Monday, December 21, 2009

Why a Strong US Dollar Foreshadows Economic Doom in 2010

Normally, in what passes for orthodox economics, a strong currency for a consumer nation is a good thing, a positive development. And America is the biggest consumer, and one of the smallest producers, in human history.

However, in these turbulent times, this economic train wreck that has been on an acceleration course since mid 2007, a strong currency or rather, specifically, a strong dollar is an absolute disaster. Allow me to explain.

Nothing has actually changed in the US economy since the absolute collapse and nationalization of the US banking firms, and along with it the British banking houses, of 2008. Indeed, in America, the exact same games that brought down the private banks are still being played by the now government owned (or is it that they own the government...that is for another thesis) entities and this is called now called recovery. Case in point: several major banks are paying back their TARP funds and the US press is screaming to the high heavens about the wisdom of the Marxists running America. True, many of the fools that are still the majority, though shrinking, of the electarite, buy into this, but let us look closer. The TARP fund is being paid back in one of two ways: 1. unspent TARP monies are being given back to the government (note I do not say owners, since the taxserfs will never ever see this cash again) and this is called recovery or 2. the banks are selling new stock through new IPOs to pay back the debt, which in turn delutes the value of the old stock which is held by the government, thus giving with one hand and mugging with the other, again, this is called recovery. None of the other US economic indicators have improved, especially when DC's fluff and out right lies are removed.

Now having established the continued progression of the US financial collapse, why than has the USD grown in strength so much in the past 2 weeks and continues to do so? For that we must look a the world wide picture and to the foundation of the next tidalwave that is about to sink us all.

The great Anglo Heist, the out right con job and mugging of the entire world by the Anglo Saxons (US/UK) has kicked out the supports of a lot of other nations, many of whom were dancing on supports of smaller EU and Gulf Arab con jobs. These have spent all of 2009 trying to balance themselves on a single stilt that itself is rotten through and through and again, the Western press has called this recovery or at least survival.

That all is about to change and the first dropping shoe, in what is about to be a shoe storm, was Dubhai. Simply, it defaulted on most of its debt and told its debt owners that it was their fault, which it was also, for giving it money and not its fault, is the heroine junky ever at fault for his addiction -- well yes, for spending it on failed indoor winter wonder lands, artificial islands and hundreds of near empty sky scrappers.

Following this came the news of Greece's down grading and eminent demise. Greece is part of the PIGS (Portugal, Ireland, Greece, Spain) all of whom are on the edge. But in Europe, they are not alone, they are in a club that also includes Ukraine, Belarus, Lithuania, Latvia, Estonia, Hungary, Iceland and possibly Denmark, Poland is also well on its way with massive government deficits for a "recovery". Healthy or recovering EU economies are faced with massive losses and bailing out nations who, like drowning men, will pull the healthier economies into the Abyss with them.

Behind these stand other nations, such as Georgia, Turkey, Venezuala, Mexico, Columbia, Nicaragua, Argentina, as well as much of Africa.

Than there is China, who has taken bubble blowing to unprecidented levels. It has masked over capacity by doing something incredibly stupid, increasing that capacity further and further, and using the extra capacity in the creation of yet more capacity. Sure, this puts off judgement day by a few years, but it is coming and 2010 will be that day. World demand has not only not returned to the levels of 2007, and Chinese production capacity is well above what it was in 2007, but what demand has remained, is now being guarded by every economy to make sure its means of satisfying that demand, and thus providing jobs, stays at home. China, reacting like a blind sided, and spoiled brat who is used to everyone pandering to it, has swung out at the world and wound up in trade wars with the EU, US and Russia. Of course, this only further cuts demand for that ever expanding capacity. Judgement day is indeed here, as the majority of China's citizens, who make up the shoeless peasants and the near slave labourers in the plants, will never be able to afford what they produce.

So, with all this happening, nations are running to buy the USD in a false hope of its stability. This in turn strengthens the USD, killing further any recovering local industries, while giving government the means to further indebt the whole of the nation. With moves like their new socialist health care and Cap and Trade, the Americans will smother their own industry, creating millions more unemployed and raising anger to a boil, all ahead of the November 2010 parlimentary elections. The temptation to spend with abandon, to ease the anger, at least until the elections are over, will be impossible to resist.

The hangover that will be felt, first by the Americans, than by anyone who owns their debt, pretty much everyone, on January 2011, will make every other year of the past 1,000 seem like a warm spring day.

10 comments:

Matthew Saroff said...

You are conflating a strong currency with an overvalued currency.

The value of a currency is generally a result of the value that a country produces.

Because of the desire of many nations to hold their reserves in a "strong currency", which means dollar, (to a lesser extent) Euro, or (to an even smaller extent) the Pound Sterling, these currencies have greater demand for their currency that what they produce or extract in goods, services, or raw materials.

The overvalued dollar actually hurts the US, it cripples exports, and encourages imports, but it's great for the bankers, because it makes dollar denominated investments more attractive.

Additionally, most settlement of international commerce in the world is done in dollars, oil being dollar denominated is a classic example, which further inflates the value of the currency.

The fact that US Treasury Secretary Timothy "The Bankers' Bitch" Geithner supports a strong (overvalued) dollar is therefore no surprise.

petkov said...

Here we go MORE bullshit and lies. a and more lies toward comminism. You are deliberrtly confuding terms and people equating crony capitalists with communists. Nothing can be further from the truth. I am sick of your bullshit man. Stop with the lies. Come one I open a challenge to you AGAIN to define with capitalism and communism is and which economic system works and which does.

When will you respond to my challenges? How many times will I define simple basic things for you?

Communism helps as many people as possible. Crony capitalism only helps the smallest number of people possible; only the people inside the circle.

You are STILL full of shit.

You analysis is full of shit too. The world has been operating on fiat currency and creating credit for hundreds of years. It will continue to do so, nothing can stop that cycle. It's been one bubble after another since the 17 century. Look at history. The great tulip mania for example. it happened in 1637. Capitalism has always relied on bubbles such as these.

Carbon credits will be the next bubble.

Cobra said...

Naaah. No revolt.
The Americans are (still) fat and lazy to take it to the streets.
But who knows?
ObaMAO and his demsheviks really angered the country.

Stanislav said...

@petkov,

First, you are the sorry liar. I did not say communist, which would be the Stalinist version of Marxism, but Marxist, of which there are many branches, to include Leninist-Trotskyte Nazism/Fascism, Moaism as well as Stalinist Bolshevism/Communism.

I have answered you in every one of your "challenges" after which you ran away, only to pop up on some other thread and bestow upon us your lies and "challenges."

As to which system works, neither, as Capitalism is nothing more, in truth than the Leninist Fascism or Brown Marxism. We know capitalism by what it is not: it is not a free market, it is not entrepreneurial, it is not a level playing field, it is not nationalistic or mercantalistic and Mercantalism is the only system that really works to protect and nurish the individual nation state.

Communism? Where has it worked? Soviet Union? East Europe? Albania? N.Korea? Vietnam? China? Where? Nowhere, you and your Stalinism are basket cases of history's ashtrays which like a bad nicotine addiction keep coming back in the form of one cancer or another.

Stanislav said...

@petkov

--The world has been operating on fiat currency and creating credit for hundreds of years. --

If you actually believe this than you are an absolute know nothing. The world went off of the gold standard in 1973 at Brenton Woods. Get a clue before openning your mouth.

The first nation to go to actual fiat currency was Mongol controlled China and when Marco Polo visited he noted how nothing held value, inflation was incredible and by the time he returned, the previous Khan and his economy were gone, wiped out by economic collapse.

Rusty Mason said...

Where does Goldman Sachs and the international banksters and social do-gooders fit into this financial fiasco?

If everyone goes broke at the same time, is it possible that the clock could simply be reset, id est, a Solon the Lawgiver forgiveness of debts, a world-wide Jubilee. Or is that not possible because a super-tiny group of people who helped create this mess are about to inherit 99% of the planet's wealth?

vonbach said...

Fiat currencies ALWAYS fail. When our country was started we were supposed to use gold to keep us out
of the jewish fiat usury game. What do you thing the revolutionary war was fought over?
@ Petakov all communism ever produced is corpses.
You want to help people get out of there way and let them help themselves. Without the government on their back like 40 pound tick people can manage just fine.

jack said...

@Stanislav

What do you make of this Stanislav a Village Voice article and others at the time debunking the myth of the Ukrainian engineered famine story in 1988 where the book and documentary Harvest of Despair was funded by Ukrainian nationalist groups linked to Nazi era linked emigrates abroad (who are members of the Orange junta), Nazi propaganda and archive pictures and footage from the 1920-21 famine.

“Harvest of Despair was the brainchild of Marco Carynnyk, a Ukrainian translator and poet who lives in Toronto. In 1983, Carynnyk found a sponsor in St. Vladimir's Institute, which formed a Ukrainian Famine Research Committee of well-to-do émigrés. The committee raised $200,000 for the documentary, including a major grant from the Ukrainian Canadian Committee (a spiritual descendant of the fascist Organization of Ukrainian Nationalists), and a loan from the similarly right-wing World Congress of Free Ukrainians.

As chief researcher for the film, Carynnyk had two major functions -- to locate and interview famine survivors, and to find archival photographs. Talking heads would not be enough to make a case for genocide. To gain its intended shock value, the film would have to show what the famine was like. "There can be no question," assessed the Winnipeg Free Press, "that without the films and photographs uncovered from the 1932-33 famine, the film would lose much of its authority."

"I gave them two sets of photographs," Carynnyk said. "I told them, `Here are the ones from the 1930s, and here are the ones from 1921-22.' But in the cutting of the film, they were all mixed up. I said this can't be done, that it will leave the film open to criticism... My complaints were ignored. They just didn't think it was important."

http://chss.montclair.edu/english/furr/vv.html

Fraud, Famine and Fascism: The Ukrainian Genocide Myth from Hitler to Harvard by Douglas Tottle Published 1987 in Canada

http://www.rationalrevolution.net/special/library/famine.htm

Cobra said...

The global financial market is like a vessel full of water.
By tilting the vessel, the water goes to one side or the other,
Since most of the water is fictitious, i.e. paper money, those who tilt the vessel, take it/make it flow from somewhere, and then, transform the water in tangible assets (REAL estate, gold, countries and industries....
Not all bankers are equal, some are more equal than others.
The Rothschilds, Rockefellers, Schiffs and a few others will be the real owners.
Was my analogy clear?

Matthew Saroff said...

The distinction between crony capitalism, and crony communism as it existed in the USSR is an artificial one.

They are both defined by the word "Crony" they are both corrupt, and they profess to serve the ordinary person while serving the needs of a small elite, "Capitalists" and "Nomenklatura".

If you want to look at systems that work well, their characteristics are:
* Strong labor unions.
* Strong sense of community.
* Moderation in their views.
* An understanding that the market is not the solution for all problems.

Look at Sweden, Norway, Finland, Denmark, and to a lesser degree Germany and France.

The problem in the US is that the corrupt crony capitalists own the system, and the problem in Russia is that attempts to put stooges for the corrupt crony capitalists in charge of everything (Oligarchs) has soured the Russian population on democracy and pluralism.

Anglo-Saxon "hypercapitalism" is more than a failure, it is evil and stupid.