Economist David Malpass wrote on Wednesday that the US administration’s weak dollar policy is causing job losses because investors are fleeing towards stronger currencies.
Bond buyer Bill Gross of the Pimco fund summed up the situation nicely in a recent CNBC interview. Asked whether low interest rates will weaken the dollar, the influential allocator of global capital said: "I think that's part of the administration's plan. It's obviously not announced—the 'strong dollar' is always the policy, so to speak. One of the ways a country gets out from under its debt burden is to devalue."
…Some weak-dollar advocates believe that American workers will eventually get cheap enough in foreign-currency terms to win manufacturing jobs back. In practice, however, capital outflows overwhelm the trade flows, causing more job losses than cheap real wages create. This was the lesson of the British malaise, the Carter malaise, the Mexican malaise of the 1990s, Yeltsin's Russian malaise through 1999 and the rest. No countries have devalued their way into prosperity, while many—Hong Kong, China, Australia today—have used stable money to invite capital and jobs.
…Washington's current economic program pushes capital away by weakening the dollar, threatening higher tax rates, borrowing short (the Fed's near trillion-dollar overnight debt, Treasury's mounds of bill and note issuance) to lend long (mortgages, student loans, entitlements), doubling down on government subsidies, and rechanneling bank loans to governments and big businesses instead of the small business job-growth engine.
The plan to de-dollarise the oil market, discussed both in public and in secret for at least two years and widely denied yesterday by the usual suspects – Saudi Arabia being, as expected, the first among them – reflects a growing resentment in the Middle East, Europe and in China at America's decades-long political as well as economic world dominance.
...Saudi bankers are well aware that in nine years' time – the current timeframe for a transition away from the dollar in oil trading to Japanese and Chinese currencies, the euro, gold and a possible new Gulf currency – China will have doubled its national income to $10trn (assuming a growth rate of 7 per cent), at which point the US might hold no more than 20 per cent of the world's gross income.
Such massive financial movements, encouraged by the de-dollarisation of oil, will have enormous political effects in the Middle East, especially if economic superpower rivalry between America and China comes to dominate the Arab world. Will American economic support for Israel remain as loyal in nine years' time if China and the Arabs are setting the pace in global financial markets? Indeed – perhaps with this in mind – some Israeli financiers have been expressing interest over the past two years in non-dollar Arab bank investments. Whenever a change of this magnitude takes place over a number of years, it has to be commenced in secrecy.
Market researcher Gerald Celente believes that inflationary US monetary policies are worsening the financial crisis and will lead to economic disaster.
“It is more than just the demise of the dollar – this is going to be felt worldwide. There’s a major financial crisis ahead. The United States, the world’s superpower, is failing on its most basic level,” Celente told RT.
And the reason for the future demise of the American currency, Celente says, is the disproportionate financial system:
“We can’t print money out of thin air, backed by nothing and producing practically nothing.”
Following Fisk’s report, free market activists have been contacting Congress calling for the restoration of the freedom to trade with a stable currency. One letter was written by libertarian columnist Mike Miller:
Several countries are making plans to stop using Federal Reserve Notes for oil purchases. I want the same freedom for my personal transactions.
The Fed has nearly doubled the money supply since last Fall. This will cut the future value of my savings in half and send my cost of living through the roof. Add to that . . .
- The $100 trillion in unfunded liabilities for Social Security and Medicare
- Your big bailout schemes
- Your so-called stimulus package
- Your cap and trade boondoggle
- Your disastrous healthcare plans, and the result is . . .
I see no hope for the dollar…
If foreigners can stop using Federal Reserve Notes, I should have the same freedom. Why should foreigners have more right to control their own economic destiny than I do?
Many in Washington claim they want to protect the Fed’s independence. What about my independence? I just want you to repeal the legal tender law so I can use forms of money other than Federal Reserve Notes (like gold and silver for instance). Doing this would also moderate the Fed’s behavior. If they want me to keep using Federal Reserve Notes then they’ll have to stop their legalized counterfeiting activities.
Please represent me. Break the Federal Reserve’s money monopoly. Give me the same right that foreigners have.
To send your own letter to Congress demanding an end to the inflation tax, visit Downsize DC.