As a component of George W. Bush's world of "globalism," the status and health of the U.S. dollar deserves close scrutiny here at the end of 2007, closer than my mention of it in a recent column.
As I've written, China is now the holder of an incredible stash of dollars. Some reports have their cache valued at over $1 trillion. You don't have to be an economics professor to worry about numbers like that. That's quite a fistful of dollars for a burgeoning superpower nation whose ultimate geopolitical goals have always been suspect. China, conceivably, could put the U.S. economy in peril if it chose to dump these dollars on the open currency market.
So it's ironic that China and the United States suddenly find themselves sitting with each other in a small life raft.
This week, Iran and Venezuela -- both avowed foes of America -- announced that they'll no longer take dollars as payment for their considerable oil sales. They want euros instead.
This is no small event. The idea that the U.S. dollar is no longer a currency of preference puts increased pressure on China to avoid seeing the dollar devalued -- they hold too many of them.
This increases America's vulnerability to China's whims. Should they ever decide to dump dollars on the international market, the value of the greenback would plummet.
This begs a broader question. Is the dollar really strong today? Probably not.
This isn't a spooky tale of woe worthy of "Trilateral Conspiracy" theories. It's simply a matter of fact that America's current national debt is over $49 trillion, according to the General Accounting Office's 2005 numbers.
Believe me, we don't have anything like that kind of money. And the only way to come up with it is to stamp endless reams of paper with oceans of green ink and call them dollars. That means further devaluation for months, probably years to come.
We are in no way the masters of our own destiny here. Indeed, individual American states dependent on federal spending are now having to turn over publicly built roads and tollways to the highest private bidder -- often foreign companies.
For example, in Indiana, a consortium of foreign investors bought 75-year rights to a toll road for $3.8 billion.
Reportedly, the contract even exempted them from state and local taxes.
Texas has greenlighted the construction of a private toll road out of Austin. It, too, is a long-term deal with toll proceeds earmarked for foreign coffers.
Indiana and Texas are not alone. One at a time, states are learning that promised huge transportation funds from the federal government won't be forthcoming. The money just isn't there.
Why my emphasis on roads? Because they're a symbol of American strength. Given that, it's not hard to imagine that states may increasingly react to Uncle Sam's lighter wallet by deciding to privatize other essential infrastructure. Publicly owned power plants or water-treatment facilities, perhaps, or other necessarily big-dollar entities potentially may become private businesses in the years to come, and often foreign-owned.
We're a nation forced by debt to allow countries like China to undercut our prices of domestically produced manufactured goods. That means our tradition of world dominance in making "things" is a thing of the past.
In essence, we're now being held hostage by oil-producing enemies. Their weapon of choice isn't the nuclear bomb. It's the slow erosion of our international monetary and manufacturing strength.
It shouldn't have been a shock to anyone this week when we learned that our trade deficit is even bigger than we thought.
If it's not a maxim already coined, allow me: The wisest way to conquer an enemy isn't with bullets or bombs. The most lethal "trigger" is mastery of monetary-system imbalances.
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