The Current Issue of the Depreciating Dollar

When the energy revolution comes, where would we be with a strong dollar? All of the experts on CNBC are always telling us how good the weak dollar is for exports. That weak dollar, which most everyone is hoping will strengthen, will continue to disappoint. There is a lot of talk about a strong-dollar policy, but no real actions are being taken to achieve that end. The interesting thing to note here is that there really are no actions that can be taken to strengthen the dollar. The policy makers are boxed in, as noted by many who discourse on the subject.

There is a similar boxing-in that has occurred in the national real estate market. Month after month we hear of new government bailout plans and projections of a "floor under housing." All the while, the housing-sector collapse accelerates. The best thing to do now is to look objectively at what is actually transpiring, rather than fixating on what government officials and experts claim is going to happen. They will continue to talk of the bottom of the housing market and the reversal in the dollar while both continue to get crushed. In 2012 when the median house in the US costs $60,000 and the average hourly wage is $7.00 we'll all be joyfully building wind turbines and solar arrays for what feels like minimum wage but buys us a nice little house with a picket fence, a dog and a cat, writes American John McIntyre

Dollar Doomsayers

"It's hard to stimulate an economy when the currency is going down the tubes,'' said David Malpass, the chief economist at Bear Stearns & Co. The New York-based firm expects the dollar will fall to $1.60 per euro in 12 months.

The U.S. economy may expand 1.4 percent this year, according to the median estimate of 82 economists surveyed by Bloomberg News this month. The median in March was for growth of 1.7 percent. As recently as September the Fed's target rate was 5.25 percent.

[... Yeah, right]

Relief may be in sight. The International Monetary Fund in Washington said last month that oil prices may be peaking as growth slows. The median forecast of 34 analysts surveyed by Bloomberg is for the dollar to gain about 11 percent against the euro this year and 4 percent versus the yen as the Fed's rate cuts spark the economy in the second half of 2008.

"If the U.S. dollar turns higher or if the crude oil market reverses then we have a spiral working the other way,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. The price of crude oil will [be] at $70 by September, Evans said.

Source: Bloomberg

The Big Endgame Element

The following letter to the editor from Dr. Paul ran in today's [Feb. 29, 2008] Wall Street Journal:

"I was delighted to read in Judy Shelton's op-ed, "Security and the Falling Dollar" (Feb. 15), that at long last the security implications of the dollar's collapse have made their way into the mainstream media. The dollar's strength (or lack thereof) has been of paramount concern to me, and the subject of many of my statements over the past several years. Decades of manipulation by the Federal Reserve have benefited the government and certain politically-connected firms, while gradually destroying the purchasing power of middle-class Americans. Despite numerous warnings in the past, it is only now at a point of acute crisis that Washington insiders are beginning to awaken to the reality of the end of dollar hegemony.

"While I desire reform of our current monetary system, my own proposals have not been as all-encompassing as Ms. Shelton's suggestion to return to a Bretton Woods-style system. Her recommendation, though, that gold backing should make up a component of a future monetary system, is one that we would all do well to heed. My own legislative proposals focus around eliminating the taxes and laws that dissuade individuals and institutions from using gold as currency or as a backing for currency. By allowing market processes to determine the issuance of currency, we can allow individuals to decide for themselves what currency they wish to use. This would lead to a gradual reintroduction of sound money and avoid the market shocks that occur when monetary decisions are mandated by government fiat."

Rep. Ron Paul (R., Texas)
Washington

Source: RonPaul2008

Got Lopedos?

Forget Canada-U.S. currency exchange rates. We have this other perpetually irksome currency problem that requires attention - whether our dollar is below par, at par or above par. Regardless of the relative worth of the dollar, we lose plus-or-minus 4 cents off the top every time we convert one of them into U.S. funds. [...] Monetary unions have proven that every little country doesn't need its own currency - and, indeed, that many of these countries perform better when they join a neighbourhood currency. Canada, of course, isn't every little country.

We're a full member of the G8, the club that produces two-thirds of global GDP. We're definitely not El Salvador. But, really, so what? Three big-league countries of the G8 (Germany, France and Italy) are themselves euro countries. And Canada's extensive economic integration with the U.S. makes the need for some kind of bi-national currency obvious - and some form of interchangeable currency almost inevitable.

But dollarization, the option of last resort, would be intolerably embarrassing. Monetary union would be politically difficult - for the U.S. as much as for Canada. The hypothetical "amero," so detested by conspiracy theorists on both sides of the border, tilts linguistically to Mexico, which doesn't help; one reader of this column suggests "lopedos" (for loonie, peso and dollar) - but this formulation sounds too much like "Laredo," which celebrates either the oldest border crossing between the U.S. and Mexico or a popular brand of Jeep.

Source: ReportOnBusiness.com