In earlier
times, money as a medium of exchange and store of value was made of
precious metals like gold and silver. Indian rupee, Indonesian rupiah
derive their names from Rupa meaning silver. Dollar (US, Australia, Hong
Kong, Singapore) derives from thaler named after Joachimsthal in
Germany, where silver mines were located and from whose silver the
currency thaler was made. Spain’s currency peso (?origin of paisa)
equivalent to a gold piece of eight or eight reales (presently Brazilian
and Iranian currency) and Britain’s guinea were tied to specific weight
of gold. The rigid grounding of currency to gold or silver content and
value, allowed negligent inflation over centuries except when there was
a severe imbalance of supply and demand, as in crop failures or
aftermath of devastation by war or plunder. The Indian rupee was valued
at five to a dollar in 1968 and deficit spending and renouncing the gold
standard let it debase to fifty a dollar two years ago (Currently $1 =
Rs.40.00). The abandonment
of the gold standard by America with profligate deficits has devalued
the dollar from 350 yen to a hundred yen and from twenty-five cents for
one Deutschmark, to a 1.6 dollars for one current Deutschmark (Euro),
the present German currency.
The idea behind the Bretton Woods agreement after WW2 was that exchange
rates between currencies should be fixed and some restraint maintained
on large capital transfers. Since the US owned half the world’s gold and
was the largest creditor nation, whose currency the dollar was
exchangeable for an ounce of gold for thirty-five dollars, the dollar
was granted the status of the premier reserve or international currency
to replace the British pound, tottering on its last legs due to wasteful
spending in two world wars to destroy rising Germany to maintain British
world hegemony and empire. The sorry consequence was loss of empire and
status, to being the current lapdog and spear carrier of the newest
white hunter America, now following in the predecessor’s footsteps even
more quickly in time. America misused the international reserve currency
status of the dollar to prosecute the Vietnam War under President
Johnson without raising taxes to fund the war. He had a benign excuse
not to raise taxes, because he was trying to improve the living
standards of poor Americans by his great society programs.
The result was rapidly rising inflation and trade, budget and current
account deficits with cantankerous DeGaulle (and other nations) lining
up at the gold window to exchange a pile of dollars. Nixon slammed the
window shut and laid the foundation for floating currencies. He and his
surrogate president Ford with repeated and possibly crippling head
injuries sustained in his prior football career, failed to tame
inflation leading to an upset victory by the pious but incompetent
Carter who lost to Reagan, the demented ideologue without any sense or
compass for right and wrong. Federal Reserve Chairman Volcker, an
intelligent and honest public official (a rare breed) raised interest
rates into the stratosphere (Prime lending rate 21%) to choke and
squeeze out inflation. The dollar shot up in value and idiot Reagan with
typical Republican incapability of thought, cut taxes immediately with a
promise to cut spending later, which he failed to deliver. He increased
defense spending massively and bankrupted the Soviet Union, mired in a
losing war in Afghanistan. He also sowed the seeds of a future US
bankruptcy.
The current idiot heir of Reagan blessed with congenital retardation
instead of his mentor’s dementia, is stuck in two losing wars
(Afghanistan & Iraq) and a sinking economy, has doubled the rate of
deficits to a trillion dollars per year. The newest Republican primate
moron contending for the presidency wants to cut taxes even more and
possibly start a third war with Iran while prolonging the present two
wars to hundred years or more. He probably wants his name in the
Guinness Book of records to replace the perpetrators of the Hundred
Years War. Why is there such a large prevalence of severe mental
handicaps in Republican candidates for the presidency or does it extend
even to the entire party? In addition, recent Republican presidents
think little of the Constitution they are sworn to uphold and even less
of the Bible they swear by and on.( Nixon and his tawdry burglaries and
secret bombings in Asia, Reagan and his Iran Contra and midget Bush and
his use of fear to illegally spy on US citizens, torture and commit war
crimes in contravention of Geneva Conventions)
In defense of the Democratic contenders, one has to concede that they
are only stupid and dishonest at worst and evasive and liars at best.
The Republicans are honest in that they unequivocally announce in
advance that they intend to cut taxes. Once they win the election they
fool the public that their taxes are cut more than those of the
Republicans’ rich donors who keep them in power. Thus the US electorate
is stupid and gullible as Bill and Hillary Clinton have proved by
masquerading as Democrats while they follow Republican policies of
further enriching the rich by robbing the poor. Barak Obama is no less a
hypocrite in his health plan and Middle East foreign policy. Some naive
and trusting people believe that he is playing this game to win the
election and then he will show his true populist colors. He has the same
Wall Street, Hollywood and trial lawyer donors to whom he will be
beholden. The young dreamers are destined for disappointment and
disillusionment like the serial monogamist on his umpteenth marriage,
banking on hope over experience.
Some Policies
Let us look
at Egypt (an autocratic corrupt tyranny posing as a democracy and with a
suppressed press), India (a democracy of corrupt leaders and foolish
ignorant voters without a genuine press) and the US (a plutarchy
pretending to be a democracy with ignorant and foolish voters with a
conniving and colluding press assisting the elite). Mubarak and his
predecessors started food and fuel subsidies to numb the populace and
make them turn a blind eye to the corrupt leaders holding power by
manipulation. Presently Egypt spends nearly 200 billion Egyptian pounds
subsidizing food and fuel for the poor. Its increasing population,
reduced domestic grain harvest, rising grain prices, under and
unemployment and rising religiosity bode an uncertain and violent
future. The US Congress policy of mandatory ethanol production for a
third of its gasoline replacement, is causing higher grain prices in the
world and increasing hunger and unrest all over.
A subsidy policy for cooking gas and kerosene, a refusal to pass on the
increased crude and cooking oil prices to consumers, providing sugar and
fertilizer subsidies to companies, lead to burgeoning current and future
budget deficits which this time the Indian Congress incurs and bequeaths
to future governments and generations, merely to improve their chances
of re-election in 2009. As kids in an English school we had to remember
collective nouns for various animal groups, like a flock of geese, a
pride of lions, a herd of cattle. From this and the previous paragraph,
the reader should not be surprised that the collective noun Congress is
used for a congress of baboons. How about a BJP of seniles, a SP of
crooks, a BSP of demagogues and a CP of fools?
Every individual US taxpayer has to report and pay taxes on all income
anywhere in the world. The Congress however exempts US corporations from
paying taxes on the earnings of their foreign subsidiaries as long as
the profits are kept abroad and local taxes are paid. This is why many
US multinational corporations have wholly owned subsidiaries abroad and
in tax havens like Bermuda, Channel Islands etc. This allows them to
shelter income abroad, some of it by transfer pricing. A drug company
can buy cheap base chemicals from India, transfer them at a minimal
profit to a tax haven from where it can sell the same unimproved product
at an exorbitant profit to the US, where the final product is
synthesized and again sold at a minimal profit. The largest profit is
garnered by the subsidiary in a tax haven, Many insurance and
re-insurance companies are based in Bermuda and even tool making and
engineering companies have their headquarters (a few rooms or mailbox)
in Bermuda, while their manufacturing, sales and administrative offices
are in the US.
The crowning indecency and shamelessness of the US Congress are-1) they
have attached many more billions in complete giveaways to automobile and
homebuilding companies as amendments to the bill to save homeowners in
default or foreclosure with a few billion in loans and 2) the piece de
resistance is that after an unprovoked attack on Iraq which is a war
crime, followed by causing the death and displacement of millions of
Iraqis, now they not only want to stay longer in Iraq which the Iraqis
do not wish or want, but they want Iraqi oil revenues to pay for the US
occupation. This is like a robber who enters a man’s house, kills some
of the occupants, drives out some more, then rapes the homeowner’s wife
and demands payment from the husband for protection of the woman, which
includes regular raping of the woman.
Traps
Finally, when
a party consistently spends more than it earns over a prolonged period,
commonly it declares bankruptcy as Argentina did some years ago. Britain
in its textile, dye and spice trade with Bengal before 1757 and its tea,
silk and porcelain trade with China in the nineteenth century was
depleting its gold coinage, so it conquered and de-industrialized India
to become an exporter of raw cotton and importer of British cloth. It
grew opium in India and forced Chinese into drug addiction to improve
its trade balance. Another option that America uses is to support
corrupt dictators who undersell their country’s natural resources to
enrich themselves individually. It helps them retain their corrupt power
while impoverishing the population. This policy has been followed in
Latin America, Middle East, Southeast Asia and Africa. A final and
newest strategy is direct unprovoked attack for conquest and direct
control of resources, as with Iraq. Reneging on debt with implied use of
force is the final alternative I outlined in my
www.atimes.com
article “Hobbesian Hell In The Making”.
As many economists and policy mavens have presaged, the large US dollar
reserves that China, India and other developed countries are
accumulating to finance US extravagant spending at the cost of depriving
their own economies are nothing but fool’s gold. The recent brouhaha in
Congress about restrictions on investment in the US by sovereign wealth
funds, the denial of purchase of Maytag and Unocal to China and port
management to Dubai Ports World and the newest rule changes by the
German Parliament, remind me of the ironic fate of the betraying spy in
the movie “Five Fingers”, who is paid by the British with
counterfeit money for betraying his own country and weeps for the rest
of his life for the ironic wages of his sin.
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