Former Fed chief’s insistence that Arab nations dump greenback peg could lead to economic chaos in America

Paul Joseph Watson
Prison Planet
Tuesday, February 26th, 2008

Alan Greenspan has again exposed himself as a traitor working against the interests of the American people by urging Gulf states to abandon the dollar peg, a move that could result in financial chaos and an economic depression in America.

The dollar peg mandates Gulf nations to price their assets in U.S. dollars and follow U.S. monetary policy at a time when the Fed is cutting interest rates, a system that has produced a boom in oil revenues but led to high inflation as the dollar weakens.

“It [de-pegging] is probably the most useful thing that can be done to stop the increasing influence of foreign assets on the monetary system and therefore the monetary base which is basically the major force in inflationary pressures,” Greenspan told the Abu Dhabi Corporate Leadership Forum yesterday.

“In the short term free floating … will not fully dissipate inflationary pressure, although it would significantly do so,” added Greenspan, giving a green light for Gulf states to drop the dollar peg.

According to Economist editor Pam Woodall, Greenspan’s comments heralded the beginning of the end for the US dollar as the currency of choice for foreign exchange reserves.

“If Asian central banks hold today more than 80 per cent of the global foreign exchange reserves, which indicates the shift of the global economy domination towards Asia, it seems quite awkward that the UAE still maintains the peg of its currency to the US dollar,” she told Gulf News.

Greenspan’s zeal to destroy the dollar is evident in numerous public statements he has made predicting the replacement of the dollar with the Euro as the world reserve currency.

The former Fed chairman has repeatedly badmouthed the dollar and hyped the inevitability of economic chaos at a time when market confidence is in the toilet. Greenspan’s rhetoric matches that of the IMF, who in October of last year bizarrely slammed the dollar as “overvalued” at the same time the greenback hit its all time low against the Euro.

A decision on behalf of the Gulf states to abandon the dollar peg would have disastrous consequences for the greenback and the American economy.

Such a move could lead the likes of the United Arab Emirates and Saudi Arabia to diversify their foreign exchange holdings out of dollars. This would amount to a vote of “no confidence” in the dollar and may cause other countries with large dollar reserves, such as China and Japan, to follow suit and begin dumping the greenback en masse.

China has threatened repeatedly to use the “nuclear option” and liquidate its vast holding of US treasuries in response to continued pressure on the Communist state to force a yuan revaluation. According to a widely-read London Telegraph report, such an event “could trigger a dollar crash” and also “cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession.”

Runaway inflation would also ensue, making the cost of living unaffordable to even middle class Americans as food prices skyrocket and international aid organizations like the World Food Programme predict rationing and food riots.

The dollar has held firm against the Euro and recovered some losses against Sterling over the past two months, but it has still lost 12 per cent of its value against the trade-weighted index over the last two years and has plunged by a whopping 60 per cent against the Euro since Bush entered the White House.

Dennis Behreandt
JBS
Friday September 21, 2007

For most of the last many years that he served as Chairman of the Federal Reserve, the public heard very little from Alan Greenspan. His public utterances were usually short and devoid of content that might cause unintended consequences in the financial markets. Clearly, freed from the his role at the Fed as one of the most powerful men in the world, Greenspan no longer feels the same inhibitions. With the release of his new book, the former Fed Chair is even making the rounds on a publicity campaign. In one recent appearance he sat down with the Jon Stewart, host of Comedy Central’s spoof news broadcast, The Daily Show.

The irreverent Stewart suffers none of the nervous ticks that prevent the cowardly cadre of so-called real “journalists” that staff America’s news rooms from asking important questions during interviews. For instance, while talking with Greenspan, Stewart brought up the idea that America, supposedly, has a free market economy. “So, why do we have a Fed?” Stuart asked. “Wouldn’t the market take care of interest rates and all that? Why would we have someone adjusting the rates if we are a free market society?”

Greenspan’s answer: “You didn’t need a central bank when you were on a gold standard.”

Bingo! Somebody give that man a cookie!

It’s worth watching the rest of Stewart’s interview with Greenspan, but this is really the most important admission a central banker has ever made. A truly free market would be based on a standard of value that can not easily be manipulated for political or other purposes.

Since the move away from the gold standard and the creation of the Fed, that is exactly what has happened with the dollar. As Greenspan admits in the interview, we no longer have a free market where the currency is concerned, we have regulation.

We also have severe inflation through the “miracle” of fractional reserve banking and the inflationary monetary policies that the Fed has followed ever since it’s creation. For more on that, see economist Murray Rothbard’s The Mystery of Banking or get a copy of The Creature from Jekyll Island.

Or, just wait around for a few days or weeks here at the beginning of the 21st century. The consequences of the massively inflationary policies the Fed has followed for the last few years are sure to come home to roost sooner or later.