Re: state power theory of money

["Romain Kroes" <romain.kroes@xxxxxxxxxxxx>]

Jim Devine wrote:
>The problem is that the kind of agreement between countries that
> you refer to has never fit with the interests of the hegemonic power,
i.e.,
> the U.S.
>
> Jim Devine

What can be objected (in addition to Alan's recent assessment abaout
Argentina's case) is the fact that examples of world hegemony of hegemonic
power's currency seem to be rare in history. As far as I am informed, there
are only two of them: pre-hellenistic Athens and today's USA. Even Rome had
to pillage the treasure of conquerred countries and to impose a tribute on
them, to pay its balance of trade. Europe of the 17th century, of which the
balance with Asia was negative, needed gold from America's mines, and
entered a long crisis, in 17th century, when human wastings in these mines
were not enough to feed the trade deficit. Victorian England, confronted
with the same problem, invented the "balance sterling", that is to say the
first immaterial world currency. But the reference to gold was not yet
revocable, and the sterling lost the hegemony when after the first world war
England entered recession. After second world war, the USA's balance of
trade being normally negative, the parity between dollar and gold could only
work under the condition that nobody demands of the USA that they fulfil
this clause. Both General de Gaulle and eurodollar market shattered this
fiction. Now, dollar is inconvertible however be the currency. But this,
because dollar is accepted by the reste of the world. Should the recession
or instability last, dollar would loose its current status.

To summ up my thinking, so far:
1. The balance of trade of world-hegemonic power is always negative.
2. What implies the necessity that international settlements be done in its
own legal currency.
3. But this gift requests the confidence from world trade.
4. The dollar being no more related to gold, this confidence lies on the
USA's economic stability.
5. Indication of stability, in the eyes of the USA's creditors, lies on the
financial US market where their bills are circulating.

As for the military power, it can eventually be used for directly extorting
tributes, but not in sustaining the dollar that is for the moment the best
instrument of extortion, as long as it is accepted in stettlement of trade
balance.

Romain Kroës