Using Economics, Not Bombs, for Defense

The United States has been in a unique position to counterfeit its currency ever since August 15, 1971, to spend unlimited amounts of money for “defense,” which in reality is “offense.” That was of course a result of President Nixon unilaterally removing gold from international money and then sending Henry Kissinger off to Saudi Arabia to construct a petroleum-backed dollar. Since the dollar was essentially a worthless unit of account after 8/15/71, something had to be used to ensure there would be a constant bid for the buck. By getting OPEC to agree to demanding payment for oil in dollars and to use the military might to enforce the petrodollar, the U.S. was able to finance endless wars and the expansion of its empire up until now.

Russia and China know they cannot compete against the military might of the U.S., which, thanks to the Military Industrial Complex, is hell bent on creating a one-world government with themselves in fact in charge. Should it come as any surprise that the Chinese and Russians are not all that comfortable with that notion? Of course they are sick and tired of Americans encroaching on their own boundaries. And so they are competing as best they can, not with military might. In fact they are engaged more in a true defense of their own sovereign rights than is the U.S., which is expanding its empire through endless wars and the creation of hell on earth of millions of citizens.

In addition to the physical infrastructure spelled out above in the CNBC article, the Chinese and Russians are indeed building up commercial institutions and markets to compete economically with the U.S.  When the U.S. threatened to cut Russia off from the SWIFT international payments system, that prompted the BRICS to set up their own. And they are setting up institutions akin to the World Bank and IMF to enable the BRICS to compete on an even playing field. Except they have one big advantage, at least in terms of economics. While the U.S. has most likely gotten rid of most of its gold, the Russians and Chinese are building up huge gold reserves even as they reduce trade between themselves using petrodollars. In fact, some are speculating that Russia is building up its gold reserves in part from the sale of oil to China in exchange for gold while China is the largest gold producer in the world. Not only that but China has been encouraging its citizens to accumulate gold. 

It is interesting to note that perhaps the most influential economist in China, namely, Major-General Qiao Liang, has said Nixon’s August 15, 1971, decision to close the international gold window was more important in terms of determining the future of global politics than either World War I or World War II. Personally I think he is right, except I would say that it was only a result of the outcome of World War II that the U.S. was in a position to be able to rob the rest of the world of its rightful wealth. But there is no doubt that if the international monetary system had remained in a gold standard, we would live not in a bi-polar world but in a multi-polar world that is much more balanced and fair than the world we live in today. Additionally, the U.S. would have remained closer to the wishes of our Founding Fathers, who hoped we could keep our Republic. They had no desire to see the U.S. become an empire.

But alas an empire is what we have. The U.S. is simply demonstrating that empires do very nasty things to the rest of the world. A day of reckoning may not be far away when the Military Industrial Complex becomes starved for lack of funding and when the dollar is no longer acceptable in the international community. After all, why would other countries continue to fund the Military Industrial Complex if its sole purpose is to destroy those nations? Indeed over the past two years, there has been a 12½% net reduction of foreign funding of the U.S. Treasury and this is happening at the same time that social security trust funds are dwindling and QE is supposedly no longer taking place.

Interest rates “can’t” rise much more than they have or the entire system will blow up, thanks to the massive amount of debt created post 1971. There would appear to be absolutely no alternative policy to the age-old process of governments printing massive amounts of money to lessen debt loads. That being the case, the only rational move now is to use your fiat dollars to buy tangible assets that have value and cannot be inflated away, starting of course with gold and silver.