Thugonomics 101: Money Matters for the Marks
Notes on the hidden instability of American Finance.
The International Herald Tribune reported on May
2 that the US Dollar had fallen to a four-year low in trading against the
Euro, having lost 2.5 percent of it value in just the previous week. On
the other hand, the Euro is now closer than it's ever been to the value at
which it debuted in January 1999, prior to the start of negative trending
in the US economy. Rebecca McCaughrin of Morgan Stanley told the IHT that
"Foreigners appear to be questioning the relative attractiveness of U.S.
assets." They were doing that last year; now they are looking for viable
investment alternatives.
I had written some weeks ago that, with Tony Blair having received a huge
boost in credibility after the relative success of Operation: Iraqi
Freedom, his next move would be to fold the British Pound in under the
Euro, setting the stage for a unified European economy that could
seriously compete against an American system that's on the ropes. That
seemed pretty obvious to me. What I did not know at the time, though, was
that Blair would soon be pushing for a formal "President of Europe" to
represent the EU on the international level. The plan is for the office to
be established by 2006 - the last year of Blair's run atop the British
government - with five-year terms; the leading contenders for the still
fictional position are Mr. Aznar of Spain and Blair himself. Convenient.
Of course, the piece never ran anywhere, because there is a sort of
proscription against straight talk about the economy, even among the
so-called "alternative media."; This has been obvious since at least the
2002 mid-term elections, when Democrats demurred from their best argument
against Republican control of Congress: the poor economic performance
during the Bush era. For some reason, perhaps because the Democrats are as
complicit in the bad decision-making as Bush is, the alleged "opposition"
party chose not to oppose anything coming from the White House since 9/11,
and have thus all but guaranteed not only Bush's reelection in 2004, but
the possible destruction of the Democratic party by the end of this
decade.
William Anderson of Mises.org writes that the
Dollar has lost half its value against the debauched Iraqi Dinar. It
traded at 4,000-1 on April 9 and now goes at about 1,800-1, even though
the man whose face appears on that currency is out of power and everyone
knows the Dinar is on its way out, at least in its present form. One of
the problems raised by the notion of a "democratic" Iraq is that Iraq is
composed mostly of Muslims, and that more and more Muslim nations seem
ready to embrace the Malaysian proposal to adopt the Gold Dinar as a means
of settling accounts between countries. It was the primary objective of
the nascent Islamic Financial Services Board, which was formed for the
explicit purpose of uniting the economies of up to 56 Muslim nations,
providing a means of "insulation"; against Western "aggression."
I've been saying since 9/11 that the major threats to the US would not
take the form of physical violence (though that is a definite
possibility); rather, the most likely method of terrorism would be an
induced collapse of the US economy. Not once, in over a dozen tries, have
I ever successfully published anything pertaining to the vulnerability of
American finances, which leads me to believe that I am absolutely correct,
unfortunately. The statistics, while openly displayed in the public
record, are never mentioned in relation to each other, but are instead
treated like brief and painless aberrations in a system that is
(manifestly?) destined to grow and grow and grow. But, as Merrill Lynch
currency strategist Alex Patelis told IHT, "The argument that the dollar
should be strong because U.S. policy makers are more flexible and
growth-oriented than their European or Japanese counterparts does not make
sense . . . It is not a matter of growth."
Perhaps the key to our economic recovery is to convince Americans that
there is nothing to recover from. Consumer confidence, after all, is what
drives the sort of economic growth we're used to. However, "consumer
confidence"; has nothing to do with necessities - things like food and
shelter that everyone needs; it's more an expression of discretionary
spending. Consumer confidence is the difference between a $20,000
Chevrolet and a $200,000 Bentley, and that's why any suggestion of genuine
weakness in the economy is strictly prohibited from mass media.
In February alone, foreign investment in the US fell by at least $13.6
billion dollars, through sales of US Treasury bonds and government
securities. That's a good thing, in the long-run, but highly problematic
in the short-term. Some commentators have gone so far as to attribute the
invasion of Iraq (and subsequently announced removal of US troops from
Saudi Arabia) as direct maneuvers to impose the Dollar again as the
preferred method of payment to OPEC countries, which have recently
expressed a preference for gold or Euros. This perception is much more
widespread in those countries that our neo-conservative hawks (under the
Rumsfeld rubric) have suggested as the next targets for "regime change"
Syria and Iran. They and their allies may soon be forced to use their only
effective weapons against us, which is manipulation of our egregious and
unserviceable debt-load.
Whereas the official national debt stands somewhere above $4 trillion,
that includes only Federal debt in the forms of the afforementioned
Treasury bonds and government securities. $4 trillion doesn't include the
debts of state and local governments, or individuals and companies; the
total debt-load could be as high as $70 trillion. And that doesn't factor
in the Dollar's decreased spending power - it lost a fifth of its value in
2002 alone. Meanwhile, gold is trading at its highest levels since the
first George Bush was President.
A recent bit of chaos in NY's Chinatown received much more press than what
set it off, and the consequences thereof. After a manager of the Abacus
Bank's Chinatown branch was accused of embezzling $1 million, customers
began a run on that bank, which claims to have $280 million in assets. The
run reportedly ceased after $30 million had been withdrawn, which is
interesting because Federal law only require financial institutions to
hold cash reserves totaling 10% of stated assets. (This is known as
"fractional reserve banking.") In other words, Abacus may have simply run
out of cash, like the Abacus branch in Philadelphia that had its vault
emptied the next day on reports of the Chinatown debacle. However, I've
yet to hear of anyone not allowed to empty their account, and bank
President Thomas Sung told NY Newsday that "We could have endured a run
for ten more days . . . We had three times more capital than regulators
required." Thank goodness they're more cautious than most financial
institutions, which are so heavily leveraged now that one more "crisis"
could break any or all of them.
I could go on, but I won't, except to say this much for myself: I know a
fair bit about money and how it works, for someone who doesn't have any.
Maybe that's exactly why I don't have any.
Shelton Hull
sdh666@hotmail.com
Related
Links:
www.ifsb.com ,
www.321gold.com ,
http://www.lewrockwell.com/rothbard/frb.html ,
http://www.amosweb.com
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