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27 March 2006
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Nederlandstalig
This article is part of the series Interviews Willem Middelkoop.
| 1 | 2 | 3 | 4 | 5 |
DeepJournal interviews RTL-Z reporter reporter Willem Middelkoop - part 2
'The question is not if, but when this financial system is going to fail'
Willem Middelkoop is an investor and freelance economics reporter for the Dutch financial report RTL Z. Based on his expertise and his sources - newsletters from insiders and conversations with bankers and financial analysts - Middelkoop believes that the question is not if the current financial system is going to fail, but when. What might then ensue, and how one can prepare for it, will be addressed in future conversations. The following interview [MP3, part two of two, recorded 8 February 2006] lays the groundwork for this.
(There are also two separate interviews with Middelkoop on current affairs).

By Daan de Wit

Daan de Wit: So the dollar is going to collapse at some point, but the people who manage or control the dollar, the Federal Reserve for example, won't they know more than the average guy in the street and be able to take measures accordingly? What can you say about that?
Willem Middelkoop: 'If the dollar falls, if the dollar crashes, it will probably be followed by a crash of the system, because we are all part of that dollar-based system. It is in no one's interest, except that of terrorists, to see our financial system crash. Everyone has an interest in keeping the dollar from crashing, even though fundamentally speaking the dollar has to crash because America is simply carrying too much debt and is living beyond its means. So everyone has an interest in seeing to it that the economic system keeps running and you're seeing this now. There is now actually a worldwide rescue mission underway. After the collapse of the markets at the beginning of 2000, 2001, 2002, now you're seeing a kind of worldwide monetary rescue mission. And how is it going? You can tell by looking at the interest rate, which has been severely reduced everywhere - in America to 1%, in Europe to 2%, in Japan to just above 0%. So this is one way that you can keep a system up and running. It has other extremely harmful consequences: it leads to massive currency devaluation, you actually create way too much money, you have a monetary policy that is much too lax, as they say. The interest rate is much too low. But in this way you keep the economy running. And that is also the only explanation for the recovery that we are now seeing. What we are calling a recovery is only an artificial recovery. This can be seen in all those commercials on TV that say 'borrow, borrow' and 'second mortgage'. They drive you crazy, but this is necessary to keep that system up and running. We have to keep borrowing more in order to maintain consumption, because if that were to end, if we were to go a year without borrowing any extra, then the housing market would collapse, and the entire consumer goods market would collapse.'

Daan de Wit: But I don't get it - that's still just fake money.
Willem Middelkoop: 'You can compare it to a kind of exponential growth. You need more and more fake money to keep the system running. It has to grow exponentially, so that each year it grows more and more and more in order to keep it running. And of course it eventually gets to the point that you can't let it grow any further. It gets to the point where it just stops, where people don't dare buy a new house any more, where people find themselves up to their eyeballs in debt. We're seeing this in America now. And if the real estate market starts to slow down in America……at this moment it's starting to happen. Housing prices are now beginning to fall in Las Vegas. If Americans are no longer able to borrow a large amount of money by putting up their homes as collateral, then consumption is going to dwindle, and they are already seeing this in America. Thirty percent fewer cars are being sold as compared to two years ago. Because of this General Motors and Ford are on the brink of bankruptcy. And those are huge institutions. GM has a total outstanding debt of 450 billion dollars. That's more than the federal deficit of The Netherlands. One question is whether the financial system can withstand the magnitude of the shock if GM were to go under. So there are many risks, and the Alan Greenspans of the world, the [Wim] Duisenbergs, they know that, and the only thing they're doing is promoting confidence in the system by the public at large and seeing to it that everything keeps running.'

Daan de Wit: Is it the intention to prolong the game - because this really sounds like a game - as long as possible? By knowing that it's going to collapse, can you fare better by drawing it out as long as possible?
Willem Middelkoop: 'Yes, of course.'
Daan de Wit: But is there a point when they're going to decide to let it fall apart on their timetable, since they'll be able to profit from it?
Willem Middelkoop: 'Everyone knows that this is ultimately going to lead to a collapse of this system, and that a new financial system will have to be devised. America knows this too. The big question is of course: What is America going to do? America is currently spending so much money that it's clear that they couldn't care less how high their federal deficit goes. And that could happen. It's totally understandable when you consider that it's all virtual money and everyone has at some point lent money to America. Then America will say adamantly: 'Sorry guys, we don't have the money any more', or 'We let the dollar drop so far that you are out ninety percent of your investment'. That could happen too. But the big question is - what is America planning to do?
America has allowed the value of its currency to decline some thirty or forty percent, that was between 2001 and 2004. Last year there was some stabilizing, a sort of recovery. The big question is: 'When is the great decline of the dollar going to happen?' But America doesn't have total control over this. Because if a big player decided tomorrow to dump their old dollars, then the dollar is going to crash on its own. But it is in no one's interest to allow the dollar to crash.
Then again don't forget that there are a number of terrorist factions out there, and the countries that support them, that may very well have an interest in subverting America in this manner. So there is a kind of economic warfare that is being prepared in order to take America down financially and economically, since America cannot be taken down militarily. This has become America's Achilles' heel.'

Daan de Wit: I have a question about this with regard to Iran, but I have also heard stories that China - still one of the biggest owners of dollars outside America - would be prepared, or would be of a mind, to dump those dollars. What do you know about that?
Willem Middelkoop: 'Of course China has nothing at all to gain by going and dumping dollars, because by working within this system China ensures that its products remain quite cheap compared to those of foreigners, which results in all these Western companies building factories there, so that the West, or Western companies, are actually investing in the growth of China. So it is only in China's interest not to dump the dollar. China also has to keep its population appeased; if there were to be an economic crisis there, massive social unrest would loom. China has of course acquired quite a lot of power over America. China possesses so many American treasury bonds that if China were to issue a press release tomorrow that stated not only that, 'We are going to sell dollars', but also that 'We're never going to buy dollars again', then the dollar would crash. It has become just that precarious. Let's say that China decides to dump its dollars tomorrow. Then America is done for. But that is not in China's interest.
China has the power to dispose of America. Japan also has the ability to do this, just like a whole lot of other parties, who at this moment also have that power. Look, if Russia wanted to it could work in sync with Venezuela - Venezuela by the way has already sold off all of its dollar concerns - and any number of other countries to build up their positions vis-à-vis the dollar, only to dump them all on one day. You could really bring America to its knees in this way. And very few people understand this. Military power is not the only thing that matters. If the dollar is ever attacked in this way - and that can happen any day now - then, well… It is certainly clear that Al-Qaeda-associated groups know this.'

Daan de Wit: But if America falls to its knees, then we fall right along.
Willem Middelkoop: 'Yes. The whole world will fall with America and because of this it's not happening anytime soon. But you could certainly deploy a kind of weapon of mass destruction, a kind of economic weapon of mass destruction. The BBC once made a kind of fictitious documentary in which Al Qaeda had some kind of mole in London, a terrorist of sorts who went to work at the banks and worked his way up to the position of trader, and then on one day began to dump currency in order to set off a chain reaction. Because we have such an unstable system, that is theoretically possible.'

Middelkoop is right that this is theoretically possible, but this theory assumes that Al Qaeda is a functioning terrorist organization that the West has no control over. As opposed to the opposite premise, in which an organization sponsored or not by the West is deployed as a black sheep in an operation like the one carried out on September 11th, 2001. Read more about this in the DeepJournal article Al Qaeda does not exist - Bin Laden videos are fake - Osama bin Laden is dead.

Daan de Wit: Are both China and Japan, which is also holding onto vast reserves of dollars, playing this game in order to prop up the dollar as long as possible?
Willem Middelkoop: 'Yes, it is in the interest of both of them. Japan in particular is in cahoots with America. That can be construed from all kinds of agreements that have been made. Japan has openly admitted that the stock markets there were propped up in recent years during the stock market crash. America doesn't admit it but it is clear that there has been a lot of coordinated management between the Japanese central bank and the American central bank, and the priorities of the European central bank quite obviously coincide very closely to the American interests, and there is a lot of mutual contact between central bankers via the BIS in Basel, which is the central bank of the central banks. The BIS in Basel is a private organization just like the Federal Reserve. The BIS is not subject to any parliamentary control or oversight of any kind. No parliamentarians or journalists are welcome there. No minutes are kept of the meetings. So these are almost secret societies in which the fate of the world is to a large degree determined and in which the system is organized. And it's all in the hands of central bankers whom we really never see.'

Daan de Wit: But those guys are also doing what is really in our best interest, namely keeping the whole system up and running as long as possible...
Willem Middelkoop: 'Yes, if you take out a mortgage now in order to buy a house, and in so doing become richer, your house still increases in value each year. That wealth is an artificial wealth that we all profit from - myself included. It is an artificially created wealth that you can actually get rich from. I myself have no interest in seeing this come to an end either. I hope it keeps going for a long time, though I would very much like to know if it will end at some point, and I would like to know as much as possible about it so that I can gauge when it will come to an end. And there are an awful lot of people around who don't stop to consider for a second that it can end, let alone want to educate themselves on how that endgame is going to play itself out.'

Daan de Wit: Could there be a strategic component to bringing the system to an end? (i.e., that the U.S. could gain advantage by determining the moment of the dollar's collapse, for instance by orchestrating a crisis such as an attack, whereby the first domino falls).
Willem Middelkoop: 'In 1944 America sold a kind of dollar system to the world. That is now coming to an end. The Rabobank (Netherlands) even wrote an official report [PDF - in Dutch] on this, on the beginning of the end of the dollar as the world reserve currency. [Middelkoop also points to this address by U.S. Rep. Ron Paul entitled The End of Dollar Hegemony]. If America ever discovers that the gig is up, then it naturally begs the question of how America is going to, well - how the endgame will play out. I can only speculate as to how that will go. But of course it is possible that America will self-determine the moment that best suits her for the system to crash. That could be more prudent than waiting for the enemy to decide that for you. But that's just speculation. But if you take a good look at what America has accomplished in the way of extra legislation since the attacks of September 11th - the attacks of September 11th have quite obviously been used to legitimize all kinds of emergency legislation - and if you analyze these laws a little bit, then you can definitely see that America is now preparing for a possible collapse of this system, a run on the banks, and that quite a lot of additional authority has been mandated so that the state will be very strong when it happens.'

Daan de Wit: One of the things that the U.S. does not have control over is for example Iran, which is going to start up an oil bourse in March of 2006 that is going to trade in euros, which will make the dollar less attractive. So that might be a good argument, as I've previously described, to put a stop to the bourse. What do you think of that?
Willem Middelkoop: 'Well it's common knowledge that Saddam Hussein was the first one to stop selling his oil in dollars. We are part of a dollar-based system and therefore all goods are traded in dollars. Every oil producing country may of course decide whether they are going to sell their oil for dollars or for apples. But Saddam Hussein was the first one to decide to sell his oil for euros, or at least a portion of his oil. So it is of course quite obvious that America is not at all happy with this because it undermines the dollar's authority. And at the moment that the oil is no longer sold for dollars, but for some other currency instead, America will no longer have the advantage of being the only one able to print that dollar and therefore able to purchase oil virtually for free. And yes, how America is going to react to such an unfavorable development, who knows, but it is quite clear that this is something that America is not going find pleasant at all.'
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