The dollar’s in a heap o’ trouble and Dick Cheney is doing his
level-best to make sure that it hits the skids before he leaves
office.
By Mike Whitney
-- Information Clearing House
Feb. 26, 2007 -- Gold traders love Dick Cheney. Every time he opens his
twisted lip and barks out another threat to Iran, the dollar
takes a powder while gold futures shoot to the moon. Maybe
that’s the way Cheney likes it. After all, he dumped about $25
million in euro-bonds before he took office. Judging by the way
he and brother-Bush have flogged dollar, he must have doubled
his investment by now.
The old greenback has dropped nearly 35 percent in the last six years
while gold has just about tripled. In 2000 the dollar was a
trim, sinewy pillar of strength. It entered the ring like a
young Mohammed Ali; darting to and fro while pummeling ihis prey
with quick laser-like blows that were barely visible.
Now, the
greenback plods along like a 60-year-old Rocky Balboa, wheezing
heavily and reeling with every punch; waiting for the one
roundhouse that will leave him staring up from the canvas,
spitting up broken teeth and blood.
Ooooh; that hurts.
The dollar’s in a heap o’ trouble and Cheney is doing his
level-best to make sure that it hits the skids before he leaves
office. Just Sunday the snappish Vice President said, "It
would be a serious mistake if a nation like Iran were to become
a nuclear power. Then he added ominously, "All options are still
on the table."
That oughta put the dollar on life support, eh?
At present, the rest of the world is really wondering if
dollar’s going to pull through. Central banks in Europe, Japan,
and China have increased money supply and kept rates low in
order to prop up the droopy greenback. But that won’t last.
Eventually, they’ll all have to raise rates to slow inflation
and stop equity bubbles from going haywire. (The Chinese stock
market increased a whopping 140 percent in one year. They probably
don’t want a Dot.com-type meltdown like we had in the United States.)
Regrettably, once interest rates start to rise, the dollar slip
quickly from view leaving only fetid trail of vapor behind.
It’s astonishing how cavalier Cheney and the gaggle of
racketeers at the Federal Reserve have been regarding the
dollar. After all, why kill the goose that lays the golden egg?
As the world’s “reserve currency” the fed can simply print out a
couple trillion whenever it comes up short and bring back
boatloads of sleek, Chinese manufactured goods or tankers
weighed down with petroleum to power our boxcar-sized SUVs. Or,
maybe, Bernanke would rather crank-out another $12 billion in
crisp $100 bills, shrink-wrapped and loaded onto pallets and
sent off to Iraq where they can vanish in the black hole of
corporate malfeasance.
No prob-Bob.
But what happens when the rest of the world sees that the
“stewards of the global economic system” (that’s us) are nothing
but a bunch of Texas yahoos, religious zealots, and
war-mongering boneheads?
See, the funny thing about money is that it requires confidence
in the provider that he will honor his part of the deal and
operate in good faith. Otherwise, no one would dream of
exchanging valuable resources and manufactured goods for silly,
green tokens of credit-based fiat money with squiggly writing
and funny looking men in powdered wigs on it.
We all expect money to have value, and yet, the Bush team
continue to sabotage the currency with their unfunded tax cuts,
their $9 per month war in Iraq, and their 35 percent expansion of the
federal government. (Remember when Clinton said the “era of big
government is over”?) The result of this craziness was
thoroughly predictable; central banks are running for the exits.
Last Friday, the government reported that net capital inflows
reversed from the requisite $70 billion to AN OUTFLOW OF $11
BILLION!
The current account deficit (which includes the trade deficit)
is running at roughly $800 billion per year, which means that
the United States must attract about $70 billion per month of foreign
investment (U.S. Treasuries or securities) to compensate for
America's extravagant spending. When foreign investment
stumbles, as it did in December, it puts downward pressure on
the dollar.
So what does it all mean?
It means they don’t want our stinking greenbacks. And, if they
don’t resume purchasing our debt (U.S. Treasuries or securities)
the dollar will join Rocky Balboa on the canvas peering up
blankly at the klieg lights.
“The full faith and credit” of the USA does not mean what it did
6 years ago. That’s a fact.
The Bush-Cheney-Federal Reserve axis believe they can keep this
ponzi-scheme going by cornering the oil market (attacking Iran)
and forcing the oil-thirsty world to accept our feeble
banknotes. But that’s just nuts. The Chinese are already killing
us by buying up oil and natural gas leasing rights around the
world WITH OUR OWN DOLLARS!
It wasn’t supposed to work that way. We thought we were being
clever by destroying the American labor movement and shipping
our industry to China. We figured we could vanquish the middle
class at home while we put the “fear o’ god” in the Chinese with
our “shock and awe military” that was supposed to be out of Iraq
in three years at the most.
How’d that work out?
Now the housing-bubble millstone is pulling millions of home
owners beneath the waves while the maxed American consumer is
down to his last credit card. In other words, the $11 trillion
of new debt that was cleverly engineered through Greenspan’s low
interest rate bonanza is about to detonate and bring the whole,
wretched tower of American debt crashing to earth.
The U.S. economy hasn’t depended on productivity for years, even
though the American people work harder and longer than their
better-paid counterparts in Europe. This entire mess was brought
on by stagnant wages, the wealth gap, and a system that rewards
the villaso-raptures at the top of the economic food-chain. Like
Cheney, they believe they can keep this scam going on forever;
forcing the world to take worthless sheets green scrip that’s
backed up by $8.7 trillion of debt and wouldn’t even make good
bird-cage liner.
But, then, that’s just my opinion.