Currency and Conspiratorial Currents

A story published this morning by The Independent has columnists, pundits, economists and die hard politicos frothing over its grandiose doom and gloom implications. The publication stated that, according to its sources, a group of central bankers, mainly those from Russia, China, France, Brazil, Japan and several gulf states, are in the earliest stages of banding together to divest their countries of U.S. dollars.

According to sources, high-level meetings have been taking place in secret, though every statement made since by officials has been one of denial. So far, however, The Independent has not retracted any part of its story, and apparently hasn't been asked to do so. So the fuel on this newest and largest of conspiracies is receiving plenty of time and space to burn – at least in the minds of those who like to worry.

Reaction to the news has been surprise. Reserved surprise. Most pundits are taking the news in stride, even while expressing disappointment with countries like Japan (an American ally) and China (a huge trading partner). Virtually all of the most prominent talking heads have said that any divestiture will take a minimum of “nine years.” Others are stating ten to fifteen is most likely. This is wrong, wrong, wrong. And I can explain why.

Most politicos aren't economists. Nor are they criminally-minded. They don't understand the mentalities of those who deliberately meet in cabal-fashion behind closed doors. When we venture into this deliberate secrecy territory we have to reevaluate our standards. We need the standards of the crime syndicate: protect the family, protect yourself. We come first.

This is where the policy analysts are going astray.

Any group of individuals that would meet secretly in order to overturn a world currency, and throw the world's most prosperous nations into upheaval and bankruptcy, can only be counted on to do one thing predictably – the unpredictable. They are not likely to divest in any way that's orderly. Nor are they likely to respect the economic wishes of any country, even the ones with which they've already made agreements. Rather, they can be counted on to protect themselves. There isn't any leadership in existence that will sit idly by and watch, while other countries purge their unwanted monies. Once the en mass sale of dollars begins, the last country holding any currency will be the country with the least valuable dollars. This is what economists call “the time value of money.” If you have a dollar now, it's worth a dollar. But if you have a dollar one year from now, while all of your “friends” sell four trillion or more as fast as they can, your dollar will be worth a fraction of its current value. The proverbial rush to the door is already evident.

So nine years is rubbish. And so is ten or fifteen. If The Independent is correct, this scenario is probably going to play out more like an ugly mudslide. It will be a solid, unstoppable race to the bottom, with nothing but debris and shocked survivors left in the end. So brace yourselves. If this story is true, we're in for a very fast reversal of fortune, and one nasty and prolonged clean up.