Story Teller: The US Dollar SCAM

Ever heard about the US dollar scam? Yep, the US is the soil of the greatest scams ever imagined.

Here is how the US dollar scam works:

Background

· The USD was chosen (forcefully imposed) as the world reserve currency back in 1944 at Bretton Woods. This is because the US had over 20,000 tons of gold - the biggest gold reserve at that time (70% of all the gold from global reserves).

· The US was decided to pay $35 for an ounce of gold.

Preconditions of the scam

· The USD acted as a scam even at that early stage. The Fed (US Central Bank) printed money out of control and the US gave these papers in exchange for real goods. Now, the essence of this scam here and later is this - to print money (just some fake papers made of textile) in exchange for real goods. To avoid inflation inside the country, the US exported its inflation in Europe and Japan under the Marshall Plan and other projects, providing grants that totaled $50 billion within some years. So, the US printed papers and granted Europe only with certain conditions of course (they shaped the EU politics in fact).

· The French President de Gaulle and other leaders from other countries wanted back their gold in exchange for USD at $35 per ounce, as agreed earlier. This is where the US gold reserves got reduced and the US was scared, so that it wanted to get out of Bretton Woods agreement. In 1971, Nixon announced that the US won’t give its gold in exchange for USD and the latter has value by itself (see Nixon shock). Basically, the US printed so much money that its gold couldn't back even a small portion of USD supply. The US tricked the world.

The scam rises under petrodollar

· So, the US basically betrayed the world renouncing international gold standard. Under these conditions, the inflation would go so high that the US dollar would lose the biggest part of its value. But this can’t happen when the smart guys manage the US. So, while the US dollar was not backed by gold and the US decided its dollar can be a floating currency (fiat money), the US decided to make some agreements with Saudi Arabia. The US would give Saudis a lot of stuff (much of which is secret till today) and all the Arabs had to do was this:

1. The Saudis agreed to price all of their oil sales exclusively in USD

2. The Saudis would be open to investing their surplus oil proceeds in US debt securities

· Soon, more OPEC (oil producers) countries joined and they benefited from US protection in exchange for selling their oil exclusively for USD.

The scam

Now, here is how the scam works. Since the US saved its ‘thing’ by replacing gold with oil, it could print money at will, and it never stopped since then. The US prints papers and can buy as much oil as they want. Also, the US could print money to buy all the stuff on earth. How this happened? Well, think about China - it’s a big big country that required huge investments in infrastructure. In short - it required “infinite” oil. So, China would go to the Arabs and would ask for oil - the Arabs would say they sell only for USD - the Chinese would go to the US and would ask for USD so that they could buy oil from Arabs - and finally, the US could print its money and buy everything China has to offer. The same is true about Japan and many other countries that don’t have oil. So, since Japan and China needed so much oil, they said to the US - let us sell all of our stuff to your country so that we could accumulate more USD. And the US said - yes! that’s what we wanted! So, this is why China-US economies are so tied.

And this is why the US is called a consumption economy (consumption accounts for 70% of the US GDP) while China is called a production economy (consumption accounts for only 34% of Chinese GDP)