I am done with inflation. It is now time for me to study the value of US dollar from the speeches of Congressman Paul. The speeches are taken from Part 5 of the book, Pillars of Prosperity. There are actually 6 speeches concerning the value of the US dollar. I selected the longest one, which Dr. Paul delivered in February 15, 2006 at the US House of Congress. Its title is The End of Dollar Hegemony.
Meaning of Hegemony
I first encountered the word “hegemony” while taking my Ed. D. at AGST. Despite of repeated reading and listening, still I find it hard to remember the exact meaning of the term. When I encountered the word again in my study of Pillars of Prosperity, I tested my memory if I could still remember the meaning of the term.
Hegemony to me is a kind of unjust or oppressive mainstream practice or system that the victims of it delight in perpetuating. Then I checked the meaning of the term in the New International Webster’s Dictionary and Thesaurus. The definition given is “predominant influence of one state over others as in a league or alliance.” I forgot where my definition came from. It is obviously subjective, but I prefer it.
Concise Lecture on Monetary History
The Congressman’s speech on dollar hegemony centers on the future of US dollar. He was talking about the end of its hegemony. He did not specify the precise date that his foresight would take place. All we know is that after six years of delivering this speech, we are now nearer to see its fulfillment.
Dr. Paul did not use a crystal ball in his prediction. He is well-informed about the history of money, the power of the market, and the abuses of the governments once they gained monopoly over the money supply. He gave us a concise lecture on monetary history that includes taxes, inflation, fiat money, militarism, imperialism, moral decline, and the downfall of empires. In this piece of history, he narrated the transition from the “dollar diplomacy” during the time of William Taft in late 19th century to “dollar hegemony” in the second half of 20th century.
The Transition to Dollar Hegemony
I understand the “dollar diplomacy” as an attempt of the US to protect its commercial interests in the Far East and Latin America from European influence. The transition took place as new monetary policy was introduced and that the US dollar has also undertaken a radical change. Dr. Paul was referring to the printing of the US dollar since the creation of the Federal Reserve in 1913 and its separation from gold standard that started in 1971. Through these changes, the transition to “dollar hegemony” was achieved.
Another special arrangement that added dominance to the US dollar was the “agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions” (p. 261). The other side of this agreement was the maintenance of US military presence in the Persian Gulf to protect its own interests.
Depreciation, Loss of Trust and Use of Force
The Congressman mentioned other details exposing the distortions in the new economic and monetary systems resulting from dollar hegemony. However, the new systems were gradually eroding the value of the US dollar through the increasing quantity of money supply. As nations of the world would come to realize the decreasing value of the US dollar, we would also see the end of the dollar hegemony.
A typical and controversial example of this loss of trust in the US dollar was the decision of Saddam Hussein in November 2000 to demand Euros for his oil. Such decision was a threat to dollar supremacy. It is alarming that in the following year, 9/11 took place and the dominant rhetoric was about Saddam Hussein and the overthrow of his government. Seen from this perspective, it is logical to think that the war against Iraq was actually a war to maintain the supremacy of the US dollar. Dr. Paul shared similar stories concerning Venezuela’s and Iran’s loss of trust in the US dollar.
Using force to maintain the supremacy of US dollar, the real victims are unaware about the manner they financially support the perpetuation of these new systems. Dr. Paul explains the subtlety of the scheme:
“The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the ‘tax’ that pays the bills for our military adventures” (p. 267).
No wonder the people remains passive. This is not reported in mainstream media. Conventional education does not train us to think this way. And so the dollar hegemony continues to thrive through the use of force and US militarism in return depends on the ongoing supply of fiat currency. This connection between militarism and the US dollar is clearly expressed by Dr. Paul: “Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar” (p. 268).
Conclusion
The golden rule has been changed. For several decades, the US dollar has been considered the “new gold” and its printers have been making the rules. But the times are changing. The dominance of the US dollar is about to end. The free market will demand a return to monetary system based on honest money.
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