Via the Business Insider: “Peter Schiff takes on [noted doomsayer] Nouriel Roubini on the subject of gold. Nouriel Roubini believes every asset, including gold, is over-inflated due to the dollar carry trade. Schiff disagrees, and says Roubini doesn’t understand the fundamentals behind gold — that it’s going to keep heading higher as a result of government action.”
Category Archives: Business
Update III: Dollar Doubts
Business, Capitalism, Debt, Economy, Free Markets, Socialism, The State, Uncategorized
“[D]iscussion on the greenback is heating up,” notes Peter Schiff. “And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions—both of which are wrong.”
“The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore ‘King Dollar’ to its throne.”
“First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.
The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario.”
I am not as confident as Mr. Schiff that the dollar can be rehabilitated. The country is moving away from markets and toward the central control of the economy and the rearranging of the income curve. What with the daily growth of debt and unfunded liabilities, I hate to be cynical, but could Mr. Schiff’s optimism have anything to do with his political aspirations?
Update I (Oct. 26): Involvement in politics invariably means convincing the masses that there is a panacea to what are intractable problems. Politics are about peddling hope against all hope. Pollyanna sentiments notwithstanding—comments about waving the wand of liberty to dissolve $60 trillion in growing government liabilities are worse than useless.
If the trend in public and political sensibilities was toward liberty—decentralization and deregulation—I’d say hope is warranted.
On the theme of cynicism—and when all else fails—perhaps the Pollyannas among us can adopt the tack taken in this WSJ article; debt can hasten recovery:
“[H]ousehold debt, including mortgage debt, [is] at about $13.7 trillion, or 125% of annual after-tax income…. the U.S. government … is building up debt as fast as households are shedding it. Net U.S. government debt could reach 85% of annual economic output by 2014, up from about 58% now, according to the International Monetary Fund.”
The impetus is in the direction of serfdom.
Update II (Oct. 27): The Economist: “America needs a weak dollar to help revive its economy and reorient it towards exports and away from consumer spending.”
Would that it will. However, a weak dollar is a symptom of all these things it’s supposed to cure; it’s not a cause of over-consumption and under production.
Update III: À la Zimbabwe (and via Bloomberg): “Forty years ago, the U.S. government said the $100 bill would be the highest-denomination note. With the Federal Reserve now trying to print its way out of the financial crisis, it may be time to revisit that decision.
Reinstating $10,000 or $100,000 notes — which existed in limited fashion years ago — won’t cut it. In today’s, ‘Brother, can you spare a trillion dollars?’ economy, we need to think bigger — a $1 million bill may be in order.”
‘The Purchase & Sale Of Paper Instruments’
Business, Debt, Economy, Federal Reserve Bank, Outsourcing, Political Economy
It is undeniable that, for better or for worse, economist Paul Craig Roberts is a fiercely independent thinker. Make up your own mind, but I have long agreed that America’s outsourcing and trade deficits—the last being emblematic of a consumer society—are a sickly specter, although I shun Roberts’ illiberal recommendations:
“The main cause of this decline is the offshoring of U.S. high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated to countries with large and cheap labor forces.
The wipeout of middle-class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.
The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.
Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high-speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic workforce with foreigners brought in at one-third the salary on H-1B, L-1 and other work visas.”
[SNIP]
Our “moonbat” frequent poster will no doubt agree with the following Robert’s assessment:
What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.
The expansion in debt that underlies this bubble has further eroded the U.S. dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the U.S. Treasury’s borrowing capability. When the interest rates rise, what little remains of the U.S. economy will tank.
'The Purchase & Sale Of Paper Instruments'
Business, Debt, Federal Reserve Bank, Outsourcing, Political Economy
It is undeniable that, for better or for worse, economist Paul Craig Roberts is a fiercely independent thinker. Make up your own mind, but I have long agreed that America’s outsourcing and trade deficits—the last being emblematic of a consumer society—are a sickly specter, although I shun Roberts’ illiberal recommendations:
“The main cause of this decline is the offshoring of U.S. high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated to countries with large and cheap labor forces.
The wipeout of middle-class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.
The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.
Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high-speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic workforce with foreigners brought in at one-third the salary on H-1B, L-1 and other work visas.”
[SNIP]
Our “moonbat” frequent poster will no doubt agree with the following Robert’s assessment:
What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.
The expansion in debt that underlies this bubble has further eroded the U.S. dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the U.S. Treasury’s borrowing capability. When the interest rates rise, what little remains of the U.S. economy will tank.