On Thursday, stock markets around the globe crashed again -- likely due to concerns about the crisis in Europe and perhaps profound concern about the growing recession around the globe.
Investors immediately started buying US dollars and American treasury bills. Thus, despite ongoing predictions about the crash of the US dollar, quite the contrary seems to be happening.
Helping to make sense of this latest development is Prof. Leo Panitch, author of the book, "In and Out of Crisis: The Global Financial Meltdown and the Left Alternative." He teaches at York University in Toronto.
Panitch says, "People have been expecting that the US dollar would go the way of the Dodo bird since the 1960's, not understanding the extent to which the whole of global trade and finance is founded on the dollar. But more importantly, all calculations of value in the world - of what something is worth - are in a monetary sense, really based on the price of a US treasury bill. And that's because the American state stands behind it."
Thus, continues Panitch, all of the world's investors, look upon the American state as the guarantor of their property. There is no question that the Americans are going to default on their debt. Even when S&P downgrades the treasury bill, people pile in and buy more dollars.
It is occurring in this context, he contends, in the face of a tremendous amount of fear that was induced by the financial crisis that began in 2007. Investors are extremely skittish and don't know where to put their money. They then go to the place where credit is issued by the state which they have the most confidence in, as the state of global capital (America).
However, Thursday's crash had to do with the Euro and has to do with the way in which the European Union is constructed, says Panitch. Watch the clip for more on the European debt crisis.