Posted on 03/25/2009 8:37:09 PM PDT by St. Louis Conservative
Obama meets with a flock of nervous bankers at the White House tomorrow to reassure them he understands their interests. Good luck. There has always been tension between the Democratic Party and the private sector. That tension is over. With its vote in the House of Representatives to punish corporate bonus payments, the national Democratic Party has disconnected itself entirely from the private sector.
The public bear-baiting of AIG's Ed Liddy, and then passage of the bonus bill, gave the nation a good look at the modern Democratic Party freed of constraints.
The current version of the party has largely broken free of any understanding whatsoever of the private sector -- how it works or what it needs to function.
True socialists at least think about markets so they can criticize them. The Democratic Party's leadership doesn't stir to even that level of engagement. In the House, Senate and some corners of the Obama White House, the party is acting as if the marketplace was the world of an alien tribe, which it has to control through intimidation or demands for protective tribute (read: campaign contributions).
This is not true of the entire 90% of self-identified Democrats who voted for Barack Obama. But Democrats who work in real jobs rather than work for the mothership in Washington must recognize that the party's obsessions are becoming ever less hospitable to a functioning economy, or Mr. Geithner's labors to that goal.
This decoupling has occurred mainly in the Northeast (New England lost its last House Republican in 2008) and in California. Invulnerable seats have allowed politicians from these regions to control key committee chairs affecting the economy: Barney Frank (finance), Henry Waxman (regulation) Pete Stark (the health subcommittee of Ways and Means), Chris Dodd (Senate banking), Ted Kennedy (health), Barbara Boxer (environment).
(Excerpt) Read more at online.wsj.com ...
all of their campaign dollars came from the private sector, at least it did
Big business has always banked on big Govt. It is a marketplace that they can control with contributions. This is how banana republics are run.
It could have something to do with the figures here:
http://www.igeg.org/TakingStockOfTheParties.html
[Barney Frank (finance), Henry Waxman (regulation) Pete Stark (the health subcommittee of Ways and Means), Chris Dodd (Senate banking), Ted Kennedy (health), Barbara Boxer (environment).]
In a rational world these crooks would be in jail, not congress.
I don’t think Timmy Geithner piping up about an international currency replacing the dollar helped soothe anyone’s ruffled feathers. A lot of moderate Dems voting for the smooth Chicago suit sort of figured he was from their wing of the party. Surprise.
The right has been a 24-7 scream of anti-capitalist populism for the past 4 months. The Fox News channel likewise. The financial press likewise. Everyone demanding failure and blood and doom and smash and predicting it as far as the eye can see. It is the mirror image of what the left did on the war. And just as ugly when our side does it.
One thing this current political climate has done is remove the mask and revealed Democrats for who they really are.
Obama wants to do to Wall Street what Osama did to the World Trade Center. The only difference is Obama has to pace his terrorism until he has all the vote fraud apparatus and citizen gestapo in place to survive the elections of 2010 and 2012. By that time, the frogs left in the pot will be in full boil.
Obama hates America and wants to destroy it.
“Obama hates America and wants to destroy it.”
I say:
0bama hates America and wants to turn it into a communist country.
abump
They will STILL get money from these God-less people because they HATE Republicans (read Christians) more than they hate losing their money and being used.
Geithner is simply much smarter than his critics pretend and doing the right things, those critics are stuck on a short news cycle and journalist level "thinking". Which, with events of this magnitude, amounts to insensate stupidity. Not to put too fine a point on it, but compared to him and Bernanke and a half dozen private money managers, everyone else running their mouth on the subject is a bag of rocks.
Yeah. A whole lot of traders base their decisions on Drudge. You betcha.
Could you explain how a global reserve currency or Special Drawing Rights is not a negative for the USD? I admit to not understanding this.
The original idea behind SDRs was that they would function as paper gold. Keynes is the man who proposed them. What did he mean by "paper gold"? He meant that the IMF would retain a stock of gold and also foreign exchange from the major countries, all of whom would conduct their business with the IMF in SDRs. The SDRs were to be redeemable in gold withdrawals from the IMFs stockpile. The IMF would use its contributed currencies to purchase new gold on the open market if necessary.
This is effectively a version of a gold exchange standard, with the extra features of centralized clearing and gold-issuer choice as to which of its foreign exchange holdings to "tap" to buy gold if required to do so by member withdrawals. Whereas in an old style gold-exchange standards as e.g. run by England between the war, when someone wants gold for British Pounds it drives down the Pound exchange rate, with banker choice the pressure can be put wherever the IMF likes and therefore cannot build up to dangerous levels against one currency. Keynes wanted the price stability aspects of the gold exchange standard without its key-currency vulnerability to speculative panic or attack.
So it was intended to be a halfway house between a gold standard and managed exchange rates of otherwise fiat national currencies.
SDRs generally weren't used as intended. The dollar itself was convertible into gold for central banks until Nixon closed the gold window in 1973. (He had previously placed such restrictions on it that it was "economically closed" as early as 1971). After the dollar floated free of gold in 1973 and devalued, all the IMF members left their SDRs on account at the IMF. The gold remained with the IMF and appreciated in value against dollars. (It is still there and worth something like $50 billion more than its book-accounts carrying value at today's gold prices). Basically we actually had a gold-exchange standard until Nixon and then floating fiat money since.
The head of the bank of China is hinting at eventually moving back toward a gold exchange standard, but with the centralized clearing features and national-currency flexibility of the Keynes-SDR version of that, rather than the dollar version of 1945 to 1973 or the British version between the wars.
How would this work in practice? Any IMF member country could pay foreign exchange it earned in trade or otherwise raised, to the IMF, in return for SDRs. Those SDRs would initially represent claims against a basket of fiat currencies - dollars, Euros, and yen mostly - and thus be equivalent to a mixed portfolio of currency deposits. But the IMF would also be free to accumulate gold, when it found the price attractive but not when it didn't. It would be free to increase holdings of one of the currencies relative to the others, if it received more dollars paid in from members, say, than Euros.
And a country could pay its import bills in SDRs rather than specific national currencies. Other IMF members would pledge to take SDRs as payment. If they then wanted to "change moneys" back to this or that national currency, they would sell their SDRs back to the IMF and it would give them their currency basket equivalent - or sell some of those in the exchange markets to allow redemption of the SDRs all in this currency or that.
The volume of transactions required would be less due to centralized clearing. Right now China earns lots of dollars in trade and pays lot of yen for imports of industrial equipment from Japan, e.g. There are minor efficiency gains from that sort of thing.
A big part of it from their point of view, though, is that China doesn't "throw its weight around" the foreign exchange markets, or set off speculative moves to "trade ahead" of it whenever it tries to diversify its foreign exchange, because it just holds an IMF-chosen portfolio of dollars, Euros, yen and gold, in the same ratios as anyone else using SDRs. Understand, right now they worry if they tried to move anything out of dollars into Euros, they'd set off a stampede and move the price a huge distance without getting anything out of dollars before that move.
This isn't against our interest in the long run, because China remains a giant "customer" for our dollars and dollar denominated financial assets. We don't want them unhappy about the exchange rate performance or the investment performance of those assets. If our financial customers can hold an asset they trust as a long run store of value, good. If we all get a more broadly stable international monetary system out of it, and one eventually and gradually with some gold-exchange standard discipline in it, that could also be helpful.
We do not actually have an interest in maintaining a system where others think we might just inflate away all our dollar debts at any time. We don't intend to do so, but their fear that we might reduces the exchange value of our dollar denominated assets. It isn't in our interest for countries with large international credit balances against all parties combined, to have that whole position only against us. When we had an overwhelming creditor position against all parties combined that might have made sense, but those days ended as long ago as Nixon.
Geithner is being diplomatic and sensible, and the proposal is a decent technocratic one. Pols playing it up as populist identity politics are just pyromaniacs ("playing with fire"), without actually understanding any of the issues involved.
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