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Ron Paul on the anemic dollar
Posted on 07/17/2007 7:57:23 PM PDT by CJ Wolf
The House of Representatives Financial Services Committee Tuesday heard from economists who agreed the weakening dollar is likely to decline further. VOA's Barry Wood reports.
Committee member Ron Paul, a conservative Republican, called attention to the dollar's weakness. The U.S. currency, he said, has this year lost nine percent against the euro and even more against some other currencies.
"It's lost more than 10 percent against the British pound," he said. "And lo and behold, the Indian rupee - if you had been holding Indian rupees - you would have made 13 percent."
Paul asked the panel of three economists whether Americans should be worried by the dollar's decline. Alan Meltzer, a professor at Carnegie Mellon University in Pittsburgh, said the dollar is weak because for America's rising external deficit.
"The long-term problem is a serious one," he said. "If you ask, over the long-term what is likely to happen to the dollar, you'd have to believe that over the long-term the dollar is going to decline in value. Why is that? Basically, because we invest more [as a nation] than we save. We save too little."
Benjamin Friedman from Harvard said no other country could get away with having such large current account (trade) deficits. It is, he said, irresponsible for the United States to incur an external deficit equal to 6.5 percent of its national income.
But none of the economists saw a danger in the huge accumulation of dollars by China and Japan. Neither country, they said, would gain by selling their dollar holdings in order to devaluate the currency further.
Jamie Galbraith, the son of the late Nobel-winning economist John Kenneth Galbraith, is a professor at the University of Texas.
"The problem, as I see it, is that the system - like all monetary systems - is inherently precarious," he said. "It is subject to a shock, a crisis, a panic, a collapse down the road."
None of the economists would predict how much further the dollar will drop. But they said a further decline could help by lowering the prices of U.S. exports, thereby boosting exports and reducing the size of the external deficit.
I looked but didn’t see this posted yet.
We continue to ignore the fiscal conservative side of our party over issues like abortion at our own peril... There’s room for both, I promise. You couldn’t tell it by the way some people place their priorities, though.
Things are only going to get worse as the Baby Boomers age and all the obesity and diabetes and countless other health problems start kicking into high gear and dig into the already vast pit of Medicare. And who knows? Maybe we’ll have “free” nationalized healthcare by then, too!
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Ron Paul Liberty DollarsI'm a little tempted by the $20 silver dollar (costs $25 to buy, $45 for the collectible). What a beauty. Great fundraising tool for Dr. No. Those guys just love RP.
“Well that is good for my foreign stocks.”
It’s good for a lot of American large-cap multinationals also. About half of the S+P 500’s profits come from overseas business. Gee, the world is outsourcing to us and we are benefiting!
I didn’t see any recommended solutions for the problem of too little saving. How about lowering the taxes on interest income to zero?
Huh? That makes no sense.
Agreed. I'm going to Paris this week. My ATM will provide a landing chute for my BIL
Exactly. This is expert testimony in front of Congress? Saving too little is most definitely not the the reason for the decline of the dollar. Why in the hell would anyone put their money in the bank for paltry interest when they can get a much higher return by investing? Additionally, inflation would erode your savings with the interest that banks pay. Everyone would be losing money. The problem is the that the Federal Reserve prints freakin money out of thin air without anything backing it except IOUs. They continue to inflate the supply of dollars at will. This inherently has too many dollars chasing the same assets and erodes the value of existing dollars. Basically, they are inflating the money supply to the moon. The only reason that the dollar holds any value at all is that some people believe the US will not default in the future. That view seems to be changing as more and more of the worlds Central Banks diversify away from the US dollar. Right now, it’s in the interest of Japan, China, and some middle eastern countries to help prop up the dollar being as they hold so many of them. They want to at least get out at some point in the future without a total loss.
I’m sure this must somehow be an indicator of an excellent economy! I believe we achieved this by outsourcing jobs to other countries, and cutting back on production of goods here. We’ve saved fuel by not having as much product to move, thus leaving trucks and trains idle. Brilliant plan!
Ping of interest.
Getting ready for the Amero I see... if the dollar is almost worthless, it won’t be that hard to say goodbye.
USA exports will continue to surge! ..Now they are more affordable.
Now, now. There are ways to discuss the budget deficit without becoming emotional. [hug]
Ron Paul is a buzz kill, man!! Why’s he got to ruin the party? We can just bill it to our kids. [/sarc]
I guess we should get some foreigners to build some factories here now that it’s affordable. We can employee them with undocumented workers!
What’s wrong with a foreign plant being built here, and are American plants staffed with undocumented workers better?
Well for one it would be considered an American export, but any profits seen would go overseas.
Exactly! Lower the corporate tax rate to zero. Capital gains rate should be zero as well.
Makes perfect sense. Say our economy needs $1 trillion in investment every year. If we save $250 billion for that investment and foreign dollar holders kick in another $750 billion, our $1 trillion investment need is met.
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