David Hines
Sanctioning collapse
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By David Hines
June 3, 2012

A number of politicians are adamant about imposing and enforcing economic sanctions upon Iran and other nations. Are these people suicidal or just plain garden variety crazy?

It is believed that because the dollar has served since World War II as the world's reserve currency, denying others its use is a source of power. A glance at economic reality suggests otherwise.

Money creation, a.k.a. "quantitative easing," is destroying the value of the dollar. This is becoming apparent to ever more people around the world. The dollar has retained some éclat only because there has not yet arisen a credible competitor. The dollar, backed by nothing tangible but rather only by the government's ability to tax and/or confiscate, relies upon faith for its perceived value.

So despite the requisite hope that people trust the dollar enough to keep using it, these political hacks tell people, "No, you can't!" Talk about shooting oneself in the foot, or in this case the part of one's anatomy near which one keeps one's wallet.

People are economic creatures. One cannot efficiently produce everything one needs; exchange is a virtual necessity. Trade must continue, regardless of politics. In the absence of usable currency, alternatives arise.

When the British crown concentrated on coining gold and silver for the aristocratic trade, commoners hadn't enough small-value coin for business. Coppersmiths filled the need. They minted copper coins that became quite popular. Trade continued in the absence of government-approved money. Eventually the crown asserted its monopoly over money, making the practice illegal. The coins continued to circulate anyway.

In colonial America currency included tobacco, beaver pelts, and whiskey. The last was the cause for some contention and repression in the newly-formed United States. Many currencies circulated freely. The Spanish silver peso was the most common; its weight and fineness was adopted as the measure of our original dollar. The dollar sign is believed to represent the Pillars of Hercules (the straits of Gibraltar) wrapped with a banner — a stylization of the coat of arms of Charles, Holy Roman Emperor and King of Spain.

Some might think it coincidence that nations proposing trading oil in currencies other than dollars were labeled Axles of Evil. Such faith in fortuitous coincidence is probably why people keep playing the lottery, expecting the big win any day now. US policy has been geared to keeping the dollar linked with the oil trade ever since Nixon abrogated the Bretton Woods agreement.

Ever fewer nations are playing along with our politicians' nutty hubris. Some sought and received exemptions from the sanctions on Iran, dependent as they are upon oil from that supplier. Others, including China and nuclear-armed India, are ignoring US sanctions, trading with Iran in their own currencies and in gold. Large buyers of dollars, most notably China, are quietly cutting back on their subsidization of US debt.

We might have been able to depose Saddam Hussein and Muammar Gaddafi, but the Chinese and Indian governments would prove to be a far more difficult task. Even crazy people with guns and money-printing presses cannot hold off reality forever. Propping up a rapidly depreciating dollar, even with guns and drones, is a losing proposition. Denying others the ability to use it, if they're crazy enough to want to, only hastens the demise of the dollar's reserve currency status. When we can no longer export our inflation, we shall see close up what crazy looks like.

© David Hines

 

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David Hines

Born in a mill town, David Hines has seen work as a furniture mover, computer programmer/analyst, and professional musician... (more)

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