Over the past century, a vast movement to liberalize global capital markets has been underway, with the object of increasing capital mobility to the point where sudden shifts in capital flows could have untold consequences, causing exchange rate volatility, disrupting world trade, and creating an artificial need for a common currency. This was seen with the recent implosion of the US housing market and its profound impact on foreign stock exchanges. Germany, Belgium, and the Netherlands all initiated bailouts comparable to our own. In effect, the present crisis was created for the intended solution -- a global currency that would dissolve national sovereignty.
This is no longer merely an academic question. World leaders are gathering on our soil next week to urge global investors to abandon the US dollar as the preferred reserve currency in favor of an internationally traded currency unit similar to the Euro. Americans must be ready, or what has already happened in Europe will happen here.
But since Americans will not adopt a unitary medium of exchange on a whim, a real or perceived need for the switch is a necessary prerequisite; hence the push to liberalize capital markets by the same individuals promoting global financial integration. It was planned that uncontrolled capital flows would eradicate the influence over national exchange rate policy of even the most potent central banks, and clinch the case for a common monetary policy. In fact, such excuses for the surrender of national sovereignty are already being practiced by the financial elite. In the May/June 2007 issue of Foreign Affairs, the flagship journal of internationalism, Benn Steil, the Director of International Economics at the Council on Foreign Relations, advocated the end of "monetary nationalism". Steil contends that nationhood is "the source of much of today's instability." Like other academics, Steil sees national currency as a "symbol" of national sovereignty. In reality, it is one of the most important attributes of sovereignty. President of the European Central Bank Wim Duisenberg recently said that "monetary union" must go hand in hand with "political union." In a similar vein, Zanny Minton Beddoes, the Washington Correspondent for The Economist, declared:
"Over the past five years, financial turmoil has shattered the semi-fixed exchange-rate regimes that much of the developing world once favored...in the face of massive capital outflows." Beddoes continued, saying, "Countries can either allow their currencies to float or...attempt a currency union. But the muddled middle ground, so popular in the years when capital was less mobile, has been wiped out by technological innovation and policy liberalization."
Indeed, the real impetus toward an international monetary regime has been in the latter category: policy-driven liberalization. This is because technological innovation can't open markets. Only policy can do that. Bi-lateral Investment Treaties are perhaps the best example of policy-driven liberalization, as they consist of a pledge to remove preference on national investors, and treat foreign investors equally. Most Bi-lateral Investment Treaties have only been signed in the last decade, growing from nearly 100 in 1995 to over 2,500 Net International Investment Position (NIIP) now stands at -$2 trillion. This means that foreigners own our GDP, and then some. A good portion of the present crisis is the result of Fed metaphorical printing of worthless dollars to "monetize" our nation's federal debt. But creating money out of nothing creates inflation, which displaces jobs, causes bubbles, and makes our creditors' investments less secure. This vicious cycle has existed since the creation of the Federal Reserve and is one of the primary causes of the Great Depression, a fact acknowledged by Chairman Ben Bernanke himself. But the lesson didn't stick. Bernanke has presided over one of the largest money pushing schemes in history, rivaling post-WWI Germany. The last year for which data are available show the Fed printing money at an annual clip of 20 percent.
Additionally, as part of President Obama's fiscal bailout, the Federal Reserve is printing $2 trillion in a single year. This is significant in the context of the current move by world leaders to abandon the US Dollar, since over 40 percent of all American stocks, bonds, and securities are owned by foreign investors. Most of the world is currently dependent on exports to the United States. To prop up the world's export dependency, the US must run deficits. The debts are then balanced by selling treasury bonds and other investments to the foreign dependents, mainly China, in an arrangement referred to by economic insiders as the "balance of financial terror."
The system is currently stable, but if the trend continues, the nations that benefit from our spending binge may in the long run have more dollars than they want to hold. Eventually, this could result in a massive "flight" from dollar-denominated assets, known as the "doomsday scenario". We've already been warned by Chinese Premier Wen Jiabao, who said, "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets." In the eighties, former Secretary of State for Economic Affairs Robert Cooper proposed the creation of a "common currency for all the industrial democracies." Cooper mourned that "it is highly doubtful whether the American public...could ever accept that countries with oppressive autocratic regimes" should have a vote on US monetary policy. During the Clinton years, Secretary of the Treasury Lawrence H. Summers got in on the act. Summers contended that the US should emphasize "integration and public action" by "reducing national sovereignty", listing monetary union as one example. In other words, centuries' worth of hard-won independence should be surrendered because a theory of questionable validity dictates it. Summers is now one of President Obama's chief economic advisors. Former Trade Representative and current President of the World Bank Robert Zoellick believes that the present situation requires "concerted global action now, not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again." According to Zoellick, the problem "has been a manmade catastrophe and responses to overcome it lie in all our hands." The common currency movement is gaining momentum. China's central bank chief yesterday posted an essay on the People's Bank of China website arguing for an end to "credit-based national currencies". Chairman Alan Greenspan is urging OPEC nations, large holders of American debt, to abandon the Dollar for a regional currency.
Behind many a political solution is a manufactured crisis. The engineered capital crisis is no different. In short, our nation's financial elites know all too well that globalization, liberalization, and integration are merely the tools being used to facilitate the consolidation of all political and economic power in the hands of an unaccountable world conglomerate, whose designs are not yet visible.