Congress just passed a budget projected to create a $28.5 trillion debt in 10 years. At the same time, Apalachicola is faced with paying a water and sewer $755,000 default out of a $4 million debt obligation the city has with the Florida Department of Environmental Protection.
The city commission and we citizens must be deeply troubled and concerned as we face the necessity to clear our debt. On the other hand, our Congress is not troubled in the least by an almost unimaginable debt.
Ever since Breton-Woods agreement after World War II, the dollar has been the central power of the world’s economy, especially as oil became supreme and that reality morphed into “petrodollars,” so that all oil in the world was bought and sold with dollars, and the world’s wealth was stored in dollar-denominated accounts, protected by the full faith of our treasury.
When the government needs to borrow money, it issues Treasury bonds at various rates of interest. Money floating around the globe gravitates to these bonds, as there is no other means that is remotely secure. Thus, we Americans finance our government deficits.
The secret here is that unlike Apalachicola’s debt to DEP, Treasury has no genuine obligation to pay back those bonds as it can merely issue new bonds to pay back the old ones and with interest.
So, this financial system works as long as folk keep buying Treasury bonds. But there is more to the system as the other parts necessary for transactions are controlled by Americans, as is the International Monetary Fund and the World Bank. The dollar dominates, essentially forcing the world to keep buying our debt. The Mafia could not have designed a more favorable system, nor could Ponzi. Thus, America the country can never default on its debt and suffer consequences that a household, city, or state would, at least as long as there are people willing to buy dollars.
Look what happens when a country deviates from the system. Col. Gaddafi of Libya decided to use Libya’s gold to capitalize a Pan-African bank and not sell Libya’s oil in dollars; the global financial system acted quickly to destroy him. Likewise, Saddam Hussein of Iraq had decided to sell Iraq’s oil in euros, and he ended badly. Iran, Russia, and China have never been on board with the dollar financial system, and now all of them are in the crosshairs of American military might.
Some pundits have claimed ordinary Americans no longer benefit from our imperial global hegemony, i.e. The American Empire. But, as long as the dollar dominates the global financial system and our deficits get covered, all of us Americans benefit grandly. It is tough for Apalachicola to face a debt slightly less than a million, but how about $28 trillion? That is a lot of water systems! What if we just issued some bonds…