The World's Reserve Currency: American Ideals

The gloom and doom forecasters have plenty of data and evidence on their side. The unconscionable Obama/Reid/Pelosi levels of spending and borrowing, and their socialist philosophy to suffocate the private sector through regulation and the denial of capital, combined with the Fed’s ‘quantitative easing’ have set a horrible stage for a possible financial collapse of unprecedented scale. America cannot pay its debts except by printing money, but has a government that does not grasp the gravity of what this means in its national and international ripple effects. Alternatively, America has a government whose principal puppet master George Soros DOES grasp the gravity of what this means, and is pushing hard to make it happen.

Either way, there is no shortage of predictions of riots in the streets, food shortages, shut off of electricity, hyperinflation, etc., etc. A potential trigger of all this disaster is said to be the world’s collective move away from the US dollar as the world’s reserve currency—a move would have radical repercussions on commodity prices, especially oil.

We’ve already posted one shot at this doom and gloom scenario, here, and will take it up again. All dimensions of this forecasted disaster are possible, but none are inevitable. In the simplest of terms, there is always time to do the right thing. The national tea party movement is now driving national politics, and the killing of the lame-duck Congress’ criminal spending ‘omnibus’ bill is the latest proof. It shows there is not only a growing awareness of the fiscal train-wreck that has been created, but the beginnings of the leadership backbone necessary to stop it. It must continue, it must increase in energy and intensity, and it must be sustained for at least a decade. But more specifically as to the fear of a move away from the US dollar as the world’s reserve currency, we understand the secular economist’s view that this could happen, that there is nothing about the US dollar that makes it any different than the British pound sterling of 150-200 years ago—which was essentially the world’s reserve currency and then fell out of favor, causing enormous dysfunction in Britain’s economy. The strength and desirability of the US dollar is fundamentally a reflection of confidence in the government and national culture that stands behind it, and there are abundant surface-level reasons for a massive loss of confidence in the US government and culture over the last decade or more, and especially during the two most recent years of radical leftism controlling all branches of government.

But dig a little deeper, and the real foundation for confidence in the US government and the US national culture is the set of founding ideals of America: that all men and women are created equal by God; that God endows mankind with inalienable rights to life, liberty and the pursuit of happiness; that ‘human flourishing’ will follow when government is limited so as to maximize individual freedom and responsibility under God. These are not trendy, transitory ideals; they are true, and they are not going anywhere. They are unsurpassed and unsurpassable; there is no higher or better formulation of society’s organizing ideals in China, India, Brazil or anywhere else.

Americans have drifted from those ideals, and the result has not been good, and these past two years have taken the nation to the fiscal and moral brink. But the past two Obama years involved such an aggressive and obvious fraud, such a flagrant and hostile attitude toward American ideals, such an accelerated agenda to 'fundamentally transform' the nation, that Americans have been shocked and awakened out of their stupor, and are taking action to reclaim their country and its ideals.

Truth is always true; American ideals are grounded in truth; and nothing inspires more confidence than the acknowledgement of and adherence to truth. All of that may sound as if it’s outside the boundaries of economics or the monetary system, but it’s actually at the core of it.

As the American government catches up to the American people and their awakened determination to honor their founding ideals, the US government’s fiscal house can and will be brought into order. Because it is the founding ideals that are humanity’s last, best hope; the basis upon which trust between people is built and progress made possible. Trust between people is in turn the foundational element by which a ‘medium of exchange’, or currency, can come into being. Which is why we say the world’s reserve currency is really American ideals, and an America that lives by them.

There is a lot of evidence that Americans are eager for and are rising to and pushing for a return to living by those ideals. That’s why the entire scenario of financial collapse triggered by a move away from the US dollar as the world’s reserve currency is not inevitable; in fact, at the deepest level, it’s not possible.

Paul Gable

December 17, 2010