In the New York Times, columnist and Nobel-Prize-Winning Keynesian economist Paul Krugman pooh-poohs the idea that the US dollar system could collapse. His reasoning for the strength of the dollar is that it continues to serve as the world’s reserve currency. He writes,
I’ve spent more or less my entire professional career being bombarded with dire warnings that the dollar’s global status was at imminent risk of collapse, and with it American power. Even if such a collapse were likely, it would matter much less than people think; America certainly derives some advantages from what was once called the “exorbitant privilege” of issuing the world’s dominant currency, but they’re not that big.
In any case, predictions of the dollar’s demise generally fail to appreciate the extent to which the dollar’s role is a result of network externalities that no potential rival offers. International banks make payments in dollars because dollar markets are huge, largely because the dollar is used so widely. Importers and exporters write contracts in dollars because everyone else does and hold dollar balances to make those payments. And so on.
In typical Krugman fashion, though, there’s an important caveat. The US dollar certainly could collapse, under certain conditions:
Still, it wouldn’t be impossible for the dollar to lose its mojo if the United States government behaved badly enough.
Imagine America suffering from extreme economic mismanagement leading to very high inflation. Imagine a major erosion of the rule of law in our country, with politically connected businesses gaining an upper hand across industries.
If either or both of these things were to happen, it’s not hard to see how the dollar could lose its special status — yes, the dollar’s strength lies in its ubiquity, but also in the perceived stability of the nation that issues it.
Krugman instructively goes on to say that the scenarios he describes “sound a lot more possible” now that Donald Trump has been elected, but he reassures that, “although I expect Donald Trump to take us down the path to crony capitalism, even I don’t think he’s about to destroy the dollar as a brand.”
Thus, Krugman curiously treats the scenarios under which the dollar could collapse as hypothetical, but, of course, we have already seen extreme economic mismanagement leading to very high inflation; “a major erosion of the rule of law in our country” is a grossly understated description of the US government existing today; and it must also require an extraordinary effort by Krugman not to see how the US economy is already characterized by crony capitalism as a result of the government’s massive interventionism and anti-free-market policies.
Simply stated, there is not a constitutional republic but a criminal organization in Washington, DC. It is already the case that the government is behaving extraordinarily wickedly.
And, of course, Krugman himself strongly favors massive government interventionism into the economy. He is strongly in favor of crony capitalism. The penultimate example of this is his staunch advocacy for central banking and the government-legislated private monopoly over the currency supply known as the Federal Reserve, which defrauds the public of their wealth by monetizing government debt through legalized counterfeiting.
The criminal organization in Washington is already characterized today by extraordinary economic mismanagement, demonic lawlessness, and crony capitalism. The scenarios under which a dollar collapse could occur have already been fulfilled. I am not saying this is imminent. But it is a question of when, not if.
Just like the housing bubble that Paul Krugman advocated, the path the US is on with the Federal Reserve monetary system and global dollar hegemony is simply not sustainable.
After all, if there were already sufficient demand for US Treasury securities, there would be no need for the Fed to intervene in the market to push interest rates down by purchasing government debt with dollars created out of thin air.
Krugman might be correct that there is no major threat to the US dollar on the horizon in terms of an alternative world reserve currency. But he has overlooked another possible scenario, which is a mass awakening among the US population and mass refusal to consent any longer to living in such servitude to the wicked parasite class.
Awaken and arise.
Cross-posted from JeremyRHammond.com
