Sinking Currency, Sinking Country

[peejay 327]

Sinking Currency, Sinking Country

by Patrick J. Buchanan

Posted 11/03/2007 ET

Updated 11/03/2007 ET

The euro, worth 83 cents in the early George W. Bush years, is at $1.45.

The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.

Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.

Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?

Nope. The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.

Is it all Bush's fault? Nope.

The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.

The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.

In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar.

A sinking dollar means a poorer nation, and a sinking currency has historically been the mark of a sinking country. And a superpower with a sinking currency is a contradiction in terms.

What does this mean for America and Americans?

As nations realize that the dollars they are being paid for their products cannot buy in the world markets what they once did, they will demand more dollars for those goods. This will mean rising prices for the imports on which America has become more dependent than we have been since before the Civil War.

U.S. tourists traveling to the countries whence their ancestors came will find that the money they saved up does not go as far as they thought.

U.S. soldiers stationed overseas will find the cost of rent, gasoline, food, clothing and dining out takes larger and larger bites out of their paychecks. The people those U.S. soldiers defend will be demanding more and more of their money.

U.S. diplomats stationed overseas, students and businessmen are already facing tougher times.

U.S. foreign aid does not go as far as it did. And there is an element of comedy in seeing the United States going to Beijing to borrow dollars, thus putting our children deeper in debt, to send still more foreign aid to African despots who routinely vote the Chinese line at the United Nations.

The Chinese, whose currency is tied to the dollar, and Japan will continue, as long as they can, to keep their currencies low against the dollar. For the Asians think long term, and their goals are strategic.

China -- growing at 10 percent a year for two decades and now growing at close to 12 percent -- is willing to take losses in the value of the dollars it holds to keep the U.S. technology, factories and jobs pouring in, as their exports capture America's markets from U.S. producers.

The Japanese will take some loss in the value of their dollar hoard to take down Chrysler, Ford and GM, and capture the U.S. auto market as they captured our TV, camera and computer chip markets.

Asians understand that what is important is not who consumes the apples, but who owns the orchard.

Other nations that have kept cash reserves in U.S. Treasury bonds and T-bills are watching the value of these assets sink. Not fools, they will begin, as many already have, to divest and diversify, taking in fewer dollars and more euros and yen. As more nations abandon the dollar, its decline will continue.

The oil-producing and exporting nations, with trade surpluses, like China, have also begun to take the stash of dollars they have and stuff them into sovereign wealth funds, and use these immense and growing funds to buy up real assets in the United States -- investment banks and American companies.

Nor is there any end in sight to the sinking of the dollar. For, as foreigners demand more dollars for the oil and goods they sell us, the trade deficit will not fall. And as the U.S. government prints more and more dollars to cover the budget deficits that stretch out -- with the coming retirement of the baby boomers -- all the way to the horizon, the value of the dollar will fall. And as Ben Bernanke at the Fed tries to keep interest rates low, to keep the U.S. economy from sputtering out in the credit crunch, the value of the dollar will fall.

The chickens of free trade are coming home to roost.

http://www.humanevents.com/article.php?id=23218

[Trumplestiltskin 5,791]

It really is quite frightening.

[Cassie 8]

The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.

1.068!!!!!

It's a little weird, even for me LOL

[Geist 0]

I bought 1 oz of gold in September for $736. At that time, it was roughly equivalent to 1 week's gross pay for me. A friend of mine has a 1/2 oz gold coin from 1911 and the face value on that coin is $10. So, in 1911, 1/2 oz of gold was worth $10 and I would have earned $20 in one week.

Now, in Nov., 1 oz of gold is worth more than $800...more than I earn in a week! In less than two months, my pay has decreased in real terms, while I'm still working just as hard as I was two months ago

This makes me very sad.

[Caladan 19]

The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.

1.068!!!!!

It's a little weird, even for me LOL

What weird is how fast it's happened. When C. first came to the U.S. to visit me, it was 67 cents on the dollar. When his parents came down for our wedding three years later, it was 93 cents on the dollar. Part of this no doubt is due to the high price of oil (as Alberta goes, so goes the loony.), but it's not just that.

[JODO 2]

Pat's right on the money here.

[peejay 327]

Pat's right on the money here.

A lot of people dis Pat, but he calls 'em like he sees 'em without a sugar coating of P.C. More than can be said for some of the spineless jellyfish running our country into the ground.

[Scott & Lai 12]

So are there real solutions? Or should we just put our heads between our knees and kiss our...assets...goodbye?

[Heracles 417]

Congress as a whole needs to dramatically cut back spending on non-essential services. I hate to say it but taxes must also be raised. There is no ifs or buts about it. People say it will stall growth but I cannot see any other way to raise money, for the nation, while curbing spending. No projects should be funded by other nations. If the country cannot afford it, they should not start it period..

Then once the US rides this storm, it is time to start investing in American and on Americans. Investing in projects to create jobs and rejuvenate this nation. Every other nation out there now seems to get this concept but the US congress and various leaders do not. That is only spend what you have and spend in areas that actually generate jobs and create growth. EG The nation's crumbling infrastructure and cities.

Second of all. Lets not even get started on the negative financial impact illegal immigrants are having on the American economy.

Edited November 5, 2007 by Boo-Yah!

[GaryC 7]

While I don't think there will be a full scale melt down of our economy I do see us heading for a downturn. The economy goes through cycles like that and what is happening with our debt being held by other countries is worrisome. But it also ties us to these other countries economies so it is in their best interest to not do something that drives us over the edge. Whether we are the strongest economy in the world or not, we are still very big and our downfall would be bad for everyone. I don't fear the debt held by other countries I would like to see the trend go back to the debt being brought back to the US and a reduction in our borrowing. The next 5 years may be bad but not the doom some see coming.

[trailmix 77]

The economy goes through cycles like that and what is happening with our debt being held by other countries is worrisome. But it also ties us to these other countries economies so it is in their best interest to not do something that drives us over the edge.

TORONTO, Nov 5 (Reuters) - The Canadian dollar touched a fresh modern-day high against the U.S. dollar early on Monday as concerns about the U.S. economy encouraged investors to keep buying the commodity-driven Canadian currency.

Domestic bonds, with no Canadian data to go on, followed the larger U.S. Treasuries market higher in a safe-haven bid as equities markets looked set for losses.

At 9:51 a.m. (1351 GMT) the Canadian dollar was at US$1.0703, valuing each U.S. dollar at 93.43 Canadian cents, little changed from Friday's close of US$1.0704, or 93.42 Canadian cents.

The Canadian unit rose as high as US$1.0748 in overseas trading, its highest level since the late 1800s, when it was at US$1.0704.

Granted this new high has a lot to do with oil prices and Alberta, however it doesn't seem to be business as usual when they are buying Canadian dollars and we haven't seen this rate for over a century.

I agree that all these economies are tied together, so maybe not over the edge - just to the edge? No one seems to be trying to correct this.

Edited November 5, 2007 by trailmix

[russ 1]

So are there real solutions? Or should we just put our heads between our knees and kiss our...assets...goodbye?

At some point, there will be enough inflationary pressure that the Fed will need to start raising interest rates. This will strengthen the dollar.

Cheaper dollars are also good for US exporters.

[Geist 0]

At some point, there will be enough inflationary pressure that the Fed will need to start raising interest rates. This will strengthen the dollar.

Unfortunately, the Fed seems only interested in cutting the interest rate and depreciating the dollar I hope they change their minds...

[GaryC 7]

At some point, there will be enough inflationary pressure that the Fed will need to start raising interest rates. This will strengthen the dollar.

Unfortunately, the Fed seems only interested in cutting the interest rate and depreciating the dollar I hope they change their minds...

The pendulum is about to swing the other way. The fact it's an election year soon will mean they don't want to do anything drastic right now. Our bad luck. I plan to take advantage of the situation if I can. The low housing market is making it easy to get a good deal on a house and the interest rates going down makes it more affordable. If I can get locked in before the bottom drops out I can come out ahead on the deal.

[russ 1]

Unfortunately, the Fed seems only interested in cutting the interest rate and depreciating the dollar I hope they change their minds...

A weak dollar isn't necessarily a bad thing (except for oil prices).