Monday, May 23, 2011

A Strong Dollar Isn’t Always A Good Thing? WTF?

I have been critical of former White House economic advisor, Christina Romer, before.  Frankly, I believe people who think like she does have been and continue to lead our society into the ditch.  The proof is self-evident.   

This article is so wrong and so short on facts on so many levels.   It’s basically nothing other than eloquently- written babble.  The mainstream media is the talking head for the status quo.  This is an editorial that is not based on reason or fact. 

Romer’s very limited grasp of the dollar shows a clear lack of understanding of the speculative world we live in.  We have remarked about the endless speculation in foreign exchange markets and that turnover in these markets in a single day is often almost as much as global trade in an entire year.  Some people would argue much of this is hedging by corporations.  I would argue that speculation creates an artificial demand for hedging.  Exhibits of this include Enron, Goldman Sachs, Merrill Lynch, JP Morgan and other Wall Street firms. 

Romer is very short on facts on every account she cites including this ridiculous paragraph. 

“Suppose American entrepreneurs create many products that foreigners want to buy, and start many companies they want to invest in. That will increase the demand for dollars and so cause the dollar’s price to rise. Such innovation will also make Americans want to buy more goods and assets in the United States — and fewer abroad. The supply of dollars to the foreign exchange market will fall, further strengthening the dollar. This example describes very well the conditions of the late 1990s — when the dollar was indeed strong.”

This is so far from reality it’s pure delusion.  The dollar was strong in the late 1990s for two primary reasons.  And the first fueled the second.  And by the way, you won’t read this in the mainstream media or in any economics book because both are sources of ridiculous ivory tower theories of baloney rather than what is happening in the real world. 

In the mid 1990s the Japanese financial system was again teetering on the brink after the initial collapse of its stock market and economic bubble.  The U.S. Federal Reserve worked in concert with the Bank of Japan to engineer a method of recapitalizing Japanese banks by investing in a carry trade.  That is, Japanese banks could borrow at zero percent from the bank of Japan and invest in dollars that were paying 6%(ish).    That fueled a massive surge in the demand for dollars, thus pushing the dollar higher for no fundamental economic reason and allowed Japanese banks to recapitalize themselves.  That in turn helped recapitalize America’s financial system which was still reeling from the massive fraud of the late 1980’s financial collapse in the U.S.   This in turn led to a massive speculative binge by financial institutions in the U.S. that we now call the bubble.   That’s when politicians and society started viewing Wall Street as a source of brilliance and of new career opportunities.  In reality it was simply nothing more than massive unregulated fraud.  Wall Street printed massive profits while bringing companies public that didn’t even have a business plan let alone any income stream.  But, hey, they made billions on the fees of selling this bullshit to your pensions and retirement accounts.  Bullshit that eventually collapsed.   And when the stock market boom turned into a full mania, unregulated global capital poured into the speculative U.S. financial markets, thus driving demand for dollars even higher and the value of the dollar along with it.   Here is the real reason the dollar was strong in the late 1990s; the dollar was going up under Clinton because of massive and systemic fraud. 

There was no economic boom in the late 1990s as Romer remarks.  That is complete and utter bullshit.  And unlike theory and opinion, the facts clearly support this reality.   We have remarked on here numerous times that the U.S. economy was collapsing under Clinton.   That the U.S. almost balanced its budget under Clinton was because of massive tax receipts that were a result of fraud and speculation not capital formation.    If the U.S. economy was booming under Clinton, why was oil at $10 a barrel and gold at $250 an ounce in 1998?  Both points we have highlighted on here that the 1990s were signaling a coming collapse of the U.S. economy.  I’ll tell you why.  Because there was zero economic demand for oil and gold was at $250 an ounce because the real economy was collapsing.  The Federal Reserve did not cause our economic collapse.  Washington politicians did.  The Federal Reserve is just the enabler that allowed fraud and corruption to go unnoticed by printing more and more money to cover it up; something else that is a very contrarian view we have remarked of on here many times.

It’s more neoliberal bullshit to remark that a strong dollar is not always preferable.  This is more of this neoliberal race to the bottom of the barrel.   Every country wishes to weaken its currency for comparative advantage.   People who believe in this bullshit; something that has never, ever, ever worked in the history of human kind, are complete idiots.  If a weak dollar is preferable, then why is not a dollar worth almost nothing even more preferable?  Why not just make the dollar completely worthless and peg it at zero?  Who decides what a dollar is worth?  Romer?  Geithner?  Bernanke?  Ridiculous. 

In the real world, where most of us live, a strong dollar is always preferable.   Always.  Because a strong dollar means as an American, I have purchasing power to feed and clothe my family, put shelter over my head and send my kids to school.  And when it isn’t strong, it’s usually because of fraud.   And that is exactly why the dollar has been going down for the last ten years. 

You can run but you can’t hide from the truth.  And as this fraud we call globalization collapses, at some point the dollar is going to push higher as we have remarked repeatedly.   As we said it would in the 2008 collapse, and as it surely did.  Like a rocket.  And it could do so very violently in the future as well thus dashing the scheme for neoliberals that the dollar should go lower to gain comparative advantage in the scam called globalization.  

We need to quit listening to the status quo as it pertains to finance and the economy.  They are completely clueless.  And we know that because there are 45 million Americans on food stamps and countless tens of millions of additional Americans scraping the bottom of the economic barrel.

posted by TimingLogic at 11:05 AM