The Plan To Replace The Dollar With The 'Amero'By Jerome R. Corsi 5-22-6
The idea to form the North American Union as a super-NAFTA knitting together Canada, the United States and Mexico into a super-regional political and economic entity was a key agreement resulting from the March 2005 meeting held at Baylor University in Waco, Tex., between President Bush, President Fox and Prime Minister Martin.
A joint statement published by the three presidents following their Baylor University summit announced the formation of an initial entity called, "The Security and Prosperity Partnership of North America" (SPP). The joint statement termed the SPP a "trilateral partnership" that was aimed at producing a North American security plan as well as providing free market movement of people, capital, and trade across the borders between the three NAFTA partners:
We will establish a common approach to security to protect North America from external threats, prevent and respond to threats within North America, and further streamline the secure and efficient movement of legitimate, low-risk traffic across our borders.
A working agenda was established:
We will establish working parties led by our ministers and secretaries that will consult with stakeholders in our respective countries. These working parties will respond to the priorities of our people and our businesses, and will set specific, measurable, and achievable goals.
The U.S. Department of Commerce has produced a SPP website, which documents how the U.S. has implemented the SPP directive into an extensive working agenda.
Following the March 2005 meeting in Waco, Tex., the Council on Foreign Relations (CFR) published in May 2005 a task force report titled "Building a North American Community." We have already documented that this CFR task force report calls for a plan to create by 2010 a redefinition of boundaries such that the primary immigration control will be around the three countries of the North American Union, not between the three countries. We have argued that a likely reason President Bush has not secured our border with Mexico is that the administration is pushing for the establishment of the North American Union.
The North American Union is envisioned to create a super-regional political authority that could override the sovereignty of the United States on immigration policy and trade issues. In his June 2005 testimony to the U.S. Senate Foreign Relations Committee, Robert Pastor, the Director of the Center for North American Studies at American University, stated clearly the view that the North American Union would need a super-regional governance board to make sure the United States does not dominate the proposed North American Union once it is formed:
NAFTA has failed to create a partnership because North American governments have not changed the way they deal with one another. Dual bilateralism, driven by U.S. power, continue to govern and irritate. Adding a third party to bilateral disputes vastly increases the chance that rules, not power, will resolve problems.
This trilateral approach should be institutionalized in a new North American Advisory Council. Unlike the sprawling and intrusive European Commission, the Commission or Council should be lean, independent, and advisory, composed of 15 distinguished individuals, 5 from each nation. Its principal purpose should be to prepare a North American agenda for leaders to consider at biannual summits and to monitor the implementation of the resulting agreements.
Pastor was a vice chairman of the CFR task force that produced the report "Building a North American Union."
Pastor also proposed the creation of a Permanent Tribunal on Trade and Investment with the view that "a permanent court would permit the accumulation of precedent and lay the groundwork for North American business law." The intent is for this North American Union Tribunal would have supremacy over the U.S. Supreme Court on issues affecting the North American Union, to prevent U.S. power from "irritating" and retarding the progress of uniting Canada, Mexico, and the U.S. into a new 21st century super-regional governing body.
Robert Pastor also advises the creation of a North American Parliamentary Group to make sure the U.S. Congress does not impede progress in the envisioned North American Union. He has also called for the creation of a North American Customs and Immigration Service which would have authority over U.S. Immigration and Customs Enforcement (ICE) within the Department of Homeland Security.
Pastor's 2001 book "Toward a North American Community" called for the creation of a North American Union that would perfect the defects Pastor believes limit the progress of the European Union. Much of Pastor's thinking appears aimed at limiting the power and sovereignty of the United States as we enter this new super-regional entity. Pastor has also called for the creation of a new currency which he has coined the "Amero," a currency that is proposed to replace the U.S. dollar, the Canadian dollar, and the Mexican peso.
If President Bush had run openly in 2004 on the proposition that a prime objective of his second term was to form the North American Union and to supplant the dollar with the "Amero," we doubt very much that President Bush would have carried Ohio, let alone half of the Red State majority he needed to win re-election. Pursuing any plan that would legalize the conservatively estimated 12 million illegal aliens now in the United States could well spell election disaster for the Republican Party in 2006, especially for the House of Representative where every seat is up for grabs
Various warnings about the USA, Canada and Mexico losing their sovereignty, merging into a North American Union and switching to a single currency known as the Amero. A video by Hal Turner claims that these are already in use in trade agreements with China.
The Truth:
This eRumor is based on a collector’s coin and on fears that the North Atlantic Free Trade Agreement could be the first step toward loss of sovereignty for the United States.
First, the Amero coin does exist, but is not American currency. It is a collector coin designed by a man named Daniel Carr and available for sale on a web site called the Amero Currency Site. This product is marketed for coin collectors and coin enthusiasts but it is not legal tender. The Amero Currency site says that visitors can “Buy Ameros for educational purposes, as novelties and conversation starters at the first tee !!!” The site says that the coin is being sold to raise awareness of the NAFTA trade agreements between Canada, United States and Mexico but the marketing of this coin has spun into a conspiracy theory.
The North American Free Trade Agreement was signed into law in 1993 by President Bill Clinton. It is a trade pact between the U.S., Canada, and Mexico and removed most trade restrictions and tariffs among the three nations. It has been a controversial agreement but has also fueled fears among those who believe it was the first step toward a North American Economic Union similar to the European Economic Union.
War Criminals Among Us: Bush, Cheney, and the Eyes of the World
Last week, Richard Clarke, the man to whom nobody in the administration of C-Plus Augustus listened because what did he know, anyway?, had a chat with Amy Goodman in which he minced no words regarding his former employers.
"I think things that they authorized probably fall within the area of war crimes. Whether that would be productive or not, I think, is a discussion we could all have. But we have established procedures now with the International Criminal Court in The Hague, where people who take actions as serving presidents or prime ministers of countries have been indicted and have been tried. So the precedent is there to do that sort of thing. And I think we need to ask ourselves whether or not it would be useful to do that in the case of members of the Bush administration. It's clear that things that the Bush administration did — in my mind, at least, it's clear that some of the things they did were war crimes."
And, something that most of us missed, there was a court on the other side of the world that agreed.
In what is the first ever conviction of its kind anywhere in the world, the former US President and seven key members of his administration were... found guilty of war crimes. Bush, Dick Cheney, Donald Rumsfeld and their legal advisers Alberto Gonzales, David Addington, William Haynes, Jay Bybee and John Yoo were tried in absentia in Malaysia...At the end of the week-long hearing, the five-panel tribunal unanimously delivered guilty verdicts against Bush, Cheney, Rumsfeld and their key legal advisors who were all convicted as war criminals for torture and cruel, inhumane and degrading treatment. Full transcripts of the charges, witness statements and other relevant material will now be sent to the Chief Prosecutor of the International Criminal Court, as well as the United Nations and the Security Council.
At the very least, this court parceled out the blame for the torture program in a fair manner and all the way up the chain of command. The testimony of the victims was as horrible as you might expect:
The court heard how Abbas Abid, a 48-year-old engineer from Fallujah in Iraq had his fingernails removed by pliers; Ali Shalal was attached with bare electrical wires and electrocuted and hung from a wall; Moazzam Begg was beaten, hooded and put in solitary confinement, Jameelah was stripped and humiliated, and was used as a human shield whilst being transported by helicopter. The witnesses also detailed how they have residual injuries till today.
In related news, Ed Kilgore notes that Cheney continues to glory in his status as the most inexcusable American who ever lived. It's like giving Pol Pot a late-night TV gig.
At times, Mr. Cheney seems to relish his villainous public persona. Outside the rodeo arena, he took a moment to show off the latest feature on his truck, a Darth Vader trailer-hitch cover, a nod to his alter-ego from the Bush days. "I'm rather proud of that," he said, flashing his signature uneven grin.
To paraphrase Rick Blaine, I don't object to a vampire, I object to a gutless one. I'll buy the stake if someone else buys the garlic.
Central bankers from Beijing to Brasilia have been acquiring a lot more dollars of late, but the overweight of the greenback has reached its limits. There is only one way left to go. It is time to sell the dollar once again.
Or so says Jerome Booth.
Booth has been in the currency and fixed income markets since 1999. That’s when he helped launch the Ashmore Group, one of the largest pure-play emerging market fund managers in the world with around $70 billion under management. Before he retired to write books and launch his new private equity firm New Sparta Limited,Booth was a regular source of mine here at FORBES. He’d talk about the wonders of emerging market debt; their relative strength compared to the Western world and how they’ve improved from their “Third World” days of yesteryear; and the day of reckoning that would come when the Chinese yuan becomes a reserve currency.
In the short term, the dollar’s problem is not the yuan. It’s a 25% gain against the euro over the last 12 months, with investors wondering if its reached its peak. The guys who think it has not are winning. And those guys include the central banks of the developing world.
“The currency composition of reserves (in emerging market central banks) has shifted slightly from euros to dollars — from 62.4% in dollars to 62.9%. The dollar is looking toppy — a good level to take profits,” says Booth.
Dollar panic-selling is possible given the homogenous structure of the investor base in externally-held Treasuries. It’s not in Barclays'hands. It’s not in Goldman Sachs accounts. Treasurys are sitting in the People’s Bank of China. Trillions of them in fact. As they are in the Russian Central Bank, the Reserve Bank of Indiaand every other major emerging market that requires a nice reserve cushion to save itself from the Western world’s short sellers who like to watch a nice currency bloodbath from time to time.
So far this year, there’s been a consensus view that the dollar can only go up.Interest rates are going to rise at some point later this year. Everyone and their mother will want higher yielding U.S. debt. Treasurys will have many buyers. That’s the gist of it.
But when the dollar falls, it will be because the surplus central banks have determined they have to shed some weight. Booth even goes so far as to say the central banks could dump all at once.
“A rush for the exit by them could cause a dollar crisis similar to that in 1971. They may lose a third of the value of their reserves in the process, but deployment in crisis is what reserves are for. And there comes a point in any trade when cutting ones losses is preferable to pouring more good money after bad,” he says.
Russian President Vladimir Putin has introduced legislation that would deal a tremendous blow to the U.S. dollar. If Putin gets his way, and he almost certainly will, the U.S. dollar will be eliminated from trade between nations that belong to the Commonwealth of Independent States. In addition to Russia, that list of countries includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan. Obviously this would not mean “the death of the dollar”, but it would be a very significant step toward the end of the era of the absolute dominance of the U.S. dollar. Most people don’t realize this, but more U.S. dollars are actually used outside of the United States than are used inside this country. If the rest of the planet decides to stop accumulating dollars, using them to trade with one another, and loaning them back to us at ultra-low interest rates, we are going to be in for a world of hurt. Unfortunately for us, it is only a matter of time until that happens.
Buiter defended his "controversial" call for a ban on cash, as Bloomberg reports:
“The world’s central banks have a problem. When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.
In a new piece, Citi’s Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. Fundamentally, the ELB problem comes down to cash. According to Buiter, the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction? Cash therefore gives people an easy and effective way of avoiding negative nominal rates. Buiter’s note suggests three ways to address this problem:
Abolish currency.
Tax currency.
Remove the fixed exchange rate between currency and central bank reserves/deposits.
Yes, Buiter’s solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether. (Note that he’s far from being the first to float this idea. Ken Rogoff has given his endorsement to the idea as well, as have others.)
Before looking at the practicalities of abolishing currency, we should first look at whether it could ever be necessary. Due to the costs of holding large amounts of cash, Buiter puts the actual nominal rate at which the move to cash makes sense as closer to -100bp. So, in order for a cash abolition to become necessary, central banks would need to be in a position where they wished to set nominal rates much lower than that.
Buiter does not have to go far to find an example of where a central bank may have wanted to set interest rates much lower to -100bp. He uses (a fairly aggressive) Taylor Rule to show that Federal Reserve rates should have been as low as -6 percent during the financial crisis.”
Definition: The debt ceiling is a limit imposed by Congress on how much debt the Federal government can carry at any given time. The debt ceiling is currently $18.113 trillion. The U.S. Treasury estimates it will reach this new limit around November 3, 2015. (Source: "Meet the New Debt Ceiling," CNN Money, March 17, 2015)
The debt ceiling is similar to the limit on your credit card, with one major difference.
As we live, wait, survive from one economic bubble to the next, isn't martial law the end game? Why did Halliburton / KBR build all those FEMA Jails? Those are privatised jails with investors sitting brand new and empty yet no crying from the investors? Do you really think the outrageous police brutality is just a passing fancy? Our media keeps us focused on some camel jockeys attacking Paris which by the way, "Parisians can't stand Americans especially Black ones" to the greater extent. Mr. Carson, I'll give you credit for your statement and that's where that ends. Trying to gain young Black votes by "so called" stabbing the invisible man in the belt buckle. Team up with "Vanilla Ice" and cruise Beverly Hills in a drop top 64'. In any event, this post is about you "Slick Willy", you can't play a playa......playa!
SAN ANTONIO, November 19, 2015 — Dr. Ben Carson, a black neurosurgeon and 2016 Republican presidential candidate, has repeatedly stated that he believes there is a chance that the 2016 elections may not be held at all.
Widespread anarchy gripping the country could be reason enough for the Obama administration to announce the implementation of martial law and the suspension of some, if not all, of Americans’ constitutionally protected rights — including the right to vote and hold national elections.
On the surface this seems unbelievable, but upon further analysis, Carson’s ominous suggestion is plausible; this is an extremely unnerving scenario that all Americans should be aware of and ready for.
The Obama administration has very quietly and subtly done many inexplicable things that could very well be precursors to the suspension of some, if not all, of Americans’ constitutionally protected civil rights.
Carson went on liberal radio host Alan Colmes’ radio show and the discussion eventually came to whether or not Dr. Carson plans to run for president in 2016. He said that there may not even be elections in 2016; when pressed to explain further, Carson said,
“If in fact we continue to have all these decrees being made the way they’re being made, if in fact we don’t fight the kind of war that needs to be fought in order to really put an end to the threat that is brought on by ISIS, if we continue along a pathway of financial irresponsibility, if we continue along a path of envy, greed, and hatred — what happened with Occupy Wall Street will be a cakewalk compared to what will begin to happen in this country.”
When Colmes pushed Carson further on the possibility of cancelled or postponed elections, Carson responded, “I don’t want to find out, I really don’t want to find out. I don’t want to continue down this pathway that we are going down. This pathway where everything is framed in a political sense and our representatives are not working for the people, they’re working for their party.”
Martial law is “a system of complete control by a country’s military over all activities, including civilian, in a theoretical or actual war zone, or during a period of emergency caused by a disaster such as an earthquake or flood, with the military commander having dictatorial powers … In many foreign countries martial law has become a method to establish and maintain dictatorships either by military leaders or politicians backed by the military.”
In America, martial law must be called for by the President, who would then suspend most, if not all, of our constitutional rights, and only the President would be able to reinstitute our constitutional structure and declare an end to martial law.
If anyone believes this idea is far fetched, please consider the numerous emergencies that Obama has put America in position to experience in the next two years — possibly with more than one of these issues occurring simultaneously: the Ebola virus and its associated mandatory quarantine may continue to spread due to Obama’s pitiful prophylactic and responsive actions; our $18 trillion and counting government debt could finally cause the government spending bubble — the only thing propping up our economy — to pop, leading to all government spending halting overnight and the massive associated riots that would occur due to welfare, EBT and Medicaid/Medicare cards ceasing to work; and, the threat of Islamic terrorism and specifically ISIS, whose unmatched funding, training and brutality could fulfill their leaders’ promise to shed the blood of millions of Americans.
Additionally, Obama’s choice not to sufficiently secure the border must be taken into consideration with all of these possible emergencies, as open access to our country could only increase the liklihood of all three possible emergencies.
Never in the history of our country have we faced so many destructive threats at the same time. America has also never had leadership that has failed to competently handle every single threat facing our country. If Obama isn’t one of the most inept people to ever hold elected office, then his actions must be calculated to produce these results.
Obama knows he is unpopular with the military, therefore, he has had to find a different way to institute martial law — and that is through a “civilian national security force.” On July 2, 2008 at a campaign stop, Obama made the following unscripted statement: “We cannot continue to rely on our military in order to achieve the national security objectives we’ve set. We’ve got to have a civilian national security force that’s just as powerful, just as strong, just as well-funded.”
In 2013 the United States spent $663.8 billion on the military, with personnel include 2.2 million people on active duty or in the reserves. America has local police forces, which could call in the National Guard, which could then call in the Department of Defense to protect the country in times of civil unrest. For what purpose, then, would a civilian security force funded with hundreds of billions of dollars and made up of millions of Americans be necessary?
Another worrying issue is that Obama has militarized almost every federal agency. In September of 2013, 70 federal agents in full body armor, carrying M-16s raided one person’s gold mining operation in a tiny Alaska town. They were from the Environmental Protection Agency looking for violations of the Clean Air Act.
After this incident it was found that Obama had created law enforcement branches in over 70 federal agencies. It is estimated that there are over 120,000 law enforcement agents in the federal government who are not part of traditional law enforcement branches — CIA, FBI, DEA, ATF, DHS, DOJ, and Treasury Dept.
These law enforcement branches Obama has created are not comprised of just one or two security guards. Obama has armed these agencies to the teeth. Maj. General Jerry Curry, a 40 year, decorated, military veteran, wrote an op-ed for The Daily Caller pointing out how, in addition to the National Oceanic and Atmospheric Administrations’ purchase of 46,000 hollow point bullets, the Social Security Administration (SSA) bought 174,000 hollow point bullets.
In reaction to these purchases, Maj. Gen. Curry said, “Hollow point bullets are so lethal that the Geneva Convention does not allow their use on the battlefield in time of war. Hollow point bullets don’t just stop or hurt people, they penetrate the body, spread out, fragment and cause maximum damage to the body’s organs. Death often follows. Potentially each hollow nose bullet represents a dead American. If so, why would the U.S. government want the SSA to kill 174,000 of our citizens, even during a time of civil unrest? Or is the purpose to kill 174,000 of the nation’s military and replace them with Department of Homeland Security (DHS) special security forces, forces loyal to the Administration, not to the Constitution?”
Curry goes on, “In the war in Iraq, our military forces expended approximately 70 million rounds per year. In March (of 2012) DHS ordered 750 million rounds of hollow point ammunition. It then turned around and ordered an additional 750 million rounds of miscellaneous bullets including some that are capable of penetrating walls. This is enough ammunition to empty five rounds into the body of every living American citizen.”
Curry’s final point is something that every American should consider: “Obama is a deadly serious, persistent man. Once he focuses on an object, he pursues it to the end. What is his focus here? … I hope I’m wrong, but something smells rotten. And If the Congress isn’t going to do its duty and investigate this matter fully, the military will have to protect the Constitution, the nation, and our citizens.”
Let’s pray that none of these matters fully materialize and Dr. Carson’s ominous suggestion becomes nothing but an afterthought. However, those who understand Obama know not to put anything beyond his desire to, in Obama’s own words, “fundamentally transform America.”
You’ve heard all the hype. We’ve heard all the stories and videos about Jade Helm, FEMA Camps, and Martial Law… and people said we were “Conspiracy Theorists.” Even the Mainstream Media Has Covered Obama’s Plans For Martial Law, but still people looked the other way.
In the video below you’ll get a rude awaking into what to expect from Martial Law… and Obama just signed it into law. A source also recently spotted thousands of Martial Law signs… more to come on that when the proof comes if the source can provide a picture for it. For now, check out the video, then learn what Obama has done right below.
The Federal Reserve is bankrupt for all intents and purposes. The same goes for the Bank of England!
This article will focus largely on the Fed, because the Fed is the “financial land-mine”.
How long can someone who has stepped on a landmine, remain standing – hours, days? Eventually, when he is exhausted and his legs give way, the mine will just explode!
The shadow banking system has not only stepped on the land-mine, it is carrying such a heavy load (trillions of toxic wastes) that sooner or later it will tilt, give way and trigger off the land-mine![1]
Even if the call was genuine, it is too late. The land-mine has been triggered and the explosion cannot be averted under any circumstances.
The only issue is the extent of the damage to the global economy and how long it will take for the world to recover from this fiasco – a financial madness that has no precedent. The great depression is “Mary Poppins” in comparison!
The idea of a central bank going bankrupt is not that outlandish. I am by no means the first author who has given this stark warning. What underlies this crisis (which I initially examined in an article in December 2006) is the potential collapse of the global banking system, specifically the Shadow Money-Lenders.
Nouriel Roubini, the New York University professor said [2]:
“The process of socialising the private losses from this crisis has moved many of the liabilities of the private sector onto the books of the sovereign. At some point a sovereign bank may crack, in which case, the ability of the government to credibly commit to act as a backstop for the financial system – including deposit guarantees – could come unglued.”
Congress and the White House are engaging in another familiar ritual: The brawl over the federal borrowing limit, known as the debt ceiling. Here’s a look at some of the most frequently asked questions, and answers.
What is the debt ceiling?
The debt ceiling limits the amount of debt that the U.S. Treasury can issue.
Before World War I, Congress approved borrowing for specific purposes, but over the next two decades, it granted more flexibility to the Treasury to issue bonds without individual, definite authorizations. By 1939, Congress effectively established an aggregate debt limit that delegated to Treasury the ability to borrow up to a certain ceiling.
Why is the debt limit in the news again?
Last year, Congress voted to suspend the debt limit through March 15, after which the prior limit of $17.2 trillion would be reset to include any new borrowing. On March 16, the limit was reset at $18.1 trillion. Since then, the Treasury has been using extraordinary measures, such as the suspension of certain pension investments, to conserve cash.
InWhy Do Foreigners Invest in the United States?(NBER Working Paper No.13908),Kristin Forbesnotes that foreigners have earned substantially lower returns on their U.S. investments over the past five years than U.S. investors have earned abroad, even after removing the effects of exchange rate movements and government investments. This return differential exists even within individual asset classes (equities, foreign direct investment, and to a lesser extent, bonds) and after making rough adjustments for risk.
Still, foreign investors might choose to continue investing in the United States and financing the large U.S. current account deficit for several reasons. Indeed, they may choose to purchase U.S. portfolio investments in order to benefit from the highly developed, liquid, and efficient U.S. financial markets, and from the strong corporate governance and institutions in the United States -- although both of these perceived strengths of the United States have shown some vulnerabilities during the recent financial market turmoil. Foreigners also may invest in the United States in order to diversify risk, especially if returns in U.S. financial markets have little correlation with returns in their own country's domestic financial markets. Or, investors outside the United States may put their money here because of their strong linkages with the United States, through trade flows or such measures of "closeness" as distance, inexpensive communications, or sharing a common language.
Forbes asks which of these factors are actually significant in determining foreign investment in the United States. She finds that a country's financial development is consistently an important factor that affects its investment in both U.S. equity and debt markets. Specifically, countries with less developed financial markets invest a larger share of their portfolios in the United States and the magnitude of this effect decreases with income per capita. Her estimates suggest that if China's bond market were as well developed as the cross-country average - about the level of development in South Korea ---then China's predicted holdings of U.S. bonds would be about $200 billion below their current level.
Countries with fewer controls on capital flows and larger trade flows with the United States also invest more in U.S. equity and debt markets. And, return differentials are important in predicting U.S. equity (but not bond) investments, because foreigners invest more in U.S. equities if they have had relatively lower returns in their own equity markets. Finally, despite strong theoretical support, it appears that diversification motives have little impact on patterns of foreign investment in the United States.
Forbes notes that these results -- and especially the primary role of a country's financial market development in determining its investment in the United States -- have three important implications. First, the results support the theoretical literature on global imbalances that emphasizes the role of U.S. financial markets. Although the exact mechanism varies across models, one key theme in recent research is that lower levels of financial market development in other countries will continue to support capital flows into the United States, thereby supporting the U.S. current account deficit and large global imbalances without major changes in asset prices. A second, related, implication is that as countries around the world continue to develop and strengthen their own financial markets, this will gradually reduce this important driver of capital flows into United States. These adjustments would likely occur slowly, though, because the development of financial markets, especially in low-income countries, is a long process. Finally, and potentially more worrisome, because the liquid and efficient financial markets of the United States are a major impetus behind U.S. capital inflows, anything that undermines the perceived advantages of U.S. equity and bond markets could present a serious risk to the sustainability of U.S. capital inflows. The U.S. sub-prime crisis and continued turmoil in U.S. financial markets already may have undermined this perceived "gold standard" of financial markets, and the risk of a sudden increase in poorly thought-out regulation may aggravate these concerns. If countries with less developed financial markets begin to question the relative advantages of U.S. financial markets, this could lead to a more rapid adjustment in U.S. capital inflows, global imbalances, and asset prices.
-- Les Picker
The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.
The U.S. Has REPEATEDLY Defaulted
Some people argue that countries can’t default. But that’s false.
It is widely stated that the U.S. government has never defaulted. However, that is also a myth.
The United States has actually defaulted on its debt obligations before.
The first time was in 1790, the only episode Professor Reinhart unearthed in which the United States defaulted on its external debt obligations. It also defaulted on its domestic debt obligations then, too.
Then in 1933, in the midst of the Great Depression, the United States had another domestic debt defaultrelated to the repayment of gold-based obligations.
Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.
The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown.
This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.
Many consider Nixon’s decision to refusal to redeem dollars for gold to constitute a partial default. For example, University of Massachusetts at Amherst economics professor Gerald Epstein notes:
Forty years ago this month, on August 15, 1971, President Nixon “closed the gold window”, refusing to let foreign central banks redeem their dollars for gold, facilitating the devaluation of the U.S dollar which had been fixed relative to gold for almost thirty years. While not strictly a default on a US debt obligation, by closing the gold window the US government abrogated a financial commitment it had made to the rest of the world at the Bretton Woods Conference in 1944 that set up the post-war monetary system. At Bretton Woods, the United States had promised to redeem any and all U.S. dollars held by foreigners – later limited to just foreign central banks — for $35 dollars an ounce. This promise explains why the Bretton Woods monetary system was called a “gold exchange standard” and why many believed the US dollar to be “as good as gold”. When Nixon refused to let foreign central banks turn in their dollars for gold, and encouraged the devaluation of the dollar which reduced the value of foreign central bank holdings of dollars, the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.
