RIP: Adieu to the euro and the dollar?

Professor David Harvey’s rich fact-filled book The Enigma of Capital (2010) raises many interesting questions with his customary Marxist twist on the current global financial disorder. Not the least of these is a smoking gun which he implies points to some hidden hand directing events, rather than common or garden market turmoil  Specifically: when Lehman Brothers was allowed to collapse in 2008, was that a deliberate act by the US authorities to spread the contagion of financial collapse around the globe, like some toxic treacle? And if so, why?

The answer may be appearing before our very eyes, with the dollar and the euro seemingly locked in a mutual death spiral, or as others put it, suicide pact. As usual it is essential to filter out the white noise to understand what is really going on.  Certainly from Lehman onwards the talk of a single global currency migrated from the loopy fringe to standard mainstream discussion promoted by all the ornaments of one-world utopia: the IMF, the World Bank, the Bank of International Settlements (BIS – ‘the holy of holies’ central bankers’ bank’) and of course the usual UN panel of housetrained wise monkeys.

We have been in this territory before. As WW2 drew to a close the post-war world was already a vast construction site. Illuminati from all corners of academia sprung forward in droves proclaiming the usual aim of ‘never again’, particularly the horrors of another apocalyptic Weimar. In these shining moments, it seemed at last possible to conjure forth a Camelot of order and stability, managed by an entirely new constellation of global managers. No-one present at the great round table held at Bretton Woods in New Hampshire in the summer of 1944 had any doubt at all they were laying the foundations of future world government.

Certainly not the towering British economist John Maynard Keynes who, like his alter ego, Karl Marx, consistently strode ahead of his times. Both men kicked over the traces concerning the vagaries of the capitalist system and the instability of money. Keynes, drawing on his magisterial work The General Theory of Employment, Interest and Money (1936) held that another Great Depression could only be avoided if the world held to a systematically reliable form of exchange, which naturally dictated an overarching global currency.

Keynes’s answer was to get to this promised land by the special deposit reserves to be held by the new-born IMF, denominated in dollars, yen, pound sterling, the French franc and the German mark. The SDR, as it came to be known, actually was from the start a parallel world currency in waiting. Keynes wanted to go all the way and make it one, there and then.

The US would have no truck with this seditious scheme, so demanded and got a gold-backed dollar standard linked to fixed parities. The imperial dollar would be the future planetary currency, once the British Empire had been liquidated, the Soviets licked into line and ditto the Chinese. The Marshal Plan, which was nothing more than one vast dollar-laundering swindle to reflate American commerce and industry, would take care of Europe.

So the SDR was relegated to the back burner as a technical unit of account, although very importantly it was also a denominated currency recognised by international standards

Time then for Cinderella to come to the Ball? It is if fairy godfather Dominique Strauss-Kahn, the present managing director of the IMF, hardline European federalist and current chairman of Bilderberg, is to be taken at his word. In February the former French finance minister flew a kite suggesting a revamped SDR Mark Two as a replacement to the dollar, which in former times would have had him blind-folded and shot, or more appropriately in his case, guillotined, right outside the IMF’s swish DC headquarters.

Not content with that, he called for management of the euro to be depoliticised with the aim of containing risk, which is IMF-speak for reducing friction between different currencies. Like, having just one.  So, he wickedly implied, in future a body like the IMF could do all the heavy lifting. The often confusing policies of  the European Central Bank concerned him much less than the wayward tug of the European Council of Ministers which is, foremost, the often discordant voice of the member states, lugging around as they do all their traditional nationalist and populist baggage.

Well, so it was until the so-called reforms of the Lisbon Treaty installed a permanent council presidency which is currently occupied by Herman ‘Van Who?’ Van Rompuy, a re-cycled drop out from the obscurities of Belgian politics who eerily resembles one of the goblin clerks at the Wizard Bank in the Harry Potter films. He just also happens to be a top-notch Bilderberger. So much so that he was personally vetted by a specially convened Bilderberg conclave just eight days before his unanimous endorsement by the College of 27 European Cardinals early in 2010.  

Almost the first thing Van Who blurted to the microphones .- reading straight from the Bilderberg script - was to declare that ‘the day of the sovereign nation state is over’ and ‘Europe is the blueprint for future world government.’  

Hallelujah! Within ten months he would be scampering around like Chicken Little, beating his chest and announcing the euro would fall unless the stubborn Irish swallowed the banking bail out medicine prescribed by the IMF and the EU.  The salient observation here is obviously that if takes just one minor outlier of the great Euro Zone, and only 2.5 million people, to wreck European monetary union, is not the entire edifice built on sand?.

Van Who’s cacklings  were merely window dressing to rush the EU into the iron corset of  full fiscal union, complete with euro bonds, an all singing and dancing EU Treasury and a debt union, the full monty, to stop the present largely ad hoc arrangements busting apart at the seams.  As Lenin famously said, why let a good crisis go to waste? The establishment economist Willelm Buiter, arch druid of what Orwell derided as the money-priesthood, is one of those no-alternative men who are often called to light a certain path. Jump start fiscal union, he says, or face the consequences.

The EU’s fractious history suggests that would in the normal run of events involve years of haggling and horse-trading. In fact there is a little-noticed clause buried deep in the Lisbon Treaty to allow retro-engineering of the pact, in emergency circumstances. Here we seem to have the exact mechanism to trigger fiscal unity and suck in all  the fringe monies – the pound sterling, all that loose change washing around Scandinavia, even potentially the Swiss franc – at the same time. How convenient and timely.

At this point  I part company with all the official explanations – and the largely infantile mainstream media coverage – as to what is really going on. In short order the panic spread from Greece to Ireland, then Portugal, Spain, Belgium, with even the UK and France hovering in the wings, to say nothing of the grotesque fiscal imbalances wracking the former states of eastern and central Europe so recently welcomed to the fold. To me the crisis has all the bearings of  a toolkit for world currency union with Made In Wall Street stamped all over it.

In any event this is a double crisis is it not? Budget deficits and improvident governmental management are a crisis of one magnitude, and important in their way. Germany for example has one of the world’s largest current account deficit accounts but seems not to be unduly panicking about that. America has been running gigantic deficits for ever and getting foreign central banks to pick up the tabs. The real crisis we are looking at now lies in the malignant assets which suddenly and I argue suspiciously – and that is the right word – swamped bank balance sheets around the globe.

Going back to Professor Harvey’s smoking gun, was Lehman Brothers the starter’s pistol for the currency wars plaguing the world and the massive concentration of resources in the banking system which is now going on? Is the euro being deliberately tanked along with the dollar by these so called rescue bail-outs? Was the recent Sino-Russian deal to bracket their intertrade in yuan and roubles instead of dollars part of some grand plan to torpedo the buck? Is it a co-incidence that as the year opened, Strauss-Kahn reminded the world of the SDR as a potential reserve currency over-riding the existing currency arrangements?

And Herman Van Whoseit  over there in Brussels. Was he doing his level best as a loyal Bilderberger to talk the Euro down, as a prelude to forcing the pass to fiscal union.?

At practically the same time, both the Russians and the Chinese, who could normally be expected to steer well of a blatant imperialist plot, instead beamed warmly on a global currency, knowing full well an upgraded SDR is the only game in town.

The explanation may not be too difficult. Both are substantial creditors of the US Treasury. It is also important  to understand that somehow the US must escape permanent impalement on its $13 trillion massive deficit hook and there's no way that is practical in terms of paying it back. In terms economists use, China’s massive holdings of American bonds are a form of rent, so it would be a severe blow if a huge default blew away all the landlord’s precious assets.  This is another argument for dumping the dollar in favour of a safer and deeper store of value.

Remember the US has actually defaulted in recent times, in 1971when Richard Nixon abruptly scrapped the gold standard and the Bretton Woods fixed parities based on it, because Fort Knox was left with echoing vaults after shovelling huge quantities of precious metal at America’s menacing bond-holding landlords.  Since then America’s debtors have been paid in paper fiat money, which as Marx foretold is a road with only one ending. A sharp dive over the precipice. It works as anyone can see just so long as creditors believe what they are told about the strength of the dollar – which means, of course, the US’s ability to fund her debts from the proceeds of the economy.  When the world lost faith in the quality of pre-war German debt the result was Weimar and hyperinflation. Ron Paul hit the nail on the head when he pronounced recently that the Fed was up to the old alchemy of monetizing debt via the printing press. “The Fed gets a bill then they print the money to pay it.”

As I wrote in a previous post, my first one this site, I suspect that we are nudging Weimar now, not least because the euro is trapped – or led by the nose - to a similar trough as the dollar. From the perspective of Beijing and Moscow, the transference of debt risk to the ultimate Big One – global currency union – would not only monetize the rents in a safer form but steer looming hyperinflation away from their own economies.

Let’s shift a gear or two. The elites never really tell us what is going on. At the moment they are taking every opportunity to marginalise the masses, except  picking their pockets in the enormous smash-and-grab transfer of wealth from the many to the already well upholstered few. If they do have a marvellous new super-currency up their sleeves then you can bet this will not be for the hoi-peloi. I am quite sure we will see a double-barrelled system.  The upstairs one for business and commerce and the transactions of the rich upper crust.  For the rest of us in the basement,  it will be barter coin or scrip, which we lowly creatures can exchange at company stores – Wal-Mart and Tesco, to give but two choice examples – for our daily mean necessities.

Have no doubt this toy money will be connected to the value of labour so the devil take the infirm and elderly. Yes, you may say slavery now.

Did you ever wonder how it was these monopolistic megaliths spread so far, so quickly, unless as cogs of some future rationing device? And are officially nourished McDonalds, Pizza Hut and the likes our soup kitchens of the future? Never forget, control food and other essential resources such as power and especially heating and you control society.  Effectively, the world of the wealthy will re-monetised by global currency union while we, the plebs, will be de-monetized.

The band wagon is already rolling. Professor Kevin Anderson, Director of the Centre for Climate Change Research, just published a paper for Britain’s Royal Society (founded by King Charles 11 in 1660 as a beacon of the Enlightenment) containing one of those elliptical dodges to justify rationing of everything from food to travel by any form as a means to curb greenhouse emissions, like a wartime emergency. Consumers in the developed world will take the pain though not those classed as emerging economies, who may continue pumping gas to their heart’s content.

No, this isn’t a trick of the light, and nor is Anderson some nutty professor. He knows perfectly well that the global corporatocracy will not allow any meddling in the resource-laden developing world, with its splendid absence of regulatory and environmental nosey parkers. He also knows full well that a system which, as he himself puts it, will

enforce a drastic change in lifestyle for millions of people could only be imposed by the most draconian authoritarian methods.

I am no climate change denier. I incline to the Snowball Earth theory triggered by the Gulf Stream and its companion the upper atmosphere Jetstream shutting down –which they already are.  The consequences may be on us sooner than we want to think. So there’s another reason for the hassle to dock the dollar and the euro in a hurry, while the remaining independent currencies scurry for cover as the battle shapes up for the future control of resources in a shrinking habitable environment.

In 1944 at Bretton Woods Keynes proposed a World Currency Unit, which he called the Bancor. Last year no less a person than Zhou Xiaochuan , the governor of the National Bank of China, declared it was time to revive the long sleeping brainchild of Keynes. Dominique Strauss-Kahn was evidently thinking along exactly the same lines in talking about a re-engined SDR. Indeed it seems there is an astonishing degree of  global acceptance that the time is ripe, bearing in mind it would be relatively simple to renovate the existing IMF reserve structure. The motives may differ at least to some extent but there seems to be a rapidly developing willingness to travel the same road.

Keynes did not see the likes of ourselves shelling out our precious Bancors on the weekly groceries or a tank full of gas. The old currencies would have hung around for that purpose. Token currencies in all but name, their original purpose as basic units of account having over time, faded away.   This time around it is likely to be very different, due to rampant population growth (at 6.3 billion, practically doubled since 1944), severe and increasing pressure on basic resources (water, food, land, oil) and the advance of climatic disturbances, which taken together form the basis of Kevin Anderson’s rationing proposal.

Rationing units then become naturally monetized (as they were in WW2) as tokens of real exchangeable value. Everyone had so many points they could spend on basics such as meat and groceries or clothes and fuel. This time around technology will endow each individual with a smart card charged with allotted allowances in the essentials, loaded towards the more useful elements in society.  The same technology will act as a spy in the pocket on everything we say or think. In time it can even take the form of rechargeable chip buried somewhere in the body and even reduced to the glance of an iris.  It will be impossible to practice counterfeit as identity theft. The relevant capabilities all exist now, just as we appear to be hurtling to the fabled imposition of a global currency.

The future is black.