Page 2 of 2 SPEAKING FREELY The evil of the US dollar
By Asif Salahuddin
Thus under the above equilibrium, the banker's currency and hence the banker's
wealth will flourish. However, if ever the other buildings stopped trading in
his currency and set up their own ones, particularly the building which drives
the micro-economy in the community (namely the paraffin-producing one), the
banker's influence and wealth will shrink drastically.
If the banker could not persuade the other buildings to continue with his
currency, especially the paraffin one, whether politically or commercially,
then the banker would end up using force (as a criminal) as a last resort to
make sure that they do not switch
over to their own currencies.
This entire scenario may sound like a fantasy when considering reality. Yet it
is not a fantasy - it is happening right now and on a global scale. The banker
is called the USA and the currency in question is of course the US dollar.
At the close of World War ll, the US had managed to place itself in the
position where its currency was effectively the reserve currency of the world
via the Bretton Woods agreement, but was still linked to the gold standard. It
was not until 1971 that the Bretton Woods agreement between the major world
powers was abandoned on America's initiative. From this point onwards, the US
dollar was no longer backed by the gold standard; that is, unlike prior to
this, on demand one US dollar would now not yield its supposed value in gold.
The thinking behind the Bretton Woods agreement, enacted in 1944 in the US, was
to ensure that all the major currencies in the world would be backed by the
gold standard, thereby theoretically assuring that no country would be able to
print its currency freely. But as the other powers in the world declined in
their influence, and as the US simultaneously gained further hegemony globally,
the agreement was broken at America's behest.
The US was fundamentally able to resort to this scenario due to the
Organization of the Petroleum Exporting Countries (OPEC) agreeing (in 1971) to
trade oil in US dollars. By now, having the sale of crude oil barrels,
relatively costly and traded in their millions per day, in dollars, the US
currency was now an essential requirement to facilitate trading on an
international level. Not only was crude oil now traded in dollars, but other
major commodities also followed suit, including gold.
Almost 40 years on, due to a mixture of reckless lending practices,
fundamentally flawed trading processes of the likes of short selling, credit
default swaps, derivatives trading and so on, the Western banking system has
been placed on the verge of collapse due to the gigantic losses the banks have
incurred.
Despite dictating their capitalistic philosophy globally (forcing Third World
countries to liberalize their markets by removing trade barriers, allowing the
privatization of state assets at heavily reduced prices), when their turn has
finally come, the Western governments are hypocritically demonstrating that
they are not prepared to let their financial institutions collapse by being
subjected to the much-advocated force of the free market.
Apart from the plugging of a few holes via various investment means (including
getting funds from Gulf nations), the Western banks have been essentially left
with no option other than to go with begging bowl in hand to their respective
governments and plead for bail-out packages. The governments in turn, having
close ties with the elite of the financial world and to avoid a run on the
banks and total economic pandemonium engulfing their societies, have in turn
been left with no option other than to plough billions of dollars, pounds
sterling or Eros into the banks.
Most crucially, if the funds to raid from do not exist currently, then the
governments are resorting simply to printing the money and injecting it into
the system. Recently, the US government announced a US$700 billion bailout
package for its financial sector. In reality, according to some financial
experts, the US government is actually pumping a fresh $400 billion a day or $2
trillion per week into the system.
This injection of readily created capital may stave of the banks from
collapsing at the moment, but in reality all that has happened is that the
problem or debt is being passed from one entity to another. As the money is
printed and fed into the banks to avoid them collapsing, the money will then
find its way into the economy.
As this is happening, inflation is taking root as ever more paper currency is
chasing a static number of goods and services. The result of which will be only
one thing - hyperinflation around the world, including Western economies, in
the coming months and years. Thus the current deficit problem of the banks is
effectively and criminally passed on to the masses.
Make no mistake - this is theft, and a theft on a colossal and universal scale.
And it is a theft of a unique nature, not being possible beyond the workings of
this model.
There is no need to take possession of the physical sums of money individuals
in the society may possess. But rather, whether people's hard-earned funds are
placed in vaults or under mattresses, the value or purchasing power of these
savings is gradually being siphoned away by those who are the recipients of the
newly generated funds, which is to say the banks. The more dollars that are
printed and placed into circulation, the more the value of existing dollars
(and currencies which are pegged to the dollar, such as the Saudi riyal) are
being stolen.
What countries around the world urgently need to do is to ditch the US dollar,
particularly the Middle Eastern states. As long as they trade in the dollar,
they give it strength. Furthermore, since they, along with the Chinese, have
some of the largest reserves of dollars that exist (earnt through the sale of
physical assets and services), they are only losing out as America criminally
dumps more such dollars into the world.
Even if today the Western world were to revert to some form of a Bretton Woods
model, reintroducing, for example, the gold standard with regard to currency,
then there still will be no guarantee that this would not again be brushed
aside at some future point if any one of these powers gained greater global
dominance relative to the others.
The real solution is to deal with the actual underlying capitalistic model that
legitimizes such behavior. We must recognize now that, as with the communist
system before it, capitalism has proven to be a failure. The world must now
search for another model to govern its finances.
We have this in Islam. To summarize, in an Islamic economic system, the gold
standard is compulsory, thereby preventing the generation of unsupported paper
currency. In addition, Islam does not permit the various aforementioned
capitalistic trading practices as undertaken by current day banks, which are
effectively bringing down the Western economic system. Moreover, unlike a
man-made system, the principles in Islam (the sharia) are unchanging; therefore
Islamic rules will remain in effect no matter what the situation.
Asif Salahuddin (asif@evocadrinks.com) is an electronic engineer
by profession. He is currently the operations director of an international
beverages company based in London, UK.
(Copyright 2008 Asif Salahuddin).
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