Wednesday, December 15, 2021

A Tale of Three Currencies: Ruble, Pound, Dollar

Soon after the 1917 Revolution, which brought the Bolsheviks to power in Russia, the Ruble collapsed. For ideological reasons, Lenin and Trotsky had sabotaged the Ruble by flooding the Russian economy with a massive amount of newly printed Rubles. They believed that once the Ruble became a worthless currency, due to inflation, they would have the power to create a communist society that was free of the taint of money. They planned to replace money with a rationing system based on coupons. Every citizen would get a certain number of coupons which they could use to procure their essential needs: food, housing, clothing, education, and other things. By 1921, it became clear that a nation without money could not function, and the Bolshevik government was forced to institute a new currency system.

The British were watching the Bolshevik experiment with interest. They decided to do away with the gold standard which had hitherto governed the monetary system of the Bank of England. The Bank of England had come into being in 1694 (four years after Britain’s defeat in the Battle of Beachy Head) when a consortium of English bankers gave a loan of 1.2 million pounds to the British Monarch at 8 percent interest. In return for the loan, the bankers were granted the monopoly on issuing banknotes. The bankers now had the right to monetize and circulate the royal debt. Thus, the British pound, which was based on the gold standard, was born. It went on to become the most stable currency in the world. In 1931, the British government stopped using the gold standard, and in 1946 the Bank of England was nationalized. 

The Americans were inspired by the Soviet and British experiments with paper currency. In 1933, they partially unpegged the dollar from the gold standard. In 1971, they unpegged the dollar fully. Since then all currencies of the world have become part of the global floating fiat currency regime. The greedy British and American establishments had thought that by unpegging their currencies from the gold standard, they would be able to transfer their inflation to other countries. They had underestimated the political and financial acumen of the Asian countries. While accepting massive tranches of American and European inflation (through their paper currency), the Asian nations managed to pull in a large number of American businesses. The result was that America lost most of its industries and the Asian nations became an industrial powerhouse. 

In the third decade of the twenty-first century, the endgame of the currency wars is being played. At the center of the battle is the American dollar. Since the dollar is the world’s most heavily traded currency, the American government has little control over its value in comparison to other currencies. Since 1933, the dollar has been fluctuating freely but its long-term trend is of continuous decline. Any geopolitical or economic crisis could lead to a stampede from the dollar. The American government will not be able to stabilize their currency. The dollar will die (so will many other paper currencies), and this will mark the end of America and the West. In the last twenty years, most major economies in Asia (and even the large multinational corporations) have been making extensive preparations for a post-dollar and post-America world.

The fall of America (and the West) will create new opportunities for mankind.

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