Posted on 02/07/2024 7:28:42 AM PST by SeekAndFind
While catching up over the holidays, my father and I began to talk politics, as we often do nowadays.
We bemoaned recent government financial blunders such as the Green New Deal, two proxy wars, and welfare for the unprecedented number of illegal migrants pouring across the Southern border. My father concluded our talk by saying, “And our tax dollars are paying for it!”
[SNIP]
But, in reality, it’s questionable if much of our tax dollars are really being spent on political misadventures.
Looking at historical metrics, it’s clear that taxes have been relatively static for almost two decades, which cuts against the idea that American taxpayer money has funded our many financial black holes.
To put it bluntly: Our tax dollars are not funding America’s financial largesse.
Instead, we fund it in an even less honest way, by printing currency and heaping it onto $34 trillion pile of national debt that has little chance of ever being paid back. Uncle Sam can pull off this sleight-of-hand without causing domestic inflation because the greenback is needed for trade by the rest of the world. This demand allows the U.S. to send about 60% of all currency created to our international trading partners. We effectively export our inflation to the rest of the world, which insulates Americans from price shocks we would otherwise experience had all that new currency stayed home.
Massive quantities of newly created dollars remained in-house -- funneled directly into the pockets of American spenders to tide them over during the Covid economic shutdown. As we now know, this was clearly a recipe for significant domestic inflation -- something Americans wouldn’t accept.
The real question is: When will the rest of the world finally refuse to subsidize Americans’ unearned standard of living by accepting our ever-increasing glut of dollars?
(Excerpt) Read more at americanthinker.com ...
In 1971 the national debt was $400 billion. In 2001 it was $5.7 trillion--a $5.3 trillion increase in 30 years. From 2001 to now we’ve reached $34 trillion--over $28 trillion in just 23 years. Our debt isn’t just increasing; it’s increasing exponentially.
Some of our trading partners have grown tired of their foreign exchange reserves being devalued by America’s belligerent monetary policies. Saudi Arabia, Russia, and China have expressed a willingness to trade in alternative currencies; the BRICS block is expanding expressly to counter dollar hegemony; and recent gold purchases by central banks have never been higher (Eastern central banks, of course, not Western ones).
Perhaps the most damning evidence of dedollarization is the decrease of U.S. dollars held in foreign reserves. In 2000, more than 71% of foreign exchange reserves were comprised of U.S. dollars. Fast-forward to today and that number has dropped to just under 59% -- a change that should give pause to even the most steadfast dollar bull.
As more countries circumvent the dollar reserve system, global demand for dollars will no longer be strong enough to absorb all the currency created by the U.S., which will lead to rising prices stateside.
No one in power seriously considers paying back the debt. Their theory is, the government is in perpetuity, and can keep rolling debt over indefinitely. If the time ever comes that the government can no longer do that, the debt will be the least of our problems. That’s the way they think, anyway.
“When will the rest of the world finally refuse to subsidize Americans’ unearned standard of living?”
The good news is we can keep this going for a long time. We don’t need to be best, just better than the rest. As long as the dollar is more stable than the Euro, Yuan, Ruble, Bitcoin, and every other rival it is what people will use.
During the Great Depression people were known to use worthless stock certificates as wallpaper.
I wonder if we will be able to get uncut sheets of $100 bills soon...
The remedy: keep interest rates high enough to induce foreigners to hold dollars, but counteract their economic drag by pro-growth tax and regulatory policies.
As soon as there is another currency worth holding, dollars will come rushing back to the US.
As of today, there aren’t any good alternatives.
If someone comes out with a gold backed currency for use in international trade two things will happen at the same time: Gold will soar and the inflation rate on imports will soar.
Until then....the dollar is still the reserve currency.
Let me re-word this: The price of gold in dollars will soar.
bkmk
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