Send this article to a friend:


The US Dollar is Finished
Paul Craig Roberts

Are You Ready for High Inflation and Collapsing Living Standards?

US power since World War II has been based on its financial dominance stemming from the dollar being the reserve currency held by central banks in place of gold.  As the dollar was the currency used to settle international trade accounts, every country needed dollars.  That ensured a large demand for dollars to absorb the supply of dollars from the growing US budget and trade deficits.  In effect, the dollar as world reserve currency allowed the US to pay its bills by printing money.  

In recent years Washington’s abuse of US financial power, such as sanctions on Russia and other countries and the theft of Russian central bank reserves, has taught the world that Washington uses the dollar-based system for coercive purposes to deny other countries independent, foreign, economic, and trade policies.  Consequently, as Pepe Escobar explains, there has been a rapid move away from the use of the dollar as reserve currency.  In other words, the demand for dollars is shrinking. 

But not the supply. The supply is exploding.  Budget deficits are running in the trillions of dollars while the Federal Reserve shrinks economic growth and the tax base, and nothing can be done about the US trade deficit. The decision to offshore US manufacturing was an economy-wrecking decision.  The goods that Apple, Nike, Levi, and all the others make in China and Asia enter the US as imports when they are marketed in the US.  The US, having moved its manufacturing offshore, has little to export to cover the trade deficit resulting from imports. By using their trade surpluses with the US to purchase US Treasuries, foreigners financed the US budget deficit and US wars.  As countries increasingly settle their trade imbalances in other currencies,  foreign demand for US debt is declining.  

The consequence is that the supply of dollars is increasing, but the demand for them is falling.  This means a drop in the exchange value of the dollar, which means a rise in import prices.  The worst inflations are caused by the decline in the exchange rate of a currency.  It is an inflation that the central bank cannot fight by throwing people out of work.

This is America’s future, and I don’t mean in ten years.  I have been warning of this development, but the presstitute media does not report any facts unfriendly to the official narratives, everyone of which is a lie. The US can hold on for a while longer by having the Japanese, European, and British central banks print their currencies with which to purchase dollars, thus cushioning the dollar’s decline.  But the consequence is that these currencies also will fall in value relative to those outside the dollar system. In other words, the plight of the dollar will spread throughout the empire.

Wall Street, greedy corporate executives and boards, and incompetent policymakers in Washington offshored US manufacturing and made the US import-dependent.  Next they destroyed the dollar as world reserve currency and thereby doomed the dollar to devaluation against other currencies, and this will destroy US power.

Hon. Paul Craig Roberts is the John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. A former editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for Creators Syndicate in Los Angeles and a columnist for Investor's Business Daily. In 1992 he received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists.

He was Distinguished Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies. During 1981-82 he served as Assistant Secretary of the Treasury for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department's Meritorious Service Award for "his outstanding contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy.

In 1987 the French government recognized him as "the artisan of a renewal in economic science and policy after half a century of state interventionism" and inducted him into the Legion of Honor.

Dr. Roberts' latest books are The Tyranny of Good Intentions, co-authored with IPE Fellow Lawrence Stratton, and published by Prima Publishing in May 2000, and Chile: Two Visions - The Allende-Pinochet Era, co-authored with IPE Fellow Karen Araujo, and published in Spanish by Universidad Nacional Andres Bello in Santiago, Chile, in November 2000. The Capitalist Revolution in Latin America, co-authored with IPE Fellow Karen LaFollette Araujo, was published by Oxford University Press in 1997. A Spanish language edition was published by Oxford in 1999. The New Colorline: How Quotas and Privilege Destroy Democracy, co-authored with Lawrence Stratton, was published by Regnery in 1995. A paperback edition was published in 1997. Meltdown: Inside the Soviet Economy, co-authored with Karen LaFollette, was published by the Cato Institute in 1990. Harvard University Press published his book, The Supply-Side Revolution, in 1984. Widely reviewed and favorably received, the book was praised by Forbes as "a timely masterpiece that will have real impact on economic thinking in the years ahead." Dr. Roberts is the author of Alienation and the Soviet Economy, published in 1971 and republished in 1990. He is the author of Marx's Theory of Exchange, Alienation and Crisis, published in 1973 and republished in 1983. A Spanish language edition was published in 1974.

Dr. Roberts has held numerous academic appointments. He has contributed chapters to numerous books and has published many articles in journals of scholarship, including the Journal of Political Economy, Oxford Economic Papers, Journal of Law and Economics, Studies in Banking and Finance, Journal of Monetary Economics, Public Finance Quarterly, Public Choice, Classica et Mediaevalia, Ethics, Slavic Review, Soviet Studies, Rivista de Political Economica, and Zeitschrift fur Wirtschafspolitik. He has entries in the McGraw-Hill Encyclopedia of Economics and the New Palgrave Dictionary of Money and Finance. He has contributed to Commentary, The Public Interest, The National Interest, Harper's, the New York Times, The Washington Post, The Los Angeles Times, Fortune, London Times, The Financial Times, TLS, The Spectator, Il Sole 24 Ore, Le Figaro, Liberation, and the Nihon Keizai Shimbun. He has testified before committees of Congress on 30 occasions.

Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University where he was a member of Merton College.

He is listed in Who's Who in America, Who's Who in the World, The Dictionary of International Biography, Outstanding People of the Twentieth Century, and 1000 Leaders of World Influence. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: [email protected]


Please Donate

I listen to my readers. In March 2010, I terminated my syndicated column. Thousands of you protested. So persuasive were your emails asking me to reconsider and to continue writing that, two months later, I began writing again.

In order to create a coherent uncensored and unedited archive of my writings, The Institute For Political Economy, a non-profit organization that supports research, writing and books, has established this site, thus gratifying readers' demands that I continue to provide analyses of events in our time.

In order to stay up, this site needs to pay for itself.


Send this article to a friend: