And Nero fiddles...

Discussion in 'Economy' started by Bullypulpit, Dec 6, 2004.

  1. Bullypulpit
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    Bullypulpit Senior Member

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    <center><h2><font color=red>And Nero fiddles...</font></h2></center>

    Surprise! The dollar is continuing its slide, accelerated somewhat by last weeks disappointing employment numbers. Economists were expecting in the neighborhood of 200,000 jobs, only about 112,000 were created.

    As a result, Japan is now threatening a huge dollar sell-off to protect its fragile economic recovery. According to <a href=http://www.guardian.co.uk/usa/story/0,12271,1366585,00.html>Kaoru Yosano</a>, chairman of Japan's Liberal Democratic Party's policy committee, Japan is going to ask for a strong dollar policy from Dubbyuh's administration that amounts to something more than vague talk. Japan is also going to ask other G7 nations to demand that the Administration deal with the massive deficits that are the driving force behind the dollars slide.

    But when we look at the policy stance of Dubbyuh's administration, social security privatization and tax-cuts, will deliver a $2 trillion plus hit to the US budget in the years to come. This could lead the US to a situation similar to Argentina, which followed similar policies and wound up defaulting on $100 billion in foreign debt in 2001. Given the size of the US economy, its outstanding debt overseas and its foreign trade deficit, the effects of such a collapse in the US are magnified far beyond the scale of what happened in Argentina.

    The situation is reaching a point where <a href=http://business.bostonherald.com/businessNews/view.bg?articleid=55356>Stephen Roach</a>, of Morgan-Stanley, gives the US only a 10% chance of avoiding "economic Armageddon". This bearish outlook is being echoed by many others in the economic community.

    The fact that Dubbyuh and his merry band don't find anything particularly worrisome here should give us all pause to wonder just how long our very own American Nero is going to continue to fiddle. With the US soaking up nearly $2.6 billion a day over overseas just to keep the doors open in Washington, one cannot help but wonder when the excrement is going to intersect the fan-blade. When it does, don't blame me...I didn't vote for his dumb ass.

    Our only consolation is that the mid-term elections in '06 will allow us to put those members of congress, who have permitted the administration to spend tax-dollars like a drunken sailor on liberty, out to pasture. Hopefully, it won't be too late at that point, but it's not looking good.

    (op-ed content with links)
     
  2. Merlin1047
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    Merlin1047 Senior Member

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    Of COURSE the Japanese and the Europeans want a strong dollar. That's what keeps their export business profitable. They're worried that the declining dollar will make US exports too competitive and that their exports to this country will become too expensive. They're worried that we'll start doing to them what they've been doing to us for decades.

    The comparison to Argentina is total baloney. It's not the same situation. Argentina was paying off loans. Our "debt" is based largely on a trade imbalance. A weaker dollar will actually serve to correct that imbalance. The only real effect a weaker dollar may have will be to cause an increase in interest rates.
     
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  3. Said1
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    Said1 VIP Member

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    Stephen Roach's analysis reminds me of what happened in Alberta during the early 80's.
     
  4. Bullypulpit
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    Bullypulpit Senior Member

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    Why don't you give Stephen Roach's analysis a good read. Then make your lame criticisms.
     
  5. dilloduck
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    dilloduck Diamond Member

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    So what economic policy should we pursue, Bully ?
     
  6. Merlin1047
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    Merlin1047 Senior Member

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    Tell ya what buttbreath, I'll read that if you study Dale Carnegie's "How to win friends and influence people".

    Chances are you'll learn more than I will.

    Oh, and by the way - your mother voted for Bush - twice.
     
  7. Mariner
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    Mariner Active Member

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    As you said, when the dollar slides far enough, we will have to raise interest rates in order to continue to attract the $2 billion per DAY that we currently require in order to finance our consumer spending and our federal deficit.

    And when interest rates rise, the economy will slow, and we'll have massive debt, high interest, and a recession.

    10 years ago the world owed us $1 trillion-- we were creditors. Now we owe the world $3.75 trillion--we're massive debtors. China and other countries will continue to finance our spending only until their own citizens can purchase their own excess production. Then they'll leave us in the dust. China will surpass our economy in 2040. Right now, China is building like mad: 40% of the world's concrete is being poured there (vs. 7% here).

    As long as we're debtors, our supposed independence, autonomy, and superpower status are bogus. We can't speak up to Saudi Arabia, the source of 9/11, because they own us. We can't speak up to China because they own us too. Walmart, the anti-union zealots, just decided to allow Chinese Walmart workers to unionize--why? Because their business is going to be key. If it weren't so sick it would be funny to think of Chinese Walmart workers getting benefits that American ones can't match.

    What should we be doing? Reducing the deficit and increasing our savings rate. How should we do that? Increasing taxes on the wealth (i.e. unearned income), closing tax loopholes for multinational corporations, ending corporate welfare, and being more careful which foreign countries we decide to invest in rebuilding.

    Mariner.
     
  8. Merlin1047
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    Merlin1047 Senior Member

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    Somehow you leftists always see the same solution for everything - more government and more confiscation of other people's money.
     
  9. Huckleburry
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    You are forgetting that a sliding dollar is eradictaing debt held by other countries. Japan is the largest holder of american currency abroad, the continued slide of the dollar threatens to wipe out a huge chunk of those assests almost overnight. It is not a question of balance of trade but rather the balance sheet of central banks. Balance sheets they are willing to protect at the expense of the dollar.
     
  10. nakedemperor
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    nakedemperor Senior Member

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    Didn't I get banned for petty name-calling last week?
     

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