It is a LONG time since I made my living as an economist. In aircraft negotiation I was officially an economist.

America now is a lot like Spain in the sixteenth century. Spain put all its effort into producing gold while other countries developed exports which immediately took all the gold. The United States has exactly the same source of wealth Spain did with its colonies, though it looks entirely different.

Gold was money. The United States produces money. It is true that China holds $700 billion in US money and bonds, but this is not the weapon you might think.

No, Virginia, China is not sitting there thinking how their vast US dollar gives them the power to destroy the white devils. If the dollar is destabilized, China loses seven hundred billion dollars it cannot afford to lose.

As I say, it is a long time since I really kept up with these things, but in 2008, when we had our monetary crisis our stock market dropped,. But it was a greater catastrophe abroad. Including in the Euro area, especially in the Euro area.

We got scared. They PANICKED.

It is hard to think of US dollars as like any other export. But US dollars underlie the world economy exactly the same way Spanish gold did. Money is a GOOD.

I remember laughing to myself at a deal China and Russia made about 1960. They were exchanging things, and there would be a gap, so they agree to settle that gap at six hundred million DOLLARS. I remember in Communist countries themselves there were foreign currency only shops where the local money was no good. For years after the collapse of the USSR dollars were called “the green ruble” and when you went to an ATM in Moscow they would ask if you wanted your money in dollars or rubles.

We know all this, but no one THINKS about it. The media, which is constantly preaching how much better Europe is than America, also preached about the superiority of Communist countries even more. So Europe’s out of control debt and the one long recession it has had for a generation is never mentioned, much less considered.

In 1960 no one even noticed that the USSR and China would not even consider dealing with each other in anything but dollars. But it is a lot like noticing if the United States and Britain refused to deal with each other in 1943 in anything but Reichmarks!

So we run deficits, big ones. Our production base is, as is said, disappearing, as Spain’s didn’t develop when its main product was gold. So people expect a collapse of the dollar.

It is true you can only export so much paper, but due to the Eurocentric media, people do not understand the other factors working here. If the dollar destabilizes, it is a disaster for those who hold all those trillions.

Obama’s economic policy scares Americans. But his policy has been standard in Europe. The Euro is worth more than American dollars, but who would HOLD Euros as a BASIC currency? You can be damned sure Europeans wouldn’t.

Money is a VERY conservative commodity. The dollar has a history. Despite all the talk, few doubt that the dollar will be worth SOMETHING twenty years from now. The Euro, the only possible competition, depends on Germany, Spain, France, Italy, and whatever parts of Eastern Europe join the Euro area in coming years to all work in concert.

It is true that our industrial based has the same problem Spain’s did. But in the time of Spanish gold, industry was the way of the future. Industry is now the way of the past. I get the impression that Japan is producing as little of its exports cars as we do. Those are built in Korea or India and assembled in Japan paying Japanese labor, if indeed they ARE even assembled in Japan now.6

I wonder how many “Japanese” imported cars ever saw Japan?

It is hard for us to realize that it has always been a major problem for non-Americans to find a place to put their money safely. It was a conjecture in the 1960s that, despite the statement that norteamericanos owned everything in Latin America, the total investment by South Americans in the US was higher than ours in them. NOBODY kept his money in South America except as a temporary investment. The routine Brazilian inflation rate over fifty percent annually.

For years Central America has been trying to get a common currency. I don’t know if they have succeeded yet. But that is the important point: I don’t KNOW.

How many Americans know the NAME of the Chinese currency?

The American word “dollar” is as universal as the American word “OK.” Money is PSYCHOLOGY, and it will take generations before any other currency gets into the world’s mind the way the one we are pumping out does.

I always marvel at the endless trade deficits we run. What is allowing us to do that? I have just explained what does.

No one can understand today’s international economics without thinking about this. Economists don’t really think about this.