Can printing dollars stave off US economic crisis?

FRFI 173 June / July 2003

Thanks to David Yaffe for his excellent article in FRFI 171. As he points out, the USA needs a constant influx of foreign capital to maintain the overinflated and privileged lifestyles of the US American masses.

Such an influx should be impossible, considering that, since 1970, the US produces less and less basic substantial goods and the weakness of the US dollar with respect to the euro. ‘Should’ be that way, if free trade governed, but not if the neighbourhood’s only armed bully has anything to do with it.

Absent from the article, I suggest, is the fact that the US dollar is today’s ‘preferred currency of international exchange’. So the US needs no foreign capital influx, but only to set the presses rolling.

A ream of top quality paper and the best printing may cost the US government $20, at most. Whereas transformed into $20 bills it’s some $14,000. More still if made into $50, $100, or $1,000 bills. Since after Nixon the US dollar needs no gold or silver or any backing other than lead – military force.

An article in The People May-June 2003 ( and a similar article by Vic Ratima, Northstar Compass last issue (, shows what happened to ‘evil Saddam’, not for gassing Kurds or gunning down potential rivals, but for daring to replace dollars with euros as the preferred exchange currency; and the implication that other OPEC nations (eg Venezuela or Mexico) might do the same – simply because the euro is backed by real wealth, unlike the dollar.

If even one third of nations made the conversion to euros, the US economy would collapse instantly.

Yes, you can expect Minuteman IIIs (each with a 300 kiloton nuclear warhead) to fly before that is allowed.

Another pipedream is President Chirac’s pretension, endorsed by Tony Blair, that ‘post-war Iraq’ be turned over to the UN for administering. No way, José! It shall be 100% the sacred duty of gigantic US conglomerates like Bechtel, Halliburton (Brown & Root), Fluor, Schlumberger and the like, who will ‘reconstruct Iraq’, in exchange for oil, pay its labour force with false currency (dollars) and retain the last speck of profit therefrom.

And who will oppose them!?

# 384484, 1401 State School Rd, Gatesville, Texas 76599, USA

David Yaffe replies:

Thanks for your most interesting letter. With much of it I am in agreement. On the question of money, however, I have to take issue with your analysis.

Money is not a mere token or symbol. It cannot be expanded at will because it has to act as a store of value. Its strength depends on the relative strength of the economy whose currency it is. This applies to the dollar as any other currencies, as was demonstrated in the 1970s with the devaluation of the dollar against gold.

Paper money – cash – is mainly used by consumers in everyday transactions but not on a significant scale by businesses. Cheques, or credit/debit cards – orders to the bank to adjust their clients’ accounts – have replaced money even for the mass of retail transactions. Most business and many retail transactions take place as a result of credit – mutual promises to pay a given amount at a given time. The vast majority of credits are cleared against each other over a set period, through the bank, without the use of paper money. So rolling the printing presses does not provide the main means of expanding exchange. The only real money manufacturers are the banks, which take the risk of expanding credit over the amount of their deposits. The government through the Federal Reserve or central bank may or may not encourage this process. The current low interest rate policy of the Federal Reserve is a desperate attempt to encourage more economic activity through borrowing in the US because of the impact falling profitability is having on the US economy.

As a result corporate, household and more recently public debt have dramatically grown and overall debt in the US economy has reached unprecedented levels. Foreign investors hold a substantial part of US corporate and public debt in dollars because of its previous strength and security. However as credit growth outruns profitable opportunities in the US economy and the dollar falls in value, the holders of dollar debts will want to sell them. The dollar will depreciate further. So there are limits to the growth of credit and hence ‘printing money’.
As you correctly say, if significant foreign holders of dollars exchange them for euros, the US economy would dramatically deteriorate and the standard of living of US people would rapidly fall.

I think you underestimate the economic strength of imperialist Europe and, therefore the importance of the euro’s rise against the dollar – since the start of 2002 the dollar has fallen close to 24% against the euro. This is why the US has been forced to assert itself militarily against ‘old Europe’ through the brutal assault on Iraq. However, military power in the final analysis has to be backed by a strong economy. The US economy faces a severe economic crisis. The other European powers are not simply going to prostrate themselves before the now not-so-almighty dollar or before the military ambitions of the Bush administration.

We face turbulent times.