House of Paine

son of gold- breath

here's another off center 
big footsee
    weigh in
on

 the dill-itory dollar 

====================================================


  how We Got Here



We have, over many years,
 worn down our trade position 
in the world economy,
 from overpowering supremacy 60 years ago
 to the point where high employment
 in the United States generates
 current account deficits 
well over half a trillion dollars 
per year

---------- true but wildly 
productive virtue betrayed in its connotation--------------- 

We have become dependent
 for our living standard 
on the willingness 
of the rest of the world 
to accept 
dollar asset
stocks, bonds and cash
in return for real goods and services

-----------how is it worse then 
if the domestic class
 of portfolio parasites 
live off the propduce of 
only their own exploited klass--------------

 the product of hard labor 
by people much poorer
 than ourselves 
in return for chits 
that require no effort to produce.

---blah blah
  if i work for a wage you ain't talkng about me pal
unless wages can capture surplus value in excess of the full value produced for those wages
say so
and i'll simply respond

prove to me you can measure this?-------------------------

For decades,
 the Western World tolerated
 the "exorbitant privilege" 
of a dollar-reserve economy 
because the United States
 was the indispensable power
 providing reliable security
 against communism and insurrection
 conditions under which many countries
 on this side of the Iron Curtain
 grew and prospered. 

---------- yes and we as a result of initial economic predominance
supplied the global reseve currency 
which you don't quite understand-------------

Those rationales evaporated 15 years ago
 and the "Global War on Terror"
is not a persuasive replacement.

 Thus, what was once a grudging bargain
 with the world's
 stabilizing hegemon country
 is now widely seen
 as a lingering subsidy 
for a predator state.

-------------no iuncle is seen
 as recieving a variable  payment
as  the state who's armed might
not only
 makes the third world
safe for capital export
but could blow away 
the rest of the first worldstates
in a test by combat ----------

-------- if not and when not
the scheme would get serious -----------

 
Since 1979, China,
 migrating slowly from the other side 
of the Iron Curtain,
 has become one 
of our largest trading partners,

The concentration of our manufactures trade
 on China and Japan
 now means that those two countries
 now hold preposterous dollar reserves
 and their actions 
substantially determine
 the dollar's value.
 
China and Japan
 are constrained
 in their behavior by creditor's risk.
----and by market lose risk-------------

 If they sell dollars aggressively,
 the value of the remainder
 of their portfolio plummets 
and they inflict large losses on themselves.

 This consideration prompts caution.
--perhaps but not dumping -------------

  everything depends 
on what everyone else does

---------- no only what the CB's do ----------------------

 If one major player
 gets wind that others may dump
 then the urge to join in
 becomes hard to resist
 This is exactly analogous 
to an old-fashioned stock panic
 or run on the bank.
-----right about any currency besides the reserve currency

the pound lost value when the global reserve currency
but only had a crisis when the dollar replaced it as the reserve currency-------------


Situation Unpredictable, If Not Perverse

The current account is strongly linked in a triangular relationship to the budget deficit and also, critically, to the savings-investment balance of American households,

 In the present environment,
 with households on average
 near financial balance, 
the current account and the budget deficits 
are nearly equal.

 
And once a rush gets going,
 jacking up interest rates
 won't stop it 

-no rush will happen only a  slide ----------


 Small interest rate hikes
 do normally affect exchange rates
 but only when no player
 has the kind 
of extreme market weight 
now enjoyed by China and Japan.

-------------none sense
the specs could blow away 
have blown away
   currency after currency 
if and when
the BC cartel let em-----------


 When they do,
 reactions are unpredictable 
if not perverse

--re-actions in a run perverse ? 
now that my friend 
is true as hell----------- 
------------------------------------------------------

"Who Wins? Bush's Base

The most stunning aspect of these events
 has been the insouciance
 of the Bush administration.
no one 
 has troubled even to emit
 the usual platitudes 
about the greenback

 It's almost as if
 they've figured it out.

----------they have dope-----------

 It's almost as if
 they realize the awful truth

---------they do dope---------------

 Which is that the dollar's decline
 is mainly good for their friends,
 and bad mainly 
for those about whom 
they couldn't care less."
---if you'd ended here
i'd of  kissed  your finger ring ------------


Yet that is the truth.
 The dollar's decline
 immediately boosts 
the stock market, 
for a simple reason.

 Multinationals have earnings
 in the United States 
and in Europe. 
When the dollar falls,
 U.S. earnings stay the same 
but the European earnings
 go up 
when measured in dollars. 

Oil prices in dollars 
will stay up
at least enough to prevent
 the price in euro from falling
 This too helps U.S. oil company profits
 measured in dollars

-------- good point
we still domestically produce half our oil
 we produce more oli then any nationbut russia and arabia --------
thus when ther are obscene price hikes
we have huge domestic oil pumper profiteers
 unlike the japs and euros  ------------


 Meanwhile,
 China will keep its renminbi 
tied to the dollar,
 and prices of Chinese imports 
won't rise much, 
so Wal-Mart isn't badly hurt. 

-------------- he's back dooring the third leg here
both
interest rates and domestic inflation 
effect the currency exchange ratio--------------

The American consumer 
will get hit, 
but mainly on the oil price 
rather than on the rest 
of the consumption basket.

-------- import price increase  are damped down
 despite the dollar fall
say your a german car maker
you can't afford the market share croaking 
so you limit the response 
by taking a lower margin-----------

 Many will grumble,
 but few will recognize
 the political roots
 of their problem.

Since the U.S. owes its debts
 in dollars, 
the financial blow will fall
 first on China and Japan


-----------what about europe's exporters?---------------

 in the form of a depreciation
 of their holdings. 
Tough luck.
 Latin American debtor countries 
will get hit on their exports,
 but helped on their debt service

. Those (like Mexico)
 who export almost exclusively
 to the U.S. will get squeezed;
 others (like Argentina)
 who market to Europe
 but pay interest 
in dollars will be hurt less

. An unequivocal loser
 is Europe, 

which has been hoping
 for an export-led fix 
to their own,
 largely self-inflicted,
 mass unemployment. 
The Europeans can forget
 about that.

If Bush's insouciance works,
 the dollar could decline
 smoothly for a while 
and then, simply, stop declining.

 U.S. exports might recover somewhat
 helping manufacturing, 
though there's no chance 
exports and imports will balance
 But even so
 the dollar system
 could stay intact
 so long as China and Japan
 remain willing to add 
new dollars to their depreciated hoard

 Given that their interests lie
 in maintaining export activity
 and the jobs it creates,
 they may very well 
make that choice.
 Large-scale dollar purchases
 by the European Central Bank
 are also a remote possibility 
(the option has been mentioned
 on the periphery of the ECB).

----------heres the real story
the euro CBs not eating dollars
including the brits

why?

cause the bankers want to squeeze the euro work force -----------

 The problems would return later on
 but meanwhile
 such an action would prove
 that God really does look after
 children, small dogs and the United States

------------ empires are empires ----------------

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