“Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown,” Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. “But it will be, and this defrocking may occur in as short a period as five to 10 years.”
Bove uses several metrics to make his point, focusing on the dollar as a percentage of total world money supply.That total has plunged from nearly 90 percent in 1952 to closer to 15 percent now.”
“The dollar’s seemingly precarious status is why Pento remains bullish on gold and believes the dollar’s demise as the premier reserve currency could end even sooner than Bove predicts — perhaps by 2015.
“Five to 10 years — that would be an outlier,” he said. “I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we’re spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing.”
– CNBC, The Dying Dollar, first published July 2013
The problem with this type of analysis is that it makes the fatal assumption that a sudden shift in the basis of value would be at all possible.
Take the current scenario centred in Greece (with the recognition that Greece is simply the country in this situation that gets the most attention, there are plenty of others):
What happens in the situation where there is a (seen as temporary) loss of trust in a given world currency, such as the Euro, against a background of an overall loss of trust in the reserve currency, the US dollar?
By the charts and statistics we have, everything else is measured in terms of the US dollar. This habit won’t simply go away: we can’t jump back to the gold standard, or base our reserve currency on say the Yuan or some other currency, precisely because most people will continue to value gold or Yuans or Euros in US dollars.
How do we determine, then, if the US dollar itself is gaining or losing value? Primarily by a reverse comparison: if the dollar drops relative to most other things we consider it to have dropped, if it rises relative to most other things we consider it to have risen. But this only measures relative value, not taking into account that people’s trust in those other measures may have simultaneously dropped. This creates the most basic risk to the global system, that none of our analyses will see the overall decline in the trust in currency.
How do we determine the absolute value of the US dollar. We don’t, of course, as the base for other value measures it by definition cannot have a base. The US dollar is worth precisely what people think it’s worth, but then, so is everything else. The reason it matters is not simply that value is absolutely relative, but that the base of valuing is itself baseless, it is purely mythical.
This mythos began with the substantialization of currency itself, largely achieved through the touchstone, which guaranteed the relative purity of the ‘precious’ metal supposed to underlie the value of any given currency. The ‘gold standard’ is nothing more than this myth updated into the mercantile era and beyond.
We have reversed this myth via the desubstantialization of currency, the so-called “cashless” society, where most currency is simply digits in computer systems. This reversal has triggered a loss of trust in currency that itself cannot be measured by any of the means we have.
Behaviourally, one would expect this loss of trust to lead to an increase in currency exchange, which is no more than a zero sum game, simply in a vain attempt to find a “stable”, “safe” currency in which to hold one’s accumulation (the loss of faith which in reality affects every currency is initially projected by the investor onto whatever currency he happens to hold the most of). One would also expect a temporary increase in the price of things like gold, and a more substantial and more permanent increase in the price of real estate, property in the oldest sense.
The currency exchange markets doubled their daily transaction averages between 2009, after the last financial crisis, and 2014, yet at the same time stock exchange transactions sunk to a 45 year low. At the same time property values have continued to explode, while the price of gold has seen a more modest but continuing increase.
The restriction on the creation of dollars that led to the US dollar dropping from constituting 90% of the world’s currency in 1950 to 15% today is partly based on the desire of the wealthy to keep the value of what they have (primarily in dollars) high at any cost. The real cost has been the decimation of total wages paid, lowering the total value of goods bought, in turn decimating the marginal efficiency of capital and thus increasing the attractiveness of real estate as an investment vehicle, which further lowers the disposable wages of those most in need of wage-goods, creating a positive feedback loop. Positive feedback loops don’t last, generally because they destroy the system they are produced in.
The second significant means by which dollars have disappeared is via the decapitalization inherent in the disruptive tactics of new companies, particularly new technology companies, which are the the only potentially successful tactics in order to secure a reasonable chunk of a shrinking pie. While the capitalization of Amazon, Apple, Google etc. it in itself huge, the capitalization overall of the markets they have disrupted is a fraction of what it was.
For the average person though the most striking way in which currency has disappeared is that they simply don’t see or use it. The company I work for gets its digits in its bank account from other bank accounts associated with other companies, via a payroll company those digits come into my account, from which the largest chunk are automatically deducted to cover my housing payments. Even the small amount of disposable income left to me is removed largely via my debit card as I purchase groceries, gas, etc. By the metaphysics that underlies common sense these digits don’t constitute a ‘real’, a res in the Cartesian sense.
The mythos of currency is more and more abstracted from the mythos of Janus, the two headed god of the physical coin, to its origin in Chaos, interminable exchange itself without any specific determinability, Hegel’s “night where all cows are black”.
If the mythos of currency itself loses currency, not only the measures of value but value itself as measurable lacks any credibility. This mythos, as the Last God of the Romans, Janus, has been the operative mythos for two millennia. But if Janus is exposed as a fraud, a naive idolatry, and the originary gods of western civilization, those of the Greeks, especially their supreme god Chaos, returns, our rationalizations of the mythos will continue to hide that reality until the god is well beyond resurrection.
Greece, understandably, gets the most attention as the foundation of Western civilization, and specifically of the marriage of Democracy and Capital. Perhaps it’s apropos that the two are in the throes of a Big Fat Greek Divorce.
Reality as it appears already for the most part constituted for us, Zizek’s ‘impossible real’ structured via the symbolic order, is based on vast layers of human learning and development that we simply believe, whether we consider ourselves Christians or Atheists, rationalists or mystics. As an example, while most physicists believe Einstein’s relativity equations to be more accurate and therefore closer to the truth than Newton’s, it’s unlikely that any current physicist has redone all the observations and corrections upon which those calculations were based, nor has any current physicist considered the difference between the ontology that underlies Newton’s projection of an absolutely dimensional space versus the ontology underlying Einstein’s space that is determined dimensionally by matter and energy, rather than being some sort of pre-existing ‘container’ in Newton’s sense. Nor is a physicist likely to judge the relative ‘believability’ of each ontology, nor their relation to the development of mathematics from the Newtonian/Leibnizian calculus to the tensor calculus used by Einstein, and to also judge the appropriateness of each calculus given the operative ontology.
Thus our experience of reality is based on vast historical layers of belief, which are themselves judged by our notion of ‘rational’ consciousness. Yet our notion of the ‘rational’ is itself fairly recent, arising only approximately 2600 years ago, and itself is predicated on the mythic, the pharmakon that is the other side of the logistikon, in Platonic terms. The pharmakon is not madness, as Foucault supposed, but simple habit, which is precisely why we learn by repetition, by habituation. Our guiding mythos is largely that of our Greco-Roman origins as a civilization. Realistically a government edict by Augustus was hardly likely to change how we fundamentally experience reality and on what that is based. But myths, like gods, and like currency, are more effective when not viewed as such, and they are most effective when not seen at all. The concealment of the way we structure reality accomplished by the ‘Christianization’ of Rome simply allows the more originary mythos to operate with virtually no restraint.
“transporting and captivation can also harden into indifference, and then the open is taken as a place of common, objectively present things which seem to be the beings, because they are actual. On account of this concealed indifference deriving from the semblant absence of transporting and captivation, these (transporting and captivation) then appear as exceptions, as extraordinary, whereas they indeed show the ground and essence of truth. That indifferent validity [Gleich-gültigkeit] is also the domain in which all representing, opinion, and correctness play out (cf. The grounding: on space). That essence of truth, however, the transporting-captivating clearing and concealing as the origin of the “there,” essentially occurs in its ground which we experience as ap-propriation. The approach and absconding, the advent and retreat, or the simple remaining absent of the gods; for us in the sovereignty, i.e., beginning and dominion over this occurrence, the initial and final sovereignty which will show itself as the last god. In the intimations of the last god, being itself, the event as such, first becomes visible, and this shining requires both the grounding of the essence of truth as clearing-concealing and its final sheltering in the changed forms of beings.”
― Martin Heidegger, Contributions to Philosophy (Of the Event)
What if the fear of the loss of faith in currency were not simply a fear of losing immediate wealth and power among those who happen to have it, but a fear of the nature of sovereignty, long associate with the power to mint currency, being exposed? The Last God, then would not simply be currency exposed, nor even its systematization in the global financial system, but the presumption of sovereignty upon which both rest. This sovereignty is not merely questionable, it appears to at root have always been a sham concealing a fundamental theft, that of the sovereignty that underlies the sham sovereignty of nations and their currencies. This sovereignty remains “hidden in the open” by the fact that currency is only currency insofar as it retains currency in the judgment of those, all those, under whose sway it reigns. Just as words and phrases gain and lose currency in a given culture or subculture, so the valuation and currency of any given currency ebbs and fades, and does so in keeping with the authority the sovereign proper allows it. Yet this sovereign in the final analysis is none other than us. It is almost unthinkable, yet astoundingly easy, to make currency, accumulation, and wealth meaningless by the simple expedient of refusal. The notion of a general strike is predicated on the same productionism it seeks to combat. In a similar way, the refusal to give currency sovereignty is grounded on the same, common source of that sovereignty, our own acceptance of it, an acceptance that can quite simply and without force lose acceptance, be refused.