The End of the Dollar System

The End of the Dollar System

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The dollar reserve currency system is a “product of the past”—but what will emerge to replace it?

This week Chinese President Hu Jintao is being wined and dined with a lavish state banquet at the White House and other official ceremonies usually reserved for America’s closest friends and allies. Why all the pomp and circumstance? One must be very polite when entertaining your banker—even if you don’t like him and he doesn’t like you.

Yet there is another more ominous but closely related reason Washington is rolling out the red carpet for China.

For years, China has warned America that its support for the dollar was not unconditional. The warnings fell on deaf ears. Reassured by academics and New York Times columnists that China was virtually forced to lend money to America, Washington embraced a borrow-and-spend policy that would have destroyed any other currency.

Then last year, when it became clear that America could not borrow enough money to pay the bills—it stepped boldly across the Rubicon—declaring that the laws of paper money no longer applied to the mighty dollar. Supply and demand, and America’s creditors, be ignored: America would just print up whatever money it needed to pay the bills. $900 billion—75 percent of America’s borrowing needs—would be conjured out of thin air, declared Federal Reserve Chairman Benjamin Bernanke.

The world was shocked that America would so callously abuse the world’s reserve currency. France, Germany, Russia and China were outraged. But Americans were reassured that the world is caught in a dollar trap and can do nothing about it.

And so far, things have worked out pretty well for America. With several European countries falling apart, the dollar has firmed up, and safe-haven money has continued to flow into America.

But is it possible that Washington might just now be starting to experience nagging inklings of doubt?

As the Washington Post wrote on Sunday, “strange things are happening in Europe—none stranger than the emergence of China as the continent’s sugar daddy.”

But wait a minute! I thought China was America’s “sugar daddy.” Which is it?

Just follow the yen—or perhaps more accurately, look who’s getting the sugar and who isn’t. In July 2009, China held $939 billion worth of U.S. treasury debt. More than a year later China’s holdings have fallen to $895 billion. This is big news—and surely isn’t lost on Washington. For more than a year, America’s most important creditor has stopped lending new money to America. And the money that it has previously lent to America, it has been rolling over to short-term loans as opposed to long-term.

Instead, China is investing its money, and its confidence, in Europe.

Today, Europe matters more to China than any place in the world—including America. That might come as a shock to some, but it shouldn’t. With 400 million First World consumers and the world’s largest economy, the European Union is by far China’s biggest export market. As American politicians continue to lambaste China for unfair trade policies, China’s trade with and attachment to Europe grows daily.

It is a reciprocal relationship, too. China now directly holds over $900 billion worth of eurozone national debt. In Greece, China is investing billions more as it attempts to build the Mediterranean port city of Piraeus into the “Rotterdam of the south,” and create a modern-day silk road linking Chinese factories with consumers across Europe and North Africa.

Most importantly, China has thrown its weight behind the euro.

Canada’s Globe and Mail reports that Vice Premier Li Keqiang’s recent trip to Europe literally transformed “Europe’s economic picture to an extent that no other foreign figure” has done. Li, China’s third in command, has in short, “become Europe’s rescuer.”

At a time when some commentators were predicting the collapse of the eurozone, Li, who is a favorite to become the next prime minister of China, appeared to throw China’s $2.85 trillion worth of foreign exchange reserves into Europe’s breach, promising to be a committed and responsible long-term investor in Europe. icbc bank, China’s largest lender, quickly followed suit, announcing that it will move full force into the eurozone. It will open its first-ever branches in France, Spain, Italy, Belgium and the Netherlands. It has already opened offices in Frankfurt and Luxembourg.

Li’s support is already paying dividends in Europe. With interest rates coming down from recent highs and successful debt auctions, Spain and Portugal got a welcome taste of what several billion euros’ worth of Chinese “sugar” can do. The sugar rush is an experience America has become dependent upon but has been doing without lately.

But China’s support for Europe is also creating some toothaches. “We hope that the EU will relax restrictions on high-tech exports to China and develop trade relations that are balanced and sustainable,” wrote Li last week. China not only wants more trade, but wants access to Europe’s defense companies.

Europe seems all too willing to do business. The EU’s Foreign Minister Catherine Ashton has already called for abolishing Europe’s arms embargo with China. Reportedly, American officials, who have to deal with a rapidly growing Chinese military presence in the Pacific, are furious.

But it was what Hu Jintao told the Wall Street Journal and Washington Post just prior to his arrival in Washington that should have all Americans preparing for one massive sugar crash. He raised important questions over the future of the dollar saying that it should no longer be used as the world’s reserve currency. It is a “product of the past,” he said. It is time for a more fair and balanced system. In a reference to American “money printing” he specifically said America needed to watch very carefully what it does.

But what does China think should replace the dollar? Hu himself said it wouldn’t be the yuan. What does that leave?

Follow the sugar.

“The euro will overcome the region’s deficit crisis,” assured Song Zhe, China’s ambassador to Europe, back in December. The cementing of the euro’s status will “promote the building of a diversified global currency system.”

Remember: When anyone talks about “diversifying” the global currency system, by definition it means ditching the current system—which is the dollar.

And China isn’t alone in shifting support to the eurozone. Just last week, Japan announced that it too would be stepping up its efforts to back Europe by purchasing eurozone debt. According to Reuters, Japan will purchase 20 percent of soon-to-be-issued Eurobonds. The Eurobonds would be jointly issued and backed by all members of the eurozone—creating a new debt market that will directly compete with U.S. treasuries. In case you are wondering where Japan would get the money to purchase Eurobonds, as America’s second most important lender, it has a whole stack of treasuries it would probably love to “diversify” out of.

If the world wants out of the U.S. dollar, there is only one viable paper alternative: Europe.

According to Li Daokui, an academic member of the Chinese central bank’s monetary policy committee, Americans only have months to prepare—while Europe works to get its act together. “For now, market attention is still on Europe and for the coming 6 to 12 months, it will not shift to the United States,” said Li on December 8. “But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. treasury bonds and the dollar will experience considerable declines.”

Strange things are happening in Europe. Now you know why. The international monetary system set up at Bretton Woods in 1944 is on the verge of breaking down and the dollar will soon be fighting for its survival as the world’s reserve currency.

America Has No Stronger Ally Than the French

America Has No Stronger Ally Than the French

Jewel Samad/AFP/Getty Images

President Obama snubs Britain again.

“We don’t have a stronger friend and stronger ally than Nicolas Sarkozy, and the French people,” U.S. President Barack Obama told French President Nicolas Sarkozy on January 10.

The British conservative press was, understandably, livid.

“Just what is Barack Obama’s problem with his country’s longest-standing and most loyal ally, Britain?” wrote James Delingpole in the Daily Express. “First he insults our prime minister, then he allows one of his minions to say that there’s no such thing as the special relationship; and now he goes and declares that his newest, bestest friend is not Britain but perfidious France.”

“I’m getting a bit fed up with the American president using terms like ‘best ally’ so loosely,” said Conservative Member of Parliament Patrick Mercer. “It’s Britain, not France, that has had more than 300 servicemen killed in Afghanistan. That to my mind is a lot more powerful than any political gesture making.”

“And what about that marvellous alliance forged during the Second World War between F.D. Roosevelt and Winston Churchill?” Delingpole wrote. “What about that even more special relationship developed in the ’80s between Ronald Reagan and Margaret Thatcher, when together they won the Cold War? What—apart from the sneaky support it offered during the War of Independence and the War of 1812—has France ever done for the U.S.?”

Michael White, writing for the much more left-wing Guardian, says the idea of France being America’s strongest ally is so ridiculous Obama cannot have really meant it. “But saying that the volatile Sarko, a right-wing populist, and the anti-American French governing elite—much more of a cadre than our own—are America’s strongest allies (or one of several such if you want to read it that way) is demonstrably silly,” he wrote.

He and many other commentators point out that Britain backed the U.S. in Iraq and sent 10,000 troops to Afghanistan, suffering 349 deaths in Afghanistan alone. France sent 3,850 men, all members of the catering corps according to White, and suffered only 53 deaths.

Of course saying that America doesn’t have a “stronger friend and stronger ally” than France is different to saying France is America’s strongest ally. But even to say that Britain is not a stronger ally than France implies there is no special relationship.

Also, it must be pointed out that this type of language is typical of the diplomatic tone adopted by world leaders. For example, when talking about Japan, former U.S. President George W. Bush said: “We had no stronger ally—and we still have a strong ally in Prime Minister Abe, by the way, from Japan—but no stronger ally in recognizing that democracy is the long-term solution to defeating this ideological enemy.”

That’s not quite the same thing Obama said, but uses similar language. In July last year, Obama used similar language to describe America’s relationship with the UK: “In short, the United States has no closer ally and no stronger partner than Great Britain. And I appreciate the opportunity to renew our relationship with my partner, Prime Minister Cameron.”

Nonetheless, as many of the British commentators picked up, Obama’s remarks in France are not a one-off statement, but the latest in a string of snubs and rejections of Great Britain. When viewed as part of that trend, it is yet another piece of evidence that the special relationship between the UK and the U.S. is over.

Ratings Agencies Warn U.S. on Debt

Ratings Agencies Warn U.S. on Debt


Moody’s Investor Service and Standard & Poor’s ratings agency warned on January 13 that America could lose its aaa credit rating if it fails to reign in its debts.

“We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase,” said senior analyst at Moody’s, Sarah Carlson.

“The U.S. is going in exactly the opposite direction from fiscal consolidation,” said one of the authors of Moody’s report, Steven Hess. “In fact, they are going for more stimulus to the economy.”

In an unrelated event, the head of Standard & Poor’s France, Carol Sirou, said there was a chance America’s debt rating could be lowered in the future. “We can’t rule out the possibility that maybe one day we might have to change the outlook,” she said.

“The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar” to support its debts, she said. “But that may change.”

Sirou plays no role in deciding America’s credit rating, however, and was reiterating comments made last year by another S&P official John Chambers, who warned that no aaa rating was guaranteed forever.

The U.S. does have a serious debt problem. A Financial Times illustration available here illustrates the size of the U.S. debt.

Chairman of the Joint Chief of Staff Mike Mullen warned last year that he saw the risk of America’s debt limiting its military as the “most significant threat to our national security.”

Last month, an 18-member bipartisan committee found that projected tax revenues in 2025 will only cover interest on America’s debt and its entitlement programs. “Every other federal government activity—from national defense and homeland security to transportation and energy—will have to be paid for with borrowed money,” the committee warned.

“By 2035, rising debt could reduce gross domestic product per capita by as much as 15 percent,” writes the Financial Times. “That would imply a harsh reduction in Americans’ standard of living.”

But America won’t have until 2035 to fix its budget. As British historian Niall Ferguson warned, historically financial problems don’t lead to a slow decline. Instead, they lead a nation into a quick, catastrophic fall.

For more information on the urgent dangers that face the U.S., see our article “America: Only Two More Years?

Why Natural Disasters

Why Natural Disasters

William West/AFP/Getty Images

Devastating floods affecting three continents are having drastic impact on both national and global economies. Why this surge in “natural” disasters?

Dramatic images of the devastating floods in Queensland, Australia, were transmitted globally over the past two weeks via the mass media. While the floods in Australia got the big headlines internationally, far greater loss of life was suffered as a result of massive floods and mudslides in Brazil. In recent months, floods in Pakistan, Colombia, the Philippines and Sri Lanka have also impacted huge swathes of those countries, disrupting thousands of lives, leading to many deaths and much property loss.

The difference between the floods in Queensland and those in other regions recently hit with unprecedented monsoon rains is the extent of damage to not only Australia’s national economy, but also to the global economy that has resulted.

For years Australia has placed its economic eggs in one basket, that of the export of raw materials—essentially coal, iron ore and other minerals. The fact that Queensland produces around half of the world’s coking coal, which is used to make steel, has already escalated the cost of both coal and steel globally.

Queensland’s Premier Ann Bligh told Australia’s Seven Network television station, “Seventy-five percent of our mines are currently not operating because of this flood, so that’s a massive impact on the international markets and the international manufacture of steel.”

The national growth rate of Australia’s economy is expected to be reduced by a full percentage point due to the Queensland floods. The Queensland Resources Council has said the floods have already cost $1 billion in delayed coal production, while the state’s resources minister says the industry is losing $100 million a day.

Over the past two decades, record losses have increasingly been posted globally as a result of so-called natural disasters. Each year brings more disasters that set new records in their devastating effects.

What’s it all about? Why this surge in “natural” disasters over the past 20 years?

Well, it’s certainly not “global warming”! But that’s another story, which we have reported on in the past.

Statistics prove natural disasters have risen startlingly since 1990. In a law-abiding universe, there has to be a reason for this.

During the 40 years preceding the decade of the 1990s, there were 142 classified natural disasters in the United States. During the 10 years of the 1990s alone, there were 72. The decade that followed from 2000 to 2009 saw some of the worst and most destructive natural disasters in recorded history around the globe. This trend continued and even escalated in 2010.

On reflection, clearly 1989 was a watershed year, a threshold from which natural disasters escalated most dramatically compared to past eras in recorded history.

Destruction of rural land, devastation of food stocks, damage to agrarian and industrial infrastructure, negatively impacted distribution systems, resultant food shortages, escalation of food and livestock theft, all these are results of an increasing rate of weather-related catastrophes sweeping the globe.

Why such drastic escalation in natural disasters since 1989—earthquakes, tsunamis, destructive storms, floods, fires, mudslides, extremes of temperatures—which take the figures right off the record charts since statistics began to be recorded?

Well, there is a reason. But it is only apparent to those who, in unbiased, clear-minded fashion, link the facts on the ground with the history of the past and the reality of inerrant Bible prophecies for the future.

Why can we point to the year 1989 as the break point, the watershed, from which there have been 20 years of rapidly accelerating incidences of disaster across this world?

Jesus Christ showed the Apostle John, in vision, a keynote prophecy for our day forecasting that we would reach a time when events He had prophesied for our generation would be no longer delayed. Referring to that prophecy, which is contained in Revelation 10, our editor in chief has declared, “We are in a time of no more delay (verse 6), and I believe that is the major reason why our commission has changed from preaching the gospel around the world to prophesying again (with the emphasis on warning)” (Prophesy Again: God’s Commission to His End-Time Church).

To a mind truly opened to receive and understand Bible prophecy, one can easily prove that the prophesied “time of no more delay” began on Dec. 7, 1989.

A study of our books Mystery of the Ages and Raising the Ruins clearly exposes this. Add to those The United States and Britain in Prophecy, and the picture as to the reason for today’s escalation in natural disasters becomes clear.

Ever since December 1989 the world has increasingly destabilized—through accelerating natural disasters, political upheavals, wars and rumors of wars, economic and financial disaster and great moral and social disintegration.

This will continue until humankind gets the message—the message that there is a great omnipresent, omniscient Creator and Sustainer of this universe who created humankind with an incredible human potential—a potential to which man remains blinded by a power set on destroying it! (John 8:44).

It is the blind rebellion of humankind against their Maker that is causing so many curses to befall man in our generation. And that rebellion has been led by the very nations that should have shown and taught people of this world how to live in subjection to their Creator!

As a result, God declares great curses on those nations because of their national rebellion against Him (Deuteronomy 28). That’s what’s really behind this current escalation in natural disasters.

The work that sustains this website, the Trumpet magazine and the Key of David television program, exists for one reason: to expose to this world the fact that there exists an all-powerful God “Declaring the end from the beginning, and from ancient times the things that are not yet done, saying, My counsel shall stand and I will do all my pleasure” (Isaiah 46:10).

Only when one’s mind is opened to that great, overarching reality can one comprehend why natural disasters, what is their true source, where they are leading in the immediate future, and the great result they are designed to achieve, ultimately, for all humankind.

The Commandment That Safeguards Marriage

What God joins together let not man put asunder.

Anti-Israeli resolution on its way to UN Security Council

The Palestinian Authority announced today that it will ask the United Nations Security Council to deliver a resolution condemning Israel’s construction of settlements in the West Bank, the Jerusalem Postreported.

The bold move disregards a U.S. plea for the PA to withhold presenting the proposal to the Security Council. “The Americans don’t want us to present anything to the Security Council,” chief plo negotiator Saeb Erekat said. “But we made it clear to them that, for us, the Security Council was a gate to international legitimacy.” The date for the resolution is yet to be determined, but Erekat said that PA representatives will hold consultations with other UN members in New York on Monday.

This stealthy maneuver by the Palestinian Authority further exposes its unwillingness to conduct serious negotiations with Israel. Historically, the UN has never been a great ally to Israel, and has in many instances been a willing instrument in the hands of Palestinians and other anti-Israel states seeking to undermine, marginalize and persecute the Jewish state. Based on its track record, it wouldn’t be surprising if the UN once again casts aside objectivity and sides with those seeking Israel’s destruction.

Moreover, the blatant disregard of Washington’s request reveals the eroding influence of America’s diplomacy in effecting any change in the peace process.

Continue to watch as the Palestinians garner greater international support in their case for statehood, in the process sidelining the United States as a legitimate broker for peace and turning the world more against the Jewish state.