- Gold traders love Dick Cheney. Every time he opens his
twisted lip and barks out another threat to Iran, the dollar takes a powder
and gold futures shoot to the moon. Maybe that's the way Cheney likes it.
After all, he dumped about $25 million in euro-bonds before he took office.
Judging by the way he and brother-Bush have flogged dollar, he must have
doubled his investment by now.
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- The old greenback has dropped nearly 35% in the last
6 years while gold has just about tripled. In 2000 the dollar was a trim,
sinewy pillar of strength. It entered the ring like a young Mohammed Ali;
darting to and fro while pummeling his prey with quick laser-like blows
that were barely visible. Now, the greenback plods along like a 60 year
old Rocky Balboa, wheezing heavily and reeling with every punch; waiting
for the one roundhouse that will leave him staring up from the canvas,
spitting up broken teeth and blood.
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- The dollar's in a heap o' trouble and "Doomsday"
Dick is doing his level-best to make sure that it hits the skids before
he leaves office. Just yesterday the snappish Vice President said, "It
would be a serious mistake if a nation like Iran were to become a nuclear
power. Then he added ominously, "All options are still on the table."
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- That comment put the dollar on its backside and sent
Tokyo gold futures to a 21 year high.
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- Good work, Dick.
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- At present, the rest of the world is wondering if dollar's
going to pull through without a nervous breakdown. Central banks in Europe,
Japan, and China have increased their money supply and kept rates low in
order to prop up the droopy greenback. But that won't last. Eventually,
they'll all have to raise rates to slow inflation and stop equity bubbles
from getting out of control. (The Chinese stock market rose by a whopping
140% in one year. They probably don't like the prospect of a Dot.com-type
meltdown like we had in the US.) Regrettably, once interest rates start
to rise, the dollar will quickly slip from view leaving nothing but a trail
of vapor behind.
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- It's astonishing how cavalier Cheney and the gaggle of
racketeers at the Federal Reserve have been regarding the dollar. After
all, why kill the goose that lays the golden egg?
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- As the world's "reserve currency" the fed can
simply print out a couple trillion whenever it comes up short and bring
back boatloads of sleek, Chinese manufactured goods or tankers weighed
down with petroleum to power our boxcar-sized SUVs. Or, maybe, Bernanke
would rather crank-out another $12 billion in crisp $100 bills, shrink-wrapped
and loaded onto pallets and sent off to Iraq where they can vanish in the
black hole of corporate malfeasance.
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- That's not a problem as long as the world keeps accepting
our "overdrawn" checks.
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- But what happens when the rest of the world sees that
the "stewards of the global economic system" (that's us) are
nothing but a bunch of Texas yahoos, religious zealots, and war-mongering
boneheads?
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- See, the funny thing about money is that it requires
confidence in the provider that he will honor his part of the deal and
operate in good faith. Otherwise, no one would dream of exchanging valuable
resources and manufactured goods for silly, green tokens of credit-based
fiat money with squiggly writing and funny looking men in powdered wigs
on it.
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- We all expect money to have value, and yet, the Bush
team continues to sabotage the currency with their unfunded tax cuts, their
$9 per month war in Iraq, and their 35% expansion of the federal government.
(Remember when Clinton said the "era of big government is over"?)
The result of this craziness was thoroughly predictable; central banks
are running for the exits.
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- Last Firday, the government reported that net capital
inflows reversed from the requisite $70 billion to AN OUTFLOW OF $11 BILLION!
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- The current account deficit (which includes the trade
deficit) is running at roughly $800 billion per year, which means that
the US must attract about $70 billion per month of foreign investment (US
Treasuries or securities) to compensate for America's extravagant spending.
When foreign investment stumbles, as it did in December, it puts downward
pressure on the dollar.
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- So what does it all mean?
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- It means they don't want our stinking greenbacks. And,
if they don't resume purchasing our debt (US Treasuries or securities)
the dollar will join Rocky Balboa on the canvas peering out blankly at
the klieg lights.
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- Just last week, the Royal Bank of Scotland conducted
a survey which showed that Central Banks in Italy, Switzerland and Sweden
have made "major adjustments" in their stockpiles of dollars.
The cutbacks raise the fear that a stampede away from the dollar could
begin at any time, triggering a global currency crisis of biblical proportions.
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- "The full faith and credit" of the US Dollar
does not mean what it did 6 years ago. That's a fact.
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- The Bush-Cheney-Federal Reserve axis believe they can
keep this ponzi-scheme going by cornering the oil market (attacking Iran)
and forcing the petroleum-thirsty world to accept our feeble banknotes.
But that's just nuts. The Chinese are already killing us by buying up oil
and natural gas leasing rights around the world WITH OUR OWN DOLLARS!
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- We're getting beat with our own stick.
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- It wasn't supposed to work that way. We thought we were
being clever by destroying the American labor movement and shipping our
industry to China. We figured we could trounce the middle class at home
while putting the "fear o' god" in the Chinese with our "shock
and awe" military that was supposed to be out of Iraq in 3 years at
the most.
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- How's that working out?
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- Now the housing-bubble albatross is dragging down millions
of home owners while the maxed out American consumer is down to his last
credit card. In other words, the $11 trillion of new debt that was cleverly
engineered through Greenspan's low interest rate bonanza is about to detonate
and bring the whole, wretched tower of American debt crashing to earth.
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- The whole mess could have been avoided with responsible
leadership. If Bush's wasteful tax cuts had gone to the middle class they
would have stimulated positive growth in the economy and reduced the widening
wealth gap. If Greenspan had raised interest rates in 2001 it would have
slowed down new home construction and circumvented the housing bubble.
If Bush had negotiated with Saddam, he could have secured oil-leasing rights
(which Saddam offered in the weeks before March 2003) without dragging
the country to war.
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- Instead, the economy is facing disaster; the dollar is
shaky, gold is soaring, personal savings rates are shrinking, margin debt
is skyrocketing, foreign investment is drying up, home sales are plummeting,
and Dick "Last throes" Cheney wants to expand the war to Iran.
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- All we're missing is a "plague of frogs."
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- Cheney is still convinced he can pull off his whacko
scheme to control Middle East oil and, thus, force the world to take worthless
sheets of green scrip that're backed up by $8.7 trillion of debt and wouldn't
even make good bird-cage liner.
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- It's madness.
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