Healthy Money Healthy Planet - library.uniteddiversity.coop

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of agricultural and mining products. Urban regions generate about 90 per cent of the
imports, yet are responsible for less than 30 per cent of the exports. Clearly, the outback
regions are subsidising the urban regions in the realm of foreign exchange.
In the Australian example, if both regions had their own currency, the outback
dollar would be worth a great deal more than the urban dollar (say, 15–20 times as
much). Rural industry would therefore be able to obtain labour, transport and other
infrastructure services at a much lower cost, and the manufacturing industry in the
cities would obtain far greater protection than was ever provided by tariffs. The cost of
imported manufactured items to the urban sector would increase, and a substantial
incentive would be created to undertake import substitution. As a result, the
manufacturing industry would flourish.
A Democratised International Currency
For many centuries the international currency has been either silver or gold, but the
world economy has now expanded so many times that there are insufficient silver or
gold reserves to back all the goods and services traded. As a result, certain national
currencies have now effectively taken on this role, namely the US dollar, the British
pound, the euro and the yen. These are all called ‘reserve currencies’ – in other words,
those in which international transactions can take place.
The US dollar is by far the most important of these reserve currencies. As at 2000,
over 68 per cent of the world’s foreign exchange reserves were held in US dollars, more
than all other countries’ currencies put together, and the majority of international trade
is now conducted in US dollars. 5 In the years from 1992 to 2000, the world’s central
banks increased their dollar holdings by around US$800 billion. To get an idea of just
how much money this is, US$40 billion for ten years would enable everyone in the
world to be given access to an adequate diet, safe water, basic health care and adequate
sanitation. 6 And this figure is, of course, only part of the subsidy given to the US, as
companies, institutions and millions of people around the world also hold dollars.
After turning down the Bretton Woods opportunity offered by economist John
Maynard Keynes in 1944 (see below), the world’s richest and most powerful nation has
been able to reap a huge benefit by creating most of the global money supply with no
formal constraints.
But why does this happen? US banks lend the dollars into existence, and then the
nation spends them throughout the rest of the world, gaining either goods and services
or interest. This has meant that US imports exceed its exports; in only one year of the
last two decades of the 20th century was the reverse true, when its exports exceeded its
imports. In 2000, the US owed the rest of the world US$2500 billion, a sum that was
rising by a billion dollars a day owing to its chronic trade deficit.’ 7 As Richard
Douthwaite says: