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By William Pfaff
Few Americans know, or much care, about the opinions foreigners hold of the United States. This was displayed during the ignorant and solipsistic debate over when or whether the United States will pay its debts, which concluded August 2 with a promise that it will soon be renewed. The debate was conducted as if foreign lenders had no role in the affair, and as if "the full faith and credit" of the United States were not a guarantee freely offered to those who in the past chose to purchase American bonds and other obligations.
The belief held by members of the
The general outlook of ordinary Americans, even (or especially) when they are elected to the
There is an important issue that was not included in the deficit debate in
The primordial quality of capitalism is that it is fiducial. It rests on trust. It cannot function unless those participating in it conduct their affairs in good faith, including trust in the value of the money in which business is transacted and in which debts will be honored. The United States dollar ceased to be convertible into gold in 1934 by passage of the Gold Reserve Act of that year, and President Richard Nixon terminated its nominal gold valuation when Charles de Gaulle's France insisted on exchanging France's dollars.
Thus American money, like all other modern money (excluding Maria Theresa silver dollars, still in circulation in Arabia and Africa!) is fiat money, accepted as worth what the issuing government or bank says it is worth, although constantly revalued by the currency market in relation to other currencies and gold and silver, and actually worth whatever you can buy with a dollar at a given time and place.
This ought to be understood by every American who took a college course in economics, but events in Washington during the past few weeks indirectly cast doubt on whether America's foreign obligations are in fact payable on demand. When
Trust is not in oversupply today. The United States has largely ceased to be a democratic republic (which is to say, a republic whose officers are validly elected by the demos, or commonality, of the community), but has become a plutocracy dominated by moneyed interests.
This is the result of (1) elimination by President Ronald Reagan of the existing
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World - Crisis of Confidence: Debt Debate Erodes US Global Standing | Global Viewpoint