Dateline: Hong Kong
Before gold and before silver, ancient traders used whatever items of perceived value were lying around to conduct business.
Call it the ultimate free market for money.
14,000 years ago, obsidian was used for barter in Anatolia before formal trade was even much of an issue. As time went on, traders throughout the region adopted obsidian as a form of barter.
Sardinians mined the stuff from several different deposits around their territory. Obsidian served alongside everything from livestock to sacks of cereal grain.
However, by the third century BC, metals like copper and silver replaced these more primitive means of exchange in much of the world.
That system, based on objects deemed valuable by their end user, worked for thousands of years.
Then, four hundred years ago, the idea of paper money caught on.
Of course, paper money started right here in China in the seventh century AD, when Tang Dynasty merchants used a system of receipts to track balances owed to each other. Paper money in a more national form came about under the Song Dynasty four hundred years later.
The guys who concocted paper money in its modern origins in Europe weren’t exactly doing anything groundbreaking.
Now, fast forward to the modern era…
After World War II, the US government saw an opportunity to do what it does best: totally dominate the world.
Being the only world power to have won the war and not be in crippling debt, the United States got to call the shots. That meant that global trade would be priced in US dollars and money would flow through the US financial system.
That system has brought us financial imperialism with laws like FATCA, which have made it next to impossible for US persons to move their own money out of US banks and into offshore jurisdictions. I ran into this myself recently when I wanted proceeds from a US asset sale sent to Singapore, only to be told the title officer had no idea where Singapore is.
Today, that system has made it so that millions of Americans living overseas legally are facing a tough time opening bank accounts.
All the while, the United States has used its position as the 800-pound gorilla of the financial system to force the rest of the world into poverty… partially thanks to the unspoken of real inflation rate on US dollars.
That’s because, as foreign buyers raced to buy the “strong dollar”, the US government decided to print more of them, eventually abandoning the gold standard and beginning the printing of worthless dollars with wanton abandon.
The result is a 93% decline in the value of the dollar since World War II.
What cost $1 back then now costs at least $14 now.
During the Baby Boom of the 1950s, the average house cost less than $16,000. The average car, $1,480. And the average American made all of $2,700.
You know what else cost less? World War II itself. The Defense Department spent roughly $350 billion fighting one of the bloodiest wars in history.
That’s pocket change compared to the more than $1.1 trillion spent on the comparatively small wars in Iraq and Afghanistan.
Yet the US government’s ability to dominate the world financial system by controlling the US dollar allowed it all.
Today, the government lies to its citizens and the world as it devalues their money further and further with its runaway spending.
For example, the world markets just bought US dollars on news that inflation in The Land of the Free hit “new lows”. Yet, interestingly enough, I just read how gasoline prices are through the roof.
Basically, the government has devised a creative method of cooking the books to convince the sheep that inflation is really very low in the US. They use things like the Consumer Price Index, which calculates the cost of living of retirees and people on food stamps, to pretend that prices aren’t going up.
While the media is reporting that consumer prices rose a fraction of a percent last month, food prices are actually up nearly 20% in just the first half of the year. One study shows it as high as 22%.
Ever since the US rigged the game in their favor 70 years ago, no one could stop them… until now.
That signboard at the beginning of the article, the one showing a small chicken meal for $50… that is from here in Hong Kong, with chicken priced in Hong Kong dollars. That makes it about US$6.25.
However, consider the implications of what’s REALLY happening in the currency markets right now.
Here in Hong Kong and all around the world, countries that have hitched their wagon to the US dollar are suffering… and they’re tired of it.
Countries like Panama are suffering massive increases in their cost of living because their economies are tied to the US dollar. Singapore, which pegs their dollar to a basket of currencies including the US dollar, has said doing so has cost them dearly.
Even the outrageous property prices here in Hong Kong are tied to the Hong Kong dollar’s peg to the US currency, leading many here to call for a new peg to the renmibi in order to stop cost of living increases.
In fact, the BRICs nations of Brazil, Russia, India, and China just met in Brazil to discuss dumping the US dollar as their transactional currency. They’ve already taken steps to do so.
Last week, I reported that France wanted to do the same.
When that happens, things like oil would be priced in another currency, such as Chinese renmibi.
If you think 22% inflation on food is bad, just wait until the rest of the world realizes the US no longer holds the power to control the entire planet’s monetary system the way it once did.
That’s when the floodgates will really open and the hurt will really come down with a sonic boom.
Then, the $50 price tag on chicken dinner here in the Sheung Wan district will be heading for US soil faster than you can say “paper money”.