July 6, 2015
Original published on Investcafe.ru on April 27, 2015
Translated from Russian by Kristina Rus
Click here for Grandmaster Putin’s Golden Trap. Part 1, the second most popular article of all time on Fort Russ
The desire to see Russia as a raw material colony is shared by the United States and Europe. But the desire of the U.S. to push Europe to war with Russia to achieve this goal divides the U.S. and Europe, as it is contrary to the interests of Europe and puts it at risk of complete destruction.
Dollar, oil and gold from the perspective of the BRICS, the EU and the world economy
When in 1971 the U.S. has unilaterally abandoned the gold standard, the principle of equality of financial and legal nature of national currencies, which has endured for centuries, has been destroyed.
The dollar lost its status as a gold-backed currency, but was superficially retained by the United States in the same capacity. That is, the dollar detached from gold and as a consequence from reality, has remained the world’s reserve currency.
Thus, relative to other recognized world currencies, the dollar became the supreme financial instrument positioned above the foreign exchange market and above the world’s monetary system.
How did this happen? And why did the dollar become the master-currency, and all the other currencies of the world had become subordinate to the dollar?
Since 1973 the U.S. imposed an exclusive peg of the value of the dollar to the value of oil on the entire world. Since then, the value of the dollar has been fixed in our minds only by the mental peg of the dollar to oil. The connection of the value of the U.S. dollar to the value of oil is simply psychological and nothing more. Because in reality the dollar is not guaranteed by the value of oil. The dollar functions only as a financial instrument (a measure of value) for the estimation and expression of our mental perception of the value of oil. And the value of gold, too.
The value of a product is determined by what the buyer is willing to pay for this product and by what the seller of this product is willing to accept as payment.
Without the role of the dollar as a standard measure of value, imposed in 1973 by the United States, nobody in the world can no longer estimate, express and compare the values of the primary assets of mankind: oil, gold and the national currencies of different countries.
Gradually, step by step, we have been insensibly led to the point, where in our perception of the value of all the global currencies, only the value of the dollar has remained connected to the value of tangible assets such as oil and gold. The value of all the other world currencies has no connection to the value of tangible assets in our mind. As the value of all the world currencies is associated in our minds solely with the value of the dollar, expressed in the dollar exchange rate. The dollar has became the one and only measure of estimating and expressing the value of all the world currencies.
What is a dollar? The dollar is a derivative of our perception of the value of oil and gold at the moment.
What is the Euro, Franc, Pound, Ruble, and so on? These are only derivatives of our perception of the value of the dollar at the moment.
How do we estimate the value of a dollar and any other currency?
The value of a certain sum of dollars is mentally perceived as an amount of oil or gold, which we can receive in exchange for this sum of dollars.
And the value of a certain sum of any other currency is mentally perceived as a sum of dollars which we can get in exchange for these currencies.
The relation of the value of the dollar in our minds to the value of the two underlying tangible assets of mankind – oil and gold – is the main difference between the dollar and all the other global currencies. Which grants the dollar a status of the supra-market financial instrument, superior to all the other global currencies and the entire global monetary system as a whole.
Check back soon for Part 2.2!