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Sunday, December 10, 2023

Decline in value of US currency

The mere change in currency valuation is more than enough for the US to earn

The trickiest strategy adopted by central banks is to unilaterally measure the value of the currency based on what the monetarists call as international reserve currency.

The denomination of the US dollar as international reserve currency came about not as accident but the result of a celebrated design.

First, the US was the only industrialized state that came out from the ravages of the Second World War.

Second, its manufacturing industries were able to escape the destruction of World War II and in fact tremendously grew in number.

Third, the post-World War II era saw the formation of huge financial capital such as the creation of the World Bank and the International Monetary Bank.

The two banks through the Bretton Woods Agreement gave the US the authority to fix the value of the US dollar at $32 per ounce of gold.

Fourth, since the US was given unlimited use of the currency to carry on its enormous international trade and banking transactions, the US dollar became the accepted international monetary system of exchange.

Consequently, the US, through the US Monetary Fund, eventually and automatically fixed the value of its US dollar as against any other currencies.

This gives the US a chance to measure its economy based on its gross domestic product (GDP) instead of the country’s gross national product (GNP).

Many opted to this measurement much that nobody could question the authenticity of the US economy, it being the biggest industrial and leading manufacturing economy in the world.

The US, being the financier of the World Bank and the IMF, stood to back up its own economy, no different from China’s position as the broker of the global project known as Belt and Road Initiative, and to the gargantuan New International Bank.

It was this economic opportunity that unilaterally gave itself the right to peg the value of the dollar against other currencies.

Nobody dared question the power of the US to adjust the value of the dollar to a price that other currencies are willing to pay in the market.

Other countries have no much choice.

The power of the US dollar over the currencies of other countries allowed it to dictate the value of export of other countries.

This resulted in the gradual reduction of exporting countries to the US; narrowed their export and value of their products; and most detrimental, this drastically hampered their own economic development.

It denied them the right to develop and expand the variety of their exports particularly against the US that often have their own natural market monopoly to limit exports of other countries.

As this uneven cycle of trade persists, the US, through the World Bank and the IMF, is able to dictate the price of the export commodities.

As a result, exporting countries end up having a limited export products that are awfully pegged at a low price.

Thus, exporting countries are forced to unilaterally adjust the value of their currencies to increase their exports.

This is also the consequence of having low value exports.

As their last remedy, they are forced to devalue their currency, which decision generally affects the entire economy of the country.

This way, lending countries are often not directly blamed for the economic catastrophe.

The US and other imperialist countries have found this method as their very tool to manipulate their economy to their own advantage.

This explains why countries unable to pay their loans often end up in the saying of having chained themselves in a debt trap.

The US has once decoupled the gold to the US dollar.

This happened in 1973 when the US experienced a huge trade deficit because of the Vietnam War.

The sale or exchange for gold in dollars was prohibited. Practically, the US monopolized the sale and exchange of gold.

The US virtually violated the Bretton Woods Agreement in 1946 where it pegged the value of gold at $32 dollar per ounce.

Only the US was allowed to do purchase the gold in the market and at the same time allowed it to print the US dollar by way of “quantitative easing.”

Nobody questioned that unilateral decision of the US despite the fact that the US simply measured its economy based on its GDP which in the 70s sharply declined because of the rising economies of Japan, South Korea, and Taiwan.

This explains why the new members of BRICS are calling for the introduction of a new reserve currency.

As stated, the unilateral decision of the US to arbitrarily increase the value of their currency resulted in the detriment of the borrowing and developing countries, and they make profit without adding value to their products.

The mere change in currency valuation is more than enough for the US to earn.

It is in the value of the currency of some countries that they either earn or incur loss.

Continuous change in the rate of exchange results in such astronomical profit for both the exporting and importing countries.

Developing countries are always at the mercy of the US.

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