Opinion Forum

The Beating Continues…

October 18th, 2009

We have an ugly little saying in nursing and medicine when a patient isn’t long for the world: we say that they “are swirling the drain.” Alternatively, they “have one foot in the grave and the other on a banana peel.” Whichever metaphor you prefer, that’s where the dollar is headed.

For the first time ever (well, in modern history, anyway), the dollar isn’t the top dog for reserve currencies any more. Central banks world-wide have begun buying Euros and the Yen in preference to the dollar. US dollars stand at about 62% of the currency reserves in central banks, its lowest share of the world bank market in history.

I warned several months ago about the Chinese being less interested in our money than they have been. Now, the rest of the world is following suit. As the dollar continues to weaken, watch as a world that depends on a strong dollar to be able to buy their cheap products starts to tremble and shake. They’ve been loaning us money, essentially to buy their stuff. We’ve been paying them back with money that has lost 10% of its value in the last 3 months alone. They’re not happy.

Interest rates are phenomenally low, which means money is cheap to borrow. The Federal Reserve is apparently running the printing presses at Warp Factor 9 to keep up with the demand, compounding the problem (well, really, that has been the problem all along).

“They” have two choices: raise interest rates (which will crush stocks and put the coup de grace on housing); or continue printing money like there’s no tomorrow (and we know where that road goes as well).

Every time I watch the news, I feel like I’m in the Emerald City: “Pay no attention to the man behind the curtain.” The lies about “the recovery” continue unabated. Joseph Goebbels said that if you repeat a lie often enough, people will come to believe it, especially if it is a big enough lie. That only works as long as the emperor actually is wearing clothes.

Articles written by Brian Bagent
Tags: China, currency, Federal Reserve, US dollar
Categories: Economics, News, Politics | Comments (6) | Home

6 Responses to “The Beating Continues…”

Harvey | October 18th, 2009 at 8:46 am

It seems to me that either 2010 completely turns the tables on our Liberal lawmakers or . . . or perhaps someone should get the impeachment process going!

I’m not a legal expert but it seems that much of what Obama is doing is unconstitutional and malicious and one way or another we need a ‘different breed’ of president in the white house.

Brianna | October 18th, 2009 at 11:16 am

Incidentally, the existence of a central bank is point 5 in the communist manifesto. Raise your hand if you think the communists did a good job with the countries they took over. Do you really think we should be taking economic tips from them?

Tom | October 18th, 2009 at 7:51 pm

We — all of us — need to grow up and face some facts. If we’re going to have all the things the government wants to spend money on, then we’re going to have to pay for it. That means higher taxes; given what we’re trying to do right now, that means much higher taxes. If we don’t want to pay the bills, then we must learn how to live within our means, or somewhere near that level.

I understand enough Keynesian economics to accept the need for deficits under some conditions and the need to stimulate weak economies, but this level of debt and wild spending is just insane. Increasing taxes right now may not make good economic sense, but we have to strike some balance between spending and income.

Brian Bagent | October 19th, 2009 at 2:21 am

Harvey, it isn’t just Obama, though he does make himself an easy target. There simply is no constitutional provision for “welfare” as we have come to know it. If anyone would know, it would be James Madison, quoted as follows: “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”

We’ve had decades of presidents and congresses who believed it their constitutional right, and apparently their constitutional duty, to spend money that way.

I feel like a broken record in saying so, but if not for the existence of the fiat currency that we have, they wouldn’t be able to do it. Were we still on a precious metal standard – as mandated by Article I Sec 8 “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures“, this sort of idiocy could not exist. One may be inclined to ask why the phrase “fix the standard of weights and measures” would be included within this clause. To the common and current understanding of money, it doesn’t make any sense at all.

But to our founders, it made perfect sense because the $10 eagle was defined as 270 grains (Troy) of gold, and the $1 coin was established as 416 grains (Troy) of fine silver. There is a finite quantity of gold and silver, meaning that the supply of currency can be expanded no more rapidly than new sources of gold and silver could be discovered.

Even within a fractional reserve system at something like 10:1, underpinned by gold and silver, there would be no way for the federal government to spend money the way it does without letting the cat out of the bag about the state of currency.

Here’s what I predict is going to happen. Nobody is going to loan us money, or at least not in the amounts that the federal government requires to keep doing what it is doing. So, the Federal Reserve is going to keep printing money like there is no tomorrow. Look for a significant tax increase, probably within the next two years, in order for the government to mask the inflation that we are going to be experiencing. They’ll use that inflated money (if they’re smart about it, which I doubt) to pay down some of the debt. The Asians (primarily China) are going to be apoplectic

For those that do not understand money and inflation, the blame will sit right on the shoulders of Obama and the rest of the Fabians and Marxists running the show. Those people will be half right. But, the GOP will go along with it, if for no other reason than to attempt to keep the federal government solvent. Remember, we had record federal growth under the supposedly conservative George Bush.

For those that do not know, the Federal Reserve is most ricky-tick not a part of the federal government. It is a private bank whose charter was approved by the federal government in 1913, not coincidentally the same year the 16th amendment (income tax) was ratified. If my memory serves, and it usually does, the federal government pays the Federal Reserve 6 cents for every dollar that is printed.

Brianna | October 19th, 2009 at 10:41 am

Brian – unfortunately, our schools do not really teach us much about money at all. Because they cover WWII and the Weimar Republic, they’ll usually hear a bit about how printing money == bad, but that’s usually it. The gold standard, the federal reserve, bretton-woods and how it was illegal to own gold (with some exceptions for numismatic coins) from the 1930’s to the 1970’s? Not a word. Ron Paul has been quoted as saying that he has had Congressmen come up to him after sessions and asking him, “You mean the dollar isn’t backed by gold?” If Congress is that ignorant, if the people are that ignorant, how are we supposed to change things when everybody is busy blaming “the predatory robber-barons of the free-market, who just don’t care what their policies will do to the environment and the middle-class”?

Brian Bagent | October 19th, 2009 at 3:28 pm

No, they don’t teach it at all. As an interesting side-note, most people are under the impression that the banking collapse in 1929 was either the fault of the free market or was just “one of those things,” neither of which is true. The Federal Reserve removed 25% of all cash from circulation, forcing banks into a position of not being able to have enough reserve on hand.

Prior to FDR, you could walk into ANY bank with a red-bordered gold certificate or a blue-bordered silver certificate (they said “United States Treasury” at the top) and demand a redemption that was the equivalent in gold or silver money.

I may have posted this link before, and if so, I apologize for the repetition, but there is a former IRS CID agent named Joseph Bannister that has a very informative web site (http://www.freedomabovefortune.com/) which explains much of this.

If you’ve never been there, it’s worth the hours of information he has compiled, especially his own story about how and why he ended up resigning his position at the IRS.