Doomsday for the Greenback

[katty]

Doomsday for the Greenback

By Mike Whitney

“Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.” Daniel Webster

excerpt: http://www.informationclearinghouse.info/article17512.htm

The investor class loves big deficits because they provide cheap credit for Bush’s lavish tax cuts and war. The recycling of dollars into US Treasuries and dollar-based securities is a neat way of covering government expenses and propping up the stock market with foreign cash. It’s a “win-win” situation for political elites and Wall Street. For the rest of us it’s a dead-loss.

The trade deficit puts downward pressure on the dollar and acts as a hidden tax. In fact, that’s what it is--a tax! Every day the deficit grows, more money is stolen from the retirements and life savings of working class Americans. It’s an inflation bombshell obscured by the bland rhetoric of “free markets” and deregulation.

Consider this: In 2002 the euro was $.87 on the dollar. Last Friday (4-6-07) it closed at $1.34-- a better than 50% gain for the euro in just 4 years. The same is true of gold. In April 2000, gold was selling for $279 per ounce. Last Friday, at the close of the market it skyrocketed to $679.50---more than double the price.

Gold isn’t going up; it’s simply a meter on the waning value of the dollar. The reality is that the dollar is tanking big-time, and the main culprit is the widening trade deficit.

The demolition of the dollar isn’t accidental. It’s part of a plan to shift wealth from one class to another and concentrate political power in the hands of a permanent ruling elite.

[papau]

1. A lot of truth mixed with errs - fiat currency works and works well and is to blame for nothing- but

the trade deficit, the sending jobs off shore, the trade deals that benefit only the corporations of the rich and not the planet or the workers, the fantastic welfare for the rich in $8 billion gone missing in Iraq and in their percentage take off the top on all the government contracts, the greed that lets insurance companies stop single payer health, condemning us to second class care - all point to capitalism failing as a system.

We must have greed for motivation - but unchecked greed destroys the place.

[bemildred]

2. Yep, it's an equilibrium system, you gotta keep it balanced.

But freeing money from being tied to any particular commodity was a good idea.

[camero]

3. Is this the economic crisis that leads to American fascism?

Both Hitler and Mussolini's rise to power was born in the great depression. Not to counter the author's basic premise, which is true, but I just wonder if the current economic situation and the fallout from it won't give cover to the elites for another massive expansion of the military through conscription and more of the same on the issues of wars for natural resources if not dollar hegemony and creating a new bogeyman after OBL and Al Qaesa by blaming the foriegn worker for our lower living standards?

We will get it but a good 30-40% of the population won't and we'll be right back to square one with more catastrophic consequences.

[bemildred]

4. It doesn't appear to me, at present, that the economic situation here in the

USA remotely approaches that in the 1930s. I expect we would have some action if it did, or when it does, though.

[camero]

5. Maybe I'm just confused

I wasn't comparing the US of today with the US of the 1930's but with Germany of the 1930's whose economy was saddled with huge amounts of war debt from WWI. Our banking system is in better shape with the FDIC and such but a massive fallout of the housing market leading to increased bankruptcies of financial institutions could bring on a new run of the banks. Hence history repeats itself.

[burf]

6. Though the economic situation

of today is different than in the 30s, I feel there are some striking similarities. For example, As stock market speculation was a cause of the crash in '29, I think the real estate bubble and the related sub prime mortgages present a similar scenario.

The debt incurred during WWI was brought up. How is the debt(currently we are spending 2 billion dollars a week) amassed in the wars in Iraq and Afghanistan different? After what war has the economy not gone into recession? Why should the present war be any different? How much of the GDP numbers we are being fed actually related to the war?

I beg to differ with the premise there is nothing wrong with a fiat currency. We just keep the printing presses humming? When does it stop? When as in depression era Germany it takes a wheelbarrow of money to go to the grocery store? What happens when the rest of the world starts to forego dollars? Our Federal Government has now stopped reporting (as of last year) what the current money supply (M3) numbers are. How can one accurately report inflation when the amount of currency in circulation is not known? Or perhaps if these numbers were known, inflation would be considerably more than reported.

We cannot continue to ignore the basic laws of economics. No one or no nation can continually spend more than they make. You may get away with it over the short term, but it will eventually catch up. Borrow and spend is not good economics. The national debt just keeps growing and our elected officials just keep raising the ceiling. We are spend over 400 billion dollars a year in debt service alone. Its like making the minimum payment of interest only on a credit card that you will never be able to pay off.


Much of this debt is being sold to foreign countries. What happens when they decide we are not such a good credit risk. We currently have states selling off assets to balance state budgets. When the assets are all sold, then what? Indentured servitude?

We now have a Plunge Protection Team to take care of any sudden dips in the stock market. I guess this is the new "free market" at work.

I gone on long enough. Have a good day. As Tennessee Erine Ford used to say, "May the Good Lord take a likin' to ya".

[bemildred]

7. Hitler and Mussolini both rose in the 20s.

It is true Hitler took power in 1933. While I don't think comparisons of the USA with 30s Germany are ridiculous, the differences are great. I think in considering what is going to happen now, the 30s in the USA are more illuminating, although there are great differennces there too. One of those differences is that we have fiat currency, another is that we have central bankers that are more than willing to open the spigots. That isn't necessarily a good thing, but it makes the economic system much easier to manipulate, and it means that the people in power are willing to do that, so there it is more difficult for a crash and burn scenario to occur. I don't really expect a 30s style economic crash until some un-bullshitable resource problem, like peak-oil, derails the economy in a way that cannot be circumvented. It's a faith-based economy, it will keep "working" as long as certain conditions are met:

1.) The population largely continues to believe in it. Since most people have no where else to go to make a living, they are not going to give up on it just because it flies in the face of long standing economic principles.

2.) The basic necessities of life are still provided at a price people can pay.

3.) None of the major international economic players wants to crash it.