They establish the value of the US dollar by their acceptance of it in trade, in use as reserves. When they stop valuing the US dollar, the dollar is dead. No one needs to trade with the US, given that the US pays in inflationary counterfeit, and cannot meet it’s debt obligations.
Granted, foreigners are part of the demand for dollars. But I’m not understanding why repudiating the debt would cause anyone to stop valuing the dollar. Certainly it would collapse the demand for US Treasuries (the Treasury would find it very difficult to borrow). But the demand for Treasuries does not create demand for dollars. Rather I think the opposite is true. A Treasury security is a promise to pay dollars (i.e., Federal Reserve Notes). Surely no one would demand a promise to pay dollars unless they already valued dollars. Thus the demand for dollars must be prior to the demand for Treasuries, not the other way around.
In fact, when someone (foreigner or otherwise) purchases a Treasury security, they are relinquishing dollars. They forgo holding current dollars (and the demand for money is the demand for cash holdings). If purchasing Treasuries is no longer widely considered as a desirable option (because they are considered very unsafe), then that may cause some people (including foreigners) to hold more dollars (instead of Treasuries), as a next best option. This would be an increase in the demand for dollars.
Yes, Federal Reserve ‘liabilities’ are inflationary (the Fed creates more of them all the time), but that hasn’t stopped foreigners from valuing them yet. I would think foreigners will still accept and hold FR ‘liabilities’ in exchange for their goods as long as they expect that Americans will still accept and hold them too (in exchange for goods produced by Americans).
From the Wizard of Oz thru to the Secret of OZ
The Secret of OZ: SILVER OUNCES/SILVER DOLLARS & GOLD BRICKS/GOLD COINAGE
http://www.secretofoz.com/index.php?option=com_content&view=article&id=63&Itemid=76
The Gold Standard representation of the story
Some scholars[6] have theorized that the images and characters used by Baum and Denslow closely resembled political images that were well known in the 1890s, specifically the debate of the day regarding monetary policy: the “Yellow Brick Road” represents the gold standard, the silver slippers (which were ruby slippers in the film version) represent the sixteen to one silver ratio (dancing down the road). Many other characters and story lines represent identifiable people or circumstances of the day. The wicked witches of the east and west represented the local banks and the railroad industry, respectively, both of which drove small farmers out of business. The scarecrow represents the farmers of the Populist party, who hoped that their indebtedness would reduce if the dollar were to be partially exchangeable with silver. The return to bimetallism would increase inflation, thus lowering the real value of their debts. The Tin Woodman represents the factory workers of the industrialized North, whom the Populists saw as being so hard-pressed to work grueling hours for little money that the workers had lost their human hearts and become mechanized themselves (see Second Industrial Revolution). Toto was thought to be short for teetotaler, another word for a prohibitionist; William Jennings Bryan, the fiery popular candidate (possibly the Lion character) from the Populist Party, was a teetotaler himself. Bryan also fits the allegorical reference to the Cowardly Lion in that he retreated from his support of free silver after economic conditions improved in the late 1890s. It has also been suggested the cowardly Lion represented Wall Street investors, given the economic climate of the time. The Munchkins represented the common people (serfdom), while the emerald city represented Washington and its green-paper money delusion. The Wizard, a charlatan who tricks people into believing he wields immense power, would represent the President. The kiss from the Good Witch of the North is the electoral mandate; Dorothy must destroy the Wicked Witch of the West—the old West Coast “establishment” (money) with water (the US was suffering from drought). Moreover, “Oz” is the abbreviation for the measuring of these precious metals: ounces.
Two Bits Four Bits Six Bits a Dollar all for a Silver Dollar stand up and holler!
http://www.secretofoz.com/index.php?option=com_content&view=article&id=60&Itemid=74
The Secret of OZ: SILVER OUNCES/SILVER DOLLARS & GOLD BRICKS/GOLD COINAGE
“2. First off, what is there even to own in the Federal Reserve?”
I’ve heard that shares in the FRB pay a guaranteed 6% dividend annually. That’s a fairly impressive income stream.
atrickpay: I’d like to start with a question on your 1st point about the class A shares. What specifically and exactly do these Class A holders own with their shares? The buildings + land for the Federal Reserve banks (in point 2 you seem to imply that they own the building + property of the New York Fed)? Or is it something else?
Do you understand the concept of stock ownership?
Davidz: yes the banks “own” some common stock…but it’s not true ownership. They were forced by law (the Federal Reserve Act) to purchase the stock…so it’s in effect a tax. True ownership is voluntarily.
2nd, ownership means control over the property you own. The banks that own common stock by law cannot sell it.
So, this private ownership of the Federal Reseve is just a smoke-screen…the Federal Reserve is controlled by the gov’t.
Because they must admit they don’t know everything.
No… that’s not really the issue. It’s not SunTrust bank and Flagstar Bank and US Bank and Bank of America or whatever other commercial banks you might be familiar with, who “own” the guaranteed 6% dividend paying shares in the Federal Reserve, it’s an international money cartel. The (conspiracy) theory version says that the Fed is owned, essentially by the following institutions:
Rothschild Bank of Londong, Warburg Bank of Hamburg, Rothschild Bank of Berlin, Lehman Bros. NY, Lazard Bros. Paris, Kuhn & Loeb NY, Israel Moses Seif Banks of Italy, Goldman Sachs NY, Warburg Bank of Amsterdam, Chase Manhattan Bank NY.
The “smoke screen” is that the Fed is governed by 12 federal reserve banks and a board of governers in the United States, when in fact it is controlled by an international money cartel.
What they “own” with this stock is not real property, but like any stock ownership is a claim to a future dividend income stream. In the case of the FRB, they are literally printing money and lending it at profit, so the 6% dividend is effectively perpetually guaranteed.