Global financial events may appear to be removed from working class life. But we need to get better informed about how international finance operates and affects us, so that we can more quickly join up the dots…
Something significant is afoot in global finance. It relates directly to workers’ daily battle with inflation, potentially also having far wider impact.
What does it matter that many G20 member countries, as well as others, are buying gold? This is happening at a volume greater than at any time since the 1950s. And it is occurring while those countries outside of the G7 (the group of seven leading capitalist countries) are simultaneously reducing their US dollar reserves and pricing their exports in their own currencies instead of accepting the dollar as a means of payment.
This ongoing change in international practice may seem innocuous and inconsequential. But if this continues, it will cause a massive change in the international monetary system. And that has the potential to result eventually in a significant improvement in independent everyday life – an undoubtedly welcome turn of events.
Discontent
The US dollar has been the international currency of choice since the Second World War under the Bretton Woods currency agreement. The move away from it is multi-faceted and the grounds for discontent varied.
Some countries are completely dissatisfied with US “casino capitalism”. Others are no longer prepared to put up with a financial dictatorship brought about by weaponising the dollar through what the US describes as the “rule of law”.
The US legalistic logic is that the dollar is the property of the US government and any use of US property makes it the legal business of the US government.
This legal construct is not based on international law or within the spirit of the 1944 Bretton Woods agreement. Instead the US position rests on what it claims as the “rule of law”. The US and their globalist allies consider it legitimate, even where other countries use dollars to trade with each other but have no US connection.
US sanctions
Currently about 3 in 10 of all countries face sanctions applied by the US through its self-declared legal reach. As far as the US is concerned, any country in the world is a potential future sanctions target. And its sanctions are often backed by US or NATO military intervention.
In polite circles this is called “US exceptionalism”. The proper, and clearer, description is that it is an attempt at US dictatorship. In practice, the US authorities are always looking for someone to sanction on some or other pretext once they have worked out the advantage to the USA.
Since the early 1980s, successive US administrations have deliberately shorn their own country of its industrial base. And over that period its national debt has risen to over $30 trillion. The dollar is by no means a safe financial bet for the future.
Instead, countries outside of the G7 are discovering their own value. This is based on the knowledge that if their country is productive in raw materials and commodities, then their own currency will be internationally respected.
This is simply because people will know that such a country’s currency is based on a tangible value, which includes gold reserves. In effect those countries are saying that the raw materials and commodities they export are no longer going to be priced and exchanged for an essentially worthless US Dollar devoid of tangible value and backed by nothing.
It should be apparent that removing the dollar influence opens the door to political and economic independence. Britain needs to become involved in this movement as a means of rejecting bloc politics once and for all. In effect Brexit from the dollar and US economic hegemony.
From a British perspective it is important to recognise that Britain is currently importing from the US a part of the inflation we are now experiencing. And that’s true for other countries too. This is due to the current economic role of the dollar.
‘The US dollar works like one big Ponzi scheme…’
The cost of printing the dollar is trivial in comparison with the value of the products that the US can buy with those dollars. In the case of Britain, the US can, and does, buy British assets at virtually no cost. In that way the US exports its money-printing inflation to Britain. It can only continue to do so provided the dollar is accepted.
This is not primarily about buying goods. US “investors” are hoovering up manufacturing businesses and property in Britain – our future productive potential – as well as plenty of retail firms and sports clubs.
There are wider impacts too. Because raw materials across the world have been priced in dollars, then dollar-denominated price hikes are cost neutral for raw materials imported to the US. On the other hand, for Britain and any other country whose currency has fallen against the dollar, raw material imports priced in dollars are inflationary.
Simply put, the dollar for the US works like one big Ponzi scheme. It can only be reversed where the amount of dollars thrown into world circulation are no longer used. They would have to be repatriated to the US, forcing them to deal with their own currency. A complete turnaround from the present situation where the US says to the rest of the world in respect of the export of inflation, “it’s our currency and your problem”.
Those in Britain fighting for wages and seeking to widen trade union influence need to take these factors into account. And come to that, anyone in Britain who sees the importance of basing manufacturing, research or other economic activity here and values national independence.
Out of NATO
This has implications too for anyone seeking to get Britain out of NATO and to put an end to imperialist war adventures. The US is by far the main contributor to the NATO budget. If the dollar can be dumped as a means of international settlement it will also help end US military might.
Foreign countries with trade surpluses (exporting more than they import) have in the past parked their monetary surpluses by buying US Government Treasury Securities (“Treasuries”). This has been considered a safe class of asset that paid interest.
Another attraction has been liquidity. Those countries holding US Treasuries could quickly sell their holdings on the open market if that country suddenly needed cash for another purpose.
For many years this process of buying and holding US Treasuries has allowed the US government to use other countries’ trade surpluses as a means of running deficit funding for the US industrial military complex and thereby NATO. In effect other countries’ trade surpluses have been used to fund military aggression.
British workers need to quickly join up the dots between pay disputes and inflation and the global economy. In that way we can start to gather an integrated set of operating ideas to counteract and pull away from an unfolding global economic mess.