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Reckless Government Policies Imperil The Dollar

By James Donahue

For years the U.S. dollar has been the standard unit of currency in international markets for such commodities as gold and petroleum. America has enjoyed this kind of economic power in world markets because the United States, as the center of wealth and power, has stood as a benchmark for world business interests.

Since the attacks of 9-11 on the World Trade Center and the reckless response by the Bush Administration, the extravagant and uncontrolled spending spree that poured billions of dollars into the pockets of private corporations involved in the Iraq conflict, The specter of peak oil and its effect on the price of crude, combined with a major tax cut for the rich, everything has changed.

The value of the dollar is slipping on the world currency market while the Euro, the new currency created by the European Common Market, appears to be rising in competition for that number one position.

The fast-changing market has become so fragile in recent months that some economists are expressing concern that these pressures may precipitate a run on the U.S. dollar with serious global financial consequences.

So here is the ugly scenario:

The US economy has already taken a severe hit from within because of the bursting Mortgage bubble. The full extent of damage in defaults resulting from falling property values and rising interest rates in a multitude of adjustable-rate home mortgages is yet to be known.

Suppose that OPEC changed its policy of selling oil in dollars, and began openly selling its product for euros. One recent report, leaked at a recent emergency OPEC meeting, notes that OPEC is actually considering such a change. If the Bush Administration continues to irritate the leaders of the OPEC nations, especially Iran, and Venezuela, this could be a very real possibility.

If a run on the US dollar happens, our government would be forced to create more dollars through increased borrowing on world markets. This, in turn, would cause an even further devaluation of our currency. As the shadow of bankruptcy sweeps across the land, the real wealth in terms of land, factories and natural resources would be confiscated and turned over to creditors.

Those creditors would obviously be overseas lenders. It is conceivable then that the OPEC nations, Germany, Japan, China, Venezuela and many of the other nations enjoying economic stability could end up owning large chunks of America.

An analysis by economic writer Andy McSmith this week said the situation has become so serious that some economists believe the decline of the dollar has become "so entrenched that some experts now fear it is irreversible.

"After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar."

McSmith quoted David Buik of Cantor Index, who said "An American businessman over here who is given the choice would take anything but the dollar. I would want to be paid in yen, and if not yen then the euro or sterling," he said.