The 'Dollar Standard' and Poor Countries

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) March 1, 2005 -- In last week�s article, �Wanted for Dereliction of Duty: Alan Greenspan�, I explained that on its present course the US economy was headed for a massive shock. This week I want to turn my attention as to why for this as well as well as for other reasons, it is imperative that developing countries do more to integrate and develop stronger linkages between their economies.

The world economy has continued to grow because of America�s massive borrowings � domestic as well as overseas. In contrast, Japan has limped along in recession while many of the larger economies in Europe have only experienced moderate or limited growth. The global economy is therefore resting on the crutch that is American economic growth. Should that crutch be removed, and there is every possibility that it will, then it is quite likely that the whole world will be drawn into a recession.

According to tradition, when America sneezes the rest of the world catches a cold. That seems to be even truer today as globalization and debtocracy have accelerated this process by increasing poor country debt levels and their dependency on rich country markets. To make matters worse, when there is a recession, investment, credit and aid from the west, all sorely needed in times of hardship, simply evaporate. It further emphasizes the need for poor country solutions to poor country problems. There are a few reassuring signs that such solutions may in fact be emerging.

The collapse of the WTO talks in Cancun in 2003 was a good start. It signaled at the very least, a temporary halt to globalization, as we know it. In Cancun, developing countries coalesced around the leadership of India and Brazil and dug in their heels. Having gained a huge advantage in agricultural trade, the rich countries wanted to complete their dominance over the poor by introducing new policies on the liberalization of investments. The poor were having none of it and scuttled the talks in the face of rich country intransigence, particularly in respect of the large and anti-competitive subsidies the US and EU pay their farmers � to the detriment of their poor country counterparts.

In July of last year there was a further important development when the Latin American trade group Mercosur, was expanded to include Mexico and Venezuela, further improving economic integration in the region. Even more interesting was the fact that Mercosur reached strategic trade agreements with India, South Africa and Egypt. Recently, we witnessed the signing of a trade pact between Brazil and Venezuela � further increasing economic cooperation.

Africa is also on the move. There is the New Partnership for Africa�s Development or NEPAD, which is being spearheaded by Algeria, Egypt, Nigeria, Senegal and South Africa. NEPAD�s main objective is; �to develop an integrated socio-economic development framework for Africa�. A strong focus of this initiative is that while developed countries are invited to contribute, the main protagonists, and Thabo Mbkeke in particular, have stressed the need for African solutions to African problems.

These are all definitely steps in the right direction. However, such is their current dependence on the developed world and the miseries associated with that existence, that developing countries need to adopt more radical strategies.

Developing countries are caught in a debt trap for one principal reason � they have limited amounts of foreign currency. To a developing country, foreign currencies and in particular the dollar, is their equivalent of the �gold standard�. Dollar deficits are the main reason why the IMF and World Bank have such a stranglehold over their economies. When there is a currency crisis, not only is the IMF the lender of last resort, no one else will lend without its approval. Any proposed solution must address this problem, but first we need to understand how �gold standards� work.

In the early parts of the 20th century, most western governments used the gold standard to manage their economies. This meant that central banks and monetary institutions would only issue currency in the form of paper, to the extent that they held a corresponding amount of gold in their reserves. Two world wars and a global depression ultimately persuaded them that this was unworkable, since it prevented them from reflating their economies in times of crisis. Anyone familiar with the stagnation imposed by IMF policies will know exactly what I am talking about. However, the crucial difference between the gold standard and the IMF �dollar standard� is that the former was voluntary, while the latter is stringently imposed.

There is another reason why countries left the gold standard � the risk of manipulation by more powerful economic entities. The following extract from Wikipedia, the online encyclopedia, although it refers to US farmers, it is particularly poignant. The extract is as follows: By the 1890s in the United States, a reaction against the gold standard had emerged centered in the Southwest and Great Plains. Many farmers began to view the scarcity of gold, especially outside the banking centers of the East, as an instrument to allow Eastern bankers to instigate credit squeezes that would force western farmers into widespread debt, leading to a consolidation of western property into the hands of the centralized banks.

This should also ring alarm bells, particularly in those countries that have been asset-stripped after an IMF imposed program.

It is not surprising that there was a rebellion against the gold standard in the US. Today, poor countries have been unable to instigate a similar rebellion against the IMF�s dollar standard. Yet, such a rebellion can be readily achieved. If a paper currency is merely representative of wealth, then why not, as and when circumstances dictate, exclude its use in trade by bartering? Bartering is after all the oldest form of commercial exchange and it is thoroughly well suited to the particular predicament of the developing world.

The Arab oil embargo of the 1970s clearly highlighted the dependency of the west on poor country resources. Anyone who has ever used a mobile or laptop is dependent on coltan, a mineral chiefly found in The Democratic Republic of Congo. Platinum is vitally essential to a whole host of industrial processes. The US alone is dependent on some twenty strategic minerals, all of which have to be imported. Then there are soft commodities such as rice, coffee and cocoa, without which life on this planet would not be the same.

The developing world is commodity rich and some of these commodities are even more precious than gold. Moreover there is a vast surplus. Simultaneously, there is a huge level of pent up demand in poor countries, particularly because the dollar standard has so effectively reduced consumption. What a great opportunity for poor countries to barter their way out of their IMF imposed austerity, and decrease their dependence on the rich? All they have to do is barter amongst themselves and keep doing that until it constitutes the greater part of their economy.

More information can be found online at http://www.amannequinforpresident.com

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