Carry a Big Stick

Last week we saw another example of how far the United States has strayed from Teddy Roosevelt’s comment, “Talk softly, but carry a big stick”, a saying of West African origin. Often misquoted as Walking and not Talking, the modern version may be more apropos to current US politicking.

Because of a refresher on US policy 101, the Royal Bank had to refuse to hold US Dollar accounts for some customers. Those In God We Trust banknotes are the property of the United States and if you happen to hold citizenship (or dual citizenship) in one of Bush’s Axis of Evil countries, you may not have American money in your possession. It is quite acceptable for these people to own an American-made automobile or appliance, but no greenbacks.

George may be under the delusion that our Canadian banks actually keep our savings in neat little piles of notes in their vaults, but in reality, they only hold about 8% of their deposits in cash. The rest of our money, including any US dollars, is floating around the banking system somewhere else. Perhaps, heaven forefend, even in a US Bank!

But Marie Smith (nee Flores), not her real name, born in Habana in 1969 had to close her US account at the Royal Bank on Sherbrooke Street in Montreal, Quebec, Canada, because she has dual citizenship in that hotbed of communism, Cuba. Maria had to take $834.23 US over to the Bank of Nova Scotia where they, for the time being, still allow any Canadian citizen of good report to open a US dollar account.

On the same day as that sad news broke, the Business Report on CBC radio gave us the news that The Peoples’ Republic of China, their real name, was holding 10 Billion dollars in US funds. Pssst, George – they are the biggest Communist country in the world and they do not have your version of Democracy yet. Their human rights treatment is no better than old Fidel’s.

Call me naïve, but if one of your old ideological enemies is holding that much of your money, you might better be thinking about the impact on your economy if they decide they want something more worthwhile than a US greenback. Not that you can hit them with the same cudgel as you used on Maria Smith, but George and Company, you have a problem.

If China, for instance, decided to shed some of those reserves and convert them into Euros or Russian rubles, as some countries are doing, you might suddenly find that your dollar had devalued to the point where not too many people would want a US Dollar account. You might also get your CIA to check out some of the Middle East countries that hold US dollar accounts. The price of oil could skyrocket if the dollar tanks.

The military imagery was intentional – the US used to be the ones with that Big Stick - but with recent events, such as the mess in Iraq, how much of a threat is that Big Stick? The realization that air superiority no longer wins the war on the ground continues to sap the US allies in Iraq. Iran and North Korea can continue with their nuclear programs with impunity, knowing that the Big Stick is not going to come down on their heads. Condi may try talking about trade sanctions, but that rings hollow when the other fellow on the block, China, can offer everything a country needs. Moreover, it is all financed with US dollars. Ten billion of them.

The thing of it is, George, that while we loathe getting involved with your politics, if your US dollar tanks, the Loonie is going to follow it down the drain. Perhaps it is time for you to drop Teddy’s old dictum and get some advice from Oprah or Dr Phil. Advice like, “Don’t sweat the small stuff.” Forget about Maria’s US Dollar account in Montreal and start thinking about China.

I wonder if the Royal Bank can open a Chinese Bank account for me?