.
And, we know how that story ends…
Ask the Romans.
My name is Marc Nuttle and this is what I believe.
What do you believe?