Sleepwalking into the next World War?

The biggest danger facing the world is not ISIS not Al Queda, or any other religious extremism. The biggest danger to the world is the US Dollar losing its status as the world’s reserve currency.

 The reason this financial foible is so dangerous is that the USA will literally do anything to maintain the status of the US dollar, including going to war.

Why? The USA is currently spending between 30 and 50 percent of the its revenue to service (pay interest on) its enormous debt mountain currently north of $17 trillion. The reason so many investors buy US debt is that the US dollar will always retain its value while the world trades in dollars.  If people started to question the future of the dollar, then US bonds would no longer be so attractive and the US would have to increase rates to sell the debt (that they need to roll-over as existing debt  it matures). If that happens then they will be effectively unable to service the debt and could theoretically default on the debt mountain. Can you imagine the impact on the world if the US defaults, it would make the crisis of 2007/8 look like a picnic in the park.

The USA will never let this happen as their power in the world (and the reason they dominate the world) is financial. Without this financial clout their power would wane quickly. Of course the USA has massive military might. But this is paid for by deficit spending (by borrowing money). If the government found borrowing more difficult the military budget would have to be cut.  This is unthinkable for the commanders of US forces. So the US military has a vested interest in stopping the demise of the dollar.

We do not have to look very far for evidence of the USA’s defence of the dollar’s status. The current sanctions imposed on Russia (supposedly because of their acts in Ukraine) have been designed to have maximum financial impact on Russia. This is because at the BRIC summit last year Putin had the temerity to propose a new “world” bank supported by the BRIC countries that would facilitate trade between them in their own currencies. If Brazil, India, Russia and China start trading amongst themselves and not using the dollar then the start of the dollar’s downfall is assured.

Russia has not responded well to the sanctions and has sought to deal with other countries like Iran, who also are under sanction by USA, making bilateral agreements in local currency. Russia and China have also recently signed such agreements worth hundreds of billions of roubles.

Over time the US’s response is going to get more and more desperate. 

We should all understand the risk that this could eventually lead to a war with Russia.