Right from the Middle: The China and Russia threat to the US Reserve Currency
By William O. Lipinski
Since 1944, following the Bretton Woods agreement, our Land of Liberty’s Dollar has been the reserve currency for the world.
It made perfect sense at that time for the Dollar to be the world’s reserve currency. We were by far the dominant economic power on this planet. Our gross domestic product, which is a measure of the total economic output of a nation, stood at 50 percent of the total of the world’s economic output.
We were truly the super economic powerhouse of this planet. No nation in the history of the world has ever economically and militarily come anywhere near as powerful.
And, we moved not to conquer a single nation, but to rebuild our enemies.
What is a reserve currency and how is it used?
Reserve Currency is a large quantity of currency maintained by central banks and other major financial institutions to prepare for investments, transactions, and international debt obligations, and to also influence their domestic exchange rate. It is used to move trade smoothly and swiftly between nations, thereby increasing wealth throughout the world.
A large percentage of commodities are priced in reserve currency: causing countries to hold this currency to pay for these goods. Gold, silver, oil, and gas are some of those commodities.
A very important aspect of Reserve Currency is that it reduces the exchange rate risk.
Since 1944 the US dollar has been the most stable and strong currency in the world, bringing stability to the world’s finances and sparking outstanding economic growth.
Let me go into greater detail on how Reserve Currency is used. Think of a company that wants to sell goods to a company in a country with a different currency. There could be two potential problems.
First, the exchange rate between the two currencies could shift dramatically and change the price of the goods. Second, the importing company might use currency that is not used much outside of its country and trading that currency might be difficult.
By using a widely circulated currency, such as the U.S. dollar, the two companies eliminate those two risks.
Unfortunately today, two autocratic totalitarian nations are trying to disrupt this practice and policy of the Reserve Currency system.
Russia and then China are working to weaken and then destroy this system in the hopes that this will weaken America, and thereby weaken the forces of freedom and democracy in this world.
If they can succeed in removing our Land of Liberty’s dollar as the reserve currency of the world they will have succeeded.
What might happen in the “Land of the Pilgrim’s Pride”? America will no longer be the most powerful economy on this Earth. Our ability to expand Freedom and Democracy in this world will be severely restricted.
The extremely powerful economic sanctions that we impose on rogue and outlaw nations will be very significantly reduced. This will lead to a much more violent and chaotic world.
The danger of nuclear warfare will increase enormously creating a world-wide crisis in which our “Land of the Free and Home of the Brave” will no longer be a safe haven for the currency of individuals and nations.
If the American Dollar is removed as the World’s Reserve Currency, the world-wide crisis will increase dramatically.
Only America as the holder of the World’s Reserve Currency is big enough, open enough, and politically willing enough to carry this burden.
If our nation is no longer the holder of the world’s reserve currency, we will no longer be able to perform this service for the rest of the world.
No other nation is capable of taking our place and that will cause financial chaos. Our reserve currency, the U.S. dollar, is used by countries that wish to industrialize and grow their economies rapidly and safely.
Only the American Dollar has the attributes to accomplish this for
America and the world.
We, and other free and democratic nations, must pull together to preserve the U.S. Dollar as the World’s Reserve Currency for the benefit of all mankind, as well as to protect the foundations of Freedom.
(William O. Lipinski served in Congress representing the 5th and 3rd Congressional District from 1982 until 2005. Email Bill at BillLipinski@hotmail.com. This column originally appeared in the Des Plaines Valley News newspaper group.)
Lipinski writes the "Right from the Middle" Column twice each month.
Born in Chicago, Cook County, Ill and graduated fromSt. Patrick High School, Chicago, Ill., 1956; attended Loras College, Dubuque, Iowa, 1956-1957; United States Army Reserves, 1961-1967.
Lipinski was elected alderman, Chicago, Ill., city council, 1975-1982; He was a delegate to: the Democratic National Midterm Convention, 1974; Democratic National Convention, 1976 and 1984; Illinois state Democratic convention, 1977.
He was elected as a Democrat to the Ninety-eighth and to the ten succeeding Congresses (January 3, 1983-January 3, 2005)
His email is BillLipinski@hotmal.com
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