What would happen if the U.S. dollar lost its world-reserve currency status? Three weeks ago, America’s most reviled billionaire, George Soros, and his Canadian counterpart, BlackBerry smartphone billionaire Jim Balsillie, held a global economics orgy at Bretton Woods, N.H., to plot how to dump the dollar after the worst financial crisis on record.
The Mount Washington Hotel venue in Bretton Woods was somewhat pretentious, selected because it was where 730 delegates from 44 nations met in 1944 after World War II to regulate international finance by creating the World Bank and International Monetary Fund.
The Soros-Balsillie bash, by contrast, produced 250 economists and 80 speakers from about 15 nations, whose unintelligible jargon barely concealed their glee that global governance of financial capitalism was broken and must be fixed — by them, of course. Reporters stayed away in droves.
This snoozer was sponsored by the Institute for New Economic Thinking, an outfit began last year with $50 million from Soros. The institute aims to indoctrinate a new generation of economists against the U.S. dollar.
Why? In simplest terms, if one country wants to buy things from another, global prices are in dollars, so they first have to buy dollars and then use them for the actual purchase.Soros’ institute wants to stop that.
The irony is that the institute’s “new economic thinking” bears the aged-cheese whiff of 1930s welfare-state economist John Maynard Keynes and the London School of Economics – where Soros earned his economics degree – to “balance the market and government.”
But conservative commentator Dan Gainor of the Media Research Center saw the conference as prophecy fulfilled: Soros had written in a 2009 op-ed that “a new Bretton Woods would have to reform the currency system. The dollar no longer enjoys the trust and confidence that it once did, yet no other currency can take its place.”
When this month’s Soros conference proposed strict regulation of global finance to weaken the U.S. dollar’s position as the world’s dominant reserve currency, Gainor predicted “an impact Americans might be reeling from for years.”
The personal success industry had already gone ballistic. Thomas Herold, of the Wealth Building Course, wrote, “There will be dramatic consequences that you can hardly imagine if the dollar finally ceases to be the reserve currency of the world … the value of the dollar will plummet. The immediate painful effects will be that commodities prices skyrocket … your lifestyle would sustain a punishing drop overnight.”
How likely is all that? I know a lot of economists — those experts who, if lined up in a row, would all point in different directions. I asked one who usually points to reality: Doug Henwood, author of “After the New Economy: The Binge and the Hangover That Won’t Go Away.”
He is also publisher of the Left Business Observer, and the only guy I know that Soros’ PR man Michael Vachon kicked off the Open Society mailing list because he asked a rude question about the boss.
Here’s Henwood’s take on Soros replacing the U.S. dollar as the global reserve currency: “Central banks and monetary policymakers everywhere know that the U.S. is the biggest economy in the world and its short term treasury pool is deep and liquid. What are you going to replace that with?
“If Soros is involved in this, he’s probably got a position in it. Guys like him are always talking their book, as they say on Wall Street. And he’s a master of the opaque transaction.”
True. I just began tracking Soros’ newly created Foundation to Promote Open Society (2010 assets $2.2 billion). Why does he need another big fund like his Open Society Institute (2009 assets $1.9 billion)? Is it related to his fight against the dollar? We don’t know.
Yet.
Examiner Columnist Ron Arnold is executive vice president of the Center for the Defense of Free Enterprise.
