Posted on 11/22/2007 6:59:12 PM PST by PotatoHeadMick
Americans paused at Thanksgiving yesterday for the traditional annual audit of their blessings. If they'd been listening at all closely to the morose lucubrations of their opinion leaders, however, it would have been pretty slim pickings.
The pundits have finally run out of bad news to report from Iraq, where, unmolested by the morbid fascination of misery-seeking reporters, the locals actually seem to be belatedly enjoying the first fruits of their liberation. So attention has turned again, as it has tended to do from time to time these past 50 years, to the inevitable collapse of the American economy.
The declining dollar is for many an ominous indication that the long period of US economic supremacy is at an end. In the past month especially, a nation that usually remains in blissful ignorance of the daily fluctuations of the foreign exchange markets has been repeatedly reminded that the dollar now buys a fraction of what it used to — down 35 per cent against the pound in the past six years and 40 per cent against that fledgeling monetary superpower, the euro.
Much has been written about the eschatological symbolism of the dollar's fall and the financial problems that have accompanied it. The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown. And all this is supposed to reflect in turn a seismic shift in the balance of global economic power away from the US and towards Mighty Europe and Emerging Asia.
Let me take a moment in this season of cheer to raise a few objections. The first and most obvious point is that there are many reasons why currencies move against each other, often in quite dramatic fashion. Seismic, epochal, geopolitical shifts are not usually the best explanation.
Rather, more prosaic facts such as differentials in countries' short-term interest rates, the rebalancing of temporary financial and economic imbalances and sudden changes in demand for and prices of commodities such as oil produced by particular countries — all of these help explain the dollar's recent decline.
US interest rates are on a downward trend, while European rates are steady and might even rise. The US still has a vast trade deficit, which is being reduced by a continuing fall in the value of the dollar. Countries such as Canada, which has seen the largest increase in its currency against the dollar, have been beneficiaries of the steep increase in the energy products they export. Another factor behind the current movements is the sensible shift by the world's central banks to a more balanced portfolio of foreign exchange reserves.
For the historically short-sighted, let's remember we have been here before. Between 1985 and 1995, the dollar declined by 43 per cent against the world's big currencies — somewhat more than it has in the past six years. That period was also marked by dire proclamations of the end of US economic power. But it turned out that in those years the foundations were laid for the strongest period of US economic growth in the past 35 years.
If you're still sceptical, ask yourself this: is it probable that the shift in the relative value of the dollar and the euro represents a bet by the world's investors that Europe — strike-torn, productivity-challenged, demographically doomed Europe — is the world's economic future, rather than the US, or, let's say, China? All right, but this is different, say the Cassandras. The US has been living on borrowing for years now. The world has finally woken up to America's addiction to debt — all that growth has been bought on the never-never and now, at last, the bill has come due.
The first thing to be said is that the level of public sector borrowing in the US is very small. The fiscal deficit, at just over 1 per cent of national income, is smaller than in most major European countries. It's true that America faces a large long-term fiscal challenge from an ageing population. But it's a smaller challenge than that faced by most of Europe, Japan or even China.
So if government borrowing isn't the problem, it must be the private sector that's neck-deep in debt, right? The general view is that Americans have irresponsibly fattened themselves up on widescreen televisions and gas-guzzling four-wheel drives, all paid for with easy credit.
If you look at a simple measure such as the savings rate — the proportion of income that is saved rather than spent — Americans do look pretty spendthrift. It is close to zero in the US, compared with 10 per cent in Europe and much higher in Asia. But focusing on this one measure distorts the full picture of America's household balance sheets. The reality is this: why save when the value of the investments you own is increasing at rapid rates? The total value of mortgage and consumer debt is indeed up by a massive $5 trillion since 2001, according to the latest figures published by the Federal Reserve.
But consider the increases in the wealth of Americans during that period. The aggregate value of houses alone is up $8 trillion. The increase in the value of stocks held either directly or through pension funds and other investment instruments is higher by another $8 trillion. That's an increase in net wealth of American households of $11 trillion in less than six years. That's about $90,000 for every household in the country. As someone once said, 11 trillion dollars here and 11 trillion dollars there and pretty soon you're talking serious money.
All right, but isn't the US going into recession, you say? Maybe, but so what? The US is overdue a recession by the standards of the business cycle in the past 60 years. It's possible the housing market and related problems will tip America into another one. Provided the people responsible get policy right, it doesn't have to be a depression.
So the dollar is falling for good, sound reasons that do not require a millenarian view of the global economy. It is yet another thing Americans should be thankful for.
It doesn’t matter who eats the apples, what matters is who owns the orchard.... Buchanan
Who gets paid to pick the apples? Locals?
I guess Buchanan loves American owned factories in foreign countries?
Ask all the p.o. Germans whose government paid off the ww1 debts with hyper-inflated German Marks crushing the savings of the middle class.
They ended up electing Hitler in power and we all know how that went...
Microsoft... :)
Did you lie?VxH has worked himself all into a lather, poor thing.
Did you "misspeak?"
Did you know something about that chip the rest of us do not?
Or did you deliberately seek to conceal that Texas Instruments is a global corporation?
I was wondering why the fixation on the word “all,” and the unwillingness to acknowledge that I understand the point he’s making (but not my point, that it serves as a distraction from the original question). I suppose that, when being shelled, some just try and wait it out in the bunker.
He didn't say all American companies. Not all American companies export. Not all American manufacturers export.
The fact that some percentage of exports have some foreign content doesn't refute what Lonestar said, so I don't know what VxH is trying to prove.
This is serious. It's one thing to try to conceal the fact that a publicly-traded, multi-billion dollar corporation proclaims on its own website that it has operations all over the world, and entirely another to claim one's company is doing well, when we all know that nothing is manufactured in the United States anymore and that we are all just a couple steps from working as baristas at Starbucks and eating out of dogfood cans.
I've seen that claim a few times, not sure if it was this thread.
Are they part of the conspiracy also?
No doubt. Probably Chinese agents.
Let him be in a lather.
If he can’t be bothered to do the research about which chips for which markets are produced where and only wants to speak in generalities, fine. I’m not going to do his work for him.
Someone asked if electronics are still made in the U.S.Now, there may be some people on this thread who didn't know there are electronics plants elsewhere in the world, although that is doubtful because even the original question implies otherwise. In any case, I thank you on their behalf, where ever they may be, if they exist.
Someone else replied that he has an electronics plant down the street from his house.
You jumped in to inform us that there are electronics plants elsewhere in the world.
The fact remains that even you don't know what you've accomplished with your interjection, apart from your belief that you saved us all from a terrible lie that none but you recognized. (Stop the presses! VxH has discovered a TI plant outside the United States!)
You sure as heck didn't prove anything to me, because I already knew TI was a global corporation. On that basis, I have to argue that you didn't prove anything to most of the people on this forum (protectionists included), because I believe that most other people also know TI is a global corporation.
I really can't spell it out in a more simple fashion than that, so you'll have to make do.
I have a chip plant three miles from my house.
Yeah, but there is a chip plant in Vanuatu!"
---------
Yes. Didn't you ever take a Logic class? This is known by logicians as the "Principle of Reflexive Antagonism," and it's formulated as follows:
-If X is true
-And Y is true
-THEN, X is NOT true
Geeze, I thought everybody knew that.
;-)
Hank
I call it the SCUD missile argument. Load it up with concrete, launch it in the direction of the enemy, and hope it hits something important.
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