China and Russia go off the Dollar

Putin and Jiabao (AP Photo)

With nary a mention in the mainstream media, China and Russia announced today that they were going off the dollar for trade between the two nations.  Most in the United States, apparently too concerned with the Palin kid on Dancing with the Stars, ignore the news as well.  I’m sorry to be the bearer of bad news, but I think it behooves you to pay attention to this story.  This is a serious story which has the potential to impact the lives of every American.

Why has the dollar been the choice of currency for international trade?  Very simple – the rest of the world saw the dollar as stable and dependable.  The rest of the world felt they could count on the United States to always maintain sensible fiscal policy to insure the soundness of the dollar.

Where are we today?  Look at our ever more rapidly increasing deficit – growing well beyond any hope of ever paying it off.  Look at our government spending habits which promise everything to everyone with no hope of government coffers paying for all these “entitlement” programs.  Look at our now non-existent manufacturing base – we used to supply the rest of the world the majority of “stuff” it wanted, now we depend on the rest of the world for our “stuff.”

What do we have left?  Think about this sobering fact: the only thing of value we have left in the eyes of the world is the dollar.  Yet we’re working overtime to gut the dollar.  Are you really so blind as to not see where that leads?

Let’s consider another sobering fact.  China and Russia have always depended on the dollar for trade.  Those who remember the old days of the Soviet Union should recall that their money was considered worthless outside of their borders.  It was mere “play money” issued for its citizens to buy the few meager goods the government permitted them to purchase.  Even at the height of the Cold War, if the USSR wanted anything from another nation, it paid in dollars.  Today, China and Russia have effectively announced they believe the dollar is now the worthless “funny money.”

So what, it’s just trade between China and Russia.  Who cares?  You should care.  Sooner or later, most likely sooner, this decision will affect you.  China and Russia conduct a not insignificant amount of trade between the two nations.  For that trade to no longer be done in dollars, directly impacts the value and soundness of the dollar.

Two major powers going off the dollar also signals to other nations that the dollar is in serious trouble.  This can, and likely will, lead to other nations going off the dollar for global trade.  Once enough nations take this route, we’re Zimbabwe.  Do you want to be paid in Zimbabwe money?  It has pretty pictures on it, but it’s not worth anything.

I would end by saying it’s time to wake up, but with this move, I think we may have past the point of no return…