Thursday, October 15, 2009
Obama's destruction of the U.S. dollar
With U.S. debt set to exceed 100% of GDP in 2011, it's no wonder people are looking for alternative ways to preserve wealth
Unprecedented spending, unending fiscal deficits, unconscionable accumulations of government debt: These are the trends that are shaping America's financial future. And since loose monetary policy and a weak U.S. dollar are part of the mix, apparently, it's no wonder people around the world are searching for an alternative form of money in which to calculate and preserve their own wealth.
It may be too soon to dismiss the dollar as an utterly debauched currency. It still is the most used for international transactions and constitutes over 60% of other countries' official foreign-exchange reserves. But the reputation of our nation's money is being severely compromised.
Funny how words normally used to address issues of morality come to the fore when judging the qualities of the dollar. Perhaps it's because the U.S. has long represented the virtues of democratic capitalism. To be "sound as a dollar" is to be deemed trustworthy, dependable, and in good working condition.
It used to mean all that, anyway. But as the dollar is increasingly perceived as the default mechanism for out-of-control government spending, its role as a reliable standard of value is destined to fade. Who wants to accumulate assets denominated in a shrinking unit of account? Excess government spending leads to inflation, and inflation plays dollar savers for patsies—both at home and abroad.
A return to sound financial principles in Washington, D.C., would signal that America still believes it can restore the integrity of the dollar and provide leadership for the global economy. But for all the talk from the Obama administration about the need to exert fiscal discipline—the president's 10-year federal budget is subtitled "A New Era of Responsibility: Renewing America's Promise"—the projected budget numbers anticipate a permanent pattern of deficit spending and vastly higher levels of outstanding federal debt.
Even with the optimistic economic assumptions implicit in the Obama administration's budget, it's a mathematical impossibility to reduce debt if you continue to spend more than you take in. Mr. Obama promises to lower the deficit from its current 9.9% of gross domestic product to an average 4.8% of GDP for the years 2010-2014, and an average 4% of GDP for the years 2015-2019. All of this presupposes no unforeseen expenditures such as a second "stimulus" package or additional costs related to health-care reform. But even if the deficit shrinks as a percentage of GDP, it's still a deficit. It adds to the amount of our nation's outstanding indebtedness, which reflects the cumulative total of annual budget deficits.
By the end of 2019, according to the administration's budget numbers, our federal debt will reach $23.3 trillion—as compared to $11.9 trillion today. To put it in perspective: U.S. federal debt was equal to 61.4% of GDP in 1999; it grew to 70.2% of GDP in 2008 (under the Bush administration); it will climb to an estimated 90.4% this year and touch the 100% mark in 2011, after which the projected federal debt will continue to equal or exceed our nation's entire annual economic output through 2019.
The U.S. is thus slated to enter the ranks of those countries—Zimbabwe, Japan, Lebanon, Singapore, Jamaica, Italy—with the highest government debt-to-GDP ratio (which measures the debt burden against a nation's capacity to generate sufficient wealth to repay its creditors). In 2008, the U.S. ranked 23rd on the list—crossing the 100% threshold vaults our nation into seventh place.
If you were a foreign government, would you want to increase your holdings of Treasury securities knowing the U.S. government has no plans to balance its budget during the next decade, let alone achieve a surplus?
In the European Union, countries wishing to adopt the euro must first limit government debt to 60% of GDP. It's the reference criterion for demonstrating "soundness and sustainability of public finances." Politicians find it all too tempting to print money—something the Europeans have understood since the days of the Weimar Republic—and excessive government borrowing poses a threat to monetary stability.
Valuable lessons can also be drawn from Japan's unsuccessful experiment with quantitative easing in the aftermath of its ruptured 1980s bubble economy. The Bank of Japan's desperate efforts to fight deflation through a zero-interest rate policy aimed at bailing out zombie companies, along with massive budget deficit spending, only contributed to a lost decade of stagnant growth. Japan's government debt-to-GDP ratio escalated to more than 170% now from 65% in 1990. Over the same period, the yen's use as an international reserve currency—it clings to fourth place behind the dollar, euro and pound sterling—declined from comprising 10.2% of official foreign-exchange reserves to 3.3% today.
The U.S. has long served as the world's "indispensable nation" and the dollar's primary role in the global economy has likewise seemed to testify to American exceptionalism. But the passivity in Washington toward our dismal fiscal future, and its inevitable toll on U.S. economic influence, suggests that American global leadership is no longer a priority and that America's money cannot be trusted.
If money is a moral contract between government and its citizens, we are being violated. The rest of the world, meanwhile, simply wants to avoid being duped. That is why China and Russia—large holders of dollars—are angling to invent some new kind of global currency for denominating reserve assets. It's why oil-producing Gulf States are fretting over whether to continue pricing energy exports in depreciated dollars. It's why central banks around the world are dumping dollars in favor of alternative currencies, even as reduced global demand exacerbates the dollar's decline. Until the U.S. sends convincing signals that it believes in a strong dollar—mere rhetorical assertions ring hollow—the world has little reason to hold dollar-denominated securities.
Sadly, due to our fiscal quagmire, the Federal Reserve may be forced to raise interest rates as a sop to attract foreign capital even if it hurts our domestic economy. Unfortunately, that's the price of having already succumbed to symbiotic fiscal and monetary policy. If we could forge a genuine commitment to private-sector economic growth by reducing taxes, and at the same time significantly cut future spending, it might be possible to turn things around. Under President Reagan in the 1980s, Fed Chairman Paul Volcker slashed inflation and strengthened the dollar by dramatically tightening credit. Though it was a painful process, the economy ultimately boomed.
Whether the U.S. can once more summon the resolve to address its problems is an open question. But the world's growing dollar disdain conveys a message: Issuing more promissory notes is not the way to renew America's promise.
Who's Behind the White House War on Fox News?
The Left just can't take criticism. They know how vulnerable they are if people get to hear both sides of an argument -- JR
White House interim communications director Anita Dunn assumed the role of lead Fox News Channel-basher this weekend. The attack was a dud. The left-leaning Nation magazine ridiculed President Obama's press shop for turning him into the "whiner-in-chief." AOL media columnist Jeff Bercovici called the war on Fox a "loser's strategy" that "signals weakness." And that's the friendly fire.
Dunn found refuge in rival CNN's green zone, where she blasted Fox News as a "research arm of the Republican Party." Unhappy with headline-generating Fox News hosts who have wrested control of the news cycle from Team Obama, Dunn complained about "opinion journalism masquerading as news."
Well, that is certainly an apt description of an Obama-sympathizing "news" segment on "The Situation Room with Wolf Blitzer," which purported to "fact check" a Saturday Night Live skit mocking the president's lack of accomplishments.
Yes, the "real" news fact-checked the fake news to cover for Obama's deficiencies. Zero complaints from the White House communications office about that. Or about authentic CNN journalist Anderson Cooper using his prime-time show to make vulgar sexual jokes about Tea Party activists. Or about the joint White House-ABC News health care reform infomercial that aired earlier this summer.
Some "opinion journalism" is more equal than others.
Debates about the blurred lines between opinion and journalism are all well and good. But don't the talking-points crafters in the Oval Office have something better to do than carp about the talking points they don't like hearing on the one cable network that hasn't been completely overrun by Obama sycophants? (Full disclosure: I've been a Fox News contributor since 2001.)
Where are the seasoned press gurus to help Nobel Peace Prize-winner Barack Obama appear more presidential and less petty and thuggish?
The corruptocratic affiliations of Obama's communications team are illuminating. His press shop can't rise above the fray because they've been entrenched in the Beltway fray for years. They can't help themselves.
Democratic media consultant Dunn's claim to fame is her decade-long service as chief strategist for disgraced Democrat and former Senate Majority Leader turned health care lobbyist Tom Daschle. She was in the thick of his failed re-election campaign as Daschle asserted a bogus property-tax homestead exemption claim on his $1.9 million D.C. mansion -- which he listed as his primary residence despite voting in South Dakota and claiming it as his primary residence in order to run for re-election. And Dunn was with Daschle during the years he failed to pay gobs of taxes on a luxury car and driver provided to him by crony donor Leo Hindery Jr.
After working as communications manager for Obama's political action committee and then as senior adviser to his 2008 presidential campaign, Dunn "trained" White House press secretary and anti-Fox sniper Robert Gibbs. Deputy communications director Dan Pfeiffer is another young protege of Dunn's, who worked with her on the disastrous 2004 Daschle re-election campaign.
(Another Daschle connection: Obama transition adviser John Podesta, who served as Daschle's counselor and has helped staff the administration with many alumni of his left-wing think tank, the Center for American Progress. One CAP fellow, Hugo Chavez-admiring radical Mark Lloyd, has attacked conservative talk radio -- the second home of several Fox News hosts -- and is now the FCC's "Diversity Czar.")
Dunn is married to Robert Bauer, a Washington, D.C., corporate lawyer who served as general counsel for Obama for America. It was Bauer who lobbied the Justice Department unsuccessfully last fall to pursue a criminal probe of American Issues Project (AIP), an independent group that sought to run an ad spotlighting Obama's ties to Weather Underground terrorist Bill Ayers.
It was Bauer who attempted to sic the DOJ on GOP donor Harold Simmons and sought his prosecution for funding the ad. It was Bauer who tried to bully television stations across the country to compel them to pull the spot. All on Obama's behalf.
While conservatives revel in the left's hysteria over Fox News Channel's dominance, more of Obama's friends hope he'll wipe his nose and man up. Fat chance. As long as he's surrounded by career flacks who demonize dissent to distract from the Beltway stench, the White House will remain an all-whine zone.
Some background here on the latest hero of American conservatism, Hannah Giles. She sounds a great gal.
GOP uses ACORN to fight bank redlining law: "Conservative Republicans are capitalizing on the troubles of community activist group ACORN — ranging from charges of voter registration fraud to embarrassing videos of its employees — to revive their long-standing fight against a federal law that grades banks on their investments in poor and minority neighborhoods. The 1977 Community Reinvestment Act was intended to end redlining, a practice in which banks in effect walled off many inner-city neighborhoods from mortgage loans. But some GOP lawmakers say it has outlived its purpose and is being used inappropriately by ACORN to shake down banks for money.”
The real problem with ACORN: "Eventually I soured on welfare in a number of ways. Even with the women it was doing no good. They had no sense of self-sufficiency. It was just a sophisticated form of begging. They would develop a sense of entitlement so that ‘getting ahead’ simply meant making more and more strident demands on more and more people. And that’s what Wade Rathke seems to have picked up on. He said on the Fox show that when funding ran out for welfare rights he moved to Little Rock to start his own community organizing effort, based on that same sense of endless grievance. ACORN became skilled at moral gangsterism, shaking down governments and corporations for larger and larger amounts, making ever more ridiculous demands.”
Tire trade tirade: "In 2002, President George W. Bush helped make us poorer by signing off on higher steel tariffs. In 2009, President Barack Obama helped make us poorer by signing off on higher tire tariffs. Is this supposed to be change we can believe in? Economic analysis shows that trade creates wealth. The law of comparative advantage demonstrates that when we specialize and trade, we produce more wealth using the same resources. Preventing trade means that we use more resources to produce less wealth.”
SCOTUS to hear asset forfeiture overkill case: "Asset forfeiture is one of law enforcement’s most potent weapons against drug crimes. When private property such as cars, boats, houses, and money are used in a narcotics transaction, US laws allow the police not only to seize those assets but to profit from the seizures. But a problem arises when the confiscated property belongs to someone unaware that crimes were taking place. In such instances, it can take a year or more for the owner to get back the seized property. The US Supreme Court Wednesday takes up a case examining whether a federal appeals court was right when it ruled that officials in Chicago were taking too long to return property to innocent owners.”
Dangerous Bible quotations: "A Delta airliner en route from Seattle to Atlanta has made an unscheduled stop in Nashville after a disturbance on board. No one was hurt. Nashville International Airport spokeswoman Emily Richard says passenger Paul Marchuk III was charged with disorderly conduct and resisting arrest by airport police. WSMV-TV in Nashville reported that a passenger had to be subdued by other passengers after he began quoting Bible passages. Richard said she had no information about that.”
Russia: Moscow court rejects Stalin grandson’s libel suit: "A Moscow court rejected on Tuesday a libel suit filed against a newspaper by the grandson of dictator Joseph Stalin. Yevgeny Dzhugashvili demanded Novaya Gazeta retract parts of an article that said Stalin personally signed death warrants. He also demanded 10 million rubles ($340,000) in compensation for damage to his honor. The paper’s spokesperson, Nadezhda Prusenkova, told reporters the article was based on recently declassified documents, including death warrants bearing Stalin’s personal signature. The warrants were then forwarded to the NKVD to be carried out. … The court hearings drew public attention and were attended by supporters of the Stalinist ideology. Verbal clashes were heard in the corridor between the activists and the defense team.”
Fresh kidneys for sale: "Part of the notion of treating individuals with dignity is that they have control over what is done with their own bodies and their parts.’ Who could disagree with that principle? A new study, ‘Trafficking in Organs, Tissues, and Cells and Trafficking in Human Beings for the Purpose of Organ Removal’ done at the behest of the United Nations and the Council of Europe, correctly observes, ‘In order to obtain organs and tissues from the living, there is agreement that, from an ethical standpoint, it is necessary to have a legally competent individual who is fully informed and can make a voluntary, uncoerced choice about donation.’ Right on. However, once these principles are enunciated, the report — co-authored by University of Pennsylvania bioethicist Arthur Caplan and three European colleagues — oddly concludes that individuals have the right to control their bodies, except when they want to sell one of their organs.”
Some blind worship of government: "The hoariest and most oft-repeated cliche in American politics may be that America is the greatest country in the world. Every politician, Democrat and Republican, seems duty bound to pander to this idea of American exceptionalism, and woe unto him who hints otherwise. This country is ‘the last, best hope of mankind,’ the ’shining city on the hill’ or the ‘great social experiment.’ As if this weren’t enough, Jimmy Carter upped the fawning ante 30 years ago by uttering arguably the most damning words in modern American politics. He called for a ‘government as good as the American people,’ thus taking national greatness and investing it in each and every one of us. … The fact of the matter is that whenever anything really significant has been accomplished by our government, it is precisely because it was better than the American people.”
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)
Posted by JR at 1:37 AM