When Saddam Hussein sent his army into Kuwait in order to control the oil lying under that land, it seemed to me that he just made a simple mistake; had failed to recognize that there is a new world order in place.
This new world order is not based, as some would argue, on the military and economic might of the United States, but on the principle that when someone wants what someone else has, even if those someones are nations, one doesn’t just take what one wants by force, like some primitive predator; one makes an exchange and returns fair value–i.e. one pays.
Paying for the things one wants that another lays claim to is what civilized people do. That is, they recognize other people’s rights and values and structure their transactions accordingly by exchanging goods and services of equal value.
The role of money in this process is merely to facilitate the transfer over distance and time, as well as to extend the network of exchange to overcome the problem of only one of the parties to a transaction wanting what the other has. (For example: Since a truck driver is unlikely to want potatoes as fuel, if a potato farmer wants his potatoes hauled to market, he’s going to have to pay the trucker some money.
A transaction mediated by money obviously isn’t completed right away. That’s why it’s important that the money have more or less the same value from one day to the next. And that’s one of the main functions governments perform. They issue currency and implicitly guarantee that the value expected will actually be received when the money is turned in for goods.
Indeed, if people can’t count on a country’s money retaining its value, they simply refuse to accept it. Or, in order to compensate for the loss in value they have come to expect, they demand more of it.
That, it seems, is what is happening to the U.S. dollar. While the dollar used to be so well respected that its use was virtually universal and people all around the globe saved dollars as a hedge against an uncertain future, just in the last few months it has lost twenty-five percent of its value.
When the European Union brought out a common currency, the Euro, there was much handwringing because it’s initial value was some ten percent less than expected. Now, the tables have been reversed, so to speak, and it’s the dollar that has dropped. And why? Because the European Union has proved more trustworthy than expected and the U.S. is trusted less.
There are many reasons why confidence in the United States, and therefor its currency, has decreased precipitously. Not only have we abrogated a number of significant international agreements having to do with weapons, pollution, energy and trade, but , in attacking another nation without provocation, we have ignored our commitment to the rule of law.
To those who might argue that our commitment to rebuild what we have destroyed in Iraq is an implicit recognition of the obligation to pay for what one takes, I can only respond that when the taker defines both sides of the equation (the value of what is taken and what is returned) , there is no valid exchange. That’s extortion, pure and simple. If the transaction isn’t voluntary, it’s not an exchange.
What must be really frightning to the rest of the world is how quickly we have been transformed from a nation that deals fairly to one that resorts to extortion to get what it wants.
No wonder the markets reflect a sharp drop in confidence. Who would have thought our democracy could be derailed so easily? That predation would trump the new world order in a matter of months.