What hath debt wrought?
well after my two week stint in Scotland I can tell you that the dollar is week. Against the Pound, the Euro, you name it. I actually made money buy getting pounds and selling them back … the dollar had dropped in the two weeks we were in the UK. Excessive interest cutting in order to prop up the crappy US economy is the reason no doubt. But now we have another issue to contend with … China.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
While it’s true that the power house Chinese economy depends on a marginally robust US economy to keep it afloat there is one small thing that makes the threat credible … Chinese politicians don’t have to worry about reelection, pissed off voters, or much of anything really, it’s a totalitarian regime. Kind of gives them a few wild cards in their hand at the showdown.
“China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
“China is unlikely to follow suit as long as the yuan’s exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar,” he told China Daily.
Now the US could start to impose trade legislation but who is kidding who? We don’t have the stones to pay for shooting wars as we go, let alone a trade war. While this is almost certainly posturing it does highlight how vulnerable we have made ourselves by following a “growth at all costs” trade policy and rushing head long into globalization with countries that don’t really share our enthusiasm for mindless consumerism.
Update: Mr. Anderson makes the reasonable point that the dollar weakening has more to do lately with printing dollars then interest rate cutting which is true. The interest rate cutting has been there of course over the last 6 years in order to “stimulate the economy”. Apparently the tax cuts weren’t enough. Also, it’s worth mentioning, the tax cuts have also contributed to the problem by creating more debt.
First, the Fed didn’t lower interest rates. It pumped tens of billions into the banking system instead. I expect interest rates cuts are coming, though.
In the meantime, our federal sugar daddy is writing really big welfare checks to the po’ folks of the financial/banking industry and big-wheel investors. Oh, and let’s not forget those enterprising folks in the super-secret hedge fund bidness who thought it a wise investment to back shaky loans to people with a flawed credit history or no credit history.
China’s trillion-plus kitty is probably more valuable to the Chinese as a deterrent and bargaining chip against being pushed into floating the yuan by the U.S. — for now. When we’re down on the floor beeding, God forbid, will the time for them to put their foot on Uncle Sam’s neck.
I still have to ask why we are doing business with China. I mean the food and toys recalls are, well, not conducive to us. One or two I can accept as an accident, any more than that I have to say is deliberate. With 90% of our toys made there, it is becoming dangerous for our kids. these damned trade and business treaties we get into may be good for business, but they sure aren’t that great for the country. I don’t begrudge business making oney, but it’s getting to the point of dangerous ridiculousness. Thanks to our stupid business leaders and our chickenshit politicians, we put ourselves in this position. Maybe it’s time we woke up the threat that China is and not just militarily but economically.
I still have to ask why we are doing business with China. I mean the food and toys recalls are, well, not conducive to us.
Easy … better profit margins. Mindless consumers. A potent combination of stupidity.
Rick, You got that right. I have to agree with you 100 Percent. It is also ddamned stupid of us as well. But we do agree here.
China!
Let me think,first it’s pet food, than tooth paste and now lead based paint on children’s toys.
What’s next?
The GI Joe Doll with the Kung Fo Death Grip.
Personally, I don’t give a rats ass if China floods the market with American Green Backs.
Good, bless them…
It just makes my gold and silver holdings (bullion)all the more valuable.
You can have your stock market, Ira’s, bonds and the rest of the crap.
Gold and silver are the only true forms of money, not some piece of paper or worthless coinage which is nothing more than the liabilities of the country which issues it. God save the Queen.
If the entire market collapsed tomorrow you would have scratchy toilet paper, I would have gold and silver. I would use my gold or silver to buy some Dolly Madison toilet paper. Gee, I wonder what Mrs. Madison or her husband, would think of her name on toilet paper.
The other advantage of gold and silver, it’s out of the reach of the IRS.
I am all for business, but there should also be responsibility. Just because something is good for businesss, doesn’t mean it’s good for the country. in our quest for cheaper products we have lost our soul and made a kind of bargain with the Devil with our trade treaties. To me this global economy bullshit was oversold and it’s like fucking ourselves in the ass and smiling while do so. Pardon my French or English on this, GATT, NAFTA, WTO and other trade treaties exported our industries and manufacturing base and imported illegals. I also think too many of our elite politicians are too used to having lower class people wait on them, so they have a Mariantoinette attitude on this. Then again, a lot of them get rich in political office. I bet our founders would puke if they saw what we have today.
Tom, you’ve obviously had an epiphany, and that’s a good thing.
What our free trade and globalization policies, especially with China, are doing to America economically is damaging and scary. But don’t lose sight of the national security liability involved. It’s even more scary.
“Foreign ownership of domestic American treasury notes may tilt Sino-American relations awry. In a world where multinational companies are moving every day into the Chinese sphere of manufacturing and business, reduced leverage at home and putting America in hock to the Chinese may not have a rosy ending. China may ultimately call the shots during diplomacy and foriegn policy due to acknowledgement of business investment in China and ownership of bonds and bills backed by the American government in Chinese hands.”
That’s from an item at America Economic Alert, a site that has loads of good information about what’s going on with the Brave New World B.S.
You can read the rest of it here, if you’re interested. And you should be interested, believe me.
I don’t know about an epiphany. I have written before on here about my dislike for these trade treaties where Rick, Dietz and I agreed about it. Don’t get me wrong I am all for capitalism and making money, but I just think if you make widgets in this country, and US citizens make and buy them, if you move the company overseas and US citizens stop making them, how many people will no longer buy them that are here? It seems to me, while a company may make profits immediately and do well, in the long term they are cutting their own throats, because their products will no longer be bought in as great a quantity. We are also having foreign companies make our weapons and armaments now, which security wise is frightening. You mean Winchester and Remington cannot do it? I do not like this so-called global economy bullshit. I think it is only a way for cheap labor and to lower our living standards. I find that I am agreeing more with Lou Dobbs on so much. I think both parties are making war on the middle class with their elitist attitudes and ways. God help us thenext few years because I see nobody worth a shit from either party. I see no changes in the business atmosphere either.
Also, it’s worth mentioning, the tax cuts have also contributed to the problem by creating more debt.
Oh, no, not again.
The OUTLAYS are the cause of the debt problem, not that I’m not having enough confiscated.
Come ON.
I have been thinking about this matter. As much as I would love to see it occur it will never happen.
This is political saber rattling.
It makes no financial sense for the Chinese to economically destroy the American economy. There very economy, future economic growth and welfare of there citizens is very much dependent upon the USA’s economy.
What makes more sense to me, is for China to try and keep marginal or anemic growth in the USA.
And with almost two trillion American dollars at there disposal this goal is easily obtainable.
As a foote note for Tom.
“I think it is only a way for cheap labor and to lower our living standards”
Tom we ourselves lower and cheapen our own wages and worth.
If you don’t agree with this please explain to me exactly what an internship is?
Personally, I call it FREE LABOR. Good for capitalist’s bad for workers.
An internship is to basically part of the education process in many career fields. I had to go through it both in high school and in college. While free, it does give some much needed training and experience. In writing for newspapers, I was more experienced at 17 to 18 than many college students were that had journalism degrees who had only written for college newspapers. The experience I had I wouldn’t trade for any thing.I received training and they got somebody who covered beats, wrote stories and help sell newpspapers. I think it was and is a fair trade. Some internships pay, others don’t. That’s the way it is. I have done some freebies for papers and publications since to show them what I can do to promote my freelancing. It helps when trying to sell you work and possibly your ability to publications. Frankly I think illegal immigrants and these free traders (but not fair traders) have done more to cheapen our wages and worth more than internships have.
“much needed training and experience”
Last time I looked we called this being an apprentice and you recieved wages for it.
Just another way for capitalism to get productivity and increase profits without paying for it.
This is wrong at so many levels but than again it’s how we sell ourselves short and decreases the value of our professional worth. Work for free what a concept. I wonder how Ayn Rand would feel about this?
Jim, some did pay. But, whether you like it or not should be up to the individual to decide for themselves if this is right or not. Isn’t that what Ayn rand was about? Our own personal choices and what was right for us, not some authority over us telling us we have to do it a certain way on things like this. Just because it is wrong for you, doesn’t mean it isn’t right for somebody else. I thought we had a right to choose here. Whether a person is in high school or college and is doing an internship isn’t really selling themselves short. It seems to me is part of the educational experience.
Know very well what ya mean Tom, we can banter this for a dogs age and it would serve no useful purpose. Point you are trying to make is some people will do it and some people won’t. Agreed. Personally, I will never give away my trade or talent as this makes no business or economical sense, but this is what capitalism is all about.
I will submit this thought for future discussion though.
A few months ago we had a bridge collapse a few people died, tragic accident to say the least. I looked at this incident with much confusion.
If you viewed the TV footage of the bridge you should notice another bridge in the picture, very interesting, as this bridge is constructed in the classic roman arch with concrete, older bridge and still standing.
Point I am trying to make is, I sure am glad that the ancients didn’t have modern technology to help them build there empires, structures or infrastructure. Otherwise we would have nothing left to view with wonder and amazement today. These buildings, roads and monuments are still standing with no maintenance or care since the particular empire collapsed. At Rome’s height the citizens enjoyed hot and cold water, a working plumbing and drainage system, some of which is still in use today, Rome was using in excess of 5 million gallons a day of water.
Now our elected officials want to increase road taxes to maintain our infrastructure better. HOG WASH… We build with obsolescence planned into the design, why should I pay any more in taxes for this?
I am still looking for the communication link that the Cambodians, Mayans, Aztec’s and Egyptians used when the pyramids started springing up on three different continents. Has anyone fond a cell tower or ball of string with a can attached that dates back thousands of years?
And we consider ourselves technologically advanced and highly enlightened.
Jim, I don’t look at it as giving away my trade or talent but submitting an example of what I can do to ensure future work and customers, much like free samples and diorect mailers in the newspapers and through the mail. Sometimes a freebie can lead to lots of extra work.
Hmmmmm.
Freebie is one thing.
I do it time and time again depending upon job or project.
Doing free labor 8 hours a day 5 days a week and calling it an internship is an entirely different matter. Some people equate this to maybe getting a foot in the door or it might help them get future employment or work. I call it shear stupidity and giving your work away for a song and a pray.
I see this action plenty in the construction field, a new up start contractor really needs work or business so he/she submits lowball or very marginal profit line project. They use this tactic with the hope that they can or will make more money on the next bid, after they establish a track record. Wrong…
Do you see why? If the powers that are can get it done for less someplace else, where do you think they are going?
Remember this is business or capitalism, it’s all about the bottom line and profit.
What is the advantage to hire an intern as a full time employee when they can get another intern for FREE just by asking !
Answer me a question Tom, ever been to a job interview and the interviewer asked you “why he should hire you”.
Yes to your question. But, people also have to pay their dues and gain some experience as well. Mnay businesses both big and small do this. I look at my experience as an intern positively and as a great learning experience. I seldom, if ever get turned down when I freelance write and turn in a story without being asked by newspapers. Usually if find a story I write it and then shop it around to the highest and most intereted bidder. I can the re-write it and change its content around and re-sell it to some other publication for some more money. I learned I own the rights to the story and can resell it, while doing an internship. So you see I learned how to make more money off of my writing while doing an internship. So, in the lone run I benefitted. My work doesn’t get turned down very often. In fact, I can only think of five pieces of work in 30 years that I did on my own, but eventually had printed somewhere for very little and I’ve had publication and newspapers contact me on doing work. I even had the US Olympic Committe ask me about interviewing the Waterford Bobsledder, Jean Racine, when she was meeting the President Clinton. So, for me an internship has paid off for me. I still say, some things such as an internship or a freebie can lead to bigger and better things. Incidently I am proud of the fact I was one of the first, if not the first, to interview Jean Racine in US women’s bobsledding. That story still remains special to me.
Jim,
I think the gist of the internship is that you are voluntarily deciding to take a short-term loss in order to better your chances for a long-term gain. It’s completely voluntary, so people are free to decide if it makes sense to them. Writing the whole system off when so many people have benefited from them seems to be counter to a vast body of experience.
Some of you are going to love this one. I was accused of being a liberal because I do not like the trade deals like NAFTA, GATT and others things recently by a Cadillac Conservative. The nerve of this person. They think about business where I think about national security and the like. Go figure!