Back in 2006, when I wrote Wondering Man, Money and Go(l)d, I used the term dollarization for the first time. Subsequently I used the term in few of my articles,Â however always to convey a different meaning than what’s usually meant by it. I used the term as opposed to globalization in its objective and spirit, with a sharp negative connotation.
ThereÂ has beenÂ references to dollarization by others, as in Wikipedia. However my usage of the term had a different meaning, more similar to dollar hegemonyÂ in the context ofÂ the increasing globalization.Â
The traditional meaning of the termmakes one think thatÂ increased globalization has resulted in increasing dollarization.Â They think globalization is the objective, dollarization is a by-product of globalization. I see dollarization as the sole objective, globalizationÂ has been a pretext to achieve it.
My objective of using ‘dollarization’ in the book was to highlight the differences that exist between a true globalization of goods and services and that of free capital flows. I wanted to mean that compared to the degree of globalization in free trade and services (which naturally should have created a sort of equilibrium forÂ employment market and employee salaries globally), what we have effectively seen is dollarization, meaning flooding the global economy with dollars (or other global currencies) in the name of liberalizing or reforming capital flows, and thereby creating equilibrium in asset prices. Wages of people in developing nations are not comparable to wages of people in developed nations, however real estate prices are increasingly becoming comparable – thanks to the free capital flows sans free trade in goods or services.
I used the term to show how a form of skewed globalization has effectively resulted in a severe form of dollarization. Equilibrium of employment market has remained where it was decades ago, asÂ one can seeÂ through minimum stipulated daily wage rates in India against hourly regulated wage rates in the U.S. The difference is around 30 times on a daily basis, if not more.
I use the termÂ dollarizationÂ notÂ to mean its standard meaning -Â which isÂ any nation officially and willingly using dollar (or currency of another nation’s central bank) as its official currency. I use the term dollarizationÂ to convey the moral wrongs done by it whenÂ a poor nations’ wealth gets legally stolen due to free flow of capital from richer and more indebtedÂ nations,Â having global currencies, to poorer but less indebted nations.
Global policy used above sense partly when it covered dollarization. It stated ‘The United States derives great economic and political power from this dollar hegemony…Dollar-denominated notes, especially $100 bills, grew in popularity with individuals as well as criminal networks, becoming the US’s largest export.’
I want theÂ earthÂ plus 5%Â isÂ an importantÂ article that I came acrossÂ while researchingÂ to writeÂ my book ‘Wondering Man’Â which effectively wanders onÂ describingÂ money, gold, human beings and our societies in the 21st century, andÂ in perceivingÂ God and Nature.
In that article on earth + 5%, the lead character Fabian, who eventually designed and developedÂ present versions of monetary policies thatÂ all nations of the world has been following, boasted:Â “Let me control the nation’s money and I care not who makes its laws.”
Since then, I got interested to find out the global money supply and how much of it has been in dollars along with growth of global money supply and growth in dollar supply. However I found this piece of information to be as unfathomable as finding God himself. I am not sure whether I missed this piece of information on the web or not, presented in a simple format. The web practically has all information, however when I last researched this area, I didn’t find any simple fact-based answer to this apparentlyÂ simple but important question.
The answer of above question has remained elusive, however the answerÂ to another such question is likely to be equally explosive. Basic research on another important question, which nation has benefited the most from the globalization, is likely to elicit different answers because of different methodologies and measures followed. Many may say it is China, many may talk about other exporting economies or even the broader developing group of nations. However my answer to this question would be the U.S., becauseÂ U.S. achieved dollarization through globalization. Global Policy has been right when it noted that ‘Dollar-denominated notes… (has become) the US’s largest export.’
Coming back to global money supply and dollar supply,Â surrogate measures on dollarized growth in Indian money supply over last few years gave an indicative figure of more than 10%, that is due speculative capital net-flows (FII net-in-flows), and over the years – it has been growing. RBI effectively has no control over it. The 10% figure may sound small, but its impact can be gauged by the dancing of global asset class prices (and thereby inflation) in line with the Federal Reserves.
This is not surprising as global financial markets now dance to theÂ whispers of the Federal Reserves. Commodity prices move in same line as Fed. policies indicate, and real estate prices follow the same. Any trader trading in financial markets in India thirty years backÂ probably did not even know the name of the central bankÂ of the U.S. and who its chairman was. It did not matter.
Now one may trade in Indian markets and can make money without knowing the name of Indian Central Bank or its chief and their policies. It is even better to ignore RBI and its policies, whatever loud there voices should be due to local presence. Following local central banks may lead to confusion in trading calls,Â and thereby the trader may not be able to make enough money or may even make losses if the trader takes positions in derivatives following what central banks of these nations probably recommend.
The efforts of the Federal Reserves in “Let me control theÂ world’s money and I care not who makes its national laws” so far has been hugely successful. There apparently is no law or objective in theÂ global sense that examines the role of the Federal Reserves in its global role, unlike its twin objectives of employment and inflation in the U.S. context.
As a citizen of the world and as a citizen of India, however I am concerned that an agency has been getting disproportionate power in controlling the world’s money, without any accountability to the world’s populace of 6.5 billions, barring only 300 million odd Americans. As Fabian realized, I also believe thatÂ it does not matter who makes the national laws as long as the power of making money rests with someone else.
I understand that this concern of mine is shared by quite a few more. Many others share this concern, many without realizing the profound nature of control that comes with controlling money, as Fabian realized. Global policy-makers or national policy-makers however seem less concerned, or rather feel helpless. So people sharing my opinionÂ belongÂ to the minority section, or probably under extreme minority section.
The concerns however are not minor ones. Individually or nationally, we may feel helpless against the ongoing system of dollarization from the U.S. Collectively, as manyÂ trade-groups have been thinking now with the latest wave of dollarization, we canÂ create a significant force to slow down this dollarization effort. China has started making voices (or noises, whatever) against it, however the time to provide lip-service concerns on this serious area is probably over.
The time has now come to act – collectively, firmly and fast. Dollarization of the world, under the pretext of globalization must stop, not only to stop wealth stealing, but more importantly to ensure no unaccountable agency like the Fed. can boast of saying “Let me control theÂ world’s money and I care not who makes its national laws”.
Once the Fed. completely succeeds in controlling the money of the world, we all would lose the power to make laws against it. That’s why Fabian settled for “Let me control the nation’s money and I care not who makes its laws” than trying to make laws as a government.
I invite you to visit my blog, Wondering Man (or take a look at my book, Wondering Man, Money & Go(l)d that rightly predicted the housing-led economic crisis of 2008,Â rise of gold pricesÂ to the currency war being played now). You are also invited to join me on Twitter.