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Uncle Sam's scam

|US Treasury|Obama government

The Regency age dandy, Beau Brummell, who is credited with having invented trousers,also invented an economic model which could be called a debt spiral. When his tailorwould present an unpaid bill, Brummell would order another three outfits, also on credit.Eventually, the dandy owed his tailor so much money that he became the tailor's mostvaluable customer, whom the tailor couldn't afford to offend in the slightest way for fearof forfeiting all of Brummell's IOUs.

The world's supposedly richest nation, America, has perfected Brummell's economicmodel: US debt has spiralled not just through the roof; it has rocketed out of thestratosphere. China alone holds some $895.2 billion of US treasury bonds. All thecountries in the world, in some measure or other, perforce have to keep US dollars for the

simple reason that almost all international trade including the oil trade is conducted inAmerican currency.

This represents the biggest financial confidence trick in the world. For what it means isthat like Beau Brummell the US is living off the fat of the land on an ever-growingmountain of debt which is being financed by the rest of the world.

The US stopped making things cars, ballpoint pens, TV sets years ago. It didn't have tomake anything. Other countries made all the things that America needed and Americabought everything from these other countries. Using US dollars of course. What else?

So the only thing that America actually had to produce were US dollars, or US treasurybonds. Whenever America has felt it was running out of cash as happened in the wake ofthe subprime crisis, when the Obama government authorised the pumping in of almost atrillion dollars into the economy to avert a total meltdown all it has to do was print moremoney. Then it could go on throwing away money like it's nothing but bits of paper,because that's exactly what it is: bits of paper, more and more of which can be printed up,as and when need arises.

The so-called Almighty Dollar is not backed by anything of real value. It is not backed bygold. It is not backed by any tangible goods that America produces and sells to the rest ofthe world, because America doesn't make any such goods. There is only one thing thatimparts value to the dollar: universal gullibility.

America has successfully pulled the wool over the world's eyes. Like Beau Brummell'stailor, the international community has been conned into paying to keep the US in thehigh-spending style to which it has become accustomed.

The more America spends i.e., the more dollars it prints the more the world laps up thosedollars. The euro was supposed to be a counterbalance to the dollar monopoly.

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Unfortunately, fiscal indiscipline (an indiscipline learnt from the US) in Greece, Ireland,Spain, Italy and Portugal, has eroded confidence in the euro. The result? Internationalinvestors are busily buying dollars and US bonds as a hedge against economicuncertainty. That's not like a drowning man clutching at a straw; it's like a drowning manclutching at an electrified wire to save himself. The dollar-rush is largely the cause of

market volatility in India and other parts of the world. How does this affect India? Ifforeign investors pull out of India and park their cash in US bonds as they're doing Indianenterprise could be starved for capital, shackling economic growth.

What can the world do to stop the US like a monstrous Beau Brummell take the pants offus? Maybe it's time for the world's two fastest growing economies, China and India,jointly to come up with a viable alternative to the dollar. They'll never do it, of course.But it's something to dream on. A yuan-rupee hybrid. The Sino-Indian yupee, anyone?