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Ron Paul: Restore The Dollar – OpEd

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We frequently hear the financial press refer to the U.S. dollar as the “world’s reserve currency,” implying that our dollar will always retain its value in an ever shifting world economy. But this is a dangerous and mistaken assumption.

Since August 15, 1971, when President Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold, the U.S. dollar has operated as a pure fiat currency. This means the dollar became an article of faith in the continued stability and might of the U.S. government.

Ron Paul
Ron Paul

In essence, we declared our insolvency in 1971. Everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it– not even a pretense of gold convertibility! Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC in the 1970s to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence backed the dollar with oil.

In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite radical Islamic movements among those who resented our influence in the region. The arrangement also gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as the dollar flourished.

In 2003, however, Iran began pricing its oil exports in Euro for Asian and European buyers. The Iranian government also opened an oil bourse in 2008 on the island of Kish in the Persian Gulf for the express purpose of trading oil in Euro and other currencies. In 2009 Iran completely ceased any oil transactions in U.S. dollars. These actions by the second largest OPEC oil producer pose a direct threat to the continued status of our dollar as the world’s reserve currency, a threat which partially explains our ongoing hostility toward Tehran.

While the erosion of our petrodollar agreement with OPEC certainly threatens the dollar’s status in the Middle East, an even larger threat resides in the Far East. Our greatest benefactors for the last twenty years– Asian central banks– have lost their appetite for holding U.S. dollars. China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever. Foreign central banks understand that American leaders do not have the discipline to maintain a stable currency.

If we act now to replace the fiat system with a stable dollar backed by precious metals or commodities, the dollar can regain its status as the safest store of value among all government currencies. If not, the rest of the world will abandon the dollar as the global reserve currency.

Both Congress and American consumers will then find borrowing a dramatically more expensive proposition. Remember, our entire consumption economy is based on the willingness of foreigners to hold U.S. debt. We face a reordering of the entire world economy if the federal government cannot print, borrow, and spend money at a rate that satisfies its endless appetite for deficit spending.

Ron Paul

Ron Paul

Ronald Ernest "Ron" Paul (born August 20, 1935) is an American physician, author, and politician who served for many years as a U.S. Representative for Texas. He was a three-time candidate for President of the United States, as a Libertarian in 1988 and as a Republican in 2008 and 2012.

2 thoughts on “Ron Paul: Restore The Dollar – OpEd

  • Avatar
    September 5, 2012 at 6:47 am
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    :)) how can you add value to a paper printed ..people died because of money .. now nobody has respect for people ..because of it ..so stop this crap propaganda .. economy base on resource and equality i think will be perfect ..money is crap

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  • Avatar
    September 6, 2012 at 4:54 am
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    REAL money, that which is backed by commodity value is also REAL capital.

    What circulates today is valueless paper without backing and as such it can only be “fictitious capital”.
    As long as the fiction is believed it continues to function, albeit haphazardly; I.e. I will accept the paper in exchange for my commodity just so long as, aided by totalitarian authority, I can quickly sluff it off on someone else in exchange for another’s commodities.

    When these totalitarian forces come under the control of the worlds banking club (which consists among others) of Central Banks, IMF, and the $TRILLION private banks the net result is a torrent of swindling that has resulted in hoards of “fictitious capital” some 20 or more times the GROSS world product estimated at $80TRILLION.

    To grasp the absurdity of this ratio imagine approaching your friendly personal banker for a loan, line of credit, or a mortgage some 20 times your net collateral worth; How far do you think that might fly.

    Deficits, debts, bonds, bills, derivatives, swaps, exchanges, &c. and now the latest fraudulent gimmick, “quantitive easing”. All to be if the banksters have their way, downloaded onto taxpayers who produce ALL REAL value but who had no say in running up this so called “sovereign debt”

    So in this 21st century the fiction becomes less and less believable. Something must give? Something will give!

    Reply

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