print“[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.”
“First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. “ Peter Schiff
Bingo! I am disgusted and enraged by deliberate attempts to weaken the dollar.
“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.” Peter Schiff
Bravo!
“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?” Ilana
Solution do exist. Capital could be drawn back into the US if we would just remember what made it great: Liberty and the rule of law.
Just the legalization of alternative banking and money solutions would turn things around for the US. Business would at last be free of the insane nationwide boom/bust cycle.
Ron Paul knows the correct solution (liberty) and Peter Schiff knows a good but painful solution (raising interest rates). Ron Paul is a gentle man. His solution is gentle too but radically correct.
From my reading of Mr. Schiff’s columns over the past year, he always tells the bad news as it is and follows that up with optimism that there is still time to correct course. This seems to be in the Ron Paul vein, who can give some terrible worst-case scenarios and then follow them up with messages of hope.
I read somewhere that Winston Churchill said. “Americans can always be trusted to do the right thing- after they have tried everything else.” Yep, how many more tries do we have left before we get to where we should be?
Debt, if invested WISELY, can be productive – however, most consumer / governmental debt goes to indulgent and stupid purposes. Burning coal and building windmills instead of uranium is unwise. Rent subsidies so children can afford phone texting is wasteful. Security for “elections” for Chief Narcopuppet between Karzai and Abdullah isn’t an investment! Keeping General Motors afloat while penalizing new entrepreneurs with red tape and taxation is unproductive. Dollars flow into the toilet of unproductivity – – living standards will inevitably follow malinvestment.
People have a right to the PURSUIT OF happiness (prosperity) but not to prosperity per se. A higher standard of living than China or Congo must be EARNED – through hard work and productivity.
Unfortunately successful politics entails telling people baloney that they WANT TO HEAR. Jack Nicolson’s character put it, “You can’t handle the truth!” Theoretically, it would be OK if politicians spouted fairy tales if they did not interfere in both the productive sector and in individual liberty. That’s when politics goes from a benign circus to a MALIGNANT PARASITE. Sadly, the feedback mechanism only promotes the statist cancer further metastasizing and grabbing more control (as opposed to market feedback which dampens bad economic decisions).
I’ve heard Schiff on his radio program state that there’s no way we will ever pay back the debt, and that the best solution would be to renegotiate with lenders. It sure beats what we’re doing now, which is spending like there’s no tomorrow and assuming that future generations will magically pay this off.
OK, I tried to be elegant but failed: here is the raw link:
http://www.youtube.com/watch?v=qJUFTm6cJXM&feature=player_embedded#
“I’ve heard Schiff on his radio program state that there’s no way we will ever pay back the debt, and that the best solution would be to renegotiate with lenders.” Steve Hogan
When one prints money to buy debt (The Fed) or when one uses fractional reserves to buy debt (the banks), the purchasing power for the money is stolen from all money holders via inflation. The “debt” is morally toward the victims not the banks, the Fed or the purchaser of the debt bought with stolen goods (money from nothing).
The public has been looted via inflation; morally it owes no debt if the debt was bought with purchasing power stolen from it.
My take on Schiff is that he does tell the bad news. I’ve heard him say that politicians do not want to make the necessary hard fiscal policy choices and tell it like it is because they want to get elected. Although Schiff paints a dire picture at times, I would like to hear some plain statements about what the “cure” means in terms of prices, wages, employment, and the value of the dollar. And I would like to hear more about how tough choices are going to impact us all. Sometimes I get the sense that Schiff is saying that if we make the necessary fiscal policy changes right now, then we will not have to experience the heavy weight of those changes. That’s like telling a family that has maximized all the limits of its credit cards that if they cease charging things, they can still live the economic life to which they’ve been accustomed. I would like both he and Paul to stay on message that what lies ahead are some hard times. But Schiff definitely excoriates those on both sides of the aisle who have spent us to where we are now and who still uphold some Keynesian notion that we can continue to spend our way to a sound economy.
“The impetus is in the direction of serfdom.”
My impetus doesn’t go in that direction and I know yours doesn’t either.
Do you really think it is our destiny to lose?
“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”
How can the dollar or the economy recover in a rigged game ?
http://sentinelradio.wordpress.com/2009/10/25/the-warning-this-is-a-must-see-video-in-order-to-understand-who-destroyed-the-economy/
Solution do exist. Capital could be drawn back into the US if we would just remember what made it great: Liberty and the rule of law.
Washington said that the success of the nation depends upon the virtue of the people. What made America great was the American people. Liberty and rule of law (as in the now thoroughly discredited notion of the Proposition Nation) do not a nation make.
Just the legalization of alternative banking and money solutions would turn things around for the US.
I guess when you’re a hammer, everything looks like a nail.
“I guess when you’re a hammer, everything looks like a nail.” Van
I simply recognize that evil generally needs someone else’s money. I have made my logic abundantly clear.
In the US, evil uses either money or force (or the threat of force) to get its way.
Or why has capitalism failed in the US? Ans: It hasn’t been tried since 1913.
Good luck on trying to impose virtue on a society that is periodically wrecked by the boom/bust cycle.
True liberty produces virtue since evil generally requires tyranny to prosper. Evil is a parasite, don’t you know?
Speaking of virtue, our current money and banking system is based on false witness, theft, oppression of the poor and government privilege. How foolish of me to think that could have anything to do with the virtue of the nation!
[Social determinism: you believe that man is a pawn and has no free will. Give him free banking and he’ll be an angel.]
I am one of the few old holdouts who pay most bills (like at supermarkets) with cash. When I grew up, a $20 bill was a substantial amount of money.
The disuse of cash has 2 consequences:
(a) the government can monitor EVERY purchase you make and (b) most Americans are oblivious to their own spending.
“I am one of the few old holdouts who pay most bills (like at supermarkets) with cash. “ Myron
Bravo! Another consequence is the bank cannot pyramid “credit” on top of your checking deposit cash.
“I am one of the few old holdouts who pay most bills (like at supermarkets) with cash”
How do we convince more people to come around to Myron’s way of thinking ?
I will add that I am EXTREMELY SUSPICIOUS of these proposals for a 30% national sales tax (favored by Republicans and semi-libertarians) will will supposedly get rid of the IRS/Income-Tax beast. It is bad enough for Uncle Sam to know your paycheck and your bank account but a 30% or whatever tax will involve getting rid of cash in favor of Citicorp-managed “debit cards” with the government knowing all your purchases [HINT – guns, ammo, porn, reefer papers, …. ]. How such a tax makes me more free boggles the imagination!
Good luck on trying to impose virtue on a society that is periodically wrecked by the boom/bust cycle.
My people [Who are they? Guys, please don’t speak in tongues.], who I value more than any republic, do not need virtue imposed upon them.
The problem with one-note economic wonkery is that it takes for granted that the same enlightened self-interest that animates its proponents animates all people, but of course it does not. Introduce Mr. Moon’s banking and money solutions to, say, Mexico, or Uganda, or Iran, and free nations will not magically rise up in those places. (And in the case of the latter, woe to the economist whose ideas are deemed un-Islamic.)
But I wish you the best of luck in convincing the myriad tribes who inhabit this country of what is in their economic best interests. I’m sure they’ll be more than happy to vote for responsibility over the all-providing state.
One thing is clear; when you have a player in the game that can essentially print money and use it to buy power with, corruption is guaranteed. Anywhere.
Whether the population will wake up and figure out what was done to them, and agitate for money that respects property rights is another question altogether.
What’s likely is that policy will continue to bribe people into being beggars, thieves, and cowardly snitches until the day the free money becomes worthless. By then the ‘entitled ones’ and the few remaining producers may be too weak to assert themselves, whether they wake up or not, and they may have to submit to whatever the juggernaut decides to do to ‘fix it’.
The bigger the lie, the more people refuse to question it.