When The Dollar Tanks
With dire warnings comes David Stockman's analysis of the future for the US economy. A future so bleak it continues to scare the bee-gees out of all of us who have read his latest article. To the rescue we have Paul Krugman whose own analysis paints a somewhat rosier picture of the economy. Needless to say Stockman's point is very well taken. Our debt crisis, and it is a very real crisis is not getting any better. In fact with-out concrete changes over the next decade our gross federal debt will climb by more than 14 trillion dollars.
We have to go all the way back to the 1930's to really find the true source and the beginning to today's financial Armageddon. FDR's biggest mistake was opting for flat currency. That is currency not backed by gold. The economic nationalization from the 30's and for the next 35 years contributed to winning the war and created the largest economic boom in US history was not the net result of flat money policy but more of a united effort to win World War II. By 1971 when President Nixon ended the convertibility of gold to the dollar was another nail in the coffin of fiscal irresponsibility and essentially defaulted on the nations debt obligations.
What we have seen over the last 40 years is a government in collusion with the Federal Reserve time and time again inject tons of freshly printed money to shore up major corporations and more recently our largest banks whose own recklessness caused financial bubbles that continue to burst. The quantitative easing has set the tone that the Grim Reaper of fiscal calamity is poised to swoop down across America and literally wipe out practically everyone's bank accounts.
To add salt to our almost mortally wounded economy from 2000-2007 the regulatory measures of the Glass-Steagalle Act quietly and quickly disintegrated. This act was put in place during the Great Depression. Now completely gutted this opened up the financial and housing bubbles that burst in 2008. What happened then Washington and the Fed in what had to be called panic-stricken hurriedness ushered in a series of bail-outs using more freshly printed money. All this did was push the United States right to the brink of financial ruin contrary to what everyone thought was done.
It should be noted that less than 4% of the President's 800 billion stimulus went to the truly needy, the 99%. Money for food stamps, earned income credits and all the other forms of poverty relief that should have been delivered never really occurred. We also have to remember that in 1993 when NAFTA took effect it was just like a huge vacuum sucking millions and millions of middle class wage income jobs right out of the United States. Jobs that probably never will come back. To top it off who ever is left working and most of the current job openings have seen their wages shrink drastically when compared with the inflationary trends from consumables to every other product and service today.
The Republican response to all of this has always been like Robin Hood in reverse. Gut programs and that safety net for the poor to shore up our nations debt. They continue to really missing the boat. What they are continuing to do is further exasperating our economic crisis and not ushering in alternatives that will defuse the ticking time bomb of our fiscal calamity. With the eradication of millions of middle class wage earning jobs since 1994 is a key factor in our current fiscal crisis. Even before NAFTA, there were so many jobs pushed over seas. But, the real flood gates opened up with our free trade agreements. All they have done is make it easier for corporations to reap more profits at the expense of American jobs. So today with our budget cutting wizards of state have only continued to ignore or are just plain oblivious to the real solutions that could pull this country back away from the brink of financial ruin.
So far the United States has been lucky in one respect. The most fortunate aspect is that the dollar is still the world's first currency. With all that qualitative easing with new money is probably a large factor that the US hasn't crashed because the rest of the world still uses the dollar as the premier currency for international markets. Will the dollar remain as the world's first currency? That remains to be seen. Odds are now being stacked against the all mighty dollar. The Chinese Yen is fast becoming the currency of choice among the Far Eastern nations. What we have seen today is that China and Japan formed a currency pact. This currency pact took effect this last December which could only mean that the US dollar is loosing ground. When the dollar tanks and it is most likely it will be replaced as the worlds currency. This could very well push the United States into dangerous uncharted waters.
Now comes the task of how to avoid a crisis that will occur if changes to not only our fiscal policies but a total reform of our government are not implemented. A crisis greater than the Great Depression. In Stockman's article he states that solutions would be so radical that they won't occur. There is a way but not as radical. Sure, there has to be some constitutional changes and amendments. But, they are necessary if we as a nation want to avoid another Great Depression. The time is now to educate all of us that the need is quite apparent that only through total National Economic Reform using it's Ten Articles of Confederation will enact the changes needed to shore up our fiscal policies and restore this nation