The coming fiat currency war

The coming fiat currency war

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BNP Paribas

WASHINGTON, July 14, 2014 — The French are not at all happy that their star bank, BNP Paribas has been fined $8.9 billion by U.S. authorities for sanctions busting it provided for Sudan, Cuba, and Iran. Perhaps not coincidentally, the French have called for a move away from the dollar in international financial settlements.

During a recent interview with the Financial Times, French finance minister Michel Sapin said “we are selling ourselves in dollars, for instance when we sell planes. Is that necessary? I don’t think so. I think a rebalancing is possible and necessary.” By we, Sapin means Europeans, and by rebalancing he means a move away from the dollar.

The calls to move away from the dollar are getting louder and louder from other governments. Should Europe stop payments in dollars, the immediate effect is that reserves of dollars suddenly have no use and will have to return to the U.S. This will cause a decline in the value of the U.S. dollar on the international scene and inflation at home. The benefits of being an international reserve currency include the ability to print money at will and export some of the resulting inflation; losing that status means that a lot of expatriated money no longer has value in international trade and must return home where it has a use.

Should the EU insist that its goods be paid for with euros, a lot of oil and other commodities will have to be sold in euros so that resource producers can purchase European made cars, chemicals, electronics, pharmaceuticals, aeronautics, and so on. This is a huge chunk of global trade. Such action would be crippling to the U.S. dollar, but the U.S. is a huge market for European products, and a falling dollar and rising U.S. inflation would also hurt Europe very much. The American market is still crucial to Europe and the rest of the world.

BRICs countries have their own idea of what the future currency landscape should look like. The BRICs, led by China, want an international basket of currencies as the global reserve. People never learn; what happens to the basket when new countries develop economically? Development is not a difficult thing; it rests merely on allowing people to do. If Nigeria, Ethiopia, Pakistan, Egypt or Bangladesh allows people to do, what happens to that basket of currencies? Is it revised?

Combinations of wounded pride and revenge always get in the way of cooperation. The highest form of corporation is the free market. By abusing the dollar’s position as the world’s leading currency in order to prop up its own interests, Washington has wounded a lot of pride around the world and helped break down global trust. Moscow wants nothing to do with Washington; it might never trust the West again. Moscow is still humiliated over the collapse of the USSR and perceived American arrogance afterwards, and this has helped push it towards China and to take Crimea.

Free markets and trade demand honest scales; in that setting, a currency you can manipulate at will is dishonest and destructive — outright evil. Why don’t we as humanity just do away with that evil? When it came to honest money, both Keynes and Milton Friedman frowned on gold; to them honesty was impractical. For all his talk about freedom and money, Friedman advocated giving money to banks in a crisis; he was the godfather of the bailouts.

There is great abundance if humans are allowed to achieve higher. Anything besides the free market is underpinned by primarily envy and greed — envy for those with better business acumen, those with a sharper mind, those with better resources. Envy leads people to block others’ advantages in the belief that we can never match them on an even playing field. This is wrong, and it slows down the progress of society. Using money as the lever of control is just a step away from using guns. To promote monetary hegemony with a fiat currency is just a way to ban opponents from having weapons to protect themselves.

Control of the money supply lets us strip humans of their dignity and make them dependents. It is an affront to human dignity, which resents dependence and prefers cooperative exchange, talent for talent. We need to truly grasp the meaning of this. Imagine running around with the flag of slavery and calling oneself a lover of liberty.

The USA, China, Russia and France all fear honest money. Hence Sapin talks of the euro replacing the dollar, but not about getting rid of fiat money. Gold and crypto currencies are their greatest fears.

Honest money means the end of currency wars; it means apolitical money. Only then can we get on with the business of cooperating fully and reaching for the stars. The manipulation of money is no way to create wealth; it invents nothing. It isn’t an activity for human beings of greatness and vision, and we should leave it behind.

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