Everyone knows that the United States maintains a huge trade deficit - we import far more goods than we export. How is it that we’re able to keep printing money and people still value the US dollar?
I had no idea what the answer to this question was until I encountered Michael Hudson’s videos. Hudson wrote a book in 1971 called “Super Imperialism” that talked about our shift away from the gold standard. He described a strategy for maintaining the value of the dollar: an IMF lending scheme where foreign nations end up with loans denominated in US Dollars. They don’t want to lose value to inflation, and they don’t have access to the stock markets or real estate, so they instead choose to buy treasury bonds, which in turn funds the state. Their loan interest must also be paid in US Dollars.
Hudson says at 5 minutes into the video below the reason why no one else has been able to explain this to you before. It’s because after his book was published, some folks at the CIA read it, and they subsequently paid Hudson to come down to the Pentagon and give a lecture to them and have a Q&A session. Then the US government proceeded to implement Hudson’s strategy. Hudson understands this system better than anyone else, because he invented it.
Since 1971 ours is a debt based monetary system. Money is created out of thin air when new loans are issued: to homeowners for their mortgages for instance. If I get a $100,000 loan for a home, and it takes $250,000 to pay the principle plus interest over the term of the loan, then there is $150,000 that must be paid back to the bank that has never existed before in the economy. Where does it come from? More loans. So the debt based monetary system is an infinitely expanding system of debt in which all debtors must pay off their debt with money created through the debt of others.
Through IMF loans and other forms of international lending, we have created a debt trap that the rest of the world finds itself in. The IMF also uses its loans to secure promises from the recipient nations that they will implement policies that open up their borders so that their workers and natural resources can be exploited by American corporations. We often bomb a country, then give IMF loans to rebuild that country, which are then put into US treasury bonds, fueling the war machine that bombed the country in the first place.
This is where the wealth in the United States comes from. This is why we are able to continually import products while exporting next to nothing. If you were expecting to find out that we are the good guys, I am sorry to burst your bubble.
Why do I share this?
Because I don’t think we can have anything resembling a real conversation about the economy until we acknowledge this. If you want to talk about the US Dollar losing reserve currency status, then you should understand how it maintained that status to begin with.
It is very likely, due to BRICS and due to the United States continued weaponization of the financial system, that the US dollar will indeed fade away as the world’s reserve currency. In what time period? Well, in the time that it takes to build the infrastructure of BRICS, and for nations to convert to using it, and in the time that the US itself manages to convert to a CBDC, or a crypto backed digital dollar. Somehow in the midst of this, we in the West are supposed to maintain faith and trust that we should have the same people running this new system as the ones that crashed the old system into the side of a mountain.
There’s an old Chinese curse that says “May you live in interesting times.”
