Pat Buchanan is not a pundit I would normally quote on anything. His hatred for anything that smacks of free trade is legendary and his wanting to cut us off from the world borders on obsession that often ignores reality. He does think Bush is a dangerous dolt, so he’s not all bad. But has he been right all along on this? Should I now be reinforcing my floors to hold all the gold I should stockpile under my bed? Should I include some rifles, too?
Sinking Currency, Sinking Country
Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush’s term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
Is it all Bush’s fault? Nope.
The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.
The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.
The whacko left meets the whacko right. No big surprise.
Funny, Buchanan never got too worked up about the Reagan-era deficits. In fact, no one really gets worked up about deficits when “their guy” is in power, it’s only those bad other people.
And yes, what about Denmark, Sweden or the Netherlands? What are their rates of unemployment? And growth?
“Is it all Bush’s fault? Nope.”
Well most of it is. We had a budget surplus before Bush took office. Euros were only worth 80 cents. The Republicans destroyed the surplus with huge tax cuts, mostly for the wealthy, corporate welfare programs, and started at least one completely avoidable war at an expense of $466 Billion so far.
The Euro will now cost you over $1.40, and when you measure US GDP or DJIA in Euros, they have both declined under Bush. Cost of living is way up, but because the government likes the idiotic “core” inflation better than actual cost of living, they put a false “everything is fine” face on it.
Real wages have not come even close to keeping up with inflation. Deficit spending is responsible for this. Inflation created this way is a stealth tax, and when you take that into consideration, Bush has raised taxes more than any President in history, they just refuse to call it that. “Inflation tax” hurts the poor far worse than the rich. Its a regressive tax.
The decline in the dollar is affecting trade world wide. Shipping companies in India are refusing to ship to Saudi Arabia, whose currency is tied to the dollar, because they lose money. If countries stop tying their currency to the dollar, no one is going to buy our debt, and we will print more money making it even worth less.
OK, here is a listing of several countries, showing their national debt as a percentage of their gross domestic product, as of 2006, per Wikipedia:
Japan 176.2%
Belgium 90.3%
Germany 66.8%
Canada 65.4%
France 64.7% (tie)
USA 64.7% (tie)
Austria 63.0%
Switzerland 51.0%
Netherlands 50.8%
Sweden 46.4%
Norway 44.8%
United Kingdom 42.2%
Spain 39.9%
Denmark 28.1%
Ireland 22.8%
The federal reserve is creating money out of thin air and injecting into the stock market though their Open Market Operations policy. The creation of the money devalues all of the money. I believe that this is a long thought out process of systematically ruining our economy. In March 2006 the Fed stopped publishing the M3, which is the total amount of currency in circulation. Why would you stop publishing that number unless you wanted to create massive amounts of new currency while trying to keep the perceived inflation in check? Sounds crazy doesn’t it?
I turned on the Rush Limbaugh show the other day by mistake and I hear him saying that inflation is at historic lows, and the (realistic) sayers that the economy is on shaky ground are “libs” that just need to work harder. This guy really tows the line, if he said that the earth is flat his followers would follow.
-Erik
#4, just one year old, many of those numbers have surely changed.
Can someone follow up with updated numbers?
This last year, the Canadian dollar has been stable. Euro has gone up, the US dollar has gone down. 1$ Can = 1.07 US today.
You should see the Can/US borders between Quebec/Vermont on weekends. Shopping Sprees!
Most stores have NOT adjusted their prices, so buying the same product today in the US often results in 40% – 50% savings.
Many people declare, pay the 15% duties at the border, which is what we would have paid in taxes locally anyways.
Several points –
-The US deficit has been falling steadily since 2003, when the last recession ended.
-The US national debt is not at a high historically, or even in the past two decades.
-Deficit spending alone does not cause inflation. It does cause a rise in interest rates. However if the government in turn tries to artificially lower interest rates in response, that causes inflation.
-As my table above shows, Canada’s national debt is significantly higher than the USA’s, and yet its currency is surging with regard to the USA’s. And several major nations of the EU have substantially higher national debts, in proportion to GDPs.
So the attempt to link the collapse of the US dollar to an allegedly high rate of deficit spending is simplistic, at best.
Anyone who ties debt to percentage of gross domestic product has a lot to learn about math. Its a right wing talking point that no respecting economist would consider significant.
Take a look at the messy math with GDP. Government reported GDP increase of 3.9% and inflation only 0.8%. In fact this was an accounting annomaly due to gas prices not rising with crude oil. Inflation actually went up 2.1% in 3rd quarter and GDP only rose 2.6%, again completely wiped out by the devaluation of the dollar.
http://tinyurl.com/34nsb4
Um, Arianne –
So to what figure would you tie the national debt, to make it a meaningful statistic?
If you compare two countries’ national debts, you’re comparing apples to oranges unless you make them proportional to the size of their economies.
#2 – And yes, what about Denmark, Sweden or the Netherlands? What are their rates of unemployment? And growth?
Why should that matter? If I were living in one of those countries and unlucky enough to find myself unemployed, I’d still be able to see a doctor.
So it seems they do have their act together. A far cry from the United State’s “Suck It Up And Die” health care plan.
Sorry about interjecting the unrelated health care issue into the thread, but I guess my point is, with all the taxes we pay, and all the wealth we have as a country, what are we getting for our money… aside from a slow decline into a police state full of unhealthy unemployed people?
#5 – I believe that this is a long though out process of systematically ruining our economy
I know the Bush Administration and current right wing leadership are poster children for sheer, unadulterated incompetence and graft. But there is a long loonbat plank you have to walk out on to believe that any of these people are trying to wreck the US economy intentionally.
But then, I guess there are those whackos who think Bush was the criminal mastermind behind 9/11….
#9 Frank IBC
Why don’t we look at this in a different way?
If the U.S. tried to purchase the Canton of Guangdong, the Chinese would just laugh because they already have so many American dollars, they don’t really know what to do with them all.
On the other hand , if the Chinese tried to purchase say, the State of Texas, they would have more than enough American dollars to take over the entire place, lock, stock and barrel.
I could be wrong but I think that’s the concrete difference in real debt you were seeking.
I think its funny, that the USA is trying to make a WORLD economy, with free trade, Nafta, and so forth.
Then we sell our Lumber to China, at an inflated price, buy MORE lumber from canada, TAX it 25%, and CHARGE the USA Citizens for it all.
First they Raise the Price to SELL to China, WE GET HIT, then Import more and Charge 25%, and we get HIT again…
THEN USA car makers have things MADE in mexico, and get them with Little or NO TAX/tarriff….And the price of a car is Thru the roof, as IF’ it was MADE in the USA. With a $10,000+ profit margin.
Its also funny that the USA sells 2/3 of the worlds rice, and do the OTHER countries pay as much as WE DO?? I really DOUBT IT.. Make that for ALL our foods…And the farmer ISNT getting the profits.
How about products imported to the USA, and marked up 1000+%, and sold to us. Even tho there is NO ONE in the USA that makes a competing product.. Look at what Apple is making on the iPhone…And it would cost about $100 to put together IN THE USA.
Do you think Sony is making money?? TONS…
Frank as you said, “As my table above shows, Canada’s national debt is significantly higher than the USA’s, and yet its currency is surging with regard to the USA’s. And several major nations of the EU have substantially higher national debts, in proportion to GDPs.”
As the article says, “The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.”
That is the primary difference here. Canada has a trade surplus, thanks to oil sales to the US.
US has a trade deficit, easily the largest in the world, and from 1971 to 2001 it did not affect us because the dollar was the reserve currency of the world. Other countries needed our dollars to prop up their own, so we could run deficits without seriously affecting the value of the dollar. Then some renegade countries like Iraq, Iran, North Korea, and Venezuela decided they did not want dollars anymore. We declared them the “axis of evil” and went to war with one of them to prop up the dollar, and threatened the other three, only to fail in Iraq and ruin the dollar value.
Now all those dollars floating around for decades are being traded for other more stable currencies and we are paying the price.
Frank
Lets look at the national debt as a % of GDP shall we?
Since Carter the only presidents that have lowered the percentage from what they were handed were the democratic presidents. Actually until Regan National Debt as a of GDP had been on a decline for 30 years.
Carter was handed 35.8% and left it at 33.3% Down
Regan was handed 32.9% he left it at 52.6% Way Up
Bush I was handed 52.6% and left it at 65.9% Up
Clinton was handed 65.9% and left it at 57.7% Down
Bush Jr. was handed 58.7% and is currently 65.6% Up
Now who really handles the peoples money better?
Don’t even think about blaming the Democratic congress for the spending under Reagan. He asked for 29.4 Billion more than they passed.
The Banks own America. I watched this video and it is pretty amazing that money=debt. NO debt, NO money. Even after watching this, I can’t really explain the miracle of money made out of thin air:
http://video.google.com/videoplay?docid=-515319560256183936
Ariane, there has not been a surplus for decades, maybe 100 yrs.
What was being called a “surplus” under Clinton was “going into debt slower”, and it was not real, the result of “Creative Accounting” worse than anything Enron came up with, and using strategic reserves (military supplies) for his thousand and one little invasions and military actions. (Part of Bush’s initial “increase” in national debt was simply replacing the ammo Clinton used up.)
Crooked politics and lying is a bipartisan problem.
As an example, you might recall the Democrats came back into power based on a claim they would “drain the swamp”? Yet bench marking continues, as bad as ever.
#10 Who said anything about the Bush administration or right wingers? They don’t mean shit. These large banks run this world. They have enslaved many countries by forcing them to buy debt and the United States is next. You sound very ignorant when you equate my statement to a 9/11 Bush mastermind theory.
And don’t forget the 300-Billion siphoned-out of our economy in 2006, by immigrants making remittances to their families back home…
http://www.reuters.com/article/bondsNews/idUSN1735191520071017
Asia was the top destination of these money transfers, receiving more than $114 billion, followed by Latin America and the Caribbean, with $68 billion, and Eastern Europe, with $51 billion, the study said.
Africa received $39 billion and the Near East $29 billion.
and thats just in one year…
You could fund the “War” in Iraq for three years with that. 🙂
12 Look at what Apple is making on the iPhone…And it would cost about $100 to put together IN THE USA.
And the funny thing is, no one has…
If it only costs $100 to assemble an equivalent product – in the USA – why hasn’t anybody done it?
—
anyway,
I still think this budget mess is playing into the hands of the “Starve the Beast” mentality which existed at the start of Dubya’s presidency.
Cutting taxes was just one way of forcing a fight over how the remaining funds would be divided – and hopefully causing cuts to the “entitlement programs” conservative loathe.
Demanding “war” funding be considered outside the normal budget – as “emergency spending” – is another i.e. “We’ve been fighting this war for a couple of years now, but you can’t expect us to have an estimate to include in the annual budget, can you???” 🙁
#3
> The Republicans
> destroyed the surplus with huge tax cuts,
Go back and take economics. We have more tax revenue after the tax cuts than before. If Bush is to blame it is for signing the bills that Congress sent to him to spend the additional money we got from the tax cuts and then some. We have a spending problem, not a revenue problem.
The devaluation of the US Dollar has little to do with the actual US economy, and much to do with how the US economy is perceived around the world.
Money trading governs monetary value, in a way very similar to the way the ‘futures’ market works. If you don’t know what a ‘futures’ market is, think of it as the stock market.
The US, if viewed as a regular company, is going down in value because of many factors, including:
– No confidence in the management.
– Bad monetary accounts. High debt.
– Declining demand for the products.
– High non-productive expenses (military expenditures that do not increase value)
– Weakening capital assets. The infrastructure is getting old, and new infrastructure is going up elsewhere (China) instead of locally.
– Unhappy employees (American citizens)
– Increasing raw materials expenditures (oil, metals) with decreasing internally produced materials.
Overall, the Unites States is turning into the General Motors of countries… a good quarter here and there, but overall a mess. Poor management, worker discontent, bad product that nobody really wants, out of tune with the times, heavy debt.
All the arguments above this post look at some monetary ratio, while ignoring the many additional factors that can be actually a deeper influence on the dollar value than pure numbers.
If confidence in the US continues to decline, the value of the dollar will continue to decline, regardless of how much they massage the books to make the numbers look interesting to the investors.
#21 sure those factors play, but lets say that a company has 1 million shares and they trade at $100, then over the course of a year they create another 2 million shares. The original shares are diluted to $33/share such that all shares have the same value. When you dilute you must devalue. The Fed are proping up the stock market on any sign of weakness whatsoever. They create money out of thin air and then buy stocks with the money. This injection of money diluted all existing money. In March 2006 they stopped reporting how much money is circulating throughout the world. It is estimated the between $500 billion and $1 trillion have been injected. This is greatest contributor to USD devaluation.
-Erik
#20 that is such a Laffer. It is way more complicated than that. Taxes have become a way to social engineer society. If we could cut taxes and increase revenue all the time then why have taxes at all?
#19 “starve the beast” is exactly right. Neocons themselves have been saying just that for three decades.
#16 I am very much an independent. The demicans are just as bad as the republicrats. The republicans are blocking every piece of legislation the democrats want, but the democrats are letting many republican bills get to through. What a bunch of pansies.
#15 and #17. The banks may control things right now, but all it will take is a nice big economic depression to destroy the entire banking system. The housing bust plus the dropping dollar plus “peak oil” has the potential of doing just that in the next few years.
22 – Eric.
You are correct… printing more money has a severe effect on monetary value, and it has to be included in the formula.
If you know anything about P/E ratios in the stock market, you know that the value of a company is rarely tied to current and prospective earnings. If it were so, the P/E ratio would be the same for all companies. Instead it’s how investors feel about the company that leads to high P/E ratios.
If you think of a US dollar as a stock certificate, with no intrinsic value aside from what people are willing to pay for it, then USA stock is valued very low these days by the rest of the world. And issuing more stock does nothing but dilute the value of existing stock, which was in decline in the first place.
Let’s all file for Chapter 11 all at the same time. That’ll put the brakes on everything. And really, is this country (usa) going to pay back any of this debt?
And I can just hear someone out of the white house saying ” At least we’re not as bad as Japan”.
They’ve wanted to devalue the dollar a bit and have been actively working to that end. They believe doing so will help increase US exports and jobs. They don’t want it to keep declining however. If they can’t stop it they risk inflation so we have to see if they can slam on the breaks and slow the decline.
There’s a twofold reason the Canadian dollar is rising. Yes the US economy has weakened considerably, but in contrast Canada’s strong economy has been buoyed by rising prices of our natural resources. We have an abundance of gold, oil, copper, nickel, lumber… all valuable exports. The number of jobs added last month was five times more than the market’s expectations driving the unemployment rate down to a 33-year low. The Canadian economy has become far more immune to US economic strength or weakness than in the past.
#23
It is not nearly as complicated as you might think and has been proven over the past seven years. The maximum return on tax revenue is a curve not a straight line. There is some point on the curve that maximizes tax revenue. Lower taxes and you lower tax revenue. Increase taxes and you lower tax revenue. The objective is to get the rich to spend more of their money on taxable investments and expenditures.
The fact is that tax revenue has increased since the Bush tax cut. The reason we have a bigger deficit is not because of lack of revenue. The bigger deficit is solely due to spending that additional revenue and more.
Hmm… Mental note to self, need to buy some Western Union stock
And don’t forget the 300-Billion siphoned-out of our economy in 2006, by immigrants making remittances to their families back home…
http://www.reuters.com/article/bondsNews/idUSN1735191520071017
Comment by Mike Voice — 11/5/2007 @ 9:24 am
#23 your last comment about destroying the banking system. The destruction of our banking system would not destroy the banks. They are playing poker with the knowledge of everyone’s hole cards. Look at what just happened, bear stern makes some real bad decision and the fed bails them out. At some point you have to pay the piper.
#11 – On the other hand , if the Chinese tried to purchase say, the State of Texas, they would have more than enough American dollars to take over the entire place, lock, stock and barrel.
Oooh Oooh Oooh… Is that a real possibility or just another pipedream?
Selling Texas help the US, China, and we’d lose our idiot President because I think the Constitution prohibits citizens of foreign countries from being President.