Global currency Game

Global currency Game

Currency today is not just a medium of exchange or store of value but it affects the fate of nations, oversees. Suppose you own few shares of a firm. Indeed you have ownership in that company, on papers, which will be diluted when the company decides to increase the number of shares. Same goes with currency. One greenback holder in Russia or in any part of the world actually holds representation of an asset in form of dollar. The asset, which backs, the dollar he owns, may be situated in his home country or somewhere overseas. Real owner of this asset is the one who enjoys the printing rights of greenback and that’s only in hands of US Fed. The moment US Federal Reserves decide to print more dollars will dilute existing ownership of dollar holders, keeping the number of economies constant, who use dollar as reserve money. It means each new dollar’s addition in money supply is actually stealing value from existing money, which is created out of thin air. Nations using dollars as their reserve currency are actually providing their assets to Mr Obama, to get his country out of crisis, at their expense, which his predecessor is responsible for, or to fund war in Iraq and in Afghanistan.

Lets understand it more through financial catastrophe, which begun from the US sub prime mortgage crisis, which has changed the world’s power-equation. Largest consumer economy is still in hot waters and those who have adequate domestic consumption are now preparing for their financial leap, as a leader. US economy seems unaffected despite $700bn Troubled Asset Relief program of Mr Henry Paulson, former treasury secretary of Bush administration and the efforts of current Secretary, Timothy Geithner. Obama ran for presidency, with accusing China as currency manipulator but then the Chinese Economic magnitude made him, to have a second thought.

There are good reasons to say “No”, to dollar now and that is exactly what happened in G20 meeting last April but efforts once again went in vain unfortunately because of politics and protectionism. Call for “a new global reserve system”, which triggered the demand to end the US dollar’s key position as international reserve currency, made by Zhou Xiaochuan, China’s central bank governor, was a turning point. Mr Putine, the Russian PM, on the other hand seconds the same call. Their words, however, seem louder than their actions because they did not materialize anything about it so far, not even, in the last sitting in Pittsburg.

China, the third largest economy and the world factory holds biggest foreign exchange reserve of over $2 trillion because the nation’s economic recovery prompted overseas investors to pump money into stocks and property. Furthermore china is the biggest foreign holder of US treasury paper. Recession although hits Chinese’ exports too but due to domestic consumption, it is still well-capable to grow. Fiscal package of China is working better than US package. Increase in China’s foreign reserves is a signal, that China is regaining investors’ confidence around the world.

The other side of the equation is the melting power. Economy with a largest fiscal deficit is now convincing major oil producer in Middle East that they still welcomes their business and they have a plane to come out of this economic tornado. The Arab states as a group are the biggest US lender after China. Indeed Timothy is no longer in a position to dictate terms but due to habit, behaving in the old fashion. The strengthening hand of US economy, the IMF and some other analyst have begun growth forecast but Timothy, feeling the heat, cautioned that healing is going to take more time. Moreover this economic crisis made World Bank handicapped as far as its poverty targets are concerned and decades’ homework went-in-vain.

The moment when world is feeding over six billion people, still increasing abnormally after western industrial revolution, with vibrant inefficiency and disparity in wealth distribution, where one percent of the population controls forty percent of the world recourses, it is clear that the repetition of recession will be relatively swift. The liberal economics is no longer in a position to answer these economic brutalities, with fractional reserve banking of a monetary system, intact and dollar remains the reserve currency, as a global wealth sweeper. It is time to free people from invisible chins of slavery, where bankers enslave nations through monetary system, where money is nothing but debt and debt is money. It is time to talk about real economics and not about financial illusion.