Washington’s sanctions policy has prompted world players to drift away from the dollar, thus throwing the greenback’s top reserve currency status in jeopardy, says American economist Dr Paul Craig Roberts, explaining how the Federal Reserve manipulated the price of gold to prop up the US dollar.
While the Trump administration is beating the “make America great again” drum and reporting about the rapid growth of gross domestic product (GDP) and a plummeting unemployment rate, the clouds are gathering on the horizon of the US economy and the dollar, says Dr Paul Craig Roberts, an American economist and author of more than a dozen books, who served as the United States assistant secretary of the Treasury for Economic Policy under President Ronald Reagan.
The backbone of the US’ financial power is the dollar’s major reserve currency status which allowed the US to pay its bills by printing greenbacks. After US President Richard Nixon unpegged the dollar from the price of gold the Federal Reserve has long maintained the illusion of the “stable” greenback by deliberately reducing the price of the precious yellow metal, the economist explained.
Now, as global players are turning their backs on the dollar by shifting to national currencies and using gold as a hedge, the US economy may find itself in a heap of great trouble, according to the former Reagan administration official.
Sputnik: What’s behind the Federal Reserve’s apparent attempts to reduce the price of gold? Could the growing demand for gold hit the US dollar’s value? Is the US dollar currently over-valued, in your opinion?
Paul Craig Roberts: The main source of Washington’s power is the reserve currency role of the US dollar. Being the reserve currency means that there is a high transaction demand for dollars, for example, to pay oil bills, and that other governments are willing to hold dollars as their reserves. The fact that other countries are willing to accumulate dollars means that the US can pay its bills by printing money.
The dollar’s value in terms of the other major currencies, the euro, the British pound, the Japanese yen, is rigged within a narrow range. When the Federal Reserve began printing money (Quantitative Easing or QE) in order to bail out the big banks by purchasing their mortgage derivatives,