Tuesday, March 18, 2008

It's Just Paper

I'm back in the States for a quick stopover - just in time, it seems, to watch the country's economy plummet into complete chaos. Fortunately, Mr. GW Bush was on the scene today to reassure the public that "In the long run, our economy is going to be fine". Fox News reports that Mr. Bush also said he was "on top of the situation". Let's have a quick look at today's announcements:

Whew! I was worried for a second that the federal reserve had lost control of the financial system and was furiously printing dollars in order to bail out banks, thereby further diluting the value of the already pathetic dollar... oh wait, that's exactly what's happened, and from all signs will continue to happen. In effect, you, me, and everyone else who holds dollars is subsidizing the stupidity and greed of the financial institutions that allowed this to happen.

The principles are fairly easy to understand. The more money you print, the more there is in circulation, the more money in circulation, the less each dollar is actually worth. That's inflation. There are examples throughout history, like the Weimar Republic in 1930's Germany, the 1970s in this country, the list goes on. The federal reserve is panicking, throwing money around, and wreaking havoc on the poor little dollar. This will certainly not turn around tomorrow, nor probably this year or next.

Considering I have no money I'm not in the most authoritative position to be giving financial advice to those who do, but well this is my blog so I'm gonna do it any damn way (and there are plenty of financial experts behind me. Get rid of your dollars. Buy Gold. Do it now. Yeah, I hear you say, but gold is freakin' expensive right now. What if I shell out a thousand bucks for a gold coin, and tomorrow the dollar recovers and gold drops back down to reality? Well friend, you can be damn sure that's not gonna happen, what with the fed's printing presses coughing up greenbacks like, quite literally, there's no tomorrow.

But wait, what about that economic stimulus package that was signed into law? Won't that give the tired ol' economy a shot in the arm? I heard the IRS was going to send out checks for $600 in May! Aside from the obvious question of where the hell is this $140 billion coming from, considering the current account deficit, May is an awfully long time from now. That was clearly an election year political maneuver aimed at elating the very short-sighted, like a $2000 hand-job charged to a credit card.http://www.blogger.com/img/gl.link.gif

Let's face it: economies have ups and and downs. They are cyclical. You can't have a booming, growing economy now and forever after. That's just not the way economies, or anything, really, works. The U.S. has been consuming far more than it produces, and far more than it's share of the world's resources for some time, and it looks as though that time is coming to an end. Accept it. Let a few weak and stupid banks fall. Today it's Bear Stearns, tomorrow there will be another. What kind of message does it send to private banks if they can be assured that the government will throw away everything to save them when their risky investments lead to disaster?

Swallow the medicine: have a recession. Let unemployment rise. Let consumer spending fall. There is no way to avoid it, but there is a hell of a lot of harm to be done by staying in denial about it. Hey, maybe when gas costs $6 a gallon like in most of the rest of the world Americans will have second thoughts about buying that bad-boy SUV and opt for a Prius.... or a bike?


Andy said...

That was a great post. The US dollar has been doomed from the start though, or at least since 1913 when the Federal Reserve came into existence. The Federal Reserve is a private bank that prints money for the US government, essentially lending out that money at interest.

This means that if the Federal Reserve prints, say, $100, the US government needs to pay back $100 plus whatever the interest may be. Let's say $101. But how can you pay back $101 when you only have $100? So the bank prints more money at interest, and you can see how it's a nasty downward spiral.

Most people have no idea how the Federal Reserve works, but if they did they'd be outraged. "Show me who prints a nation's money, and I care not who makes its laws," said one of the Rothschilds.

If you haven't already, watch the documentary Zeitgeist at zeitgeistmovie.com, particularly part 3.

Kyle said...

pretty shameful time to be an american.. more then usual anyway.