December 20, 2004 issue

Copyright ? 2004 The American Conservative

 

Benign Neglect of a Dying Dollar

 

by Pat Buchanan

 

On Nov. 19, Alan Greenspan informed the world?s central bankers that the U.S. dollar will continue its fall indefinitely.

 

What an admission. We cannot defend our currency. We cannot protect the value of the savings and income of the American people. We cannot, in the near term, cease becoming a poorer nation.

 

Within hours of Greenspan?s speech in Berlin, the Dow sank 115 points and $100 billion in equity and bond value was wiped out. Yes, the chickens have started coming home to roost. Even that pied piper of globalization, the Wall Street Journal, has begun to recognize the risks of financial ruin: ?Sorry to interrupt the current White House euphoria, but someone ought to mention that the great American middle class didn?t reelect President Bush so he could debase the currency.?

 

America?s dollar crisis reflects a failure of political will and imagination. What are its causes?

 

There is, first, the U.S. budget deficit that in the fiscal year ended Sept. 30 came in at $413 billion. That deficit has been largely financed by foreigners, especially Chinese and Japanese, who buy U.S. bonds and T-bills and collect scores of billions of dollars in annual interest payments from American taxpayers.

 

There is, second, the trade deficit, which should come in this year at $600 billion, with the merchandise trade deficit closer to $700 billion. As we Americans save so little, we borrow abroad to finance our rapacious consumption of foreign goods. And with U.S. companies closing factories here and shedding American workers to re-site their plants in Asia, exports cannot rise fast enough to cover the surging increase in imports.

 

Greenspan is saying that this trade deficit will not shrink until the dollar sinks so low that U.S. exports become cheap enough to sell abroad and imports so expensive Americans can no longer afford them. But how far must the dollar fall for U.S. workers to become competitive with South Koreans, Mexicans, or mainland Chinese? Is that the America we want?

 

A third cause of the dollar decline is, as the Journal notes, Greenspan himself, ?the fact that the Fed has for some time been running a looser monetary policy than either the European or Japanese central banks.? Thus the dollar has sunk to 103 yen and a euro, worth 83 cents early in Bush?s term, is now worth $1.30.

 

More relevant than the dollar?s euro or yen exchange rate is its price in gold. Early in Bush?s term, gold was selling around $260 an ounce. The day Greenspan spoke, it hit $447, up 72 percent. A rising gold price has long been a harbinger of returning inflation.

 

And there is supporting data. The core consumer price index rose .2 percent in September, but the producer price index rose a sickening 1.7 percent.

 

Greenspan?s prescription for rescuing our sinking dollar? It seems to be benign neglect. Let the market determine the value. Only this market is run by Greenspan himself. He is in charge of the money supply and is thus responsible if the dollars earned by his countrymen are able to buy less and less of the world?s goods, upon which we have become dependent due to the trade policies of Bush I & II, Clinton, and Greenspan.

 

As for our budget and trade deficits, says Greenspan, we would not need to borrow so much abroad if we saved more at home. We should increase public savings by cutting the deficit and private savings by giving folks incentives to save more. Economics 101.

 

But while cutting taxes on interest income might increase private savings, it would also increase the deficit. And with the leading economic indicators having fallen now for five months, with no end in sight to the Iraq War, and a president who has not vetoed a single bill, how do we erase a $400 billion deficit?

 

What we are witnessing here is a failure of leadership.

 

While there appears to be a growing recognition of the gravity of America?s condition?the prospect of endless deficits, a dollar in a death spiral, constant hemorrhaging of manufacturing and high-tech jobs to Asia, growing dependency on imports for the vital necessities of our national life?there seems to be neither the will nor vision in Washington to arrest an inexorable U.S. decline.

 

The New Economics of JFK and LBJ guttered out in the guns-and-butter budgets of the late 1960s and Nixon?s closing of the gold window in 1971. Free-trade globalism now appears to have also run its course.

 

Robert Zoellick can negotiate all the trade treaties he wants, but they will only accelerate the dollar?s decline. The economic patriotism of yesteryear may be about to get a rehearing.

 

December 20, 2004 issue

I have yet to get an answer from anyone who has supported Bush on this problem. Ive brought it up to others I know and they just shrug. Its like they dont think the problem exists as long as the fags cant get married.

 

Then when it all crashes, we will get to hear how the democrats are somehow responsible..or better yet..Clinton was responsible! Maybe its the minority of democrats who didnt act fully in conformity with the majority party that is responsible.

 

Regardless, so many purported deficit hawks are ok with military debt spending and destroying of the dollar. Its those damn social programs they hate with a vengence and hence are not defecit hawks. The true one's like Buchanan are a dying breed.

I have yet to get an answer from anyone who has supported Bush on this problem. Ive brought it up to others I know and they just shrug. Its like they dont think the problem exists as long as the fags cant get married.

 

Then when it all crashes, we will get to hear how the democrats are somehow responsible..or better yet..Clinton was responsible! Maybe its the minority of democrats who didnt act fully in conformity with the majority party that is responsible.

 

Regardless, so many purported deficit hawks are ok with military debt spending and destroying of the dollar. Its those damn social programs they hate with a vengence and hence are not defecit hawks. The true one's like Buchanan are a dying breed.

635732[/snapback]

 

indeed. hence why i can't identify myself with the republicans.

indeed. hence why i can't identify myself with the republicans.

 

 

But (if you can) did you vote for Bush?

no, i can't, still haven't felt the inclination to become an american citizen.

 

anyway, my voting options were as follow:

 

1a Badnarik

1b Perutka

2 Nader

4 Bush

5 Kerry

Then when it all crashes, we will get to hear how the democrats are somehow responsible..or better yet..Clinton was responsible!

635732[/snapback]

I'm sure we haven't heard the end of that one.

 

On another note, why are we still funding the Missile Defense Shield program? Another test failed again today of a system that would have been useful in 1984, not 2004.

no, i can't, still haven't felt the inclination to become an american citizen.

 

anyway, my voting options were as follow:

 

1a Badnarik

1b Perutka

2 Nader

4 Bush

5 Kerry

635754[/snapback]

I like true libertarians. You guys are cool.

 

I need to get around to reading Atlas Shrugged one of these days. :\

the dollar isn't in that bad of shape

 

there should be long term safegaurds against crashing ... hopefully there is enough concern so that those get implemented

 

however from an economics standpoint this isn't bad and can help stimulate an economy, especially one that is having trouble competing at an international level

 

things will pick and the cycle will swing in the other direction

no, i can't, still haven't felt the inclination to become an american citizen.

 

anyway, my voting options were as follow:

 

1a Badnarik

1b Perutka

2 Nader

4 Bush

5 Kerry

635754[/snapback]

I like true libertarians. You guys are cool.

 

I need to get around to reading Atlas Shrugged one of these days. :\

636303[/snapback]

 

I read The Fountainhead recently...

 

recommended.

How do we restore our economy and cut the deficit? CUT MILITARY SPENDING. Critics will say we cant b/c of Iraq, but what we need to do is pull all of our forces completely out of all of Europe and South Korea. Sure we'll still have some involved with NATO, but if we have no need for all those troops stationed in Europe we can cut spending on military dramtically. On top of that the EU, will have to spend more on their own defense, which will force them to either cut their own social spending or it will hurt their eocnomy slightly since they wont be able to put as much funding into their economic system, which is a controlled economic system outside of their common market. EU as a more balaned power and not so lopsided on eocnomics and a US with more money available to cut taxes or to use on economic matters, and the dollar will rise back up without needing protectionism

I completely agree. Ronald Reagan bankrupted our country with this bulls*** and nobody except Clinton has had the balls the reverse the trend since.

I completely agree. Ronald Reagan bankrupted our country with this bulls*** and nobody except Clinton has had the balls the reverse the trend since.

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Actually during the cold war it wasnt a problem b/c we had plenty more buyers for weaponry to defend against the red threat. Nowadays the trend is more towards economic union and globalization, so there is no need to produce those expensive weapons. What reagan did was actually not bad at all in terms of military spending, the thing is that now its obsolete

High troop levels don't bankrupt you, big ticket weapon systems do.

 

Do the math. Say 150,000 people in Iraq, and perhaps a cost of $100,000/year for each one (wild guess with nothing behind it). This is $150B.

 

A relative pittance compared to the hudreds of billions spent on things like new aircraft and naval systems.

 

Its hard to cancel the big ticket weapon systems though - basically they fall into the pork category and are defended vigorously by those congressman whose districts would be zapped.

 

The bulk of military spending is really a form of welfare for engineers and defense contractors.

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Problem is where troops are stationed there is also an excess of contractors and weapons. So pulling troops from Europe and the DMZ will defintely save a lot of dough