Maybe you're like me and you don't know a whole lot about economics. Lately, I'm trying to remedy that a bit. Here's a very readable article on the subject. Get ready brothers and sisters (okay, I'm stepping out of the way back machine now).
http://onlinejournal.com/artman/publish/article_1948.shtmlThe American people are in La-la land. If they had any idea of what the Federal Reserve was up to, they’d be out on the streets waving fists and pitchforks. Instead, they go about our business like nothing is wrong.
Are we really that stupid?
What is it that people don’t understand about the trade deficit? It’s not rocket science. The Current Account Deficit is over $800 billion a year. That means that we are spending more than we are making and savaging the dollar in the process. Presently, we need more than $2 billion of foreign investment per day just to keep the wheels from coming off the cart.
Everyone agrees that the current trade imbalances are unsustainable and will probably trigger major economic disruptions that will thrust us towards a global recession. Still, Washington and the Fed stubbornly resist any change in policy that might reduce overconsumption or reverse present trends.
It’s madness.
The investor class loves big deficits because they provide cheap credit for Bush’s lavish tax cuts and war. The recycling of dollars into US Treasuries and dollar-based securities is a neat way of covering government expenses and propping up the stock market with foreign cash. It’s a “win-win” situation for political elites and Wall Street. For the rest of us, it’s a dead-loss.
The trade deficit puts downward pressure on the dollar and acts as a hidden tax. In fact, that’s what it is -- a tax! Every day the deficit grows, more money is stolen from the retirements and life savings of working class Americans. It’s an inflation bombshell obscured by the bland rhetoric of “free markets” and deregulation.
Consider this: In 2002 the euro was $.87 on the dollar. Last Friday (4-6-07) it closed at $1.34 -- a better than 50 percent gain for the euro in just four years. The same is true of gold. In April 2000, gold was selling for $279 per ounce. Last Friday, at the close of the market it skyrocketed to $679.50 -- more than double the April 2000 price.
Gold isn’t going up; it’s simply a meter on the waning value of the dollar. The reality is that the dollar is tanking big-time, and the main culprit is the widening trade deficit.
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