Bad 'Karma' Brings Bad Consequences for Those Who Practice It

by Hugo Salinas Price, Plata:

There is a lot of commentary going around the world, regarding Trump’s initiation of a “Trade War” to rebuild America’s industries. Trump thinks that tariffs will do the trick, and stop the rest of the world from taking unfair advantage of the US by selling their goods to the US in exchange for lots of US dollars. According to Trump, this nefarious behavior on the part of the rest of the world is causing a h-u-u-u-ge Trade Deficit, sending hundreds of billions of dollars out of the country. Trump’s view is that this is just plain “unfair”.

I guess Trump is not familiar with what happened at Bretton Woods, back in 1945, when the US, as victor in WW II, forced the rest of the world to accept the US proposition: gold would be the world’s money, supplemented by dollars, which were to be regarded as good as gold – and perhaps they were, at the time, as good as gold, for the US had a stock of some 22,000 tons of gold at that time.

But as time went on, US trading partners began to ask for gold instead of dollars, a thing of which the US disapproved – and General Charles de Gaulle was a prominent recipient of US disapproval, for after asking for France´s gold (to which France had a rightful claim) in 1968,  the General was faced with a timely revolutionary situation which very nearly overthrew him.

Finally 1971 came around, the US stock of gold was severely diminished, and Nixon had to revoke Bretton Woods by declaring that the US would no longer redeem dollars held by foreign governments, for gold. The gold window was closed. The world was compelled to work on a Dollar Standard – the irredeemable dollar became the essential currency required for Central Bank reserves, a situation which prevails at the present time.

So since the world revolves around the US dollar, it is essential for the Central Banks of countries to hold dollar reserves.

How can the rest of the world obtain those dollars?

The only way for the Central Banks of foreign countries to own dollars, is by having their economies sell things to the US.

The only way to sell things to the US, is by underselling US producers.

So the Exorbitant Privilege of the US, the production of the world’s fundamental currency – which allows it to purchase anything in any amount, in any place, at any price – produces automatically the fundamental need of  foreign countries to undersell US producers.

So if Trump wants to make it hard for foreign countries to obtain the dollars they need to prop up their economies, what he is doing simply undermines the Exorbitant Privilege established by the US itself, in 1945, and reinforced in 1971.

This is the operation of “Bad Karma”, which produces bad consequences for those that live with “Bad Karma”.

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