My Exorbitant Privilege

I opened my eyes, lifted the shade, and squinted out the window. A big, radiant sun was rising over a pristine white-washed city, surrounded by an army of idled cargo ships awaiting their call of duty. After seventeen straight hours of feeling like a canned sardine in my economy airplane seat, we finally landed in Singapore. Modern and clean, with delicious food, and a classy comfortable ambience, this picturesque city was the perfect place to rest up before continuing on a bus to Kuala Lumpur (KL), capital of Malaysia.

It’s my first time in Malaysia, and so far, I haven’t been disappointed. First thing I noticed was Merdeka, the second tallest building in the world! I’ve never seen anything like it, towering 2,227 feet over KL with divine majesty. Merdeka’s courtiers are equally impressive. The Petronas Twin Towers, Exchange 106, Four Seasons Place, Oxley Tower 1, and many more. Outside my window is the Kuala Lumpur Tower that lights up at night with an array of gorgeous colors. I’ve never seen a more radiant and magical city by night. Otherwise known as ‘The Garden City of Lights’ the Kuala Lumpur metropolis comes alive with all kinds of twinkling colors that decorate darkness.

On the first day, I meandered over to the Pavilion KL Shopping Centre where I enjoyed a $4 lunch (pictured to the right) and a glass of fresh-squeezed carrot juice for $2. My belly couldn’t have been more content writing this post from the 29th floor of a bright skyrise. Even those heavy rains in the afternoons are delightful, humming and drumming against the large glass windows. Just a few days in, I’m looking forward to exploring this multicultural country, and will be writing about my experiences in the next several posts.

Why am I here? For years, I’ve been looking for a suitable place to launch the next stage of my life. Sometime after my youngest son starts college in the fall, I’ll hopefully be slow-transitioning to a small self-sufficient farmstead, where I can spend most of my time working and playing outdoors. I’m not sure yet if I want to do that in Portugal, Uruguay, Malaysia, or Colombia. There are advantages and disadvantages with each opportunity, and the only way to determine what’s best is to visit these idyllic places, get a reality check from the experience, and imagine my day-to-day life there. As far as Southeast Asia goes, Malaysia is the only place where foreigners can own land.

While you’re reading this post, I will have just finished my checkup at Prince Court Medical Centre. PCMC is among the world’s top ten hospitals for medical tourists and is the top in Malaysia, awarded by Medical Travel Quality Alliance (MTQUA), USA. I got a Signature Female Health Screening for about $446. See the pic below.

Isn’t it a novel idea to proactively screen for signs of sickness and disease? I’m convinced that if health insurance companies focused on prevention, they’d save a ton of money. Unfortunately, the U.S. healthcare system is not designed to prevent illness; it’s designed to “manage” symptoms. That’s the for-profit agenda anyway. Like everyone, I have some medical issues I want to check into, but I’ve found it very difficult to get this done through the convoluted expensive medical system in the U.S. It’s comforting to know that I can visit Malaysia or certain other parts of the world and receive excellent medical attention without being put on waiting lists for months or deal with insurance companies and referrals. Just last year, I had a full-mouth panoramic x-ray, cleaning, and a medical consult in Portugal for just $60.

This leads me to a question: why is the United States becoming so expensive and why are so many other countries a great deal cheaper? I watch videos all the time about middle-class Americans who have decided to leave the United States and move abroad for this very reason. Some of them have had serious medical expenses that resulted in bankruptcy or severe financial hardship. Others realized they had no life outside of work, and still couldn’t lead the kind of life they wanted. So they all figured out how to have a much higher quality of life by moving away.

Americans aren’t any smarter than the rest of the world, and they certainly don’t produce more, so what’s the deal? Exorbitant privilege is the deal; it’s the reason why U.S. dollars have an incredible advantage for consumers in the world economy. Exorbitant privilege refers to the benefits that we get from the international reserve currency, like not having to pay currency conversion fees and being relatively immune to exchange rate risks. Exorbitant privilege has made exports more expensive and imports cheaper, while it’s put many small U.S. producers out of business. Abdurrahman Arum Rahman, founder of Global Currency Initiative, Indonesia, called exorbitant privilege the Imperialism of International Currency:

Our international monetary system is neither symmetrical nor democratic. Some countries create international payment instruments while others buy them. This gives rise to imperialism. Countries that create international money can benefit at the cost of the world. Countries in the world give up resources and wealth to countries that own international currencies from hundreds of billions of dollars to trillions every year for free. Countries that own international currencies create and regulate the international monetary system for their domestic interests, not for the world’s interests. The current international currency system is the greatest empire of the modern age.

It was former French President Valery Giscard d’Estaing who coined the term privilège exorbitant. He recognized that it isn’t U.S. military power or industrial prowess that gives us our advantage; it’s the world reserve currency. Financial managers and investors around the world religiously watch the Federal Reserve. As the Fed hikes interest rates, the dollar’s value goes up, making dollar-denominated loans more expensive in all other currencies. As the Fed lowers interest rates, the principal value of treasury bonds goes up, encouraging investors to buy. In this brave new financialized world, you make more money if you learn how to play the game, and speculating on the Fed’s next moves is an important strategy.

Barry Eichengreen, in his book Exorbitant Privilege. The Rise and Fall of the Dollar and the Future of the International Monetary System, provides a historical overview of the U.S. dollar. Before World War 1, the dollar played no role in the international monetary system, behind the British sterling, German mark, French franc, Swiss franc, Dutch guilder, Italian lira, Belgian franc, and Austrian shilling. In the first half of the twentieth century, it became the world’s principal unit for invoicing and settling trade, denominating commodity prices, and settling international financial transactions. In the second half of the twentieth century, its dominance started being challenged.

According to the Bank for International Settlements (the central bank of central banks), approximately 90% of foreign exchange involves the dollar. Trade in almost all commodities, the biggest being oil, is priced in dollars. For decades, the U.S. has been able run a trade deficit without a balance of payment crisis, which has led to the notion that debt doesn’t matter. However, for the first time in history, treasury bond auctions aren’t going well, and the government is having a harder time selling its debt. If the U.S. government can’t sell its debt, it will have to buy the debt itself which catapults the nation into a death spiral of fiscal dominance.

What does all this mean? America’s exorbitant privilege is coming to an end. At some point, we won’t be able to export our dollars, and import resources and products in the same way as before. Oil will be our biggest problem, since globalism isn’t even close to working without it, and shale is drying up. Expats who are relying on social security checks and pensions will find themselves in a pickle when the dollar falls. They’ll no longer be able to live like kings and queens in the way they did before. Humanity will soon experience its biggest wakeup call ever in the history of world. A simple truth: the dollar system is not supported by gold and steel, but by cardboard and paper that burns.

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