Thursday, November 7, 2013

245. History of the much Obsessed U.S Dollar……!!!!!!!!

Why is world treating the U.S dollar as the piece of paper which has the signature of the Goddess of Wealth???

This write up is a little too long than normal please bear. I need to confess that this blog is not directly connected to spirituality and to know the history of U.S dollar and how it is made to be on the top read on…….

Long Long ago precious metals like gold and silver were treated as currency. For trading purpose they had gold and silver coins with the emblem of the kingdom which minted them. Ancient coins are proof for those. Then as time passed by promissory notes came into existence. People used to deposit gold or silver with someone whom they had trust and in return got a promissory note which had the mention of gold worth. That promissory note could be exchanged for gold in the other place with another person. They came to be known as trustees. The trustees would charge a small amount to safe guard gold. People felt carrying few papers were much more safe than gold.

Now there was a problem the people who exchanged gold to promissory notes did not come back for gold instead circulated the promissory notes among themselves. Trustees felt why not issue more promissory notes than the amount of the gold reserves they had? From there started the beginning of modern currencies and the banking system. Trustees simply issued more promissory notes thinking that no one will come back to claim the gold.

If all the people came back there was no enough gold to give them all but it never happened as none were worried about gold as long as the promissory notes were serving their purpose. And those promissory notes were given on loan to earn interest and people kept the promissory notes with the trustees to get the interest benefit. Those trustees sat fat on the gold reserves. Now promissory notes became the reserves to the bank and it was used to lend and earn interest. This is how the banking systems as we know today came into existence.

Even today banks keep only a fraction of the customer deposits in reserves and lend out all remaining money as loans to earn interest. Obviously interest on the loans would be more than the interest paid by the banks for the deposits made and this is how banks make profit and is able to pay its staff. The deposits are nothing but loan offered by the depositors to bank for which bank pays a small interest, and in turn lends that money to others for a higher interest rate.

In case borrowers don’t pay back the loan amount, then deposited money is gone! And that is what is exactly happening in US today in the name of Sub-prime crisis. Lehman brothers is an example of becoming bankrupt and American International Group was bailed out by the U.S Government because it was too big to be allowed to go bankrupt! How does the U.S Government bail these big bankruptcies? Simply by printing more dollars! In fact Billions of it!

Now why can’t other countries also do the same?? Print more currency!!!! It is not possible because our currency is just piece of papers outside our countries. Why is it so???

After the World War II world economy was devastated. All the gold reserves had ended up in U.S as all countries required U.S help to rebuild. U.S had the ambition to replace Great Britain as the world economic power as Britain has many countries in its grasp by that time including our country. U.S agreed to give a loan under Anglo-American Loan Agreement in 1946 which was cleared in 2006.  That was the start of Bretton Wood Agreement where all member countries had to trade their currencies against U.S dollar instead of against Gold or other world currencies. Ultimately a country need not worry if it didn’t have enough Gold to support its currency; all it had to do was to buy U.S dollar!

To buy dollar any country had to sell their products to U.S for cheap prices and this lead to competition amongst other countries. U.S got best of the world products for lowest prices. This situation went fine till one day the flaw in the system came out. Whole world exported goods to U.S it printed more dollars to satisfy its hungry consumers. But then according to the agreement the dollar was being supported by a promised denomination of Gold. But printing more dollars is not same as mining more Gold!

Unable to supply Gold at the time when Richard Nixon of infamous Watergate was President of U.S in 1971 U.S blindly refused to pay Gold for U.S dollars anymore. If any other country had done this to U.S, it would have destroyed it, but since it had great military power all other countries had to keep quiet. And all the other countries decided the exchange rates based on demand and supply principle for currencies. And then there was the fall of the automobile giant city of Detroit which turned it from automobile capital of the world to crime capital of the world. With Dollar losing it respect and U.S its grip on the world, Nixon then did another monkey trick. In 1970 fuel for transport was more important than Gold. Seizing the opportunity Nixon made an agreement with Saudi Arabia to provide technological and military assistance and in return Saudi had to trade its oil exports only in terms of US dollars.

Again U.S Dollar got back its valve and is still on the top but every time it is upheld it has been done with shameless acts of the U.S administration. U.S administration did not let any of the Saudi country to fall out. If any country dare with the support of U.K and few European countries that are its second fiddle U.S uses the reason of protecting the world from Weapon of Mass Destruction and Chemical weapon and crush them and gain back the supremacy. This write up may end but the immoral intent of U.S to keep its Dollar on the top never ends……

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