No economy can develop without international trading: the modern world is impossible without export and import operations. Every country is trying to produce something unique and offer it in the international market. These may be goods, commodities, technologies, scientific and cultural achievements, and so on… Such an exchange is very profitable for all of the parties, but, as in any process, it has its disadvantages. For instance, the domestic problems of the export economy, such as inflation, are exported along with the products as an inseparable part. Generally, it is natural, maybe because no one ever managed to make the economy work in a different way. In the modern world, there is such a thing as export of inflation on its own – and this is a much more serious problem.
In our articles, we are looking for a way out of the dead-end that the modern money system has brought us to. This is why the Reserveum Group is developing an effective currency that could replace the current money and help the economy get rid of inflation that has spread around the world like an epidemic.
Who Came Up with an Idea to Export Inflation?
What goes next may make you smile: we, as usual, blame the USA for all of our problems. But there is nothing we can do about it; their currency the world leader, so the States will have to be held responsible for all of the problems.
So, the story with the inflation export dates back to 1947. Europe was trying hard to overcome the consequences of the war, its biggest cities were in ruins, and the economy was devastated. In the US, it was much better except for one undesirable little thing – inflation.
This is when they came up with this wonderful idea to solve all of the problems on mutually beneficial terms. The idea belongs to the US Secretary of State George K. Marshall. History remembers it as the “European Recovery Programme” or the Marshall Plan.
In this plan, the USA offered huge lumps of money as financial assistance to the European countries; it also provided them with food. In return, the European countries were forced to rule all communists out of the government and creat the North Atlantic Treaty Organisation. These were the key conditions and they were considered the official start of the Cold War; but in fact, it was a matador’s red muleta to draw the attention from the main profit the USA made from this programme.
Within the Marshall Plan, there was over 13 billion USD sent to Europe, most of which was distributed among Great Britain, France, Italy, Western Germany, and the Netherlands. But in fact, the USA just dropped a bomb of 13 billion inflationary dollars on the top of already devastated Europe, thus reducing the money supply in their own country and reducing the price index in their domestic market.
If you want to get a better understanding of why the USA struggles with inflation so much, we would highly recommend our article called “Why Cheeseburgers Become More Expensive”.
So, all the excess money shifted from the USA to Europe, and now inflation became their problem. National currencies started losing value with incredible speed, while the USD became the only solid currency for many years.
We have dwelled on the details of the post-war crisis in Europe in our article called “Hyperinflation: 5 Examples”.
What did it lead to?
The results of the help programme are still questionable. Not all of the countries managed to recover from the received funds quickly; Spain did not take part in the programme at all, yet it did manage to show rapid economic growth, so overall, the effect of the Marshall Plan is still not clear.
There is, however, no doubt that the biggest countries of Europe became very dependent on the USA. They became a big market for the US export and provided cheap resources; American trading companies made their way into European markets; all of the national currencies were tied down to USD and depended on it.
The climax came in the second part of the 60s when all countries started exchanging dollars for gold. Back then, the Gold Standard was still working, so Europe’s refusal to dollar hit the US economy hard; because of that, the US currency devalued greatly and the Gold Standard was cancelled.
What do we have to learn from this story?
When money has particular owners, as with FED and USD, they will manipulate the money in their own interests. The US currency is subject to constant inflation because its emission is not transparent and more money is printed than the economy actually needs.
An ever-growing money supply needs a safety valve – in other words, some kind of a mechanism that would release the excess money from the economy fed up with its money. In a healthy economy, this valve is raising the interest rate on business loans which makes the whole economy slow down – so the money supply and the consumption rates are lower. But in the USA, this mechanism doesn’t work; it does not keep up with the speed of the printing machine, so the excess dollars go to less developed countries as an investment. It happens now too, and every country receives the US inflation along with its funds.
So the very money that should make the exchange easier and help the economy thrive actually became the yoke for the whole world. Manipulations with fiat currencies make it more complex, they tangle the money system, and make it bulky and prone to crises.
The only way out is to switch to a fair currency that would not be manipulated by anyone. Modern technologies enable us to create such money now. It would be a transparent, decentralised, and non-inflationary currency that would have just the right amount of money needed for the economy at any particular moment.
According to the analysis group findings: reserveum.org