Uncle Sam's scam

|US Treasury|Obama government

The Regency age dandy, Beau Brummell, who is credited with having invented trousers,
also invented an economic model which could be called a debt spiral. When his tailor
would present an unpaid bill, Brummell would order another three outfits, also on credit.
Eventually, the dandy owed his tailor so much money that he became the tailor's most
valuable customer, whom the tailor couldn't afford to offend in the slightest way for fear
of forfeiting all of Brummell's IOUs.
The world's supposedly richest nation, America, has perfected Brummell's economic
model: US debt has spiralled not just through the roof; it has rocketed out of the
stratosphere. China alone holds some $895.2 billion of US treasury bonds. All the
countries in the world, in some measure or other, perforce have to keep US dollars for the
simple reason that almost all international trade including the oil trade is conducted in
American currency.
This represents the biggest financial confidence trick in the world. For what it means is
that like Beau Brummell the US is living off the fat of the land on an ever-growing
mountain of debt which is being financed by the rest of the world.
The US stopped making things cars, ballpoint pens, TV sets years ago. It didn't have to
make anything. Other countries made all the things that America needed and America
bought everything from these other countries. Using US dollars of course. What else?
So the only thing that America actually had to produce were US dollars, or US treasury
bonds. Whenever America has felt it was running out of cash as happened in the wake of
the subprime crisis, when the Obama government authorised the pumping in of almost a
trillion dollars into the economy to avert a total meltdown all it has to do was print more
money. Then it could go on throwing away money like it's nothing but bits of paper,
because that's exactly what it is: bits of paper, more and more of which can be printed up,
as and when need arises.
The so-called Almighty Dollar is not backed by anything of real value. It is not backed by
gold. It is not backed by any tangible goods that America produces and sells to the rest of
the world, because America doesn't make any such goods. There is only one thing that
imparts value to the dollar: universal gullibility.
America has successfully pulled the wool over the world's eyes. Like Beau Brummell's
tailor, the international community has been conned into paying to keep the US in the
high-spending style to which it has become accustomed.
The more America spends i.e., the more dollars it prints the more the world laps up those
dollars. The euro was supposed to be a counterbalance to the dollar monopoly.

Unfortunately, fiscal indiscipline (an indiscipline learnt from the US) in Greece, Ireland,
Spain, Italy and Portugal, has eroded confidence in the euro. The result? International
investors are busily buying dollars and US bonds as a hedge against economic
uncertainty. That's not like a drowning man clutching at a straw; it's like a drowning man
clutching at an electrified wire to save himself. The dollar-rush is largely the cause of
market volatility in India and other parts of the world. How does this affect India? If
foreign investors pull out of India and park their cash in US bonds as they're doing Indian
enterprise could be starved for capital, shackling economic growth.
What can the world do to stop the US like a monstrous Beau Brummell take the pants off
us? Maybe it's time for the world's two fastest growing economies, China and India,
jointly to come up with a viable alternative to the dollar. They'll never do it, of course.
But it's something to dream on. A yuan-rupee hybrid. The Sino-Indian yupee, anyone?