DEMISE
The fall of the US Dollar is shaking international faith in the American economy (emphasis added):
The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible.
After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar. . . .
Kenneth Froot, a Harvard university professor and former consultant to the US Federal Reserve, warned yesterday: "Part of the depreciation [of the dollar] is permanent. There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity."
Professor Riordan Roett, of Johns Hopkins University in Baltimore, told Bloomberg News: "There is a loss of confidence in the dollar and the US. It may only reflect the widespread dismay with the Bush administration, but it is obvious that the next administration, of either party, will have a steep uphill struggle." As well as reaching its lowest level against the euro, which has been trading at more than $1.47, the dollar has also fallen to its lowest level against the Canadian dollar since 1950, sterling since 1981, and the Swiss franc since 1995.
Its plight was made still worse by a jarring signal from China that it was switching to other currencies. Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress, told a conference in Beijing: "We will favour stronger currencies over weaker ones, and will readjust accordingly."
TPJ refers to China as America’s “Banker.” With the Federal Government running historically high deficits and balance of trade deficits, China has been buying US Government securities to finance our mounting debt. If Cheng Siwei’s statement means that China will actually reduce the US Government securities it buys; the “Banker” is signaling that it is cutting off the loans that America must have to sustain its economy. If the Chinese greatly reduce or stop buying US Government securities, interest rates in the United States will rise, inflicting yet another blow to the US economy.
China’s unwillingness to continue financing America’s debts is sufficient cause for concern, but it is not the worst case senario. Clyde Prestoqitz, Reagan’s senior trade negotiator and currently with the Economic Strategy Institute, notes the danger if China starts actively selling its huge hoard of US Dollars:
[If] the Bank of China sells a few --just a very few to get our attention -- US Treasury securities [US] [m]oney markets would reel.
Would the Chinese play such a risky game? They have their own interests, geopolitical as well as economic. They are certainly not an American pawn, less so with every passing year. Miscalculations have happened in world economic relations before, and with calamitous results.
Simply stated, Republican economic policy has needlessly placed America’s economy in jeopardy. Republican economic policy has given China real power to undermine the US economy. Republican market economic philosophy holds that China would never negatively exercise that power because to do so would damage China as well as the US. It is a calculation that if wrong will send America into economic hardship since the Great Depression.
Republican philosophy fails to appreciate which nation is now better able to sustain the blows should Republican have miscalculated China’s intent to continuing funding a large share of or national debt.
Republican economic policy has put America at risk, both domestically and internationally. It is time that Democrats start addressing the issue.
$16,500 REASONS
What does the billions of dollars (emphasis added) spent for Bush’s occupation of Iraq really mean for Americans?
The economic costs of the wars in Iraq and Afghanistan are estimated to total $1.6 trillion roughly double the amount the White House has requested thus far, according to a new report by Democrats on Congress' Joint Economic Committee.
The report, released Tuesday, attempted to put a price tag on the two conflicts, including "hidden" costs such as interest payments on the money borrowed to pay for the wars, lost investment, the expense of long-term health care for injured veterans and the cost of oil market disruptions.
The $1.6 trillion figure, for the period from 2002 to 2008, translates into a cost of $20,900 for a family of four, the report said. The Bush administration has requested $804 billion for the Iraq and Afghanistan wars combined, the report stated.
For the Iraq war only, total economic costs were estimated at $1.3 trillion for the period from 2002 to 2008. That would cost a family of four $16,500, the report said.
Future economic costs would be even greater. The report estimated that both wars would cost $3.5 trillion between 2003 and 2017. Under that scenario, it would cost a family of four $46,400, the report said.
In most states, $16,500 is a substantial share of the cost of an undergraduate degree from a public university.
Last Update: 11/25/2007
