"ONLY THE STRONG Have Weak Currencies!"
1964-D-Peace @ Thu Apr 21, 2005 5:55 pm
Competitive currency devaluation, aka "bottom-feeding". Kinda hurts to conjecture that modern society, rather than emulating an ant colony, more closely resembles a school of gold fish. ^__^'
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$1:
ONLY THE STRONG Have Weak Currencies!
By Alex Wallenwein
April 19, 2005
In this seemingly nonsensical environment of competitive currency devaluations, everything is turned on its head.
Under normal conditions, a strong economy would be expected to have - and desire - a strong currency so that it can afford to buy what it needs in international markets, so that international investors are naturally drawn to its currency's value, and so that its assets are widely seen as safe and profitable.
But not so in a world dominated by an artificially manufactured emphasis on "free trade."
Free Trade, the panacea of modern big-government politicians, social planners, and central bankers, is the very vise in the grip of which the world economy currently finds itself. The real pressure isn't even on yet, but the world is beginning to realize where it is headed.
Under an enforced free-trade regime like the one we currently have under WTO rules, exports are the singular road to riches for a country, whether it is listed in the "developed" or "undeveloped" column.
That's all fine and good, but a big problem arises when exports are treated as a "get rich quick" scheme that allows a country to bypass the necessity of building its internal market for the internal consumption of many, if not most, of its products. Unfortunately, the lure of easy money always brings out the worst in people, groups, and nations, and so they do what brings in money the easiest and quickest way - at the expense of real and organic progress.
The trouble with an export-dependent economy is just that: it's, well, DEPENDENT - just like a drug addict is dependent on getting his daily fix. If the several exporters' main customer suffers an economic setback or undergoes a shift in consumption patters, all of the exporters' economic, political, and social fabric is subjected to a serious stress-test.
Normally therefore, it only makes sense to aim for having several customers with a variety of consumption patterns, none of whom carry such a huge share of the exporter's production that the failing of any one economy can potentially wipe out all that has been gained on the quick road to riches.
But when an entire world's exporters or would-be exporters rely on mainly one single, huge, importer and consumer of last resort, and when that importer suffers from systemic, structural maladies that were brought on precisely because of its status as the world's number one consumer (and worthless fiat-currency issuer), then we got ourselves a problem.
And what a nice problem we are having.
Needless to say that this 'customer of last resort' we are talking about it the United States.
In a way, free trade was sort of a necessity for the US dollar system. It was literally 'life support' for an ailing and failing patient - the US dollar in its post-Bretton Woods, purely fiat, reincarnation after 1971.
Without continuous and increasing demand, any pure fiat system is dead on arrival. But ours was put on life support by using the US' huge worldwide influence to create an artificial dollar-demand machine that would artificially pump oxygen and blood into what would otherwise be a lifeless corpse. More cynical minds might call this system "Frankendollar" - or maybe "the Zombie currency"....
By Alex Wallenwein
April 19, 2005
In this seemingly nonsensical environment of competitive currency devaluations, everything is turned on its head.
Under normal conditions, a strong economy would be expected to have - and desire - a strong currency so that it can afford to buy what it needs in international markets, so that international investors are naturally drawn to its currency's value, and so that its assets are widely seen as safe and profitable.
But not so in a world dominated by an artificially manufactured emphasis on "free trade."
Free Trade, the panacea of modern big-government politicians, social planners, and central bankers, is the very vise in the grip of which the world economy currently finds itself. The real pressure isn't even on yet, but the world is beginning to realize where it is headed.
Under an enforced free-trade regime like the one we currently have under WTO rules, exports are the singular road to riches for a country, whether it is listed in the "developed" or "undeveloped" column.
That's all fine and good, but a big problem arises when exports are treated as a "get rich quick" scheme that allows a country to bypass the necessity of building its internal market for the internal consumption of many, if not most, of its products. Unfortunately, the lure of easy money always brings out the worst in people, groups, and nations, and so they do what brings in money the easiest and quickest way - at the expense of real and organic progress.
The trouble with an export-dependent economy is just that: it's, well, DEPENDENT - just like a drug addict is dependent on getting his daily fix. If the several exporters' main customer suffers an economic setback or undergoes a shift in consumption patters, all of the exporters' economic, political, and social fabric is subjected to a serious stress-test.
Normally therefore, it only makes sense to aim for having several customers with a variety of consumption patterns, none of whom carry such a huge share of the exporter's production that the failing of any one economy can potentially wipe out all that has been gained on the quick road to riches.
But when an entire world's exporters or would-be exporters rely on mainly one single, huge, importer and consumer of last resort, and when that importer suffers from systemic, structural maladies that were brought on precisely because of its status as the world's number one consumer (and worthless fiat-currency issuer), then we got ourselves a problem.
And what a nice problem we are having.
Needless to say that this 'customer of last resort' we are talking about it the United States.
In a way, free trade was sort of a necessity for the US dollar system. It was literally 'life support' for an ailing and failing patient - the US dollar in its post-Bretton Woods, purely fiat, reincarnation after 1971.
Without continuous and increasing demand, any pure fiat system is dead on arrival. But ours was put on life support by using the US' huge worldwide influence to create an artificial dollar-demand machine that would artificially pump oxygen and blood into what would otherwise be a lifeless corpse. More cynical minds might call this system "Frankendollar" - or maybe "the Zombie currency"....
If you'd like, you can read the rest here:
ONLY THE STRONG Have Weak Currencies!
themasta @ Wed Jun 15, 2005 9:02 pm
Boggles the mind.