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Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles The Dollar's Reserve Currency Role Is Drawing to an EndE-mail - editor@economyincisis.org |
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Editor's Note: EconomyInCrisis.org is not a partisan advocate for any particular party or candidate. However, the following article speaks to many causes of our current situation that an increasing number of Americans feel are critical for future voters and leaders to consider. It is difficult to know where Bush has accomplished the most destruction, the Iraqi economy or the U.S. economy. In the current issue of Manufacturing & Technology News, Washington economist Charles McMillion observes that seven years of Bush has seen the federal debt increase by two-thirds, while U.S. household debt doubled. This massive Keynesian stimulus produced pitiful economic results. Median real income has declined. The labor force participation rate has declined. Job growth has been pathetic, with 28 percent of the new jobs being in the government sector. All the new private sector jobs are accounted for by private education and health care bureaucracies, bars and restaurants. Three and a quarter million manufacturing jobs and a half million supervisory jobs were lost. The number of manufacturing jobs has fallen to the level of 65 years ago. This is the profile of a Third World economy. The "new economy" has been running a trade deficit in advanced technology products since 2002. The U.S. trade deficit in manufactured goods dwarfs the U.S. trade deficit in oil. The United States does not earn enough to pay its import bill, and it doesn't save enough to finance the government's budget deficit. To finance its deficits, America looks to the kindness of foreigners to continue to accept the outpouring of dollars and dollar-denominated debt. The dollars are accepted because the dollar is the world's reserve currency. At the meeting of the World Economic Forum at Davos, Switzerland, this week, billionaire currency trader George Soros warned that the dollar's reserve currency role was drawing to an end: "The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars." If the world is unwilling to continue to accumulate dollars, the United States will not be able to finance its trade deficit or its budget deficit. As both are seriously out of balance, the implication is for yet more decline in the dollar's exchange value and a sharp rise in prices. Economists have romanticized globalism, taking delight in the myriad foreign components in U.S. brand name products. This is fine for a country whose trade is in balance or whose currency has the reserve currency role. It is a terrible dependency for a country such as the United States that has been busy at work offshoring its economy while destroying the exchange value of its currency. As the dollar sheds value and loses its privileged position as reserve currency, U.S. living standards will take a serious knock. If the U.S. government cannot balance its budget by cutting its spending or by raising taxes, the day when it can no longer borrow will see the government paying its bills by printing money like a Third World banana republic. Inflation and more exchange rate depreciation will be the order of the day. COPYRIGHT 2008 CREATORS SYNDICATE INC. Paul Craig Roberts is an economist. He served as Assistant Secretary of the Treasury for Economic Policy in the Reagan Administration where he earned the nickname the “Father of Reaganomics.” He was an editor and columnist for the Wall Street Journal, Business Week and Scripps Howard News Service. In 1993, Forbes Media Guide ranked him as one of the top seven journalists in the United States. Currently he is a nationally syndicated columnist for Creators Syndicate and a frequent contributor to EconomyInCrisis.org. Front Page Photo by SqueakyMarmot- Flickr © Some rights reserved Click here to contact your Representative in Congress. Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles
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Article Comments From Readers
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guest says "Re: commentor below" on 02/11/08
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guest says "Re: Ron PAul" on 02/09/08
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When you have something called a minimum wage, it in its nature implies that the currency being used is not adequate because under a sound money system we would have more entreprenuers, and not McDonalds and Walmart workers. More local community, governance and more purchasing power. Before 1913 if you asked a man who he work for it would start a fist fight because most men owned his/her business.
Social Security is a joke! Why do you need to give the government your hard earn money, are you a child that needs a parent to watch over your money? Mutuals Funds, IRA, CD"S, 401K, Stocks, all have your money. Why not hold you own money and what you put in is what you get. But that is not possible under the current ponzy scheme called "Central Banking". How about lets stop making so many babies and we would not have to worry about mudering them. How about actually educating these dome American kids about finances and morals! We act as if we cannot ask people to make logical decision. We have to have everything right now, that is why we are financially and morally bankrpt! Have you heard of condoms? If you understood the constituion Walmarts ould not exist becuase under a gold stand a corporation could not bororrow billions of dollars from a Central BAnk. All the grwth would have to come from profits the company actually made. Their would be more state to state business and more local business. Why do you need a pension. If someone pays you for labor that is it nothing more or less. A slave is the only person that expect his master to feed him/her after work. If you have a strong currency cost would be low and corporation as you know hem would not exist, I sold real estate. My last property sale was a 3 bedroom/8 room colonial on one-third of an acre -the year was 1979 and the price was $50,500.00. Today that same house sells for ~$850,000 dollars - a thirty fold increase. Remeber when gas was a nickle. Cost of livig would be sow low that moms would notwork and everyone would be rich, in terms of everything being affordable! Manufcterer exist because of stocks, without public offerings corporation world not exists. Before 1913 we only had 1 billion John D. Rockefella, and that was because he murdered and bombed the competition. With out the Federal Reserve Corporations as we know them would not exist. For every MCDonalds, Burger KIng and WalMarts, HomeDepots you could add hundreds of local burger shops and businesses making millionniares. Why workers at the place make 7 bucks an hour. If you can recall when MCDonalds openeda burger was a nickle! I believe because you do not understand economic and sound money you only see reality through the eyes of the system that currencly exists. Emagne a world where a car cost 1,200 and a nice home is 8,000. Food is cheap and education is a small portion of you check. More local businesses and more community, well that world did exist before 1913 and it can heppen again, you just have to be willing to give up yor China goods. Ask people in AArgentina and Weiner Germany and Zimbabwee is Ron PAul is nieve. Take away guns and petro dollars and e would be in worse shape that you can imaging. LEts those trillions of dollars sitting in Central BAnks come home and a loaf of break will cost 1,000 dollars. The world is not complicated beucase we have bankruptedthe world stealing its saving and most of the poverty in the world is doe to the US excessive imbalances and the IMF and World BAnks robbing coutries bling for their resources! |
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guest says "Ron Paul can't make it" on 02/08/08
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Ron Paul is a simple simon with a primitive 18th c.understanding of our Constitution. Although he may mean well, only an intelligent and thoughtful president is going to serve our nation wisely and prudently.
Ron Paul is committed to abolishing the minimu wage yet letting the millionaires and billionaires keep all of the public's money. Ron Paul would be more than happy to abolish Social Security cheating all those workers who have worked hard, played by the rules, and invested 30-40 years and tax payments out of their fair compensation. Ron Paul is pro-life. Therefore his policies would bring many dependent, unwanted, retarded and deformed children into the world to live a miserable life and be a burden on families and society. Ron Paul would definatley end government subsidies for the citizens, but would allow corporate welfare to continue unabated. Ron Paul would give a free pass to any industry to relax safety standards for workers, cut pensions, reduce or eliminate benefits and healthcare for workers. Ron Paul assumes that an individual worker holds as much power and influence as a multibillion dollar transnational corporation. This is astoundingly naive! Ron Paul would allow manufacturers to freely pollute and befoul the public land, water, and air and have no responsiblity for clean up or public health consequences. No. I'm sorry, but we are not living in the 18th c. anymore. The world we live in is complex, gritty, and difficult and requires an intelligent and courageous leader to look after the public good. A simple simon like Ron Paul simply is intellectually ill-equipped and morally unprepared for the job as president. |
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guest says "LOL Ralph Nader?" on 02/08/08
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That guy is still thinking about being President? You must be living in the woods because America already has a champ campaigning for Presdient, his name is Ron Paul. clean air, clean water, and airbags is not going to change America for the better. Things like getting rid of the Fed, ending the war on drugs, ending government subsidization etc. are what we need.
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guest says "Ralph Nader has come to the rescue" on 02/07/08
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Raph Nader "America's Champ" is exploring a Presidential run for 2008.
There is no greater living American running for office at this time with a longer list of achievements in claen air, clean water, seatbelts, air bags and other consumer protections. If anyone can save the USA it is certainly Ralph.Give him your support and help America before we collapse into a 3rd or 4th world economy. Thank you. www.NaderExplore08.org |
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guest says "#1 Economy" on 02/06/08
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If the US is the worlds largest consumer, why don't we prodcue what we consume. What does CHina and its currency peg have to do with American workers making American products and American citizens consuming the goods.
When you have greed come into play and another company tries to get a compettitive advantaje by ousourcing labor, and then everyone joins the party we have the econnomic crisis that we are facing. Just because the Chinese are willing to work in bad conditions for cheap wages doesnot mean that we needed to take our jobs there, but when you have people who's eyes only see $$$$$$ signs and cannot predict that there kids and family and friends not ahving jobs as a direct result of the greed, you have everyone man/women for themselves syndrome. Do not blame to poor Chinese or Mexicans or anyone else blame our reed. We had it so good that it was too good to be true, we had to mess it up. The $ is toilet paper and we are becoming a 3rd world economy, education system and will have 3rd world nation living standards. BUT HEY, 1% OF AMERICANS ARE STILL WEALTHY! |
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guest says "Please not the gold standard" on 02/06/08
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YOU DO NOT HAVE TO PASS A LEGAL TENDER LAW FOR GOLD AND SIVLER ON PAPER!
"PAPER CURRENCY IS ONLY THE GHOST OF MONEY." We have a standard and it is, I am the hero and you are the villian, if you do not except our dollars you will get bombed. WHAT WOULD HAPPEN IF WE HAD A GOLD STANDARD: -SAVING WOULD RISE -UNEMPLOYMENT WOULD GO DOWN -PURCHASING POWER WOULD GO UP -BALANCED GOVERNMENT BUDGETS -MORE SMALLER BUSINESSES -BIGGER MIDDLE CLASS FROM REDISTRIBUTION OF WEALTH -LESS POOR AND BIGGER MANUFATORING BASE -LESS IMPORTS O' MY GOD WHAT IS RON PAUL THINKING, WALLSTREET BANKERS AND HEDGE FUND MANAGERS AND MUTUAL FUND MANAGERS AND IRA MANAGERS AND MONEY MARKET ACCOUNT MANAGERS AND CD ACCOUNT MANAGERS AND CORPORATE LAWYERS, AND INVESMENT BANKERS, INSURANCE AGENTS, AND 401 ABCDEFGHIJK MANAGERS, WOULD ACTUALLY HAVE TO WORK. LAWYERS, BANKERS, ENTERTAINERS, AND OFFICERS WOULD ACTUALLY HAVE TO OPEN A BUSINESS TO EARN A LIVING. THE WAR MACHINE COULD NOT BE OFFORDED WITHOUT DEFICIT SPENDING. FOX NEWS COULD NOT EARN A PROFIT OFF OF WAR PROPAGANDA AND B.S. NEWS! WE COULD NOT BE IN IRAQ FOR 100, LOOKING FOR PEOPLE IN CAVES. AND WEAPONS THAT WE COULD NOT REMEBER IF WE SOLD THEM."OR DID WE SELL THEM TO SOMEONE ELSE". THIS MUST BE TYRANNY. NO RON PAUL! AMERCANS DO NOT HAVE TO WORK IN THE NEW SERVICE ECONOMY. ONLY MCDONALDS AND ALMART JOBS, AND CASINOS, TICKET SALES AT BALL GAMES, NEWS CASTERS, TV SHOW HOSTS! OR WE COULD JUST PACKAGE DEBT AND PASS IT ON AS AAA AND EXPORT INFLATION FOR GOODS SO WE NEVER HAVE TO PRODUCE! THIS HAS GO TO BE THE DUMBEEEEST GENERATION IN THE HISTORY OF THE FREE WORLD, IT IS LIKE A NIGHTMARE THAT YOU WANT TO WAKE UP FROM. NO RON PAUL, GOD GAVE OUR IGNORANT SELVES AN ANGEL AND WE BLEW IT! |
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guest says "TheDollar'sReserveCurrencyRoleisDrawingtoanEnd" on 02/04/08
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Some guest commentators seem to have trouble reading English. Paul Craig Roberts rules out free trade. The question I'm asking and you are not answering is what then? Our repertoire of reactions is very limited. Does he suggest, as Keynes did at the end of his General Theory, the resurrection of mercantilism? Or perhaps he suggests the Soviet method of re-industrialization-autarchy? Or perhaps managed foreign trade just like the Japanese did with their Ministry of International Trade and Industry. Here we pick winners and losers just as recommended by the Democratic Party theoreticians like Felix Rohatyn, Robert Recih and Lester Thurow back in the Seventies (although I haven"t heard from them lately). They recommended what is called Industrial Policy. An economic Czar would pick winners to subsidize and losers to protect. Do you have a different idea? If so say so and don't tell me that the economy is oh so complicated.
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guest says "Should we go the way......" on 02/04/08
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Before you so poignantly criticize others maybe you should inform yourself. There just as many inaccuracies and "laughable" arguments in your response. Should we as Americans not be educating and uniting one another? In others words assholes in glass houses shouldn't throw stones. Mexico's economic problems are as much a result of American banks and corporations as our own. Also you say we should go back to the gold standard as Ron Paul suggests? This is absolutely laughable and impractical. Read the book Web of Debt if you want the most up to date infor regarding our economy and why we are in so much debt. Then maybe your arrogance might be a little more palatable.
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guest says "Should we go the way of Ron Paul or perhaps Robert P. Reich?" on 02/04/08
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Response to the gentleman commenting below.
There are actually many more factors and complexities to creating a strong and sound financial policy than you mention.Giving a Simple Simon response using 8th grade mathematics, treating economics as a normative science, and dismissing real world complexities simply does not capture the reality of what Americans are enduring. There are so many assumptions that are false in your argument that your point is either laughable or lamentable. All you need to do is look at the cheating that China does in setting quotas, imposing extra tafiffs on American goods, insourcing production, stealing American technology, unfairly pegging the yuan to cheat, and other tricks to damage other nations. World economics are not even close to fair or level. Only naive idiots would believe that. Hence your assumptions about the relative strength/weaknes of the dollar and imports/exports is essentially irrelevant. You must also take into account public sentiment such as feelings of security and confidence and patriotism to invest, withhold, boycott, plan families or not as well as comprehend that the playing fields are neither fair nor balanced nor will they ever be. It is the duty and responsibility of each nation to look after its own people's welfare and allow inferior and poorly planned economic systems in other nations to fail and rebuild.We should not be tied into predatory systems that we cannot fully understand or control unless we want to be at the mercy of the world's worst economies. Pursuing a path of Isolationism creates self reliance, jobs for Americans, and frees us from foreign entanglements of many kinds. For instance:We should not be bailing out Mexico-unless we want to prop up a corrupt government. We should not be creating puppet governments in Afghanistan, Iraq or perhaps Iran, unless we want them to attack our nation again. We should not be allowing illegal aliens to steal American's jobs and benefits, fail to pay taxes and then wire billions out of our nation unless we want to become a 3rd world nation. The whole idea of world government and dependency upon anti-union slave labor while creating world business monopolies with a handful of obscenely rich ceo's is unhealthy to human happiness and democracy in general. We need to get out of these rackets IMMMEDIATELY. Foreigners should not be allowed to own ANY US business or infrastructure. Dollars should be backed by gold and/or silver. Illegals should be booted immediately. Taxes should be an instrument of wealth equilization rather than a weapon to punish the poor and reward the rich and the corporations with tax shelters, loopholes and sweetheart deals. Finally, we should imprison all the economists who led us off this cliff and seize all of their property immediately. These educated idiots with PhD's were the ones who assured us that NAFTA and the WTO were good. They assured us that Free Trade was good and that everyone benefits. They have told us that deficits don't matter and lied to us about unemployment numbers for years. They measure life only through corporate profiteering and tax evasion techniques and look at people like ants (units of expendable labor) to be exploited heartlessly. They seek to find the lowest paid ants to undercut the ants at home and hope to create a world empire of compliant, low paid non-thinking ants who will happily live and die to benefit the world's welathiest dictators, ceos and autocrats. |
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guest says "US Economy Crisis" on 02/03/08
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Back in Jan 2007, when most media experts and economists were dreaming about the strong US economy, a nonpartisan study predicted the current economic turmoil.
http://www.iim-edu.org/u.s.economyrisks/index.htm The study is easy to read and makes a lot of sense, more importantly, it predicted the fall in late Jan 2007...in March 2007 the markets took their first dive! The study provides: 1). A neutral assessment of the U.S. economic health, 2). Analysis of the long-term consequences of current policy decisions 3). The emerging economic, social and geopolitical threats to the U.S. financial prosperity 4). Risk mitigation strategies 5). Management best practices". According Med Yones, President of the research project, “We were surprised to learn that the U.S. economy is in much more trouble than anticipated. When combining all the numbers from different national and international research agencies, we see a different picture than the one advertised, the country seems to be headed to a major crisis. The good news is that the U.S. government can avoid the disaster, the bad news is that some of the necessary measures are going to be painful, controversial and difficult to implement. The next decade is the most critical for U.S. economic health. In order to mitigate the risks, the U.S. government must make major changes to socioeconomic and foreign policies”. Maybe you and your readers could make use of some of the information in it. It's even free to publish any part or all of the study Here are some media and blog mentions: http://www.reuters.com/article/businessNews/idUSN0925116620070311 http://americaabroad.tpmcafe.com/blog/john_freeland/2007/mar/01/credit_card_nation_should_the_government_get_credit_counseling http://blog.sustainablemiddleclass.com/?cat=152 http://www.democrats.org/page/community/post/stephaniewilkinson/C2bn |
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guest says "Bush Legacy" on 02/02/08
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Bush is an idiot of unprecedented magnitude that has lead this nation down a path of self destruction. Every action taken by Bush has been to the detriment of the American people, our spirit as a nation, and our reputation around the world. While Bush and his buddies make billions off phony wars, the American populace faces third world status. Bush doesn't even know what has happened during his reign of indifference towards everything other than war and destruction. No other President in recent history has failed to address America's internal challenges as a Nation and as a people more than Bush. His legacy is that he and his supporters have royally screwed over everybody everywhere.
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guest says "TheDollar'sReserveCurrencyRoleIsDrawingtoanend" on 02/02/08
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I wasn't aware that foreigners were lending us money out of the goodness of their hearts. They get dollars through our current account deficit. As the dollar falls in value our imports become more expensive and our exports become cheaper. Over time that will do away with the current account deficit which is so lamented by Paul Craig Roberts. The dollars that go overseas have to come back here on our Capital Account. What else would China do with our dollars. But as our current account balance (trade deficit) contracts fewer and fewer dollars will fall into the hands of foreigners. That will relieve Paul Craig Roberts of the complaint that foreigners are buying up our industries. Of course, everything is trade offs. There are no unmixed blessings. As the dollar falls our imports become more expensive. Industry that depends on imports will have to pay more. But what is Paul Craig Roberts solution to the problem. He never seems to get around to that even though our options are very limited. Should we go the way of Ron Paul or perhaps Robert P. Reich? Let him say so.
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guest says "Bush #1 in creating public unhappiness" on 02/01/08
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Whether or not Bush II is fully successful in terminating the health, wealth,hope and happiness of the citizens of our nation is still TBA.
I can't say the hopes for a sunny turnaround look very likely at this point. As of this week, 2 more homes in my neighborhood went into foreclosure. One of my neighbors was a victim of subprime lending and has now moved in with his cousins while they figure out what to do. In the 72 years I've been on this earth, I can't remember a bleaker or darker outlook for our nation. Looking back, the Great Depression was a period of tremendous financial hardship for many, but even then there was hope and a genuine effort on the part of the government to fix the problems and put America back on its feet. I have never seen America so divided and disunited then it is now. It seems to me that the government has no genuine interest in public well being, job security, coping with healthcare or rising gas food and educational costs for familes or the plight of the working man in general and the consequences for future families. It is much easier for Bush and company to simply continue lieing, warring, cheating and stealing from the tresury than putting our house in order. Other than throwing a re-election bone of a a few hundred dollars to Americans, I don't see the congress acting responsibly either. What does it mean for the dollar? Not being a finance wizard, I can't say for sure. But seeing and experiencing what I have seen happen to our nation in the last few years, I would not gamble any dollars on the USA. Better to invest in gold and silver that have enduring value and are in finite supply. |
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guest says "DOLLAR" on 02/01/08
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WELL,OLD GEORGY WANTED A LEGACY,THERE IT IS THE MOST POWERFUL,ENVIED,ADMIRED DESTROYED IN 8 YEARS BY A BONE HEAD,HE REDUCED THIS COUNTRY TO A THIRLD WORLD,I GUESS THE SAUDIS TAUGHT HIM WELL IM SURPRISED AT THE AMERICAN PEOPLE,THEY WILL ELECT HILLARY AND IF SHE WINS TWICE,THAT 27YEARS OF THE BUSHES AND THE CLINTONS,NO WONDER THEY CALL AMERICANS STUPID,THEY DO IT UP YOUR ASS AND DONT EVEN GIVE YOU VASELAINE,YEAH WERE A STUPID PEOPLE,SO LONG AMERICA
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It doesn't appear that you are able to spell or reason very well in your response to defend Ron. Even more telling is that most of your facts are just flat out wrong. Your historical ignorance of the 20th century conveniently ignores labor struggles for fair wages and worker safety measures, pensions and benefits for retired and injured workers strikes and strike breakers beating up workers and the legislation that was a partial corrective policy to these earlier abuses by organized business.
You're living in a fantasy of a fool's paradise with Ron and other simpletons.
While you are welcome to continue in self delusion, your fantasy is untenable for our nation. Ron's fantasy does not exist now, never did in the past, and is impossible to create in the future. Wake up and read some history!