hen it comes to our personal finances, we understand how and why a poor credit rating and history influence the way we're treated in the market place. Max out your credit card and businesses and banks will turn you away. But when a government runs up the sort of tab that plunges a country's currency into a crisis, economists take to talking in tongues.
"It's driven by the fact that U.S. data is continuing to deteriorate," one expert prattled, according to WND
. Others habitually frame effects as causes: The housing bubble is to blame. Financial reporter Diane Francis of the neoconservative National Post has concocted a currency conspiracy. "There is a Currency Cold War being waged by Russia, Iran and various allies such as Venezuela," she fulminated.
Back on terra firma
dollars are being dumped. Consumers generally dump stuff they don't want. The global currency market isn't exempt from the immutable laws of supply and demand. Another immutable economic truism is that, if profitable, people will do business with those they dislike. Markets, money markets too, reflect a bias toward profit. If the dollar were good for it, it would still be king of all currencies, irrespective of how the world feels about the US.
For the first time since 1976, the Canadian dollar is worth more than the US dollar. The Australian dollar is predicted to soon reach parity with ours. And the euro is at an impressive $1.4283. According to His Holiness Alan Greenspan, a third of all foreign exchange reserves are now held in euros.
Foreigners—governments and individuals—simply don't have faith in the American currency. Back-to-front thinking ignores that the dollar's depreciation preceded its dumping.
The devaluation of the dollar is Dubya's doing. The slide began in early 2002, confirms the Cato Institute's James A. Dorn, commensurate with the debt Bush began to amass, when 9/11 fell into his lap. The national debt—the total amount of money owed by the government—is now well over $9 trillion. It increases on average by $1.50 billion per day, by the Debt Clock's
math. Every American (bar politicians, illegal immigrants, and other tax consumers
) is on the hook to the tune of $29,893.82.
When they're not borrowing to feed their appetite for our assets, Bush and his brigands press the Federal Reserve and the printing press into service. Day and night they flood the market with paper money unbacked by gold or real assets. (You gotta "fund" those unwinnable wars, the laptop bombardiers scold.) This increase in the money supply is
Republican Party partisans swell the chorus—and state the obvious—by warning us that Democrats will raise taxes. As horrible as a tax hike would be, it is nothing compared to what Dubya's dilution of the dollar has done to American assets.
a hidden tax. We're being taxed surreptitiously in lieu of the debt. More fiat paper money in the system means that every unit depreciates. "Any substantial increase in the quantity of money," explained Henry Hazlitt, in Economics in One Lesson
, "will reduce the purchasing power of each individual monetary unit—in other words, that will lead to an increase in commodity prices."
Depreciation of the dollar spells higher prices and hardship for those of us who are removed from power and from the new money.
Unlike present-day Republican Party boosters, Ronald Reagan understood this: "The truth is that inflation is caused by government," he observed. "It's caused by government spending more than it takes in, and it will go away just as soon as government stops doing that."
The fate of the dollar is in the grubby paws of the parasitic class, not Russia, Iran, Venezuela, or even China. The much-maligned Chinese act as our creditors by funding our debt. But rather than indict the real currency counterfeiters—and compel them to stop stealing America's future—Americans make China a repository of their anger. Consequently, a Demopublican contingent of protectionists (and vote procurers) demanded not long ago that Bush muscle China to change its monetary policy.
Again, that'll hurt ordinary Americans, not politicians or parties to the Military-Media-Industrial-Congressional-Complex. (Economist Robert Higgs has pegged all "defense-related" spending alone at "approximately $1 trillion per year.") China's artificial devaluation of the yuan benefits the American consumer, who, consequently, enjoys cheap goods. Uncompetitive American rent-seekers
(and a few rabid pet owners) are the only ones complaining about cheap Chinese goods.
Given the debasing of the greenback, hastened by Ben Bernanke's lowering of the interest rates, dollar-denominated assets are no longer as attractive to our foreign creditors. Their yields are declining as well. Hording dollars could very well contribute to inflation in China, forcing it to act out of national self-interest and discard dollars.
The upside? China will get both barrels for what Dubya has done to the dollar.