Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Keep CounterPunch ad free. Support our annual fund drive today!

A Dollar the Size of a Postage Stamp



Lately it seems as though everyone wants to take a poke at the dollar. Last week, it was the Brazilian supermodel who demanded euros for her jaunts on the catwalk instead of USD. The week before that, hip-hop impresario, Jay-Z, released a video dissin’ the dollar and praising the euro as the ‘baddest Dude in the ‘hood’.

Lambasting the greenback has become trendy. It’s a favorite pastime of politicians, too. At the November OPEC meeting in Riyadh, Iran’s president Mahmoud Ahmadinejad asked the assembled finance ministers to “study the feasibility of selling oil in another currency.” Ahmadinejad disparaged the dollar as “a worthless piece of paper”.

The fiery Venezuelan President, Hugo Chavez, followed Ahmadinejad’s lead predicting that the demise of the dollar would mean the “end of the Empire.”

Hugo may be on to something. The dollar is America’s Achilles heel; if the dollar tanks, so does the empire. That means the taxpayer will have to foot the bill for Bush’s bloody-interventions in Iraq and Afghanistan, rather than the Chinese. That also means that the US will have to export something of greater value than Daisy Cutters and gulags. That could be a tall-order, now that Bush has boarded up the factories, hollowed out the industrial base, and outsourced 3 million manufacturing jobs. We’ll have to scrape the rust off the machinery and get back into the widget-making business like we were before the Free Trade fiasco.

Central banks across the globe are trying to figure out how to ditch their dollar reserves without triggering a stampede for the exits. No one wants to see that. But, then, nobody wants to be stuck with vaults full of Uncle Sam’s green confetti either. So, the question arises; What is the best way to divest oneself of $5.6 trillion (total USD held overseas) before the Lusitania capsizes?

Kuwait, Venezuela, Iran, Russia, and Norway have already opted to ignore the destabilizing effects of “conversion” from dollars and are in some stage of divestiture. Others will follow. The UAE, Bahrain, Qatar, Oman and Saudi Arabia are considering switching from the dollar-peg to a basket of currencies so they can hedge against the inflation that’s battering their economies. It’s only a matter of time before the Petrodollar System—which links the dollar to petroleum sales and creates a de facto “international currency”—unravels completely, precipitating the final collapse of Breton Woods.

Talk of America’s impending currency disaster is no longer relegated to the Internet blathershere. Mainstream journalists have joined the chorus and are sending up their own red flags. The UK Telegraph’s economics’s editor, Liam Halligan, made this grim observation in his recent article, “Bet Your Bottom Dollar Tensions Will Follow”:

“The importance of “dollar divestment” cannot be overstated. At the very least it means the greenback has much further to fall – plunging the US into recession. But it begs a bigger, more alarming, question. How will Washington react to the end of the US hegemony?”

The dollar was savaged by the monetary policies of the Federal Reserve. The Fed’s policies were designed to coincide with Bush’s Middle East Crusade. They were supposed to work like two wheels on the same axle. The administration believed that, by 2007, the military would need only 30,000 or so troops to maintain security in Iraq. That would give Bush’s legions the chance to turn east and push on to the next target-state, Iran. If things went according to plan — and no one thought the high-tech US war machine could be stopped — the US would control two-thirds of the world’s oil. This would allow America to keep writing bad checks on green paper for the next century.

But then, of course, the plan hit a snag. The Iraqi resistance mushroomed, the US got bogged down in an “unwinnable” war, and the once-mighty dollar shriveled into nothingness. Now we’re at a turning point and our leaders are in a state of denial. Bush is still playing Teddy Roosevelt, while Paulson and Bernanke are just plain shell-shocked. They probably know the game is over. As the dollar continues to wither; the frustration is beginning to mount in Europe. Liam Halligan sums it up like this:

“Europe has finally had enough of America’s “benign neglect” dollar policy. As a large economic area, with a floating exchange rate, the eurozone suffers most. Over the past seven years, the single currency has risen by a shocking 82 per cent against the greenback. That’s hammered eurozone exports – provoking serious trade disputes between the EU and US, the world’s two biggest trading blocks. No wonder French President Nicolas Sarkozy describes America’s drooping dollar as “a precursor to economic war”. (UK Telegraph, “Bet Your Bottom Dollar tensions Will Follow”)

Sarkozy is leading the charge for “intervention”; the buzzword for shoring the greenback through exchange controls and buying up billions of dollars. But it’s a risky business; especially when net capital inflows — which are the monthly purchases of US-backed securities and Treasuries –have gone negative for the last two months. That means the US isn’t attracting enough foreign investment to finance its trade deficit. So the dollar will have to fall to compensate.

So, how much loot is Sarkozy willing to put up to keep the dollar from slumping further — $100 billion, $500 billion, $1,000 billion? And where’s the bottom?

The fact is, the greenback took a “header” down the stairwell and by the time it picks itself up, it could be eye to eye with the peso. Who knows? Maybe its time we all learned Spanish?

More than two-thirds of all sovereign foreign exchange holdings are denominated in dollars. When those dollars are converted into back into foreign currencies and start recycling into the US; we’re in deep trouble. Inflation will soar. Surely, the Fed must have known this day would come when they were pumping trillions of dollars into subprime mortgages and complex debt-instruments which served no earthly purpose except to fatten the bottom line for rapacious bankers and hedge-fund managers. The Fed also knew that the nation’s wealth was not being “efficiently deployed” for capital improvements on factories, technology or industry. Oh, no. That would have ensured that America would remain competitive in the global marketplace into the new century. Instead, the money was shoveled into the bottomless sinkhole of stucco homes with composition roofing and toxic credit default swaps.

The stock market lost another 237 points yesterday; the third 200-plus slide in a week. Now all three indexes are down more than 10% since their record high on Oct 9. Treasury yields are plunging as investors flee the stock market looking for safety. That means the Fed will have to slash rates again at its December 11 meeting to provide more low interest crack for the investor class. Traders see an 82% chance that Bernanke will cut the Fed Fund’s rate by another quarter point to 4.25%. All that is likely to do is put the dollar into free fall and send food, oil and gold prices to the moon. It won’t pay off the overdue mortgage payments and it won’t remove the billions of dollars of debt from the banks’ balance sheets. It’s pointless. The US is headed for a “hard landing” and its dragging the rest of the world along with it.

Harvard Economics professor, Lawrence Summers offered this sobering warning yesterday in an article in the Financial Times, “Wake up to the dangers of a deepening crisis”:

“Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability. Even if necessary changes in policy are implemented, the odds now favor a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond. Several streams of data indicate how much more serious the situation is than was clear a few months ago.”

Summers is not the smartest guy on the block. If he was he wouldn’t have said men are smarter than women and he’d still be president of Harvard. But he’s a capable economist and he can sniff disaster as it comes stampeding round the corner.

MIKE WHITNEY lives in Washington state. He can be reached at:



MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at

More articles by:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine


October 26, 2016
John W. Whitehead
A Deep State of Mind: America’s Shadow Government and Its Silent Coup
Eric Draitser
Dear Liberals: Trump is Right
Anthony Tarrant
On the Unbearable Lightness of Whiteness
Mark Weisbrot
The Most Dangerous Place in the World: US Pours in Money, as Blood Flows in Honduras
Chris Welzenbach
The Establishment and the Chattering Hack: a Response to Nicholas Lemann
Luke O'Brien
The Churchill Thing: Some Big Words About Trump and Some Other Chap
Sabia Rigby
In the “Jungle:” Report from the Refugee Camp in Calais, France
Linn Washington Jr.
Pot Decriminalization Yields $9-million in Savings for Philadelphia
Pepe Escobar
“America has lost” in the Philippines
Pauline Murphy
Political Feminism: the Legacy of Victoria Woodhull
Lizzie Maldonado
The Burdens of World War III
David Swanson
Slavery Was Abolished
Thomas Mountain
Preventing Cultural Genocide with the Mother Tongue Policy in Eritrea
Colin Todhunter
Agrochemicals And The Cesspool Of Corruption: Dr. Mason Writes To The US EPA
October 25, 2016
David Swanson
Halloween Is Coming, Vladimir Putin Isn’t
Hiroyuki Hamada
Fear Laundering: an Elaborate Psychological Diversion and Bid for Power
Priti Gulati Cox
President Obama: Before the Empire Falls, Free Leonard Peltier and Mumia Abu-Jamal
Kathy Deacon
Plus ça Change: Regime Change 1917-1920
Robin Goodman
Appetite for Destruction: America’s War Against Itself
Richard Moser
On Power, Privilege, and Passage: a Letter to My Nephew
Rev. William Alberts
The Epicenter of the Moral Universe is Our Common Humanity, Not Religion
Dan Bacher
Inspector General says Reclamation Wasted $32.2 Million on Klamath irrigators
David Mattson
A Recipe for Killing: the “Trust Us” Argument of State Grizzly Bear Managers
Derek Royden
The Tragedy in Yemen
Ralph Nader
Breaking Through Power: It’s Easier Than We Think
Norman Pollack
Centrist Fascism: Lurching Forward
Guillermo R. Gil
Cell to Cell Communication: On How to Become Governor of Puerto Rico
Mateo Pimentel
You, Me, and the Trolley Make Three
Cathy Breen
“Today Is One of the Heaviest Days of My Life”
October 24, 2016
John Steppling
The Unwoke: Sleepwalking into the Nightmare
Oscar Ortega
Clinton’s Troubling Silence on the Dakota Access Pipeline
Patrick Cockburn
Aleppo vs. Mosul: Media Biases
John Grant
Humanizing Our Militarized Border
Franklin Lamb
US-led Sanctions Targeting Syria Risk Adjudication as War Crimes
Paul Bentley
There Must Be Some Way Out of Here: the Silence of Dylan
Norman Pollack
Militarism: The Elephant in the Room
Patrick Bosold
Dakota Access Oil Pipeline: Invite CEO to Lunch, Go to Jail
Paul Craig Roberts
Was Russia’s Hesitation in Syria a Strategic Mistake?
David Swanson
Of All the Opinions I’ve Heard on Syria
Weekend Edition
October 21, 2016
Friday - Sunday
John Wight
Hillary Clinton and the Brutal Murder of Gaddafi
Diana Johnstone
Hillary Clinton’s Strategic Ambition in a Nutshell
Jeffrey St. Clair
Roaming Charges: Trump’s Naked and Hillary’s Dead
John W. Whitehead
American Psycho: Sex, Lies and Politics Add Up to a Terrifying Election Season
Stephen Cooper
Hell on Earth in Alabama: Inside Holman Prison
Patrick Cockburn
13 Years of War: Mosul’s Frightening and Uncertain Future